The strategy should be Ajaokuta playing in the primary sector, and the cold rolling mills in the secondary sector, with the primary feeding the secondary, writes SIAKA MOMOH.
The Yakubu Gowon regime kick-started the plan to develop the Iron and Steel Sector of the Nigerian economy with the formation of National Steel Development Authority (NSDA) in 1971. Basir Borodo, former president, Manufacturers Association of Nigeria (MAN), who has been a player in the Nigerian industrial sector for over 40 years, attested to this in an interview with this writer.
Mandate
The mandate of the Authority was essentially to develop the steel sector. What followed was the formation of various steel companies during the General Muritala Mohammed/Obasanjo Regime. These companies started realizing their potentials during the Shagari Regime. The companies include Ajaokuta Steel Company, Kogi State; National Iron Ore Mining Company Itakpe, Kogi State; Delta Steel Company Ovwian Aladja, Delta Steel; Jos Steel Rolling Company, Jos Plateau State; Katsina Steel Rolling Company, Katsina State; Oshogbo Steel Rolling Company, Osun State; National Steel Raw Materials Exploration Agency, Kaduna State; National Metallurgical Development Center, Jos Plateau State; and Metallurgical Training Institute Onitsha, Anambra State. A mouth-full, isn’t it? But they never realized their full potentials.
Comparative advantage theory
The Western World, through their institutions, the World Bank and International Monetary Fund (IMF), argued the development of the steel industry in third world countries which includes Nigeria, is uneconomical and so should not be considered. They drew on the sham David Ricardo theory of comparative cost advantage that Africa should not develop the Steel Industry but should export their raw materials to the metropolitan West and buy finished steel from them. The Soviet Union agreed to develop the Iron and Steel Industry for Nigeria. The civil works given to the West grounded it.
Borodo corroborated this West’s sham stand when he recalled that some of his professors in Nigerian universities (professors from the West of course) in sixties, said Nigeria should not consider having steel plants, that we were not right for it, “whereas they had steel plants in their own countries”.
Ajaokuta steel plant project and the adjoining steel rolling mills are thus lame duck today. Ajaokuta has gone through many hands – The Ajaokuta plant was 90 percent built by Russia’s Tyazyproexport and designed to use local ore and imported coal. Nigeria signed a concession agreement with Ispat unit, Global Infrastructure Holding Ltd. to revive the uncompleted 1.3 million tonnes-per-year mill after the collapse of an earlier $3.6 billion 10-year deal with UK-registered Solgas Energy Limited. What we witnessed thereafter was the plundering of the plant’s machinery.
The new strategy
If Ajaokuta will not work, if the adjoining steel rolling mills will not fly, something has to work; something must take its place. A number of steel companies sprang up to fill the gap created by sick Ajaokuta. This had to play out. To do otherwise would have meant turning Economics on its head. The likes of African Steel Mills Limited, African Foundries Limited, Verod Steel Limited and lately, WEMPCO Steel Mill Limited, and several others, came in to fill the gap created by the failure of Ajaokuta and Co.
PAN Steel Group Corporation’s $5bn investment
And only recently, PAN Steel Group Corporation, China, decided to invest $5 billion in a new steel manufacturing plant in Nigeria. The company’s President, Mr Zhang Dade said in Abuja, that Nigeria’s good investment environment prompted his company to decide to invest $5 billion in the new steel plant that will produce 4-5 million metric tons of steel annually.
All these are playing out in the secondary sector of the steel sector. Ajaokuta is a primary sector. The primary sector is steel manufacturing with iron ore as raw material, whereas the secondary sector is cold rolling mill. This has to do with importation of steel ingots and flat sheets which serve as raw materials and recycling of steel scraps which African Foundries Limited specializes in. These are processed into various steel products.
WEMPCO (and perhaps other cold steel rolling mills too) are set to change the story going by revelations at the commissioning of WEMPCO Steel Mill Limited by President Goodluck Jonathan at Ibafon, Ogun State. Mr President assured existing investors in the steel sector of government support “as we collectively strive for self-sufficiency in local steel production”. Said he: “I strongly believe that self-sufficiency will open major downstream sector activities with the attendant massive job opportunities and economic empowerment for our engineers, technicians, artisans, fabricators alike”.
This is a spin-off from the Minerals and Metals Development Road Map, which was presented to the general public, one that stipulates time-bound targets for the Minerals & Metals Sector. This document articulates the strategies to be adopted to ensure the accomplishment of the set objectives of increasing steel production in Nigeria. The target set is three million tonnes of liquid steel production by the end of 2013 which can be progressively increased to 12 million tonnes of liquid steel by the year 2020.
The WEMPCO Steel Rolling Mill is worth $1.5 billion and capable of producing 700,000 metric tonnes of steel annually. According to the company’s group managing director, Lewis Tung, the production capacity of the steel mill represents 65 percent of the 1.2 million of steel used annually in Nigeria, mostly imported. Tung said the mill, which would produce cold rolled (flat steel), would depend on imported steel billets for raw materials “until it could work out how to transport iron ore from Itakpe in Kogi State”. Thus government and private sector players in the steel industry have agreed the private sector which now plays largely in the secondary stage of steel manufacturing – cold steel rolling milling – will now show interest in backward integration. So, if Ajaokuta will not fly, the private-sector steel manufacturers will fly.
In fact, Yung said, “We realise that importing these products costs a lot of foreign exchange and we thought that since the raw materials are available locally, producing them locally will help conserve foreign exchange”.
A challenge to Ajaokuta
The challenge now is to make Ajaokuta work and let there be a linkage to the rolling mills. There are 15 in all. Basir Borodo said, “If you can get Ajaokuta right, WEMPCO and other rolling mills will benefit. The rolling mills and Ajaokuta should integrate. If Ajaokuta is left the way it is now for 5/6 years, the likes of WEMPCO will move and Ajaokuta will never be able to catch up with it.”
Automotive industry
If the automotive policy must work, steel manufacturing is central to it. Making the steel sector to work is therefore a task that we must religiously focus on.
In summary, the strategy should be Ajaokuta playing in the primary sector, and the cold rolling mills in the secondary sector with the primary sector feeding the secondary sector. And this will translate to conservation of foreign exchange, creation of more jobs and boosting of the nation’s GDP.
Update on Ajaokuta Steel Company – N853m Approved For Ajaokuta Steel Company
In April 2022, the Federal Executive Council (FEC) approved the engagement of transaction advisors for consultancy services for the concession of Ajaokuta Steel Company Limited and also the National Iron Ore Mining Complex in Itakpe in favour of CPCS Transform Consortium in the sum of N853.2 inclusive of 7.5 percent VAT.
Lai Mohammed, the Minister of Information and Culture, revealed this to State House correspondents after the FEC meeting presided over by the President, Major General Muhammadu Buhari, at the council chambers of the State House, Abuja.
Mohammed, who spoke on behalf of the Olamilekan Adegbite, Minister of Mines and Steel, said the move assured hope for the long-abandoned piece of infrastructure.
