Ajaokuta Steel: Spending Much On A Moribund Plant

Ajaokuta Steel: Spending Much On A Moribund Plant

Resolve by the Federal Government to make remediation payment to an Indian company on Ajaokuta Steel Plant project has raised some dust within the country with many thinking such a payment was ill-timed.

The government last week  agreed to pay $496 million to settle part of a multi-billion dollar claim from Global Steel Holdings Limited following the termination of a contract to upgrade the country’s steel plants.

The figure was revealed in a report by Mining.com, an online news medium with focus on the global mining and metals industry.

The Attorney General of the Federation and Minister of Justice, Mr Abubakar Malami confirmed the decision of the government to pay the claims.

After a prolonged dispute, the government had signed a renegotiated concession agreement with Global Steel Holdings Limited for the Nigerian Iron Ore Mining Company, NIOMCO, Itakpe.

The agreement had taken place after years of mediation and there had been hopes that Nigeria would begin to produce steel. But that never happened.

The negotiations for amicable resolution of the Ajaokuta crisis had dragged on since 2008, leaving the country’s steel and industrial sectors largely in comatose.

Malami,  said that the government had managed to get a 91% cut on the original claims of $5.258 billion.

“I pay tribute to President Muhammadu Buhari for his dedication in resolving this problem and wrestling back a crown jewel of our national industrialisation plans rather than leaving the challenge to the future administration to deal with” he was quoted as saying.

Global Steel Holdings Limited, an Indian company, won the concession of the Ajaokuta steel mill for 10 years, but the agreement was revoked when the government accused the firm of asset stripping, a development that led to a court case between the two parties.

To resolve the matter, NIOMCO was reportedly ceded to the GSHL for the remaining period of the concession in line with an agreement reached during mediation.

Global Steel, which is linked to India’s Mittal family, had between 2004 and 2007 acquired rights to Nigeria’s entire state steel industry via five major concessions and share purchase contracts.

The deal also included access to Nigeria’s iron ore reserves and the central railway network. But in 2008, the government of the late President Umaru Musa Yar’Adua terminated the contracts.

Global Steel sought arbitration at the International Chamber of Commerce, Court of Arbitration in Paris the same year.

Between 2011 and 2020, Global Steel and the Nigerian government made several attempts to settle but failed.

Nigeria is said to have been losing billions of dollars in revenue and job creation opportunities for the last 35 years on the project, although the government reportedly  sunk over $10 billion to start milling.

The project, which as far back as 1994 was said to have reached 98% completion, has the capacity to provide direct employment for 10,000 technical staff and indirect 500,000 unskilled upstream and downstream employment.

The steel plant was designed to produce 1.3 million tonnes of liquid steel per annum in phase one, with a built-in capacity to expand its production to 2.6 million tons of flat iron and steel products in its second phase.

The plan for phase three was to produce 5.2 million tons of various types of steel products, including heavy plates and has the capacity to become a major catalyst for the production of industrial machinery, auto-electrical spare parts, shipbuilding, railways and carriages.

There are concerns that such huge sum of money can be channeled to other critical sectors, especially education now that the university lecturers are on strike over non implementation of the 2009 agreement with the government.

We are disturbed like others that despite trillions of dollars spent on the Ajaokuta steel plant over the years, nothing tangible has been achieved. The Ajaokuta steel plant project has become one huge money guzzler over the years even when its plants have remained silent.

AljazirahNigeria urges the government to reconsider it’s stance on the ASUU imbroglio by sourcing funds to keep up to its renegotiated MoU and in the same vein  be circumspect in handling the Ajaokuta project and ensuring that its plants roar to production before stepping down next year. By that, it would have etched its name in gold as the administration that made it happen.