It is not surprising that the latest initiative of the Federal Government to concession the Ajaokuta steel and Itakpe iron ore companies has also ignited a tempest because the companies have been plagued for a long time by official prevarication, dubious concessions, asset stripping, litigation, and protests by workers and host communities. The House of Representatives and various labor unions are raising objections to a plan by the incoming administration of President-elect Muhammadu Buhari (ret.) to concession the two companies. The controversy is just another chapter in the long and winding history of the steel complexes, which have cost the nation over $8 billion over the past 40 years but have produced no steel whatsoever.
In his eight years in office, Buhari did not succeed in taking decisive action to resolve the quagmire through a transparent privatization process to a reputable global steel sector operator. Instead, on his way out of office, he attempted to further muddy the waters by adding to the confusion. The House of Representatives desires that the proposal be put on hold on the grounds that it is detrimental to the national interest. Abdullahi Halims, a member of parliament, provided the following line of reasoning: “We are also concerned about the timing of the concession arrangement. Why now? Why is there such a rush to sell off such strategically important national assets in such a short period of time—less than six weeks?
In a similar vein, the Iron and Steel Senior Staff Association of Nigeria and the Kogi Heritage Protection Advocacy, a stakeholder group, both voiced their disapproval of the concession arrangements. Eleven businesses, three of which are based in Russia, have submitted their bids for the concession. In addition, the government of Kogi State has filed a lawsuit against the government of the United States of America in an effort to thwart the plan.
The history of the steel industry in Nigeria is a case study in ineffective leadership, corruption, waste, and missed opportunities. Its elaborate integrated steel system is supported by the Ajaokuta Steel Company and the National Iron Ore Mining Company, Itakpe, both of which are located in Kogi State. Other steel companies can be found all over the country.
While previous administrations privatized the Delta Steel Company, Ovwian-Aladja, and three rolling mills located in Osogbo, Jos, and Katsina, Ajaokuta and Itakpe continue to be owned by the state even though they are not in use and continue to cost the taxpayers money without providing any value. Previous governments’ attempts to concession them ended in farcical failure, which prevented Nigeria from reaping the benefits of a robust steel backbone for its economy after investing more than $8 billion.
Concessions, commercialization, and privatization are all concepts that Nigerians, quite reasonably, view with suspicion. Although the National Assembly stated a few years ago that approximately 80 percent of privatized state-owned enterprises had failed or were failing, the Bureau of Public Enterprises has admitted that only 37 percent of the 142 SOEs that were sold between 2004 and 2018 had failed. This admission comes after the National Assembly stated a few years ago that approximately 80 percent of privatized state-owned enterprises had failed or were failing. This is in contrast to the positive outcomes that were seen in other countries, where asset sales resulted in “strong performance improvements, achieved surprisingly without sacrificing employment security,” according to the Journal of Finance.
The workers’ unions in Nigeria are also understandably concerned about their jobs. They argue that the country’s “national patrimony” should not be sold to profiteering investors and point out that previous concession deals have not been beneficial to the nation. These assertions are accurate to some extent, but they do not exhaust the subject of these contemporary economic imperatives.
The liberalization of the telecommunications market resulted in an increase in tax revenue, jobs, and foreign direct investment. In spite of the poorly planned and executed power privatization that took place in 2013, the National Council on Privatisation has just awarded Transcorp Power with a post-privatisation discharge certificate for its successful operation of the Ughelli Power Plant.
In 2003, the administration of Olusegun Obasanjo gave Ajaokuta’s first concession to a relatively unknown company called Solgas. Subsequently, it gave concessions to Global Steel Holdings Limited. Ajaokuta has a tragic history of making treacherous concessions. After further investigation, the NASS came to the conclusion that successive concessionaires engaged in asset-stripping rather than investment and production of goods. Concerned, the government of Umaru Yar’Adua took back control of the ASC in 2008 and awarded GSHL the concession to operate the NIOM for the remaining five years of the concession’s original 10-year term.
It did not work. Instead, Nigeria’s plans for industrialization were a failure to materialize. After that, GSHL pursued arbitration in a London court, where a settlement was reached in which Nigeria agreed to pay the Indian company $496 million.
To be fair, the Buhari regime was responsible for finishing the Warri-Itakpe rail line, which was a necessary requirement for the transportation of raw materials and the steel that was produced. Its promise to resurrect the ASC in 2019 is what brought Buhari all the way to Russia, but it later claimed that the COVID-19 pandemic in 2020 and the conflict between Russia and Ukraine in 2022 derailed those plans.
Since the Buhari-led junta overthrew the Shehu Shagari civilian administration in 1983, the economy in Nigeria has been in a state of stagnation. As a result, Nigeria is currently paying the price for the grave errors committed by its previous governments. During Shagari’s presidency, Nigeria was on the cusp of becoming a major player in the steel industry across the world.
This opportunity has been lost. It is reported that the DSC was sold for $30 million, despite the company having invested $1.8 billion (at 60 kobo to $1) in its construction. Rolling mills are currently in a comatose state. Almost all of the automobile manufacturing plants that were planning to rely on the steel products that were produced domestically have closed their doors.
On every front, Nigeria has been defeated. In addition to the $496 million penalty, the government has been allocating approximately N3.5 billion annually for salaries to idle ASC staff since 2016. In the third and fourth quarters of the year 2021, Nigeria imported iron, steel, and metals with a combined value of N837.76 billion.
According to Reuters, India, which is the world’s second largest producer, shipped 6.7MT in 2022/23. In contrast to this, China only shipped 3.2MT.According to Statista, the industry in the 27 countries of the EU employed 308,675 workers in 2021.
According to the World Steel Association, crude steel production will drop globally to 1.87 million tonnes or 4.2% in 2022. Nevertheless, several countries that started the journey with Nigeria have completed their own projects within a decade. Iran, Venezuela, Saudi Arabia, Brazil, Egypt, South Africa, India, and Argentina are the countries in question here. Egypt, Libya, and South Africa held the top three spots in terms of the amount of 1.1MT that was manufactured in Africa in 2022.
A thorough analysis of the industry ought to be carried out by the incoming government in conjunction with the NASS, the BPE, the NCP, the governments of the host states, the unions, and the communities of the host states in order to save the industry.
Outright privatization is becoming increasingly popular around the world as a result of the numerous advantages it offers, including the following: the government will no longer have to pay salaries to redundant workers; importation will be stopped; new jobs will be created; tax revenue will increase; and the government will save money.
The idea of yet another concession must be abandoned by the government of Nigeria; the only viable alternative is an outright sale.It is important to steer clear of the mistakes that were made in the past that gave privatization a bad reputation.
