Nigeria’s steel revamp hangs on Ajaokuta unbundling
Faith Omoboye
The revival of Nigeria’s steel sector depends largely on the unbundling of Ajaokuta Steel Complex, analysts say.
Experts note that the steel complex has become a behemoth that must be broken into parts to enable it to support steel and other ancillary sectors with raw materials.
Manufacturers say that a number of inputs could be obtained from a virile Ajaokuta Steel to push the growth of industries such as steel, aluminium, automobile, among others.
“I have often advocated the unbundling of the steel complex. This complex has not worked since 1979 when it was established. Break it into sections and then privatise or concession it,” said Ike Ibeabuchi, an emerging markets analyst.
Nigeria’s effort to establish a thriving steel industry began in 1958 when the federal government first introduced the idea. The Ajaokuta Steel Company was envisioned as the foundation for Nigeria’s industrialisation, with plans to produce high-quality steel for both local use and export. However, decades later, the project has yet to reach any potential, forcing Nigeria to remain dependent on steel imports.
The Manufacturers Association of Nigeria (MAN) says the nation has invested over $8 billion into Ajaokuta without much result.
“There is a very big housing project there, a shop where machines are fabricated, and a section producing construction materials and a power plant,” said Muda Yusuf, chief executive officer of Centre for the Promotion of Private Enterprise, in an earlier interview.
Yusuf, who said he earlier worked in the complex, noted: “There is a need to unbundle Ajaokuta Steel before concession. The federal government can then get a firm with technical and financial expertise to handle it.”
Why steel sector can’t make progress
According to Segun Ajayi-Kadir, director-general of MAN, “One major factor that brought down the fortunes of the industry was the long years of moribund state of the Ajaokuta Steel Complex and the other factories in Aladja, as well as the four steel rolling mills in Jos, Oshogbo, Katsina and Itakpe.”
He stated that the steel industry’s failure to meet expectations has severely impacted the performance of Nigeria’s manufacturing sector.
“The prevailing weak performance of the manufacturing sector is partly traceable to issues in the steel sector. The industry possesses strong potential and the capacity to create an extended value chain in its affiliated industries as well as other sectors. Such affiliated industries include the automobile, construction, and marine industries. The metal and aluminium sub-sectors are not performing optimally also because of the inactivity and low level of development of the core steel industry,” he explained.
Okhai Ehimigbai, a consultant on steel and export matters, said: “Nigeria can only produce steel that meets local standards.” He identified the biggest challenge in the steel market as the lack of pure liquid steel, which could have been readily available if the Ajaokuta or Aladja steel mills were operational.
Ohai explained that while Nigeria has the capacity to produce steel with thicknesses up to 25mm, noting that anything above that must be imported.
The reason, he said, is the lack of liquidity and purity in local production. Steel below 20mm still contains some impurities, making it less suitable for certain applications. However, he emphasised that the real challenge is the importation of thinner steel, which directly competes with and disrupts local production.
Another major challenge is the export of metal scraps that could be used for domestic steel production, further reducing the available materials for local steel producers, he noted.
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