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Reviving the steel sector in Nigeria



FG has assured me that Ajaokuta Steel Complex is not up for sale— Yahaya Bello

The momentous discovery of oil in commercial quantity at Oloibiri in Bayelsa State in 1956, apart from the attendant political effect has had a dual impact on the economic fortunes of Nigeria. On the positive side, the discovery of oil was a boost to government revenue and foreign exchange earnings. On the other hand, the impact of the government attention to the oil industry has had a “crowding out” effect on the other sectors, notably Agriculture that was the mainstay of the economy prior to the discovery of oil and the solid mineral sector which exploitation actually predates the discovery of oil. It has been acknowledged by scholars and analyst that the growth and development of Nigeria economy have been lethargic due largely to non-diversification of the economy. Though, Nigeria has the potentials of becoming a global economic super power but lack of deserved attention to other sectors is impeding the growth of industrialization and other factors that drive national productivity.

However, it may not be entirely correct to say that the government has overlooked the other sectors for there has been identifiable government interest in the development of other sectors over the years. In particular, there have been government investment in solid minerals and steel sector because of its strategic importance but implementation of the designed policies to revamp the sector has been in fits and starts.

A peep into economic history reveals that the industrial revolution in Europe was the after effect of the use of coal and development of iron and steel works. Therefore, it is a fact that a vibrant iron and steel sector is necessary for the infrastructural and technological development of any nation.

Thus, in realization of the strategic importance of steel sector in our quest for industrialization and economic development, the various Nigerian governments have shown interest in steel development since the first Republic. The exploration of iron ore began in Nigeria in the 60s and culminated in its discovery in commercial quantity at Itakpe in 1972 and the establishment National Iron Ore Mining Company (NIOMCO) in 1979. The development of the Iron and Steel sector was a key item in the second National Development Plan with the establishment of National Steel Development Authority (NSDA). But, Nigeria actually came close to realizing her dream of establishing a viable steel sector at the tail end of the Third National Development Plan when the contracts for the establishments of government-owned integrated steel companies and steel rolling mills were executed. The contract to build the two integrated steel plants at Aladja and Ajaokuta and the establishment of three steel rolling mills at Oshogbo, Jos and Katsina were consumated. While the Aladja steel plant was completed and commissioned on schedule in 1981, the Ajaokuta steel plant was never completed till date, forty years after the contract for its construction was awarded in 1979.

Again, the government in its quest to properly regulate, promote and attract investment in the solid minerals sector established the Ministry of Solid Minerals in 1985. There was attempt to divest government holding in the steel sector in order to improve efficiency and reduce wastages through privatization of the state-owned steel companies but that did not improve the fortunes of the steel companies. Mineral Mining Act (MMA) of 2007 and the Nigerian Minerals and Mining Regulations (NMMR) of 2011and other regulations were designed to give a legal framework to the issue of mining in Nigeria.

But regrettably, after over fifty years of activity in the iron and steel sector, Nigeria is yet to have the deserved thriving steel sector in spite of the humongous amount invested in the sector. And despite the huge potentials and availability of solid minerals in Nigeria the contribution of the sector to the GDP over the years is less than 1%. Despite the huge investments in the sector, the Ajaokuta Steel Company has failed to take off while Delta Steel Company at Aladja and the three state-owned rolling mills in Oshogbo, Jos and Kastina are moribund, working below their installed capacity. The steel rolling mills depend on imported billets which come at a huge cost due to the inability of the integrated steel companies to function. The privately owned rolling mills now depend on recycling metal scraps. The attempted privatization of the steel companies did little to revive them as the privatization process was marred by irregularities. Other mining activities in the solid minerals sub-sector are in small holding as illegal mining and communal clashes are commonplace.

The poor performance of the Nigerian steel sector is the result of unfortunate combination of many factors ranging from: inadequate funding, poor policy engineering, bureaucracy, corruption, weak institutional framework and capacity, political influence, poor planning and implementation, external interferences, international politics, technical challenges, inconsistencies in policy implementations, Illegal and informal mining, communal clashes, and operational challenges. While it may not be necessary to go into details about these challenges, it is pertinent to note that the siting of the steel plants and the rolling mills were done out of political manipulations rather economic consideration or national interest. The spatial location of rolling mills and the integrated steel companies that is supposed to supply them billets, created huge operational and logistics challenges.

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Indeed, there is no better time than now when the economy is in the doldrums to revive the steel sector. There is rising unemployment, instability in oil prices and declining oil revenue. The demand for oil export is threatened by developments in bio-technology and less emphasis on fossil-fueled automobile by Western countries. There is need for multiple streams of income to the national treasury in the face of declining revenue, declining Foreign Direct Investment and unfavourable Balance of Payment problem. Instead of wasting resources on oil prospecting, the country should do proper scenario analysis and prepare for life without oil and the steel sector is a viable alternative.

Potentially, Nigeria is blessed with all the raw materials required for steel development including iron ore, coal, natural gas and limestone and other ferro-alloy minerals such as columbite, manganese, nickel, molybdenum etc. And statistically, Nigeria has a large domestic market for steel products as it imports about five million metric tonnes of steel valued at over three billion Dollars annually. The struggling local steel rolling mills recycling scrap metals could only supply less than 30% of domestic needs.

In this connection, it is therefore heartwarming to hear from the Minister of State for Mines and Steel Development, Dr. Uche Ogah in the news recently about the plans by the Federal Government to revive the Ajaokuta steel Company. It is indeed a welcome development. Reviving the Ajaokuta Steel Company will be a great boost to Nigerian economy currently experiencing a downturn. It will revive the other rolling mills by supplying the rolling mills billets for their operation and reduce the huge import expenditure on steel thereby creating a thriving steel sector. A flourishing steel sector will have a positive multiplier effect on the whole economy. It will have a good impact on the construction sub-sector and infrastructural development of the country. In addition, there will be boundless opportunities down the value chain that may lead to the much awaited industrialization take-off. Moreover, there will be employment generation and the creation of jobs will have positive socio-political effect. Clearly the potentials in the iron and steel sector if properly harnessed, would give the nation’s economy the much-needed push.

Generally, the beneficiation of iron ore and the processing of steel and its allied products require massive deployment of resources, unalloyed commitment and dedication, and sincerity of purpose and above all the political will to follow through the designed policies and programmes of action. In this regard, the government should do a proper diagnosis, involve experts, critically appraise our current position, make intelligent and proactive future projections, plan accordingly, invest properly and do proper stakeholders’ engagement in order to have the desired result.

By Gozie Irogboli…

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