In a fresh bid to revive the long-dormant Ajaokuta Light Steel mill, the Federal Government of Nigeria has set its sights on generating approximately N35 billion through local financial markets, amid mounting concerns over the history of failed investments and mismanagement surrounding the Ajaokuta Steel Company.
The Minister of Steel Development, Mr. Shuaibu Audu, announced the government’s plans after a meeting with President Bola Tinubu in Abuja. Audu outlined that the primary focus of the mill would be on producing iron rods to support the administration’s ambitious road construction initiative, aiming to create thousands of jobs across the country.
“The Minister of Works, Sen. David Umahi, has already written a letter through his ministry, guaranteeing that there will be off-takers in the iron rods that are being produced,” Audu stated.
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He said the Minister of Works plans to construct about 30,000 kilometers of roads in Nigeria, requiring an estimated 7 million metric tonnes of iron rods.
“We can produce about 400,000 tonnes of those iron rods in Ajaokuta if we’re able to restart the steel plant. Mr. President gave approval for us to raise money locally,” Audu added.
Discussions with local financiers are actively underway, with finalization expected within the next few weeks to ensure a swift commencement of the project, according to Audu.
Audu also highlighted a joint meeting with the President and the Minister of Defence, Muhammed Badaru, regarding the Ajaokuta Steel plant’s potential role in manufacturing military hardware. A Chinese firm has expressed a commitment to invest $5 billion in the steel sector of the Nigerian economy, as discussed at the G20 summit in India.
However, skepticism looms over the success of this endeavor, given the tumultuous history of the Ajaokuta Steel Company.
To oversee the implementation of this significant investment, a move that is seen as an attempt to allay the concerns, President Bola Tinubu has approved the establishment of a ministerial committee. The committee will include key stakeholders from the government, such as the Ministers of Finance, Trade and Investments, Defence, Solid Minerals, and Steel Development.
A viable project or a wild goose chase?
However, as these endeavors to breathe new life into Ajaokuta Steel Company take shape, questions arise about the feasibility and prudence of such a move, especially considering the troubled history of the plant.
The 2024 budget allocates N4.45 billion to the moribund Ajaokuta Steel Company, with over 90% of the budget earmarked for personnel costs. Maintenance of personnel at the idle steel plant is expected to consume about N4.3 billion, leaving a minimal amount for maintaining power, water, and equipment.
Critics point to the fact that former President Muhammadu Buhari had previously claimed a $400 million investment to “transform” the Ajaokuta Steel Complex. However, this investment has been labeled as another misallocation of public funds, adding to the estimated $8 billion already spent on the idle steel plant over the past 42 years.
The plant’s mismanagement extends to expenditures captured in its annual budgets. Currently, the Transmission Company of Nigeria (TCN) has suspended operations at Ajaokuta Steel Company due to outstanding electricity debts amounting to N33 billion. The TCN order specified that the steel company defaulted on payments to the Nigerian Bulk Electricity Trading PLC (NBET) and service providers.
Economists and experts have expressed shock at the ongoing mismanagement at Ajaokuta, suggesting that unbundling the plant might be necessary.
“There is a need to unbundle Ajaokuta Steel before concession because it is a massive project. Then get the private sector involved, that is, a company with the technical and financial capabilities to manage it. You can decide to concession the power plant, then the machine shop and other segments differently,” Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, said in 2022.
Against the backdrop of its past failures, this fresh attempt to revitalize Ajaokuta Steel Company, and the current economic viability of the project, have been described as a wild goose chase. Only time will tell whether this effort will break the cycle of mismanagement and financial waste that has plagued the steel plant for decades.