Contrary to popular opinion that the resuscitation of Ajaokuta Steel will resolve all the challenges in Nigeria’s steel sector, private sector experts say the complex is no more viable as it has obsolete technologies that cannot compete in the 21st Century market.
The private sector position coincides with a period of woes for Nigeria’s steel sector, characterised by overcapacity at both local and global markets, slowing demand and crashing prices.
According to steel industry players who spoke with BusinessDay, it will require a lot of investments to change obsolete technologies at Ajaokuta Complex into modern ones. They further say the current dwindling government revenue does not guarantee such investment. They add that even if government decides to spend on the complex from now, it will take a number of years to revive it.
“Currently, I am not sure those technologies are competitive in steel making. The world has moved on. What is required now is for the private sector to get more and more involved in the downstream and the upstream segments in the steel business,” said Raj Gupta, chairman, African Industries Group, a consortium of 12 companies, including six steel plants.
An engineer who was part of the development of Ajaokuta Steel Complex, told BusinessDay that the plant is obsolete and needs to be scrapped for a modern plant with newer technologies.
The expert, who has been involved in setting up of similar complexes across Europe and America, said the complex is no longer viable or sustainable.
The story of Nigeria’s steel industry began in 1971 when the Federal Government set up the Nigerian Steel Development Authority (NSDA) with a charge to carry out studies on local availability of inputs. The NSDA was dissolved by Decree No. 60 in 1979, which also created Ajaokuta Steel Company Limited as a successor of NSDA.
The complex was set up to generate important upstream and downstream economic activities critical to making Nigeria an industrial hub in Africa. This prompted the then government to tag Ajaokuta Steel as the “Bedrock of Nigeria’s industrialisation”.
The complex was also set up to supply inputs to other industries in the manufacturing sector. But hopes have been dashed as over $5 billion has been sunk into it without commensurate result.
The poor operations of the complex means manufacturers cannot get steel inputs locally, as they are inexorably forced to depend on the global market for raw materials that could have been obtained locally.
Frank Jacobs, president, Manufacturers Association of Nigeria (MAN) told BusinessDay that technologies and machinery in the complex are obsolete, but cautioned that there are several structures that cannot be done away with.
“I do not wholly accept that it should be done away with. The complex is critical to the industrial development of Nigeria. We need to have an industrial policy in the country,” Jacobs said.
The Federal Government is planning to privatise Ajaokuta steel complex as part of a plan to kick-start its industrial and mining industries, Kayode Fayemi, minister of solid minerals development, said in February.
Russian firm TyazhPromExport TPE is being tipped to complete the complex.
Nigeria’s steel industry is hampered by low utilisation, demand and prices. Low oil revenue and late passage of the 2016 budget mean many steel firms were owed for months, according to Gupta.
Oluyinka Kufile, chairman of steel makers in Nigeria and CEO of Qualitek Industries Limited, told BusinessDay recently that Nigeria needs to support the sector to create hundreds of thousands of jobs and truly diversify the economy.
ODINAKA ANUDU
