Why Ajaokuta steel plant is in a comatose state

Every country hopes (and it is in its best interest) to control their economic means of production. This is done by establishing companies or creating a conducive environment for industries to thrive. The Ajaokuta Steel Plant is one of the several companies set up by the Federal Government to enhance the economic capability of Nigeria in the mines and steel industry.

However, over four decades years later, the project has been abandoned and left to rot away. So, what is the Ajaokuta Steel Plant? Why is such a sprawling project in a decrepit state?

Overview of Ajaokuta Steel Plant

The Ajaokuta Steel Company Limited (ASCL), sometimes referred to as Ajaokuta Steel Plant, is a steel mill located in the city of Ajaokuta, Kogi State. It is the largest steel mill in Nigeria, and the coke oven and byproducts plant is reportedly bigger than all of Nigeria’s refineries put together. Construction on the 24,000 hectares (59,000 acres) site began in 1979. The Steel Plant itself is built on 800 hectares of land. 

The plant was expected to produce safe, sustainable steel and be the leading supplier of quality steel products in all the major economic sectors in Nigeria, including the construction, packaging and wire drawing/nail-making industry. However, the project remains unfinished and has been abandoned 43 years after. Only the light mills have been put into use for small-scale fabrication and the production of iron rods, with the other 75 per cent of the complex abandoned.

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History of the Ajaokuta Steel Company 

First given to the British, a feasibility study for the manufacturing of steel was later carried out by the Soviet Union as part of a partnership with Nigeria. Soviet experts suggested Nigerian iron ore prospecting in 1967 since the known resources were of insufficient quality for steel production. Iron ore of the necessary calibre was found in Itakpe, Ajabanoko and Oshokoshoko (all in present-day Kogi State) in 1973. The Ajaokuta Steel Company Limited was established in 1979, 

The Ajaokuta Steel Plant was conceived and developed by the Federal Government in a bid to erect a Metallurgical Process Plant cum Engineering Complex with other auxiliaries and facilities. The plan was for the steel plant to become an epicentre for the global market and supply the world with materials for iron and steel. As of the time President Shehu Shagari was overthrown by the military in 1983, the steel plant had been 84 per cent completed.

A contract for the construction of Nigeria’s first standard gauge railway from Itakpe to Warri was awarded in 1987, with the iron mines from the Kogi community to be heavily relied upon and used for the railway’s development. By 1998, 40 of the facility’s 43 units had been built, bringing the steel mill’s completion rate to about 98 per cent.

However, four decades after construction started, the Ajaokuta Steel Mill remains underutilised. The Nigerian government regained control in 2016 after multiple failed privatisation attempts. By December 2017, not a single sheet of steel had been manufactured at the Ajaokuta Steel Mill. To produce iron rods and perform small-scale fabrication, the light mills were ultimately put into service in 2018. However, the plant’s remaining three-quarters have been left in ruins, including the large-scale equipment and the internal railway.

Who built the Ajaokuta steel company? 

The Ajaokuta Steel Company Limited (ASCL) was incorporated as a limited liability company in 1979 under Section 2 of National Steel Council Decree No. 60 on September 19, 1979. The facility was built and solely belongs to the Federal Government.

The late Shehu Shagari laid the cornerstone for an integrated steel mill at Ajaokuta while he served as Nigeria’s President in 1980. The steel plant was constructed on 800 hectares of 24,000 hectares of land. 

There are four different kinds of rolling mills used by the steel industry inside the factory, including a mill that makes billets and a mill that makes round, square, strip, and angle metals.

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Why the Ajaokuta steel company has failed

In an interview with a Nigerian newspaper, Professor Ibrahim Garba, a geologist and a former Director-General, of the Nigeria Mining Cadastre Office, expressed concern that the Ajaokuta facility might never operate due to the poor quality of iron ore in Nigeria.

According to him, Nigeria has, over the years, been forced to rely on mixing high-grade iron ore from Guinea, a fellow West African country, before grinding the steel. He claimed that Nigeria will amass billions and place them there for every new government, after which the funds will vanish and nothing will be accomplished.

With hindsight on Professor Garba’s submissions, some of the reasons for the failure of the steel company are:

Policy failure 

The Soviet Union’s state-owned corporation, Tiajpromexport (TPE) and the Nigerian government signed the Ajaokuta deal, with completion slated for 1986. The Federal Government introduced its backward integration programme in 2012. Moving ahead, only local steel-producing enterprises were given import licences for steel products. TPE built the rolling mills at Ajaokuta before the actual steel factory was finished by importing billet from Ukraine to assure they could import steel parts for it. 

As a result, Ajaokuta was producing steel before the construction of the actual steel factory. Therefore, Ajaokuta is unable to make steel from the common iron ore found in Nigeria in her blast furnace, despite having functional rolling mills. This is the definition of placing the cart before the horse.

NIOMCO factor

The National Iron Ore Mining Company (NIOMCO) was built by the Nigerian government to process the low-quality iron ore from Itakpe into iron ore suitable for Ajaokuta Steel. The iron ore in Nigeria designated for Ajaokuta is from Itakpe and has a low iron content. Simply put, Ajaokuta cannot operate if NIOMCO does not (unless Ajaokuta uses imported iron ore). NIOMCO is non-functional at the moment.

Change of plans for railway track operations

A railway track was to be built from Itakpe to Ajaokuta to transport the 15 million tonnes of iron ore needed for the construction, as transporting it by road may ruin the roads.

Itakpe to Ajaokuta is only 52 kilometres away by rail. The rail line was supposed to be completed by March 2019. However, Rotimi Amaechi, the immediate past transportation minister, revised the completion date to June 2018 and changed the railroad from exclusively conveying large goods to transporting people. 

Due to the need to construct passenger waggons and train stops, these alterations required adjustments to the project’s budget and delivery schedule.

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