…to import Ukraine iron ore, Guinea coal
…It can’t work for Nigeria –Prof Gaba
After 14 years of legal encumbrances, which is part of the over 40 years of inactivity in the multi-billion dollars Ajaokuta Steel Company, the Federal Government last week reached a deal to pay off $497 million, as settlement for the $5.3 billion claim made by Indian firms, Global Steel Holdings and Global Infrastructure Steel, over the ownership and control of Ajaokuta Steel Co and iron ore mine. However, PAUL OGBUOKIRI reports that the euphoria which greeted that news would be short lived as the plant can’t overcome its foundational challenges and thrive
Designed to fail
Unknown to Nigerians, the Federal Government was aware 40 years ago that it would have to import coal, maybe ore to sustain the Ajaokuta Steel Company. Yet, it went ahead to build an integrated steel factory in the hinterlands and started constructing the costly 850 kilometers standard gauge Warri-Itakpe rail line to convey the materials to the now moribund plant.
Commenting on the recent deal reached by the Federal Government and the Indians, a geologist, Professor Ibrahim Garba, said that the plant’s chances of taking off are slim because it was predicated on a low-grade iron ore, an important raw material needed for the smooth operation of the rolling mill.
Garba, who served as the 14th Vice-Chancellor of the Ahmadu Bello University, Zaria, and also former vice chancellor of the Kano State University of Science and Technology, Wudil, said it is doubtful if the steel plant will work for Nigeria.
Sunday Telegraph learnt that the professor had worked on secondment at the Federal Ministry of Mines and Steel Development, Abuja as Director-General, Nigeria Mining Cadastre Office, where he spearheaded the development and implementation of the Mining Cadastre System in the country.
Garba warned that the Ajaokuta plant may never work because the quality of iron ore in Nigeria is very low, though the country has the ore in abundance.
Because of this, Nigeria had to rely on Guinea’s high-grade iron ore to blend before milling the steel.
He said: “People keep saying that for every government that comes, the minister will collect billions and put it there. The money will disappear and nothing will work.
“This is because Ajaokuta was conceived at a time when we knew little about the issues. The main iron ore deposit for Ajaokuta is at Okene, in one place called Itakpe and the entire deposit is about 300 million tons, which is of very low quality of like 35 per cent, when you need about 50 – 60 per cent to have very efficient steel production.
“At that time, what the Nigerian government did was, having known that the Russians built it for us knowing that the iron ore was poor, they went to Guinea and arranged with one big mine in Guinea that produces very high-grade iron ore.
“In fact, Nigeria took up shares in that mine, so that they can be bringing high-grade iron ore into Nigeria to blend with our low grade to produce the steel.
“That is why they constructed the Alaja-Warri, by the seaside so that when importing the iron ore from there, you come to Alaja and use gas through one technology they called Direct Production and produce steel,” Prof Garba said.
According to him, this material could then be moved by rail from Warri to Itakpe, which explained the purpose of that railway line between the two towns.
“You bring the iron ore from Guinea, bring it up to Ajaokuta and blend with our own. You see, what it means is that if you need about 50 – 60 per cent iron ore, which means if the rock that contains the iron ore is 60 per cent, you have to remove all the remaining 40 per cent. And, if you have 40 per cent, you have to remove about 65 per cent as waste, and you are going to use the same energy to process these two grades of iron ore.
“So, that means you will not be making money because the people that are producing the steel are producing it from higher-grade iron ores, which means your cost of production will be very high. So, you cannot compete.
“That is why for iron ore, we know we have vast amounts of it but of low grade.
We have some that are of high grade around Lokoja, but they have some components that are not wanted and very difficult to remove,” he further explained.
Similarly, many Nigerians took to twitter to debate President Mohammadu Buhari’s feat at removing the legal encumbrance on the steel plant 14 years after late President Umaru Yau’ Adua terminated the concession to the Mittals of India.
Though many expressed happiness over the deal reached by President Buhari with the Indian companies (Global Steel Holdings and Global Infrastructure Steel with headquarters in the United Arab Emirates (UAE), others cautioned that the pay off deal is a further waste of Nigeria’s resources, saying that the Indians bought Ajaokuta Steel plant did asset stripping, because they found out that it’s a scrap.
They said that there is a nagging technical question about the viability of the furnace technology of the Ajaokuta Steel Company, an old technology. “It’s the elephant in the room,” they stressed.
According to them, the USSR built a factory that needed imports from the then Soviet Union (Ukraine) to work. “They knew that Nigerian ore can’t make steel, yet they built it. The only time Ajaokuta made steel was with imported billets from the USSR.
“How eventually will Ajaokuta run effectively without local coal to coke blast furnaces? Our coal is largely non-coking,” they said.
They further argued that, “if Ajaokuta works today; no one will buy its steel because it will be too expensive and uncompetitive in the market because Ajaokuta needs many things to work including massive imports of coking coal from Ukarine.”
Kalu Aja, tweeting under @FinPlantKaluAja1, said; “When I tell people not to invest in Ponzi schemes, their response is exactly what I am reading when people want to invest more in Ajaokuta.
“They hope it will pay. They ignore data and facts and hope that it will work. Save this post; Ajaokuta can’t make commercial steel. Ajaokuta was the 419 of the millennium; we fell Mugu.”
Talking about the initiators of the company, he said, “These were 30-something-year-old boys in military uniforms that wanted to build an “integrated steel plant.
They hoped to use Nigerian iron ore, but the Soviets designed to use Ukraine ore, as well as foreign coal. That is why you have the Warri-Itakpe rail. It was conceived to convey the coal to Ajaokuta. The Nigerian government already bought coal reserves in the Guinea Republic. It is messy.
“Ajaokuta is the most complex project in Africa. It involves imports and infrastructure that Nigeria does not have. It’s like trying to swallow a ship.
“The issue with Ajaokuta Steel plant is complex, even if Federal Government decides to revamp it, we still need to import the major material which is coking coal. The whole thing isn’t viable from the onset.
“If you want to import coal, Ajaokuta must be near the coast, not in the hinterland. Yet you spent billions to build a railway to the hinterland that barges can accomplish at a fraction,” Aja tweeted.
FG upbeat on revitalization of Ajaokuta Steel Plant
In 2019, Buhari ordered the completion of the company, while the Senate in 2020 also passed a resolution urging the Federal Government to, as a matter of urgency, complete the Ajaokuta Steel Plant.
To revive the company, the Federal Government immediately inaugurated the Ajaokuta Presidential Project Implementation Team.
The Minister of Mines and Steel Development, Olamilekan Adegbite, had said that the Ajaokuta Presidential Project Implementation Team would enact a pact reached between Buhari and Russia’s President Vladimir Putin, which required the East European country to assist in completing the project and finding a Russian firm to manage it on Build-Operate-and-Transfer basis.
The minister said that Afreximbank would fund the project with $1 billion, while the Russians would offer $460 million, adding that a Russian firm, MetProm Group, would ensure the completion and operation of the steel company.
However, efforts at concession have failed. There had also been calls on the Federal Government to privatize the company.
The Federal Government halted privatisation move, stating that the problem with the Ajaokuta Steel Company was very complex.
In July, 2020, Adegbite said that the Ajaokuta Steel Company Ltd. would function to capacity before the end of the administration of Buhari.
The minister added that the Federal Government had made efforts to ensure that the Russian company that built the steel industry would come to Nigeria to conduct a technical audit of the company.
But in March this year, Adegbite shocked Nigerians when he said that the Federal Government will no longer be able to revitalise the company in 2022 as it earlier pledged, citing the impact of COVID-19 and the ongoing Russia-Ukraine war.
Adegbite said the project will also likely not be completed by the Buhari administration before it leaves office in 2023.
The minister explained that before the pandemic, the government had successfully convinced Russia, the original builders of the steel complex, to evaluate its status and consider completing the steel facility, but could not proceed with the negotiations due to force-majeure caused by the COVID-19 pandemic.
He said: “Where we are today, we may not be able to get Ajaokuta to work but I pray that we can start something permanent.
“I’ve said it before. When we came back from Russia, yes, I went to the public and said, ‘look we will deliver Ajaokuta before the end of this tenure’. And I pray that I’ll have a chance to go back and apologise and explain what happened to the people before I leave office.
“It is due to no fault of ours. Everybody was ready to go, but unfortunately, COVID came in. So, it is a force majeure.”
Nigeria has pumped more than $10 billion into Ajaokuta Steel Company, a project which began more than 40 years ago but has yet to produce one tonne of steel. Several attempts have been made to bring the plant into production, but without success. It was built to 98 per cent capacity by the Soviet Union’s Tyazpromoexport.
A British company is being lined up to “take over”Ajaokuta and there is a juicy $2 billion fund waiting
Professor Garba stated that it will be suicidal for Nigeria to put any more money into the plant. Rather, we can aim to build a new steel complex.
Also, in the past seven years, the Federal Government continues to appropriate funds to the moribund company, allocating a whopping sum of N30.51 billion to the idle Ajaokuta Steel Company Ltd.
Details of the N30.51 billion is contained in the annual budget of the Federal Government for each of the seven years covering 2015 and 2022 obtained from the Budget Office of the Federation.
Only advanced technology will save the day
According to Prof. Garba, the Chinese have developed a technology that could eliminate the unwanted things in that iron ore.