| Nigeria Economy |    1516 VIEWS  |
| Nigeria Economy | |
| 1516 VIEWS | |
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| PROSHARE | |
| PROSHARE | |
Tuesday, October 20,
2020 / 12:21 PM / by CSL Research/ Header Image
Credit: Bloomberg
A Punch report yesterday stated that the Minister of Finance, Budget and
National Planning, Zainab Ahmed, during an inspection tour of the African
Natural Resources and Mines' US$1.5bn steel plant that is nearing completion in
Kaduna State noted that the plant will attract automobile industries to Nigeria
when completed and save Nigeria foreign exchange because importation of steel
will stop. The facility is expected to produce one million metric tonnes of steel
annually. The firm would be mining iron ore to produce direct reduced iron,
which would enable the company produce a higher-grade steel more efficiently.
The steel industry is essential to the industrial growth and development
of any nation. According to stakeholders in the industry, over 95% of the
current steel production in Nigeria is from scrap metal, making the country
currently focused on developing the upstream mining sector. The history of
Nigeria's attempt to develop the steel industry in Nigeria dates back to the
establishment of the the Ajaokuta Steel Project in September 1979. Designed as
an integrated iron and steel complex, the first phase was designed to produce
1.3million tonnes (MT) of liquid steel per annum wth capacity to expand to 2.6
MT and 5.2MT in three phases. The Federal Government also established the Delta
Steel Company in Aladja which was commissioned in 1982, (now privately owned)
with a capacity of 1.0MT per annum. Both companies have however never been
fully functional due to a myriad of factors including poor corporate
governance.
Over the years, successive governments have made efforts to revive the
steel company, unfortunately, such efforts have not produced significant
strides. The ministry of steel and development states that its target is
to increase the contribution of the total mining sector to 10-15% by 2025 from
0.1% in 2019. The major investment case for the steel sector is the abundance
of the raw materials for steel production which include; iron ore, limestone,
clays/silica sand. The Nigeria mining industry also allows for 100% foreign
ownership. The country also has a huge potential for growth in steel demand. According
to the World Steel Association, steel use per capita for finished steel
products stood at 8kg in 2017, significantly below the world average of
214.5kg.
The Nigerian steel company
has enormous potentials given its capacity to become a major producer of
industrial machinery, auto-electrical spare-parts, shipbuilding, railways and
carriages. At a time when the Federal Government is exploring alternative ways
of diversifying foreign exchange earnings away from oil, the project is
also a veritable source of foreign exchange earnings. Self sufficiency in steel
production would also mean conserving the much needed foreign exchange expended
in the importation of steel. With increasing levels of unemployment, the steel
company also has the capacity to employ a large number of the nation's labour
force both directly and indirectly. We are positive that increasing private
investment in modern steel plants will drive the growth of the steel industry
in Nigeria.
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