The 9th Senate and the House of Representatives must reject the $1 billion earlier voted for the retrogressive Ajaokuta Steel Complex, which is yet to give Nigeria any value since 1971 when it was established.
In December 2018, the 8th Senate passed a bill seeking to allocate $1 billion from the federal government’s share of Excess Crude revenue for the completion of Ajaokuta Steel Company.
The Senate resolution followed the adoption of the ‘Ajaokuta Steel Company Completion Fund Bill 2018’, which was a bill presented by now Senate president, Ahmed Lawan.
Many senators were happy about the bill, as they felt it would rejuvenate the behemoth. However, a critical analysis shows that allotting $1 billion to Ajaokuta is a waste of resources.
It is on record that Ajaokuta was established in 1971 to develop Nigeria’s steel sector and stimulate the exploration of God-given natural resources, especially iron ore. Luckily for the country, large iron ore deposits were found in Itakpe, Ajabanoko and Oshokoshoko all in Kogi State. The Ajaokuta Steel Complex and Delta Steel Company were subsequently incorporated in 1979 as limited liability companies.
Between 1980 and 1983, the then federal government stated that it had achieved 84 percent completion of Ajaokuta steel plant, having completed the light mill section and the wire rod mill.
It was also widely reported that erection work on equipment reached 98 percent completion around 1994. Ever since then, Nigerians have been made to believe that Ajaokuta is 98 percent completed.
But here lies the biggest puzzle: Why is a company that is 98 percent completed still failing to produce a sheet of steel over 35 years after its establishment?
Despite being unproductive, government after government has continued to pump billions into the complex. Government records show that successive administrations have pumped $8bn so far into the complex since 1979. The current government of Muhammadu Buhari has joined the party of spenders on a government facility that needs to be in private hands.
In a move that shocked economists and finance experts, the federal government budgeted N3.9 billion in 2016 and N4.27 billion in 2017 for the resuscitation of the moribund Ajaokuta Steel Company, despite an earlier business case in the last administration showing that the complex could only work if properly privatised or concessioned. There was also a humongous budget on it in 2018.
“So why would anyone continue to pump money into an enterprise that is unproductive,” Ike Ibeabuchi, a manufacturer, said. “The government says new investors are interested in taking over the complex, so why would Nigeria spend that huge fund on it?” he asked.
Eleven private investors expressed interests in the concessioning of Ajaokuta Steel Company, Abubakar Bawa Bwari, former minister of mines and steel development, said in the nation’s capital on January 15, 2019.
Bwari said it would be concessioned to a firm with the financial muzzle, technical know-how and genuinely committed to the nation’s steel sector development.
Ime Ekrikpo, director of ferrous metals at the Federal Ministry of Mines and Steel Development, said at a recent event held by the Manufacturers Association of Nigeria (MAN) in Lagos that the federal government had accepted the option of concessioning Ajaokuta Steel, whereby it would maintain some level of ownership while being funded and operated by a private player.
He, however, added the procurement processes to engage a transaction adviser is on hold following its delisting from the enterprises to be privatised by the National Assembly.
BusinessDay had criticised the immediate past Senate for insisting on setting aside $1 billion for the steel plant. This is because it makes more economic sense to sell or concession the plant which has gulped over $8 billion without producing a sheet of steel
“I hope Lawan will not promote this anymore, especially now that he is the Senate president with more influence,” a private sector player said.
“It makes no sense to waste our resources on that complex,” the private sector player added.
Ajaokuta Complex has the capacity to produce one million metric tonnes of steel, one million metric tonnes of coal , manganese and limestone, among others, but it is yet to produce a sheet. It has a managing director and staff members who are paid from tax payers’ funds.
“Currently, I am not sure those technologies at Ajaokuta are competitive in steel making. The world has moved on. What is required now is for the private sector to get more and more involved in the downstream and the upstream segments in the steel business,” Raj Gupta, chairman, African Industries Group, a consortium of 12 companies, including six steel plants, told BusinessDay recently.
ODINAKA ANUDU
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