Nigerian Muse | Obasanjo in Ajaokuta | Nigeria, Africa, and World Insights

"The Federal Government yesterday (Monday, June 30,2003) signed a N468 billion (about US$3.6 billion) agreement with Solgas Energy Nigeria Limited for the takeover of Ajaokuta Steel Plant located in Kogi State," so the story went in several daily newspapers.

However, the value of this story and that of the signing of the agreement on that Monday were overshadowed by the more exciting story on the beginning of a national strike called by the main central trade union in the country, the Nigeria Labour Congress (NLC).

In spite of that, discerning citizens of this country regard the signing of the agreement on the uncompleted but strategic steel-making complex in Ajaokuta as a serious national issue and an apparent achievement, if the positive implications and potential impact of completing and optimally operating the complex on the economic future of this country are considered.

The Ajaokuta Steel Company, which is so large that it has equipment more than those in fifty large-scale cement factories put together under one roof, was started in 1979 and a recent technical audit by the Russians confirmed the integrity of the equipment, that is, 95 per cent are in good condition. The major unfinished part is the blast furnace, or the iron-making pot. It is designed to turn the confirmed deposit of 200 million metric tones of iron ore in the country into consumer steel, using the robust and reliable blast furnace technology. Its initial production capacity is 1.3 million metric tons of primary steel products, but it will be expanded to produce 2.6 million tons of both billets and flat steel sheets in the second stage and 5.2 million tons ultimately.

Most of the more than 20 subsidiary industries attached to the plant such as the foundry, structural shop, machine shops, forge shop, electrical repair shops and rubberizing workshops are already functional.

Industry operators say that the country currently imports 4 million metric tons of primary steel and semi -finished steel products every year.

Mr. Didi Adodo, the Secretary General of the Iron and Steel Senior Staff Association (ISSSA) said in ThisDay of Friday, July 4, 2003 on page 16 that, about US $2 billion is spent per year to import finished steel into the country, arguing that the amount could be used in revamping the local steel sector. With Ajaokuta working, the amount would be saved.

The agreement between the Federal Government of Nigeria and Solgas Energy Limited is many-sided as it includes the completion of staff housing estate at the complex, its water treatment plant as well as the main task of rehabilitating, completion, commissioning and opera-ting of the steel plant. There is also the need to establish an additional gas processing plant and a new gas- fired power station to generate 2,300 megawatts of electricity to be sold to the National Electric Power Authority (NEPA) for the wider Nigerian market.

Sources at the Ministry of Power and Steel said that Solgas Energy Limited would be the sole financier of the project, suggesting that there is no financial implication for the Federal Government, other than pledging the assets of Ajaokuta Steel Company. But a provision in the agreement commits the Federal Government to installing one unit of the just-developed Kobe Steel Fast-met/Fastmelt iron-making technology.

The Nigerian Metallu-rgical Society CNMS) said that this technology is untested anywhere in the world adding that Nigeria would be the first country on earth to experiment with it, if the relevant portion of the agreement is actually implemented.

The agreement provides that after operating the steel plant, the power and gas complexes for ten years and recouping their investment, the whole system would be returned to the Federal Government in good working condition. But if the investment could not be recovered, the ten-year period could be reasonably extended. Also there is provision for the privatization of the company either within the ten years or at the expiration of the term.

Some other advantages in the agreement include the fact that the Ajaokuta Steel Company on which Muhammad Salisu of the Bureau for Public Enterprises (BPE) said the Federation of Nigeria invested US$10 billions and much hope as one of the major springboard for our leap into the technological era on a solid foundation, will remain a national property. The agreement with Solgas Energy Limited is not an agreement to sell it to them, even though it is the energy firm that would pollinate a bank of international standing where the title deeds to the lands and other assets of Ajaokuta Steel Company will be deposited and also have the sole authority to appoint the board and management staff when it takes over the complex soon.

Additionally, it is expected that when it arises from its slumber, the giant industrial complex in Ajaokuta will generate 10, 000 new job opportunities in the main steel plant alone. The gas stripping and power generating plant will directly contribute another 6.000 jobs in an area loudly crying for job opportunities. The immediate results of this will be less unemployment and more prosperity for thousands of Nigerians, who have deep emotional attachment to the steel complex right from its early days.

Another of the expected benefits of having Ajaokuta functioning properly is that the over 30 steel rolling mills scattered across the country would have their capacity utilization raised by sourcing their main raw material loc-ally at the promised lower price than the prevailing spot price on the international steel market.

But as usual in a plural society and in the spirit of democracy, the impressive picture of smoothness and success envisaged by the agreement is questioned by some of the stakeholders and experts in the steel industry. For instance, Dr. Sanusi Mohammed, the Secretary General of the continent- wide African Iron and Steel Association (AISA), doubts the workability of the agreement, which he said is lopsided against the interest of Nigeria. He argued that Solgas Limited of Texas, USA, is not technically competent to finish the plant as the Russians, who own the technology, might not cooperate with them. He said the company does not have the ability to raise US$3.6 billion to finance the completion of the project. It has no record of performance in the steel sector. And it is a minor player in the gas and electricity sector with no clout to make any difference in the country's energy sector. Dr. Sanusi Mohammed also pointed out that the Ajaokuta steel complex has its own power generating plant with a capacity to generate 110 megawatts of electricity, which is now on 50 per cent capacity, thus generating 55 megawatts of power.

The AISA scribe pointed out that it is not possible to purchase and install the heavy mining equipment required to make the mines for the ore, marble, limestone and other necessary inputs for the iron melting pot to be effectively functional and produce steel on sustainable basis in the next 18 months as announced by Mr. Tom Russell, Chairman of Solgas Energy Limited.

"Blast furnace must be operated continuously for at least five years, or seven years without interruption for economic value. This cannot be done when the facilities for delivering the necessary inputs for steel-making on continuous basis are not on the ground", he stressed.

Whatever the arguments are, the fact remains that the Ajaokuta Steel Company is a major national asset, which needs to be made operational in the interest of this country. Nigerians, who deserve to reap the benefits of the giant factory, which over the last two decades cost the nation an enormous US$10 billion, are feeling good.

Salisu Na'inna Dambatta is an Assistant Director (Information) in the Presidency.

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