44 years after the commencement of the construction of the Ajaokuta Steel Complex project that was designed to produce steel and industrialize Nigeria, it remains a work in progress, assuming the age-long status of ‘Almost Ready’.
The news, recently, that the Federal Government is going ahead with a concession process for the moribund Ajaokuta Steel Company as part of efforts to hasten its revival is cheery news. That is in line with President Bola Tinubu’s campaign promise to revamp the conclusion of the construction of the complex.
The FG also hinted at a three-year ultimatum to kick-start operations and production of steel in line with President Bola Tinubu’s directive.
It would seem like Ajaokuta has become a mere object to score political points by politicians, instead of an end to score economic gains for the country because virtually all the regimes since the inception of the Fourth Republic, have failed on their campaign promises to bring the project to life. This is even as the complex has reportedly reached 98 percent completion, gulping approximately $10 billion in the process. The amount pumped into the complex could even exceed $10 billion if the time value of money is factored in.
However, experts say three are salient issues to consider to bring the plant to life. According to Nigerian financial planner and economic strategy consultant, Kalu Aja, a series of policy failures has prevented the Ajaokuta Steel Mill from being completed and put into operation 40 years after its construction first began. Aja contends that three major requirements must be satisfied before the mill can produce steel: the Nigerian Iron Ore Mining Company (NIOMCO) operating at Itakpe must be operational since Nigerian iron must first be processed before being suitable for steel production; the Itakpe to Ajaokuta railway line must be functional to ensure continued supply; and the blast furnace must be operational.
Blast furnaces operate continuously for years at a time without being shut down and thus require a steady supply. Aja concluded that since none of the three requirements are met, the furnace at Ajaokuta has never been turned on because Ajaokuta has never had raw materials available to ensure continuous production.
Speaking with NATIONAL ECONOMY, a metallurgist, Dr. Adebayo Johnson, stated that floating a steel plant the size of Ajaokuta requires a concerted approach from the government or serious investors. He said politicians in the past may not have been fully aware of the degree of concentration and investment, time, and resources required to get the plant rolling out steel.
He advised concessioning the complex to investors who have the wherewithal to embark upon such a huge project.
“Bringing the Ajaokuta Steel Mill in Nigeria to life requires a comprehensive approach involving various stakeholders, addressing technical, financial, and governance challenges,” he said.
Financial economist Dr. Paul, Jakpor, noted that in giving life to Ajaokuta, there is a need to conduct a thorough assessment of the current state of the Ajaokuta Steel Mill infrastructure and equipment and to develop a detailed plan for rehabilitation, modernization, and maintenance of the facilities to ensure they meet international standards for steel production.
“Seek advice and technical expertise from international steel industry consultants and experienced professionals. This could involve partnerships with established steel producers or consulting firms specializing in steel mill rehabilitation.
“Secure the necessary funding for the rehabilitation and modernization of the Ajaokuta Steel Mill. This could involve a combination of government funding, private investment, and international financing from development banks or foreign investors,” he said.
Also speaking, economic affairs analyst, r. Peter Olaleye, stated that if the Tinubu government wants to move away from the rhetoric of promises we have been used to, then there is a need to explore opportunities for public-private partnerships (PPP) to facilitate the rehabilitation and operation of the steel mill. PPPs can bring in private sector expertise, management efficiency, and investment capital while allowing the government to retain a stake in the project.
He also stated that the government should implement policy reforms to create a conducive business environment for the steel industry. “This could include streamlining regulations, improving infrastructure, providing incentives for steel production, and ensuring a stable macroeconomic environment.
“Conduct a market analysis to identify potential demand for steel products both domestically and internationally. Develop a marketing strategy to target key industries and export markets for Nigerian steel products.
“Finally, invest in training programmes to develop a skilled workforce capable of operating and maintaining modern steel production facilities. This may involve collaboration with technical institutions and vocational training centers,” he stated.
A lecturer at Auchi Polytechnic, Zakari Mohammed, said the government should improve infrastructure such as transportation networks, power supply, and water resources to support the operation of the steel mill and facilitate the transportation of raw materials and finished products.
He said the government should also develop a long-term strategic vision for the Ajaokuta Steel Mill, outlining its role in Nigeria’s industrial development and economic diversification efforts. “This should involve consultation with stakeholders from government, industry, and civil society to ensure broad support and sustainability,” Mohammed noted.
Built on a 24,000 hectares (59,000 acres) site starting in 1979, it is the largest steel mill in Nigeria, and the coke oven and by-products plant are larger than all the refineries in Nigeria combined. However, the project was mismanaged and remains incomplete 40 years later. Three-quarters of the complex has been abandoned, and only the light mills have been put into operation for small-scale fabrication and the production of iron rods.
Recall that as early as the 1960s, when Nigeria had money but knew not what to do with it, in the words of a former Head of State, a feasibility study for the production of steel was first awarded to the British, and later undertaken by the Soviet Union under a cooperation agreement with Nigeria. In 1967, Soviet experts recommended prospecting for iron ore in Nigeria, as the known deposits were of poor quality for steelmaking. In 1973, iron ore of the required quality was discovered in Itakpe, Ajabanoko, and Oshokoshoko. The Ajaokuta Steel Company Limited was incorporated in 1979 under President Shehu Shagari who began the project which was 84% completed by the time of his removal from office in 1983. The steel mill reached 98% completion in 1994, with 40 of the 43 plants at the facility having been built.
To supply the Ajaokuta Steel Mill with raw materials and connect it with the world market, in 1987, a contract was awarded to construction company Julius Berger for the construction of Nigeria’s first standard gauge railway, from the iron mines at Itakpe to the steel mill at Ajaokuta, and later continuing to the Atlantic Ocean at Warri. However, both projects have been mismanaged.
In 2002, the federal government, under Olusegun Obasanjo concessioned the project to Japanese Kobe Steel in an attempt at revitalization without much success. In 2004, the project was again transferred, this time to Ispat Industries. The deal was financed by Global Infrastructure Holdings Limited (GIHL) (now Global Steel Holdings Limited, GSHL), which is chaired by Indian steel magnate Pramod Mittal.
The concession ended in 2008 after the government accused GIHL of asset-stripping. GIHL then sued Nigeria at the International Chamber of Commerce. The dispute was initially resolved in 2016, with Nigeria regaining control of the Ajaokuta Steel Mill in exchange for GIHL retaining the Nigerian Iron Ore Mining Company (NIOMCO) operating at Itakpe. In 2022, the Nigerian government paid $496 million to GSHL to settle the claims.
The Ajaokuta Steel Mill still had not produced a single sheet of steel by December 2017. The light mills were finally put into operation in 2018 for small-scale fabrication and the production of iron rods. However, three-quarters of the plant have been abandoned, including the large-scale equipment and the internal railway.
In 2019, at the Russia-Africa Summit in Sochi, Nigerian President Muhammadu Buhari and his Russian counterpart Vladimir Putin agreed on a revitalization of the steel mill with Russian support. A task force within the Nigerian government was set up to revamp the project with funding from the Afreximbank and the Russian Export Center. However, the COVID pandemic delayed and ultimately thwarted these plans.
In January 2024, the Nigerian government announced that it had commenced discussions with Chinese steel company Luan Steel Holding Group to revive the Nigerian steel industry, including the production of military hardware at Ajaokuta Steel Mill.