Imported User:
Mr Dan. D. Kunle is a Business Development Adviser to some leading companies including a Seismic Company based in Lagos. He was an adviser in the privatisation agency - Bureau of Public Enterprises (BPE) and served as STA to the former Minister of State for Gas in the Ministry of Energy. In this interview with Ruth Tene, he proffers solutions to much of the problems bedeviling the sector.
What is your interest in the steel sector?
Steel is the first rare earth material after clay that supports human existence. Clay, Sands, Woods and Grasses, Rock and Iron Ore were the Physical materials that supported man in the beginning and till date, and may remain same for eternity. Water and Air had been the first chemical agent and Sunlight gives photosynthesis. From iron, man invented fire and tools to tame his environment. When I was consulting as a young graduate, I visited many working industries locally and internationally.
The Nigerian industries, such as the Paper Mills, Cement Plants, Sugar Mills, Foundries, Iron Ore mining sites and Auto Assembly Plants were mostly requiring spare parts and auxiliary equipment from Germany, Italy, Japan, Canada and USA. My efforts to procure some of these products exposed me to how important steel were to the survival of all industries. My curiosity got the better of me and I started going to the libraries and calling on the metallurgist in ABU Zaria and Kaduna Polytechnic to know more about steel making process. That was how I knew about, Nickel, Chrome, Carbon, Alloy, Carpenter, Ferro and Non Ferro, Lead-Zinc, Coking-Coal and many other special metal materials that are being used in our daily lives. I visited Ajaokuta Steel Complex severally and I was convinced that it was going to serve as bedrock to the Nigeria industrial revolution. I placed my interest in the completion and the workability of the steel complex all through the 90s.
The Ajaokuta Steel Complex is an integrated one with its in-site and off site facilities. It has Alumina silicate plant, mild steel rolling plants, forge shops, mechanical tools shops, electrical repair shops and one of the biggest Foundries on Africa Continent. I was shocked and overwhelmed with what Nigerian Government and Russia have put on ground. This same steel complex was said to have been completed by the Russians for the Indian Government since 1948. My interest has continued to grow in Iron and Steel and that is why I called on your Publisher on this national debate on whether we should complete Ajakuta Steel Complex or not. My own Verdict is that a Nation without a robust Steel industry cannot be a global player.
What are your impressions of the Nigerian steel sector?
Very bad. This is the case with our education, health, sea ports, railway, housing, oil and gas and almost all the sectors and subsectors have been grounded. I have strong passion for the iron and steel industries because of its strategic importance in nation building. Nigeria with a population of about 160 million needs iron and steel of her own in order for her to make any meaningful economic and technological development.
My impression of the sector today is that of lacking political will to complete the Ajaokuta Blast Furnace Unit which is the heart of the Ajaokuta Steel Complex. I have been very disappointed and I have sympathy for whomever they make the Minister of Mines and Steel development because past leadership have handled this strategic industry as of no importance. Egypt produces about 4% of the total world iron and steel output. Iran produces about 5-6%, Pakistan and India have moved up on the graph, while China, Australia, Canada, South Korea, USA, Russia are the big steel power countries. No nation can flex its muscle or show her strength of influence when she has no steel production competency and capacity. Even in the old empires, black smiths and gold smiths were very powerful people because they produce swords and other tools for war for the Emperors from Iron!
Japan has no iron ore but they import iron ore from Brazil, Peru and Australia, and today Japan is a steel nation because they produce steel on their own. Great Britain, France, Germany, all developed on iron and coal. You will recall that the industrial revolution of Britain and France was based on iron and coal. General Gowon made a bold attempt through the Development Plan authored by Professor Adedeji when he sent a Team to Russia in 1973 to open further discussion and negotiations with Russia to actualise the Nigerian iron and steel industry dream, but since 1984 to date, the dynamics and the circumstances that characterised our political economy has almost wiped off the dream of us having a viable steel industry. Canada has about 4 billion metric tonnes of iron ore deposit as the largest endowed nation in the world and next door to the United States of America which has the number one steel complex in the world; Bethlehem Steel. Now, China BAO Steel is taking advantage of the phenomenal growth to become the number one steel company in the world as they are now the largest iron ore importer and producer in the world. POSCO of South Korea is the third largest steel complex in the world, importing iron ore from Australia, Brazil, Peru and any other source that is competitively cheap for them to import. I am sorry for Nigeria, I am sorry for my generation that knows what makes a nation thick, strong, competitive and prosperous, but yet, the system disenabled us from functioning and putting our talents into the good use for our dear nation.
Going by your knowledge of the sector, what would you say was the cause of the dearth of the sector?
All sectors of the Nigerian political economy have failed. No sector is doing well and no sector is independent of one another. All sectors are important to build a healthy political economy. Iron and steel sector failed because leadership since 1966 also failed. Take education, take railway, take health, take road, take the oil and gas industry, take the banking system, just look across the Nigerian nation and all the institutional framework that make the political economy, which one is not a failure?
In 1995, I hosted a big seminar and workshop both in Lokoja and Ajaokuta Steel Complex to x-ray the fundamental problems on why the Ajaokuta Steel project was poorly attended to. I mounted pressure within my own level of political influence at that time on the Abacha Regime to complete Ajaokuta Steel Complex because I know that the complex was fashioned after the first steel complex that was built in India and commissioned in 1948 by the Russians. When I compared what the Russians built in Ajaokuta to what they built in India, I asked myself; if India got their own Steel Complex commissioned in 1948 and have used it as springboard of their industrialization and the launching pad of their space shuttle; I questioned why everything is like this in Nigeria. All the Tata’s and Mittal’s of the Indian Steel magnates who are now fortune personalities derived their inspiration from the first Indian Steel Project.
Another very sad reason why we recorded failure in the steel sector is lack of consistency in government. I have always believe that you need a specialised Ministry to develop certain sector of the economy and I remembered that President Shehu Shagari tried to do that by having a dedicated Minister in charge of Steel who was virtually residing in Ajaokuta Steel Complex site. This is the same thing we need today if we want our steel industry to work. The railways also need a dedicated Minister, i.e. Minister for Railway Development. We need a Minister for Highway Development, we need a Minister for Water Resources Development who will capture anything water is used for; water for agriculture, deep sea ports and harbours, water for transport etc. This will enable us to mobilise and assemble the best brains to drive the sector to an optima level!
There are many issues that we need to re-address in this country before some of these sectors can ever be made to contribute in accordance to their purposes. The reform agenda we were driving from 1999 at the BPE must be revisited and re-invigorated even though there are other serious constitutional reform issues that the National Assembly also must carry out to enable Nigeria have a harmonious democratic development. Issues such as revenue formular, derivation, proper federal fiscalism, issues such as local government and state relationships. Until all these contentious socio-political issues and constitutional crisis are resolved, we will continue to stupidly carry on like this.
The Iron ore deposit in Nigeria has an average of 30-35 per cent purity which means you must set up a beneficiation plant, i.e iron ore refinery, to enhance the value of the ore, but we are a lucky country by natural endowment and by location, we have good coal, we have natural gas, we have limestone, we have clay, we have magnesium and then we are not far from Guinea Conakry and Liberia where we can easily use our ECOWAS integration spirit to get higher grade iron ore to augment our local production.
Today, River Niger has been partially dredged up to the mouth of the ocean from Baro in Niger State and maintenance dredging is expected to continue henceforth so as to make the river navigable all round the year and this will support Ajaokuta in heavy material movement in and out. The standard gauge railway line from Itakpe; the iron ore mining site, is built to serve Ajaokuta and Delta Steel project in Warri. It was also designed to link with Warri Port for easy movement and handling of bulk materials, such as coking coal and other steel making materials. Without all these arrangements being completed, the failure you asked me about we continue to stare at us. Infact, the railway line was to be continued from Ajaokuta to Ankpa in Kogi State, to Oturpo in Benue State and Lafia Obi in Nasarawa State to connect to mining sites of iron ore deposit, coking coal, magnesium and some other materials from Central and North East of Nigeria. The best limestone for steel making in Nigeria was to come from Calabar via River Niger to Ajaokuta. All these and many others were all planned for, but today we are only discussing our failures and yet we give national merit awards to all the political leadership and civil servants that created these failures.
With USD$513 million needed to complete Ajaokuta, would you not say too much has already been put into this unending project?
I would like to ask; “if you embark on a journey of 100 kilometre and you are at kilometre 90, will you return or stop there when you still have strength to complete the journey?” Because, until you reach kilometre 100, you cannot know what is at the mile end. If Nigerian government has spent USD$4.5 billion to build an integrated Iron and Steel Complex, out of about USD$300 billion they have earned in oil and gas in the last 25 years, then what is USD$500 million to complete the heart of the steel complex which is the blast furnace? Today, one or two or three Federal Government Paratstals can provide that money, such as, Central Bank Excess Fund, NCC Fund, and Ecological Fund etc. Without the completion of the Blast Furnace, you cannot produce steel and without Liquid Steel, you cannot produce bloom and billets of your own. Infact, we need additional money to put the Flat Sheet Plant (Sheeting Plant) because Ajaokuta was designed without Flat Sheet Unit. It may be good just to remind our readers that from 1926 when the first car was built to date, it has still remained a simple metal box hanging on steel structure, whatever type of car you are riding today across the world, it is metal box, hanging on a steel structure. Air planes are being built with special metals and aluminium of certain scientific grades. Polymer from natural gas, as versatile as it has been, has not been able to displace steel and aluminium materials.
There is no amount of investment a nation puts in its iron and steel industry that will be a waste when you have a population such as 160 million people. With good education and training, you will get a crop of talented and innovative people that will turn around the steel sector into a fortune sector down the stream, because the upstream may look unattractive initially, but the value chains of iron and steel remained unquantifiable world over. Take Brazil as an example and compare it to Japan that is importing all the raw materials. The Federal Government should help Nigeria to complete Ajaokuta if they want to create one million or two million jobs within the next 2 to 3 years. I sympathise with Dr. Mohammed of the African Iron and Steel Association, who have spent the good part of his life as a metallurgist in pursuing steel development in Nigeria. The World Bank should not be held responsible for the failure of our iron and steel industry. We should hold ourselves responsible because the World Bank did not ask us not to produce rice and yellow corn in Nigeria and yet we are importing rice and yellow corn for our survival when we have the climate to grow them in excess. The World Bank did not ask us not to produce natural gas in Nigeria, but Bonny LNG is producing 22million tonnes of natural gas per year and exporting it to support the comfort of the developed world, while Nigeria that has 49 per cent in the LNG has no natural gas to power her economy.
We have all the natural resources to build a robust and competitive iron and steel industry which will consequently stimulate the other industries in Nigeria for our economic growth, but appropriate leadership has eluded us since 1966. It has been hope!, hope! hope! And yet failure, failure, failure. So something is fundamentally wrong with us and until we sit down to redraft our constitution and restructure Nigeria into a functional state, nothing will work.
Lacking the work culture, what is the sense in putting in so much money only to have some people destroy it?
The Nigerian socio-cultural heritage encapsulates hard work and reward as the case in China. But along the line, Nigeria lost her work culture and ethics. People don’t work enough as they should but they want huge rewards. This phenomenon now pervades every sector of the Nigerian society. The Public Servant don’t work compared to what they take from the public treasury, the private sector employers have problem with their employees because of lack of commitment from their workers. This attitudinal infrastructure that we lost from the mid 70’s when Udoji Award was introduced has remained a Dutch Fever which no drugs can cure. Today, if we finish Ajaokuta Steel Complex, we can hire Professional Steel Managers anywhere in the world to manage the place for a fee and to help train and retrain our local Nigerian manpower. Until we have a crop of talents that can take over and develop the steel sector further, we should not because of our lost work culture value not complete the steel complex.
When the government of President Olusegun Obasanjo and the then Minister of Power and Steel concessioned Ajaokuta to Global Infrastructure, the idea was to make them manage the complex, but along the line we at the BPE felt we should finalise the privatisation to enable a core investor own at least 70-80 per cent of the steel complex to enable them attract private investment. This privatisation exercise was to be consummated before May 29, 2007 but was not. The concession was alive when the late President Umar Yar’Adua reversed the concession and put an Adhoc Committee. There is nowhere in the world where an Adhoc Committee can run a steel complex like Ajaokuta. The Global Steel Group should have been invited for re-negotiation of their Concession Agreement if the government was having a new agenda for the iron and steel in Nigeria. I don’t think this is late. If I have the mandate, I would advise the government to bring Global Steel back to the table, re-align the concession agreement, tell them what you want to do with the heart of the steel complex which is the blast furnace and ask them to concentrate their activities on the other Units of Ajaokuta Steel Complex that were already in operation. The FGN can also re-negotiate the Itakpe Iron Ore Mining Concession Agreement and the Rail Line. But the most important focus in all these should be how to complete the blast furnace and how to get Ajaokuta Steel Complex working, which will lead to huge employment opportunities in mining, engineering, construction, fabrication, welding and so and so forth. Nigeria needs the steel industry to support her oil and gas development if we are to get optimal value from our natural resources, thus recreating the desired work culture and ethics for the future generation.
There were allegations of corruption in the privatisation processes by the BPE, would you say BPE contributed to the failure of the Steel sector?
The word corruption in Nigeria is already over flogged and used in the most abnormal and absurd ways. Our society does not reward decency and hard work. We only respect and honour people who become rich anyhow and by any means. The great work that we did from 1999 to 2007 at the BPE when we attempted to implement the provisions of the Privatisation and Commercialisation Act can never be discredited in any form or shape for a long time. President Olusgeun Obasanjo and Vice President Atiku Abubakar did their best and gave BPE alll the support you can think of to carry out the essential reform agendas, sector by sector of the economy including the telecommunication reform that all of us are enjoying today. Mallam Nasir El-Rufai must be credited and applauded for his bold attempt to move Nigeria from a rent-seeking economy to a private production-driven economy.
We worked sector by sector, we carried out an overview and diagnostic review of all the industries in which the government invested the Nigerian public money. We discovered that we were coming from a command economic era when there was competition between the socialist and the capitalist idealogy and for that reason our leadership invested money in every aspect of the Nigerian economy including restaurants and clearing and forwarding agencies. Nigeria Airways, Nigeria Coal Corporation, Nigerian Mining Corporation, Hotels, Guest Houses, all such of things you can think of were driven by the government (the commanding heights). If you were a Minister during those command era of 60’s, 70’s 80’s and 90’s, you automatically become the Manager of the sector in your Ministry. You create policies, you implement policies, you operate the factories, you appropriate the gains and determined whom to sell to; it was a vertical command system.
From 1999 we tried to shift the paradigm but we met with resistance because change is a difficult dynamics of life. The traditional Ministries and Parastatals were not cooperating with the privatisation agency. It took the President and Vice President to preach economic reform before we could achieve what we achieved. It took us in BPE a lot of fights and stakeholders relationship Management to get some of these government enterprises privatised.
The issue of corruption is a reflection of what our society is today. If you are in police, customs, NNPC, anywhere you are in public service, there is a reflection of corruption on all of us, but I can say the corruption cases recorded in BPE from 1999 to 2007 may not be more than 2 or 3 incidences which cannot in any way stain the good job we did. We were the best Federal Government Agency in those eight years in terms of organisational arrangement, work ethics, performance and focus. To abandon economic reform and privatisation is to further put the Nigerian treasury under stress. I believe the current Minister of Finance will advise her current economic management team appropriately.
You mentioned Nigerian Coal Corporation and Nigerian Mining Corporation, yes, these were Corporation set up the same time with NNPC by Law, but we did not any way kill NCC and NMC. We carried out a diagnostic review of their structures and assets, their subsidiaries and associated companies and we discovered that they had invested more money in housing, landed properties and issues that were outside their core business and we recommended that there non-core assets should be separated and liquidated so as to fund there huge pension fund deficit. It is only by an Act of the Parliament that the NCC and NMC can be repealed. We have done our own little part as at that time, but there may still be some other unfinished assignments with NMC and NCC as the case with the entire privatisation programme. We succeeded in concessioning some of the Mining Leases of our coal fields and some Mining Leases of the Nigerian Mining Corporation. The issue of value and proceeds from all these concessioning exercise are subject to debate, but will always be subject to debate, because the present value of money in 2004, 2005 is not the same as today. The valuation of an abandoned quarry plant in 2004, 2005, may not be the same today. The valuation for a Coal Field in 2004 may not be the same today. And therefore, the basis for valuation will continue to vary in accordance to the dynamics of the economic environment. It is better to have 10% of a fortune enterprise than to sit on a 90% of a big enterprise that is not producing and returning dividends.
From your perspective, what hope do you see for the Steel sector in Nigeria?
Let me start by saying I am incurable optimist. It is not late for government to re-negotiate Ajaokuta concession in order to respect the Rule of Law with the Global Steel Group and then revisit the Iron Ore Mining project in Itakpe, and then revisit Russia and Ukraine to see how the blast furnace in Ajaokuta Steel Complex can be completed. It is said to be 10% of the technical configuration of the entire Ajaokuta Steel Complex, but without that 10% you cannot produce liquid steel.
I will advise, and if I have the mandate to work on the side of the government, that we engage Global Steel in a very constructive meeting to sort out whatever legal issues that has arisen and allow them to run part of the complex while the FGN work out a programme of action to complete the project. As we talk today, the natural gas pipeline from Niger Delta to Ajaokuta Steel Complex is functional. This was built during President Shehu Shagari’s regime and the new 36 inches gas pipelines from the same Niger Delta has just been terminated in Ajaokuta to strengthen the old pipeline. I believe that Ajaokuta Steel Complex and the Estate is the midland industrial hub of Nigeria with the completion of the dredging of River Niger and the Obajana Cement Complex on your way to Kabba.
I am aware that the Railway Line from Itakpe to Ajaokuta to Agbor and Delta Steel in Warri and the Warri Port is being completed, but we must put the rail way line from Itakpe to Obajana Cement to maximise the use and the value for both cement, iron ore and other cargo that will support the industrial growth in Nigeria.
Investors are not interested in investing in this sector, what do you recommend?
The Iron and Steel Sector is capital intensive in terms of finance and technology. But it is by the set of government incentives available that will stimulate the interest of investors locally and internationally. Even the most attractive sector world over, which is banking and some other easy sector to make money, when the global melt down and the systemic failure in global economy manifest itself in 2008, United States and some leading economy in the world quickly used the public treasury to create what you heard was called “Stimulus Package” and “Quantitative Easing” to rescue those sectors from total collapse and yet these countries are serious capitalistic countries. Today Nigeria government can create the right incentives for iron and steel, aluminium smelting, coal mining, gas production and gas processing to deliberately stimulate the interest of the investors for the good of the Nigerian people.
Strategically, Nigerian government must empower the Geological Survey Agency and the Office of the Surveyor General to enable them carry out a thorough Scientific Investigation in association with other relevant agencies in Nigeria and abroad for all our steel raw materials, locations, volumes, qualities and production ability. They must be empowered to carry out some detailed studies of the previous work done by the Russians and the British Geological Survey Services who have more Geological Data in their archives than we think of. In South Africa, Australia, America, United Kingdom, China, India, the Geological Survey and the Surveyor General bodies are part of their National Strategic Intelligence institution because of their intellectual endowment and the information they gather about the geology and coordinates of their country. These are the issue we must not wish away in Nigeria if we want to develop in all spheres in Nigeria.
What would you say will be the benefits of developing this sector?
Take Dangote Cement Group and see what they have done with Limestone deposit in Obajana near Kabba in Kogi, Gboko in Benue and now Ibeshi in Ogun State. You can re-create that type of fortunes in 20 places with the iron and steel industry in Nigeria. The value chain of iron and steel industry is so huge that for you to become an emerging nation economically, you need to capture such value chains as the case with Brazil, Russia, India and China. (the BRICs)
It is the bedrock of our industrialization. Japan is importing up to 20 billion dollars of iron ore from Brazil, there is no way you can build ships, cars, rigs, houses etc without iron and steel. As I said earlier, since the day car was developed, it is still a metal box no matter the shape, which means you cannot produce a car without steel. The heavy industries of SAMSUNG, Hyundai and Mitsubishi where big ships and rigs are being produced rely heavily on the iron and steel industries. So how are we going to become a world power or self sufficient if we don’t develop our steel industry. The benefits are enormous!
Finally, may I use this opportunity to personally, for whatever it is worth, in case our leaders are reading this interview, appeal to Mr. President and the Vice President to resolve the hanging problem on Ajaokuta Steel Complex and work out a completion programme for the Blast Furnace. With the iron and steel industry you can generate millions of jobs and you can re-invent agriculture because most of the agricultural tools can be produced cheaply within Nigeria.
