“If you don’t have steel, you don’t have a country” – US President Donald Trump
Steel is in the news locally and internationally. In America, President Trump recently slammed huge tariffs on steel and aluminum imports into the US against bi-partisan objections. Typically combative, Trump says he’s ready for a trade war because America is the victim of massive dumping of the two products by other countries based on unfair trade rules that have led to huge deficits. Trump has also cited national security as a factor in his decision. Steel, he says, is so fundamental to America’s economic development and is used in so many security-sensitive areas that America cannot afford to let other countries control its production.
Back home, the House of Representatives is conducting an open hearing into the moribund Ajaokuta Steel industry in Kogi State. Established in the late 1970s during the Shagari administration, Ajaokuta which was meant to play a starring role in Nigeria’s industrial development is today a monument to dashed hopes and missed opportunities. The revelations of massive corruption and selfish politicking at the hearing explain why.
Against this background, the recent commissioning of a one million-ton steel rolling factory complex in Ovwian-Aladja, Delta State built by Premium Steel and Mines Limited is heartwarming news. The event marks a refreshing positive shift in the sad national narrative of failed efforts to develop a vibrant steel industry in the country. It is also the crystallization of the strategic efforts of the Asset Management Corporation (AMCON) to revive the decades-old moribund multi-billion-dollar firm, formerly known as Delta Steel Company (DSC).
Delta Governor Ifeanyi Okowa identified AMCON’s intervention as critical in the turn-around of the revived steel company: “We must appreciate AMCON for the very important role they played in being able to resolve the issues that surrounded the company without which we would not be here today commissioning Premium Steel and Mines Limited, which was previously known as Delta Steel Company Limited.”
Since 2010 when AMCON was established as a key-stabilizing tool to revive the financial system by resolving the non-performing loan assets of the banks, the institution’s actions have help rescue many critical businesses on the verge of collapse and saved thousands of jobs. Its impact has been felt in sectors such as banking, aviation, hospitality and the auto industry amongst others.
The launch of the steel plant is the latest practical result of AMCON’s strong focus on business-rescue interventions under the result-oriented leadership of Ahmed Lawan Kuru who is leading a management determined to maximize AMCON’s role as an asset not only in strengthening the financial sector but the achievement of national economic renewal. Although the efforts to revive the plant were initiated before Kuru’s appointment as Managing Director of AMCON, he has played a key role in seeing it through. Under Kuru, AMCON demonstrated a commendable sense of urgency, prioritized activities critical to progressing the project and provided relevant support to the new owners and stakeholders. These contributed significantly to the attainment of the feat.
Kuru’s proactive management style strengthens the position of AMCON as an asset to the government’s economic growth plan. By driving high-impact initiatives such as the steel plant, AMCON is complementing the Buhari administration’s efforts to revive manufacturing and drive inclusive economic growth by stimulating critical sectors of the economy to create jobs.
Even though, the country has lost a lot of time, the potential impact of this turnaround on the steel industry both in the short and long term is exciting. Take the rolling mill’s start-up capacity of one-million-ton liquid steel for instance. Its products will help considerably to boost and reinforce the industry with quality steel and allied products, possibly cutting down imports, and eventually lowering costs and prices.
The second level of promise and impact is job creation. The new management of the steel firm is targeting at least 5,000 direct and indirect jobs and projects to touch the lives of over 30,000 Nigerians. Besides, the start of operations will of course transform the community into an active business area that would support growth of smaller dependent business in the immediate community and the country at large.
Third is the boost in local manufacturing capacity and the resulting reduction in the amount of steel imports. According to the Minister of Solid Minerals Development, Kayode Fayemi, the country currently spends about N887 billion ($4.5) annually on the importation of steel and aluminum products. The plant working at optimal capacity will help cut this down by a significant measure. This will reduce pressure on scarce foreign exchange used to finance the imports.
AMCON’s intervention and the resulting turnaround of the Delta Steel company is therefore momentous and should excite not only industry players who will be the direct beneficiaries, but also the government policy drivers because of its potentially game-changing impact of steel on the industrial development of the country. The nexus between steel and development has been established going by the experiences of advanced countries in Europe and the West. For instance, the rise of the steel industry in the United States was a prime catalyst for America’s growth as a world economic power. The story is the same across all advanced countries in the world. And it is this knowledge that inspired the establishment of the Delta Steel plant in the first place.
So, what went wrong? Like many failed government enterprises, the story of the Delta Steel Company is not any different. The company was established in 1979 and launched in 1982 at the cost of $1.89bn as a fully equipped and integrated steel plant with a lot of promise. In fact, it was designed to be the flagship of steel development in West Africa. Till date, no other steel plant has the range of steel processing equipment and facilities that the plant was fitted with. When the plant commenced operations, it had over 3,000 employees. It boasted competent staff, with the management led by Fred Brume, a Stanford-trained chemical engineer who was recruited from the World Bank. At its peak in the 1980s, the plant was producing over 200,000 metric tons of liquid steel and playing the role of a major supplier of steel and allied products to the rolling mills in Katsina, Jos, Osogbo, and the controversial Ajaokuta steel mill.
However, not too long after, things took a turn for bad as mismanagement and corruption set in. The foreign manager was relieved of his job and replaced with local managers. Despite the functioning of the plant, production standards plummeted, and things turned awry. Early signs of decay had started setting in due to the sharp practices of civil servants and the laxity of government. By 1997, the one-million tonne capacity steel plant could hardly produce a single billet and had racked up several months in unpaid workers’ salaries and bonuses totaling about N11billion.
The first attempt to sell the company in 2005 to Global Infrastructure Nigeria Limited (GINL) did not help matters. In fact, it worsened the state of the company. GINL used assets of the company to get loans totaling over N31 billion from Nigerian banks. The sale was revoked in 2008 by the Yar’Adua government. AMCON later stepped in and took control of the company when it was glaring that the company was bankrupt and could not pay the loans to the banks.
At the time AMCON intervened, Delta Steel was literally a dead company. The company that was designed to serve as a pillar of Nigeria’s industrial growth had plunged from peaks of efficiency to a sorry state of non-production. Several years of mismanagement, corruption and financial recklessness had drained life out of the firm and left it choking on the throes of death.
One of the first actions AMCON took was to appoint a competent management to oversee efforts to stabilize the operations of the company and to coordinate the eventual sale of the company to the highest bidder. It was this transparent sale process that produced the new owners, Premium Steel and Mines Limited. The technical readiness, financial capacity, and determination of the investors to commence and sustain full operations inspire hope of a new chapter in the sad history of the former Delta Steel Company and by extension the country’s quest for steel development.
The second important action was tackling the longstanding problem of unpaid workers’ salaries. Last year, AMCON concluded a staff verification process after which it paid the salaries and gratuity arrears of the ex-staff. This brought relief to traumatized ex workers. It has been reported that some of the staff got as much as N2.1 million in the payout. Over 1,600 staff were screened and paid in the exercise. Although the payout was far less than what the workers were being owed, it is still significant that they eventually got something considering the fact the company was in fact insolvent.
The launch of the factory is the first in a series of plans to overhaul, revive and transform the company by its new managers. The hope is that despite challenges, these would be executed in a timely manner and the palpable excitement and expectations in the market will be sustained and met. This is clearly not where we should be now. We have lost decades already.
Indeed, AMCON’s successful takeover, management, and transparent sale of the long-troubled company to a competent operator has kept the country’s hope for a strong steel industry that will power national development alive. AMCON’s strategic interventions have not only helped to prevent the colossal loss of a multi-billion dollar national asset but also provided a solid launch-pad for the growth and eventual expansion of the country’s steel industry. This includes saving time to start all over. The near-death state of the Delta Steel Company and its managed come-back as Premium Steel Rolling Mill, invigorated and poised to impact the steel industry, is a metaphor for the important work that AMCON is doing as an agent of economic growth.
Cletus Adole
Adole is a public policy analyst based in Lagos
