July 27, 2020 / 2:11 PM / CSL Research / Header Image Credit: THISDAYLIVE
Last week, the Senate expressed its readiness to work with the executive arm in reviving the Ajaokuta Steel Company project. This was disclosed by the Senate Leader, Yahaya Abdullahi, who led the Senate team on an oversight visit to Ajaokuta Steel Mill and the Itakpe National Iron Ore Mining Company (NIOMCO). This comes despite the President's rejection of a bill passed by the Senate seeking US$1bn from the Excess Crude Account to fund the completion of the Steel Company.
Earlier in May, the FG inaugurated the Ajaokuta Presidential Project Implementation Team headed by the Secretary to the Government of the Federation (SGF), Boss Mustapha with the Minister of Mines & Steel Development as the alternate chairman. According to the SGF, the mandate given to the implementation team is to prepare and submit periodic work plans and develop concession contract terms towards reviving the company. We understand that the revamp of the steel plant will be supported with funds estimated at US$1.46bn from AFREXIM bank as well as Russia Export Centre.
The Ajaokuta Steel Company is one of the foremost industrial projects conceived after the discovery of iron ore and coal deposits in commercial quantities in Nigeria in 1970. The Steel company with a capacity to produce 1.3 million tonnes of steel per year was designed and built as an integrated plant by the Russian Steel Company, TyazhpromExport, in 1976, after reaching an agreement with the Nigerian government. By 1983, the project had reached 95% completion and was commissioned by President Shehu Shagari at the time.The agreed plan was that the remaining 5% of the project will be financed using profits generated by the company. However, after almost four decades of several concessions and legal disputes with foreign private companies, Ajaokuta steel company remains in a moribund state.
Over the years, successive governments have made efforts to revive the steel company, unfortunately, such efforts have proved abortive. The failure of the project has been blamed on several factors with poor management being the leading factor. The project has also not been spared from legal battles as the Federal government had been involved in legal face off with the Global Steel Holdings Limited, an Indian firm involved in the failed concession of the Steel Company. In 2016, the Buhari administration settled a pending court case that enabled the FG to take control of the project and accelerate efforts to resuscitate the company. While we applaud the giant strides made by the current administration in reviving the company, it remains uncertain whether there is an end in sight to years of abandonment.
Nonetheless, we believe the steel company has enormous potentials given its capacity to become a major producer of industrial machinery, auto-electrical spare-parts, shipbuilding, railways and carriages that will lead to job creation and reduce reliance on imported steel. At a time when the FG is exploring alternative ways of diversifying foreign exchange earnings away from oil, the project is also a veritable source of foreign exchange earnings.
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