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How Ajaokuta Failed For Thirty-nine Years

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Thirty-nine years after Ajaokuta Steel Company was commissioned, the company is yet to produce even a beam of steel. ABAH ADAH takes a look at how the company failed to come on stream till now.

The Ajaokuta Steel Company Limited (ASCL) , popularly known as the Ajaokuta Steel Complex or better still, Ajaokuta Steel Mill in Ajaokuta, Kogi (then Kwara) State became incorporated way back in 1979 with the notion that it would help catalyse Nigeria’s industrial development. In fact, Ajaokuta was envisaged to be the bedrock of Nigeria’s industrialisation. But the most unfortunate thing is that this all important company meant to be the industrial pillar or backbone of the country has remained a dream all these thirty-nine years, even till today in spite of all the efforts purportedly made and the huge sums of taxpayers’ money said to have been sunk into it at one time or the other.

An expert, Engr Christopher Edim, while speaking to LEADERSHIP recently,  has fingered what he described as “monumental failure” on the part of Ajaokuta as a major reason while most of Nigeria’s contemporaries with whom she started the struggle for industrialisation back then have crossed their line, leaving Nigeria far behind as they now rub shoulders with the industrialised countries of the world. There are many white elephant projects in Nigeria, but the Ajaokuta Steel Company is perhaps Nigeria’s most infamous white elephant project.

Following the incorporation of Ajaokuta in 1979, Alh. Shehu Shagari, Nigeria’s president in the second republic, laid the foundation stone of the complex in 1980. However, the Ajaokuta project is, in fact, older than independent Nigeria itself. It was conceived when the government of Sir James Wilson Robertson, the last British governor-general of Nigeria, conducted a feasibility study on the possibility of setting up a steel company in the country.

Many reports passed, and a civil war happened, and the decision by the  Nigerian government  to build the steel plant in its present location was finally arrived. After the one that gave so much hope to successful internal running of the company happened:  In 1972, one year after the Nigerian Steel Development Authority was formed, iron ore was discovered in Itakpe, Kogi State. A Soviet survey team discovered the deposits and in 1975, a contract was signed between the Nigerian government and the Soviet state-owned company, Tiajpromexport (TPE).

“Everyone at the time was so excited about the potential of this project,” said Mr. Badams, a worker in the company since 1985.

“When the Russians were building it,” Badams said, “they built it like they were building their own. They built it so it in a way that would make it almost independent of imports. They were very socialist in their approach.”

According to him,  the steel plant has 43 plants in it. From assembly plants to workshops, and almost everything needed to function can be built there.

Thousands of Russian engineers lived and worked in Nigeria to make this project come to life and in 1983, Shehu Shagari inaugurated the project, though the complex was still not completed at the time. 40 of the 43 plants are now completed.

One Engr Akin, who has been with company for so long said “compared to the amount of progress made between ‘80 and ‘83, not much has happened after that.

“Corruption started to happen, and Ajaokuta became a conduit pipe,” one veteran staff said. “It became an outlet where money meant for this place never really reached here.”

Preliminary market studies were carried out and studies were initially directed towards the feasibility of establishing rolling mills.

However, because of the growing awareness of the availability of iron ore in Agbaja, Udi and other areas of the country, emphasis later shifted to establishing an integrated steel plant.

In 1967, a team of Soviet experts arrived in Nigeria to conduct a feasibility study on the establishment of an iron and steel plant, as a follow-up on a technical/economic cooperation agreement between the governments of Nigeria and the USSR.

In their report, they recommended the use of blast furnace process of iron making. The report also pointed out that the known iron ore deposits in the country were of poor quality and recommended that further geological surveys be conducted to see if better ore could be found.

However, the federal government signed a contract in 1970 with TYAZHPROMEXPORT (TPE), a Russian company, under which they agreed to provide specialised equipment to carry out further geological survey to determine the quantity of the deposits of iron ore, coal resources in the country that could be used for the proposed iron and steel industry.

By 1973, suitable iron ore deposit was discovered in Itakpe, Ajabanoko and OShokoshoko all in the region around Kabba-Okene-Lokoja – Koton Karfe axis, now in Kogi State.

The TPE was contracted to prepare the preliminary project report for the proposed Iron and Steel Industry in Nigeria.

In 1975, during the reign of Murtala Mohammed, the preliminary project report specifying the raw materials base at Itakpe in Kogi plant site location (Ajaokuta), 1st phase production volume (1.3 mmt), process route (Blast Furnace -Basic Oxygen Furnace), Product form (Long products) submitted by TPE was reviewed, discussed and accepted.

TPE was subsequently commissioned to prepare the Detailed Project Report (DPR) on Ajaokuta which was completed and submitted in 1977.

In 1979, Ajaokuta Steel Company Limited (ASCL)/NIOMCO, Delta Steel Company (DSC), among others, were established under Section 2 of National Steel Council Decree No. 60 of September 19, 1979 and incorporated as Limited Liability Companies.

Shagari laid the foundation stone of an integrated steel plant in Ajaokuta on 24,000 hectares of sprawling green-field landmass, built on 800-hectares.

The steel company has four different types of rolling mills inside the plant, such as the Billet Mill which produces billets; the Light Section Mill which produces round, square, strip and angles metals.

The Wire Rod Mill produces wire rods and rebars used in construction companies and production of nails, fencing wire, rope mesh, bolts and nut and netting and the Medium Section and Structural Mill produces parallel flange channels, equal angles, unequal angles and standard channels.

The four rolling mills are bigger than Aladja, Osogbo, Katsina and Jos rolling mills put together, while the coke oven and bye products plant is bigger than all the four refineries in Nigeria put together.

In 1980 to 1983, the administration achieved 84 per cent of Ajaokuta steel plant as the Light Section Mill of the plant was commissioned earlier than the scheduled date, while the Wire Rod Mill was also commissioned in April 1984, earlier than the scheduled month of December.

In 1994, equipment erection work at Ajaokuta Steel Plant reached 98 per cent completion.

With all these achievements, it is highly regrettable and at the same time pitiable  that the gigantic steel plant idea conceived and executed by past leaders had failed to contribute to the development of Nigeria.

The Ajaokuta steel that had reached 98 per cent completion as far back as 1994 had not produced a single steel till date.

The integrated plant was envisaged to have multiplier effects on all sectors of the Nigerian economy such as the industrial, agriculture, transport and construction sectors, among others.

The steel plant was designed to produce 1.3 million tonnes of liquid steel per annum in its phase one, with a built-in capacity to expand its production to 2.6 million tonnes of flat iron and steel products in its second phase and phase three plan was planned to produce 5.2 million tonnes of various types of steel products, including heavy plates.

The steel plant complex also has highly sophisticated assemblage of 43 different plants made up of a web of complex iron, cable and machinery of different sizes and functions.

Out of the 43 plants, 40 are already completed and can produce independently.

Ajaokuta steel has the capacity to become a major producer of industrial machineries, auto-electrical spare-parts, shipbuilding, railways and carriages.

The steel plant’s first phase has the capacity to provide direct employment for 10,000 technical staff and indirect 500,000 for unskilled upstream and downstream employment if it is in operation.

As it stands today, the federal government had spent about $10 billion over 40 years on a project that was meant to gulp $4.6billion, and would require more to complete the about two 3 per cent  of the plant remaining to be completed.

South Koreawhich started its steel construction around the same time with Ajaokuta steel now has a revenue base of over $60 billion per annum and employed over 65,000 staff.

Ajaokuta steel would have done better if it had started production.

According to World Steel Association (WSA) report, South Africa and Egypt produced 6.1 and 5.0 million tonnes of steel in 2016, while South Africa is the 22nd on the list of countries on steel production, Egypt is the 27th.

China, the world’s largest steel producer topped the chart with a production of 808.4 million tonnes representing about 50 per cent of global steel output for 2016, as Japan and India produced 104.8 and 95.6 million tonnes of crude steel to maintain the second and third position on the list.

Virtually all the nations that are playing big globally have enhanced capacities for steel production.

Even those that do not have any of the key mineral inputs needed for steelmaking had over the years developed the capacity to produce steel.

Japan and South Korea, for instance, have no mineral resource for iron and steel, but they rank among the world top 10 countries in steel production.

Nigeria that is blessed with raw materials such as iron ore, coal, natural gas and limestones needed for the manufacture of steel is still struggling with what to do with the dormant plant.

In June 2003, former president, Olusegun Obasanjo, conceded Ajaokuta steel to Messrs SOLGAS ENERGY of USA on a 10-year tenure; in August 2004, the federal government terminated the SOLGAS agreement due to non-performance.

In 2004 and 2005, the Obasanjo administration, again, granted another concession to Global Infrastructure Nigeria Limited (GINL), an Indian company for the operation of Ajaokuta Steel and the Nigeria Iron Ore Mining Company (NIOMCO) at Itakpe in Kogi.

However, the Indian company did not live up to federal government’s expectation in managing the two companies.

Consequently, the late Umaru Yar’Adua administration was compelled to revoke the contract in April 2008, without meeting the requirements of the clauses built into the agreement.

The Indian company thereafter took Nigerian government to arbitration court in London, which also crippled the two firms.

In 2016, President Muhammadu Buhari fulfilled his campaign promise on Ajaokuta Steel by settling the legal bottleneck surrounding the companies out of court.

However, the federal government signed modified concession agreement with GINL to enable the firm to retain the National Iron Ore Mining Company, Itakpe.

The modified seven-year concession agreement was signed on August 1, 2016, while the federal government took over the Ajaokuta steel.

While the federal government was planning to reconcession Ajaokuta steel again, stakeholders in the Nigerian Metallurgical Society (NMS) urged it to complete the remaining two per cent and operate the plant for few years before concessioning it.

Much earlier this year, the ministry of mines and steel directed that the audit be carried out, leading to the setting up of an audit committee by the management of Ajaokuta Steel Company.

The committee, according to the sole administrator/CEO of the company, Sumaila Abdul-Akaba, who presented the report to the minister, comprised experts and other stakeholders from concerned sectors.

Having invested so heavily in the Ajaokuta Steel Complex project for over 35 years without result actually got some well meaning Nigerians worried.

Barely two months after the face-off between the national assembly and the federal government over the ownership status of the Ajaokuta Steel Mill, the report came, affirming that the complex still remains a property of the federal government.

Receiving the report of the audit which was carried out at the instance of the ministry to ascertain the state of the Ajaokuta Steel Complex at the ministry’s headquarters in Abuja, the minister of state, Abubakar Bawa-Bwari, described it as a milestone in the effort to complete and put the steel mill to work.

The minister, who expressed profound joy at the report put together largely by a team of local engineering experts, said he was not only happy that this report was out, but that it was put together by local engineers instead of the usual practice of calling foreigners to come and do it, a trend he said the government was bent on changing.

“This is a milestone, considering the attention that has been generated by the Ajaokuta Steel Plant. Today, we now know where we are, what is missing and what need to be done.

“Am happy to announce that our power plant in the complex that is being test run will soon add to the national grid of electricity, because what we need for Ajaokuta is just 40MW, while the plant is capable of producing a 110mw. So is a milestone in our roadmap. We can now tell what Ajaokuta is worth. If we are going in for concessioning, partnership or whatever, we know the exact value.

“This time we want to avoid past mistakes. We will be observing due diligence in all our steps, and we have to involve transaction advisers, so that mistakes of the past is not repeated.

“When Ajaokuta was being built, most of our universities of technology were not there; and not we have them, some for over 20 years.  So it saddens me when I hear professionals suggest that we call foreigners for something that can be done by locals. I believe today, we are setting a good example on how our own can be used,” he said.

According to the report, the Ajaokuta Steel Complex (ASC) which has generated a lot of concern in recent times is 95 per cent ready, while the fund required to complete and make it operational is estimated at $653 million.

The sole administrator/CEO, Sumaila Abdul-Akaba, made this known while presenting the report to the minister.

He said, “The level of readiness of Ajaokuta now  as regards the internal infrastructure is 95.7 per cent, while the estimated cost of completing it has been put at $653 million,” adding that the amount did not cover external facilities, but the internal infrastructure-the steel equipment, rail and plants.

“What has happened differently is that a lot of vandalisation in terms of underground cables and some transformers has taken place in Ajaokuta. People want to steal some parts to go and sell.

“We also have the conveying belt that runs into kilometres, which are worn and bad due to long time exposure to adverse weather conditions.

“We also looked at the rail track internally and all the shoulders are wood which can last for just about 10yrs. What people use is concrete and not wood any more. So there is need to look into that.

“From our audit, the financial analysis made put the amount required to fully revive the plant is $652m. It covers some essential upgrade as well as replacement of over 3, 000 rotten woods.”

According to him, that sum was not a contract sum but an estimate to cover only the steel equipment and machineries; no external infrastructure.

But Nigerians are in the dark as to when this new hope of reviving Ajaokuta would materialise.


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