FG Needs Not Borrow to Bring Ajaokuta Steel Company Back to Life, Says Expert
The chairman, Basic Metal, Iron and Steel and Fabricated Metal Products sector of the Manufacturers Association of Nigeria (MAN), Dr. Kamoru Yusuf, in this interview said local industry operators are instrumental to the ongoing process to resuscitate Ajaokuta Steel Rolling Complex by the federal government, adding that the federal government does not need to borrow to make the Complex work again.
On the ongoing process to resuscitate Ajaokuta Steel Complex
I have taken my time to study and assess the federal government’s efforts to resuscitate Ajaokuta Steel Company Limited and my conclusion is that it may be difficult for any foreign investor(s) to successfully operate Ajaokuta Steel Complex without the full support of the local industry operators.
As you can see that steel business is my core area of specialization which has also led us to the acquisition of our new steel factory complex in Igbafa, Village, Sagamu, Ogun State which is now KAM Steel Integrated Company, Sagamu-Plant for national interest. There is need to firstly commend the efforts of President Muhammadu Buhari, GCFR, and the Honourable Minister for Mines and Steel Development, Arc. Olamilekan Adegibte for their astuteness and determination to resolve the age-long problem and make the Ajaokuta Steel Complex a dream that comes to reality in an effort to industrialize the country.
The drive to revive Ajaokuta Steel Complex is to set the stage for Nigeria as the leading industrial nation in the continent as earlier envisioned, which is being driven through the development of the Steel sector under the leadership of the Honourable Minister of Mines and Steel Development, Arc. Olamilekan Adegbite; who has demonstrated passion and capability in promoting the steel sector in Nigeria, through his resolve that there is “the need for the Federal Government to declare Iron and Steel as National Products for Rapid Economic Growth.
The process of resuscitating Ajaokuta Steel Company which is our nation’s heritage was not properly structured. What should have been done was to consult with owners of existing steel plants who would have given clearer narrations of the issues in the industry. But this important aspect was jettisoned by the Presidential Committee constituted by the Federal Government on Ajaokuta. However, some of the indigenous stakeholders had since drawn the attention of government to this gap.
On the proposed negotiation with foreigners
No foreign investors can bring Ajaokuta Steel Company back to operation. What the Federal Government needs to do is to adopt the model used by the Peoples Republic of China which later transformed the country’s Steel industry within 25 years which led to massive development of the industrial sector in China.
What the Chinese government did was to indigenize one of the country’s major industries – the Iron and Steel, into the hands of their people with the government holding only 25% interest while local investors were allowed to own 75% stake. This created opportunities for the local investors and ensured that the wealth remained within the country – China, without repatriation of capital as well as dividends; thereby leading to development of local skills and other multiplier effects that finally resulted in what the world is witnessing today as the industrial explosion in China.
I urge Nigerian government to redirect its policy on the industry because it expended close to 40 years experimenting a particular model without result, it should be clear and in fact obvious that the commercial interest of the offshore investors does not match the developmental interest of the Government of Nigeria as well as the industrial aspiration of her citizens.
With my over 30 years’ experience in the iron and steel business, I can confidently provide a workable template, which of course could also show that no foreign investor can fix Ajaokuta Steel Company.
Any attempt to invite foreign investor(s) to resuscitate the Ajaokuta Steel Company will result in the said foreign interest depriving us of our national heritage; as any proceed realized from the sales, will be repatriated by such interests to their countries and would consequently have negative effects on Government’s policy of backward integration and the corresponding objective of conserving the scarce foreign exchange with dare consequences on the current and future well-being of our economy.
Therefore, it is only indigenous investors that can make it happen so that the proceeds can remain here in Nigeria and we can re-invest this into the economy. This we have all seen, was the case in the cement industry and with Nigeria now taking another giant stride in refinery and petrochemicals.
Developed nations of the world are always at the forefront of periodic review and monitoring of progress and challenges facing the Iron and Steel sector; by mandating their financial institutions to provide adequate support to the industry”.
Challenges facing Iron and Steel Sector
For more than two decades, government had not paid the desired attention to the steel sector which is the primary basis for industrial growth and development of any nation.
Steel sector plays similar role as that of cement, sugar, fertilizer and petrochemical industries, all of which can provide the needed tripod-support for the development of other light industries in the country. The incremental and progressive results being witnessed by them was the outcome of the success story of the indigenous players in the cement industry over the past 9 years and with reduced stake from the offshore investors. The best model is to indigenize and empower Nigerians and ensure that the strategy as encapsulated in the Nigeria Industrialization Revolution Plan (NIRP), creates avenues for whosoever wishes to partner with the local giants who have verifiable track record in the industry to do so.
Iron and steel sector is suffering as a result of what is happening to Ajaokuta Steel Company. For an industry that is driven by committed and persevering investors who are putting national interest as paramount in their business decisions, what government needs to do in the immediate circumstance is to mandate commercial banks and Development banks through the Central Bank of Nigeria (CBN), to focus and direct attention to giving adequate support to the steel industry due to the capital-intensive nature of the business.
Expectations from financial institutions
Despite CBN’s announcement on diversification and creating of a window for Real Sector Support Fund (RSSF), some of the commercial banks are not willing to support genuine industrialists, probably due to lack of key project appraisal management skills.
We expect that Bank of Industry (BOI), which is created to support industrialization in Nigeria should have intervened but it seems the Bank have changed its windows of operations, which Central Bank needs look into. One wonders what was the rationale behind the current aloofness of BoI which has the expertise of project appraisal management but have decided to deviate from its initial mandate by not getting involved directly in project financing anymore except through the commercial banks by requesting for bank guarantees.
The ensuing confusion is that commercial banks are no longer comfortable with this arrangement as they believe BOI is not sharing the risk with them and hence, the consequent abandonment of the needed support from BOI, which some real sector operators believed has created and classed them into financial orphans, with no ‘care-giver’ in the financial market!
The current situation where most of the Nigerian banks showed little or no interest in project development industry due to absence of project underwriting insurance company, thereby creating preference and appetite for funding trading, may take us nowhere but rather, will continuously discount our developmental progression as our resolve to play in heavy industrial arena without capital investments, will perpetually confine us to the league of ‘industrial spectator rather than being an active player’.
Nigerian Economy and the African Continental Free Trade Area
The only way Nigeria can participate successfully in the African Continental Free Trade Area (AfCFTA) and successfully compete among countries in the continent is to develop our giant industries. We can look at China, which always underwrite their capital projects under Sinosure (China Credit Insurance Corporation).
The federal government should also borrow a leaf from other developed nations as well as some African countries; by creating platforms for Credit Insurance Underwriters in order to reduce the huge risks involved in capital projects. Government also needs to create more funding windows and other support infrastructure to elicit rapid industrial development.
There cannot be significant growth in the sector without the intervention of the Federal Government where and when necessary. Government should be the driving force behind the steel industry, which has the capacity and potential to resolving part of our social unrest by getting thousands of unemployed youths off the streets through direct and indirect job opportunities.”
Advice to the President Muhammadu Buhari’s government
Once again, I commend the president and his economic team for salvaging our economy by fighting corruption, crimes and criminality as well as creating more windows of rapid economic recovery. To our industrial giants led by our mentor and astute industrialist, Alhaji Aliko Dangote, I want to commend you for setting a pace for successful business operation in our country and African continent at large.
Meanwhile, one way that could be easily employed is for the government to urgently channel the Comprehensive Import Supervisory Scheme, (CISS) charges paid to the Nigeria Customs Service, (NCS) over the years, to providing bailout and support to the steel sector. “Such money should be utilized to drive the industrial revolution process that will galvanize national industrial development.
There will be no reason for the government to borrow money to bring Ajaokuta back to life. We have the resources as a nation and we also have expertise who can make it work. We don’t need foreign investors to do it. Ajaokuta can be back again to produce machines that are needed by other steel industries in their production processes.
You will agree with me that with the gigantic size of Ajaokuta, the complex should not focus on the middle-steel production, which are massively available around Nigeria and West Africa. Rather, it should focus on the configuration of a high class production of steel products such as Slab Caster, Hot Rolled Coils and Plates, and Foundry for the production of the required machinery and tools in the country, since 50 percent requirement for these high-class configurations are already available in Ajaokuta.
Although, we still welcome more opinions and contributions towards developing our sector for better performance to the benefit of our dear country and humanity at large via [email protected]
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