COMMUNIQUE
IRON AND STEEL DEVELOPMENT STAKEHOLDERS’ WORKSHOP ORGANISED BY THE NIGERIAN SOCIETY OF ENGINEERS (NSE) ON THE THEME “IRON AND STEEL PRODUCTION IN NIGERIA – A PARADIGM SHIFT IN POLICY AND INVESTMENT PRIORITIES”
The Preamble:
The Nigerian Society of Engineers (NSE) organised a 2-day Stakeholders’ Workshop on the theme “Iron and Steel Production in Nigeria – A Paradigm Shift in Policy and Investment Priorities”. The workshop was held on 6th and 7th October, 2015 at its Main Auditorium, NSE National Headquarters, Abuja under the Chairmanship of the President of the NSE, Engr. Ademola Isaac Olorunfemi, FNSE. The main aim of the Workshop was to articulate the issues surrounding the iron and steel development in the country and develop a roadmap/template that is technically and economically feasible for the sector.
The specific objectives of the workshop include defining the situation; identifying priority areas of work, especially in policy and investment; developing work plans for each identified priority area; developing a networking mechanism between professionals and government organs and developing a roadmap/template that is technically and economically feasible for the sector.
Opening/Attendance
The workshop was declared open by the Secretary to the Government of the Federation, Engr. Babachir David Lawal, FNSE. It was attended by various stakeholders from the Industry, Academia, Private Sector, National Assembly, Ministries and Parastatals. Notable personalities in attendance include: the Permanent Secretary Ministry of Mines and Steel Development, represented by the Director of Steel, Mr. Also Abdullahi; Sole Administrator of Ajaokuta Steel Company (ASCO), Engr. Joseph Isah; Director General of the National Automotive Design and Development Council, Engr.AminuJalah FNSE, Director General of the National Metallurgical Development Centre, Engr. Prof Ibrahim Madugu FNSE; Project Director, Revenue Mobilization Allocation and Fiscal Commission, Engr. Dr. Friday Eguche MNSE; Deans of Faculties of Engineering, Prof. Stephen Mallo, Prof.A.G.F.Alabi, Prof Jacob Jatau, Prof. David Esezobor, Prof.K.Abubakre, Prof. Emmanuel Anyanwu, Prof. O. B. Oloche; two members of the House of Representatives, Hon. Abdullahi Bello and Hon. AliyuMadaiki; Representative of the Managing Director of the Bank of Industry, Engr.KolawoleAdewole MNSE,(the Group Head Engineering and Technology); The Executive Secretary General of the African Iron and Steel Association, Dr. Sanusi Mohammed; former General Manager of Nigerian Export Processing Zones Authority (NEPZA), Mr. David Chun-Guang; Representative of the President of Nigerian Metallurgical Society, Engr. Dr. EdekiMudiare MNSE; President of Iron and Steel Senior Staff Association of Nigeria, Comrade OtoriSalisu Maliki; the CEOs of KOCH Nigeria Ltd., Engr. Sir David Osunde; TOTAL Steel Ltd, AlhajiHussaini Abdulrahman and Engr.Abiodun Abe of BUA Group, among others. A total of 145 participants were in attendance.
The Keynote Address was delivered by the Secretary to the Government of the Federation (SGF),Engr.Babachir David Lawal, FNSE and 3 Lead Papers were presented by Engr. Ibrahim KhaleelInuwa, FNSE, FAEng, OFR (Past President, NSE (1988 – 1990), Member Monitoring Committee to ASCO and National Iron Ore Minerals Company(NIOMCO) Concessions (2006-2008), Member Interim Management Committee to ASCO and NIOMCO (2008-2013); Engr. Dr. Edward Chukukere (former Project Director/CEO ASCO and former Executive Director, Technical Services, Delta Steel Company, DSC and former General Manager/CEO of Niger Steel Company Ltd) and Engr. Prof. Steve NwachukwuOjobor FNSE (former Assistant General Manager, Construction and Erection of DSC and later Deputy General Manager, Engineering and Technical Services). A comprehensive discussion of the papers and 7 syndicate sessions took place after the presentations.
Observations:
The Workshop made the following critical observations pertinent to Iron and Steel Production in Nigeria.
The iron and steel sector in developed economies is the highest employer of labour due to its multiplier effect on the economy and hence is treated as a STRATEGIC SECTOR of the economy.
The lack of coherent, well-articulated and consistent iron and steel development policies and plans in Nigeria, which strategically interface with other developmental policies such as:
– Employment generation
– Peace and security
– Economic diversification
– Wealth creation
Currently, over 2.3 trillion naira is expended annually on the importation of Iron and Steel products into the country with the subsequent negative effects on the national economy, resulting in:
– Significant expenditure of foreign exchange
– Exportation of jobs
– High cost of infrastructure projects
Given the significance of iron and steel as a critical enabler of industrial development, employment creation and foreign income earnings, it would amount to gross error and misplacement of priorities for Nigeria to side-line such a vital sector.
The Ajaokuta Steel Project is more than a conventional integrated iron and steel plant, but a complex metallurgical industry with the potential of stimulating economic activities through the establishment of downstream and ancillary industries. The project was initially meant to be an industrial hub of Nigeria in particular and the West African sub-region in general, occupying 24, 000 hectares. The project comprises an integrated iron and steel plant, (installed capacity of 1.3, 2.6 and 5.2 million metric tonnes of crude steel annually for the 1st, 2nd and 3rd phases respectively) and allied industries (occupying 800 hectares), training centre, comprehensive engineering workshop, machine tools, etc similar to Steel Works in Donbas industrial zone of Ukraine
The Federal Government stopped providing the needed funds for the completion of Ajaokuta Steel Complex in 1994. This accounts for the various references to the complex as idle, moribund, ailing and comatose after attaining 98 % technical completion status.
The privatisation of Government owned steel companies such as the Delta Steel Company, Jos and Oshogbo Rolling Mills has not achieved the expected private sector level of efficiency and performance.
The nation’s public steel sector, especially the Ajaokuta Steel Project (ASP) is not mature for privatisation due to the huge capital investment required and the absence of supporting infrastructure. Therefore, any attempt to privatise ASP at this stage of its non-completion and non-removal of the factors mitigating growth and development of the sector will not yield the desired results.
The privatized downstream inland rolling mills, except DANA Steel Ltd in Katsina, are not in operation and are currently kept under lock and key.
The role of the Bretton Wood Institutions (i.e. International Monetary Fund and World Bank), was inimical to the development of the Ajaokuta steel plant.
The decision to use the Blast Furnace – Basic Oxygen Furnace process route of Ajaokuta Steel Company was largely informed by the fact that it is the most efficient and enduring technology that is employment friendly with the potential of stimulating downstream and ancillary industries and manufacturing of spare parts, etc. which will benefit the country tremendously.
The blast furnace technology is the optimal and dominant technology for large scale production of crude iron. Today, over 70% of world steel production is derived via the blast furnace technology.
The factor of the initial high investment cost of BF – BOF technology is cancelled out by its high efficiency and low operating cost per ton of hot metal.
Various research works from universities, Nigerian Geological Survey Agency, the National Metallurgical Development Centre, the National Steel Raw Materials Exploration Agency, Russia and France have established the availability of coals at Lafia-Obi and Lamja and other locations which could be blended with imported coals to produce metallurgical grade coke.
Federal Government economic blue print of year 2010 enunciated in its Vision 20: 2020 that for Nigeria to take its pride of place amongst the top 20 industrialized nations, Nigeria should be producing not less than 12 million tonnes of liquid steel annually, with Ajaokuta Steel and Delta Steel plants contributing 7.2 million tonnes by the year 2020. Sadly, inadequate or lack of support, commitment and political will by government for public and indigenous Iron and Steel production is increasingly rendering this target unachievable.
The Nigerian Metallurgical Industry Bill 2014 passed by the 7th National Assembly but not yet assented to by the President does not satisfy the aspirations of the stakeholders because it is not responsive to the issues critical to the development of the industry.
There are inadequate and uncompleted transportation infrastructure such as railways, waterways, roads, and air transportation, for the conveyance of the raw materials from source to the processing plants as well as for evacuation of finished products.
There is in existence the Nigerian Content Development Fund estimated to be over $540 million US Dollars with Central Bank of Nigeria as at the end of April, 2015 and it is projected to hit $700 million US dollars by the end of the year 2015.
Significant human resource capital required for the realisation of a Nigerian steel industry has been developed over the years and many Nigerians were trained in various countries such as defunct USSR, India, Japan, Bulgaria, Austria, etc. However, this resource has been largely depleted due to age and brain drain to other sectors.
The absence of synergy between the government agencies, industry, academia and research institutions is inimical to the sustained development and growth in the sector.
Recommendations
The Federal Government of Nigeria (FGN) should consider the role of iron and steel production as a critical enabler of industrial development, employment creation, diversification of economy and therefore ensure that a clear vision and roadmap for the development of the steel sector is articulated and implemented as a NATIONAL EMERGENCY.
The FGN should note that the iron and steel industry is not amenable to an over-hastened private sector take-over because of its capital intensive nature, massive infrastructure supports and high susceptibility to policies and global market situation. The FGN should only consider the privatisation option upon successful completion and commercialisation of the Ajaokuta Steel Project.
Within the context of diversifying the national economy and generating employment, the FGN should, as a matter of urgency, expedite the completion and commercialisation of the Ajaokuta Steel Project and resuscitation of National Iron Ore Mining Company Ltd, Itakpe. In particular, funds should be provided for the reactivation of 40 completed units and the completion of the remaining 3 units of Ajaokuta steel plant.
The FGN should ensure the identification and early completion of the under listed projects associated with the eventual completion and commercial operation of Ajaokuta Steel Project:
• transportation infrastructure (Rail lines on Itakpe – Ajaokuta – Warri; Jakura – Ajaokuta and Osara – Itakpe to facilitate the transportation of Iron Ore, limestone and dolomite);
• access road to mines/ rail sidings and inland waterways;
• rehabilitation of Okene – Ajaokuta dual carriage way;
• effective waterway (routine dredging of the River Niger for the provision of bulk materials handling facilities at the ports);
• roads and waterways that link the project sites to raw materials sources and the markets must be prioritized within the framework of the National Integrated Infrastructure Master Plan
• open up and develop local mines to assure unfettered availability of relevant raw materials.
The Federal Government should fund the completion of the Ajaokuta Steel Project as a national infrastructure project and commercially viable units unbundled and operated by the private sector as a strategy of ensuring world-class efficiency.
The Government should ensure that there is a proper Due Diligence on prospective bidders for the acquisition of Delta Steel Company Ltd to ensure that only companies with the requisite technical and financial capacity acquire the company. The share purchase agreement for the asset should provide milestones for the rehabilitation and restoration of the steel plant back to its optimal capacity utilisation and further expansion, failing, which the Government reserves the right to re possess the company.
The Government should review the current status of the dormant inland rolling mills at Jos and Osogbo and invoke any of the relevant terms and conditions of the divestment for the purpose of reactivating the companies for the good of the nation.
There is a need to withdraw the Nigerian Metallurgical Industry Bill 2014 which was passed by the 7th National Assembly, but not yet assented to by the President because it is not responsive to the needs of the development and sustainable growth of metallurgical sector.
As an imperative for effectiveness and efficiency, organisation, coordination, regulation, inspection and monitoring of metallurgical activities in the complex and high tech iron and steel sector and its related raw materials development in Nigeria, the FGN should promptly establish:
– Upstream Metallurgical Enterprises Development Agency
– Downstream Metallurgical Enterprises Development Agency
– Metallurgical Research and Development Agency
– Metallurgical Industry Regulatory Commission
– Metallurgical Health, Safety and Environment Bureau and
– Metallurgical Development Fund
The establishment of the above institutional frameworks, incorporating existing laws/Acts (such as Act CAP N76 [No 60 of 1979]; Act CAP N77 [No 49 of 1992] and Act CAP N60 [No 50 of 1992]) will be solely responsible for iron and steel production, metallurgical sector development and growth, and charged with planning, implementation and monitoring of all concerns of iron and steel production. These agencies will strengthen, consolidate and upgrade the existing organisations: National Steel Council, National Steel Raw Materials Exploration Agency, National Metallurgical Development Centre and Metallurgical Training Institute. Although these agencies are governmental, they will bear no financial burden to the government. They will be funded from the revenue of the metallurgical industry channelled through the proposed metallurgical development fund.
The Iron and Steel Development Fund could be used to support entrepreneurs in this sector at very friendly conditions as well as assist in mobilizing funds at all levels of needs for the development of the iron and steel industry.
The FGN should seek for long term “Government to Government” concessionary financing for the implementation of strategic infrastructure projects and on-lending to local entrepreneurs
The FGN should explore all financing windows for the development of the steel sector and this includes but not limited to:
– Nigerian Content Development Fund with the CBN for funding the demands of the sector;
– 1 % of the Federation Account and ¼ % levy on income or turnover of commercial companies and firms of turnout of N4 million and above accruable to National Agency for Science and Engineering Infrastructure (NASENI) fund (CAP N3 Section 20 (1)(a) and (b));
– 1 % surcharges on import of raw materials accruable to Raw Materials Development Fund (CAP R3, Section 6(2)(a));
– 1.6 % of the Federation Account accruable to the Natural Resources Development Fund
– Solid Mineral Development Fund (Section 37 of the Nigerian Minerals and Mining Act 2007);
– Sovereign Wealth Fund;
– PenCom fund;
– Floating of Steel Development Bond;
– International funding options, e.g. African Development Bank; International Finance Corporation; Islamic Development Bank, etc.
It is advocated that the FGN should, without further delay create policy-based Fund for national strategic infrastructure projects (including iron and steel sector) through setting aside at least 20 % of the Federation Account.
The FGN should re-establish contact and initiate negotiation with the original builders, TIAJPROMEXPORT (TPE) now from Russian and Ukraine for the completion of the Ajaokuta Steel Project.
The Federal Government should consider Public Private Partnership (PPP) as an expedient strategy of stimulating the rapid development and growth of the iron and steel sector with particular reference to new metallurgical projects like specialty steels, foundries, forge shops, machines shop and metalworking. .
The FGN should enforce the patronage of domestically produced iron and steel products and by-products in line with the Nigerian Content Policy by incorporating such terms and conditions in the Contract Agreements of key infrastructure projects of government funded by the public sector.
In pursuit of enhancing local content in the steel sector, the Federal Government should review the Contract Agreement with a Chinese firm for rail projects for the purpose of utilising the medium section and structural mills plant of Ajaokuta Steel complex.
The Federal Government should encourage synergy between iron and steel industries, government agencies/parastatals and academia.
The relevant Ministry and Agencies should facilitate the conduct of pilot industrial scale tests of blending of Nigerian coals with imported metallurgical grade coals for steel production at Ajaokuta steel plant.
All past and present research works on iron and steel production should be articulated by the Federal Ministry of Mines and Steel Development and their results utilized for ultimate commercialization.
The print and electronic media should be involved by enlightening our populace on the need to patronise our local steel products.
The Federal Government should work with relevant stakeholders for the development of a “Road Map for the resuscitation and development of Nigerian Steel Sector”.
CONCLUSION
In conclusion, therefore, the participants of the workshop wish to draw the attention of Federal Government of Nigeria and its agencies to the above recommendations.
The Federal Government should set up a broad based Committee of key stakeholders including but not limited to professional engineering firms, representatives from public and private steel companies, academia, relevant Ministries and the Presidency to work out the modalities for adoption and implementation of these recommendations. The Nigerian Society of Engineers is desirous of working with other stakeholders in forging this new initiative with the potential of resuscitating the steel sector and producing a lasting and sustainable impetus for the technological and socio-economic development of the nation. The said committee shall report directly to the Presidency.
The participants expressed profound appreciation to the Nigerian Society of Engineers, the Bank of Industry, O.T. Otis Engineering, Koch Nigeria Ltd. and Ajaokuta Steel Company for sponsoring the workshop. The participants also thanked the Secretary to the Government of the Federation for his moral support. The organizers expressed appreciation to all the participants for their commitment, contributions and cooperation during the workshop.
This Communique was adopted by acclamation at 6 pm on Wednesday, 7th of October, 2015 at the NSE National Secretariat, Abuja, Nigeria.
Engr. Ademola Isaac Olorunfemi, FNSE, FNIM
President