The Nigerian should get out of Ajaokuta Steel Company, sell the place and allow private sector capital and expertise restructure and own it, Financial Expert, Kalu Aja has said.
The Financial said this in a series of tweet on his official twitter handle on the 12th of September, 2019.
See his tweet below…
No Nigerian can visit Ajaokuta Steel Company ASC, see investments of more than $8b rotting in the African sun and not cry. i went there, I cried. what exactly is the problem? if I have written severally on this topic, but today let me do a comprehensive post.
Ajaokuta Steel is massive, 68km road network, 24 housing estates. Some of the estates have over 1,000 homes, a seaport, a 110mw power generation plant. There are 43 separate plants in Ajaokuta alone. It is estimated that if Ajaokuta becomes operational, it will create 500k jobs.
There is no industrialized nation on earth that does not have a steel sector it’s that simple. The Central Bank of Nigeria reports that Nigeria currently imports steel, aluminum products and associated derivatives of approximately 25 metric tonnes per annum estimated at $4.5bn.
Ajaokuta is an integrated steel company, it was designed by the Russian to be self-sufficient to get all its inputs from Nigeria and make steel. Ajaokuta strength is also its weakness, Ajaokuta can only work with all inputs available. A technical post, but please try and follow
Steel is an alloy of iron & carbon. Iron is the base metal in steel, to make steel, you need Iron Ore, Coke from Coal, Limestone as main components. These components are mixed in a blast furnace to make liquid steel which can be long steel for rail lines or flat steel for auto
To give a simple example, look at steel as making jollof rice, iron ore is the rice, the limestone and coke are the pepper and salt the pot is the blast furnace. At a steel plane the blast furnace is ONLY turned on when the steel company is ready to make steel.
Blast furnaces operate continuously and are never shut down. The raw material to be fed into the furnace is divided into several small charges that are introduced into the furnace at 10- to 15-min intervals.
This means everything must be in place BEFORE the blast furnace is turned on, the iron ore, the coal, the limestone, everything, why? Because you do not switch off a blast furnace for another 10 years or however its campaign life is.
Nigeria has all raw materials needed to produce steel including iron ore in Kogi, coal & limestone in Enugu Nigerian iron has very low iron concentration. Agbaja has the largest iron ore deposit in Nigeria with about 2b tonnes but the Agbaja ore has a high phosphate content.
Phosphate can cause brittleness in steel making it to fracture, thus Agbaga was abandoned for Itakpe. Itakpe iron ore has no issues with phosphate but has low iron content. Stay with me
Thus to make steel with Nigeria iron ore, a process called “beneficiation” has to be done to process the Itakpe ores to raise its iron content to meet the required standard for steel production.
Coal? Most of the coal found in Nigeria is non-coking, thus, unsuitable for steel production. coal deposits in Enugu, have no impurities but are non-coking. The good news? Nigeria has abundant deposit of limestone and we have natural gas to provide power
So back to Ajaokuta, what really happened? why can Nigeria not make steel anytime soon? let’s link up the elements 1 Policy Failure: The Ajaokuta contract was signed between the FGN & the Soviet state-owned company, Tiajpromexport (TPE) was scheduled for completion in 1986.
In 2012, the Federal Government launched her backward integration policy. Going forward import licenses for steel products was only granted to companies producing steel locally.
TPE to ensure they could import steel parts for Ajaokuta simply went ahead and built the rolling mills in Ajaokuta BEFORE the actual steel plant was completed, they imported billet from Ukraine to accomplish this.
Ajaokuta was producing steel before the actual steel plant was started. Ajaokuta has a functional rolling mills but no operational blast furnace. Ajaokuta cannot produce steel from basic iron ore found in Nigeria. This is the definition of cart before the horse.
2 NIOMCO: The iron ore in Nigeria earmarked for Ajaokuta is from Itakpe, it has low iron content thus the FG built National Iron Ore Mining Company (NIOMCO) a 2.15 metric tonnes beneficiation plant to process the low-quality iron ore from Itakpe to iron ore suitable for Ajaokuta
Simply put, if NIOMCO does not operate, Ajaokuta CANNOT operate (unless Ajaokuta uses imported iron ore.) as at today, September 2019, NIOMCO is not operational
3. Railway: 15m tonnes of iron ore cannot be moved by road, as it will destroy the roads, thus a railway was to be built from Itakpe to Ajaokuta to take iron ore from the beneficiation plan in Itakpe to the Ajaokuta. Rail link not working today
4. Blast Furnace: The furnace is the heart. It is the pot where the jollof rice will be cooked, however it has never been turned on, why? because there has never been any time Ajaokuta has had raw materials available to ensure continuous day in day out production for 5 years.
Why no raw materials? Because there is no rail to take iron ore from Itakpe to Ajaokuta. Why no railway from Itakpe to Ajaokuta? Because NIOMCO in Itakpe is moribund and not functional thus cannot convert Itakpe iron ore to high grade ore for the furnace in Ajaokuta.
For Ajaokuta to work, she MUST have three key critical paths 1 NIOMCO must be functional 2 Itakpe to Ajaokuta Railway line must be functional 3 Blast Furnace operational All three are not functional, so its clear Nigeria cannot make steel in Ajaokuta for now.
Nothing however stops a corrupt government official from importing billets and running them in the rolling mills. So, when anyone tells you Ajaokuta will soon begin working, ask them, can a steel plant work without NIOMCO, railways and a blast furnace?
Ajaokuta is the only steel plant in the world built by the USSR, sold to Americans, then to Indians, all these teams have come and gone with their own technical style, there have even been accusations of asset stripping by the Indians.
Ajaokuta is Nigeria and probably Africa biggest failure. It has failed. Can it be made to work? yes but the cost to integrate Ajaokuta with her mines and rails can be used to build new smaller modern turn key functional steel mills.
The government should get out of Ajaokuta, sell the place and allow private sector capital and expertise restructure and own it. If you want to make jollof rice and there is no rice the solution is not to keep boiling water without rice but to go and get rice.