April 4, 2022/CSL Research
Last week, the Minister of Mines & Steel Development, Olamilekan Adegbite, indicated that the impact of Covid-19 coupled with the ongoing Russia-Ukraine war has taken a toll on fixing the Ajaokuta Steel Company project, initially meant to be completed in 2022. The Russian-Ukraine crisis began shortly after the team in charge got a fund approval of US$2m from the President to conduct a technical audit by the Russian company that built the steel plant to ascertain the level of work remaining to be completed on the steel company.
Meanwhile, we recall that in May 2020, the Federal Government inaugurated the Ajaokuta Presidential Project Implementation Team headed by the Secretary to the Government of the Federation (SGF), Boss Mustapha, with the Minister of Mines & Steel Development as the alternate chairman. According to the SGF, the mandate given to the implementation team was to prepare and submit periodic work plans and develop concession contract terms for reviving the company. As of then, the Minister, Olamilekan Adegbite, indicated that the technical audit would commence once flight restrictions were over. Granted, almost all countries shut down their air spaces, especially in the wake of the pandemic, stopping the Russian experts from conducting the audit. However, the delay in the approval of the needed funds may have been the reason why the technical audit was not done when global economies reopened in 2021.
The Ajaokuta Steel Company is one of the foremost industrial projects conceived after the discovery of iron ore and coal deposits in commercial quantities in Nigeria in 1970. The Steel company with a capacity to produce 1.3 million tonnes of steel per year was designed and built as an integrated plant by the Russian Steel Company, TyazhpromExport, in 1976, after reaching an agreement with the Nigerian government.
By 1983, the project had reached 95% completion and was commissioned by President Shehu Shagari at the time. The agreed plan was that the remaining 5% of the project will be financed using profits generated by the company. However, after almost four decades of several concessions and legal disputes with foreign private companies, the Ajaokuta steel company remains in a moribund state.
Over the years, successive governments have made efforts to revive the steel company, however, such efforts have proved abortive. The failure of the project has been blamed on several factors, with poor management being the leading factor. The project has also not been spared from legal battles as the Federal government had been involved in a legal faceoff with Global Steel Holdings Limited, an Indian firm involved in the failed concession of the Steel Company. In 2016, the Buhari administration settled a pending court case that enabled the FG to take control of the project and accelerate efforts to resuscitate the company. While we applaud the giant strides made by the current administration in reviving the company, the current Russian-Ukraine crisis and the uncertainty around it imply a further delay.
Nonetheless, we believe the steel company has enormous potential given its capacity to become a major producer of industrial machinery, auto-electrical spare parts, shipbuilding, railways and carriages that will lead to job creation and reduce reliance on imported steel.
