By Hussaini Abdulrahaman
Crude steel output per annum of African countries that started at the same time as Nigeria
Has anybody paused to ask why there is no alternative accountable business model and plan to complete Ajaokuta Steel Plant which involves risk sharing by stakeholders and private sector investors other than constantly asking the Federal Government of Nigeria to cough out huge sums of money to foreign contractors who in most cases never sign up and contractually commit to a long term sustainable running of the plant?
There is indeed ample evidence to show that in the last three decades close to a billion US Dollars was offered via European metallurgical plant building contractors to various Government owned steel plants as technical assistance with very little to show for it. The practice which constituted a great leakage to our national economy only stopped ten years ago when the OECD Secretariat raised a query and instituted an inquiry which showed that most of the Government steel plants being offered technical assistance were comatose!!!.
The truth of the matter lies in the fact that a sensible solution for the actualization of the completion of the Ajaokuta Steel Plant and to have sustainable steel production with unnecessary breaks lies in implementing a smaller budget business plan which will involve the investment of a maximum of USD 200-300 million to install a 70 ton capacity electric Arc furnace to commence the production of billets via 100% initial steel scrap melting within a year and concurrently investing in the building of 3 number 600 tons per day pellet plants, SLRN Rotary Kilns equipped with hot charging system into the EAF to utilize our local sub bituminous coal and local iron ore available within 100 kilometers of Ajaokuta steel plant to target the production of 600, 000 tons per annum of liquid steel. This budget includes the cost of installation of a slab caster and a hot strip mill.
The profits made from the operation of the plant which is reinforced by the double advantages of having an existing captive Itakpe Iron Ore mine and a potential partner’s captive coal mine will then be ploughed first into a techno-economic viability and feasibility study of the blast furnace route to address the changes and innovations introduced in the last 35 years to the blast furnace technology route such as reduced coke usage and pulverized normal coal injection as well as address the human capital, logistical and infrastructural deficits required to operate the blast furnace efficiently and sustainably. Ditto arranging access to more proximal indigenous, coking coal mines, and using some generated steel for the completion of the Blast furnace at ASCL.
I must say that the often highly exaggerated infrastructural requirements of the 1st phase of Ajaokuta steel plant can be demystified by sending a Federal Government fact finding and evaluation team to countries such as India and China where there are several integrated steel plants operating in the middle of nowhere with neither Rail transport nor river or sea transport but which still operate blast furnaces or Direct Reduced Iron plants of 500,000 tons to 600,000 tons per annum capacity plants by transporting coal and other critical steel production inputs by road since the bulkiest item is iron ore in which vicinity the steel plants are usually located.
The following are the steel plants of 600, 000 tons capacity and above, their capacities and location which operate without river or rail links and are solely dependent on road transportation:
1. Prakash industries Ltd. Chhattisgarh, India
DRI/EAF
2. Tata Sponge Iron Ltd. Joda, Orrisa India
0.6 million ton DRI Unit
3. Himanshu Steel Syria
0.6 million plant capacity
MBF, BOF, CCM and Bar mill
It can be safely concluded that right-sizing of Integrated Steel plants and choosing capacities within the bracket of 600, 000 tons TPA to 800, 000 tons TPA is imperative to being able to run and operate such plants without the necessity of investing huge sums of money on rail and other infrastructure. This point further reinforces the significance of the non coke intermediate solution to the completion of Ajaokuta steel plant since the non coke model (600,000 TPA) suggested above can be very easily operated notwithstanding the present infrastructure deficit. Ditto the choice of a 70 tons capacity (70 tons per heat and not 70 tons per day) EAF is right sized to accommodate the limitation imposed by the 110 tons Megawatts TPP without additional investment.
The anxiety expressed on the availability of scrap to sustain the 600, 000 TPA plant is unfounded. Several Indian and Chinese plants in Nigeria which have run uninterruptedly for the past 20 years fall within the bracket of 500, 000 TPA to 700, 000 TPA. Our recent national scrap survey shows that sourcing 300, 000 tons per annum of scrap steel a year to be concurrently followed by feeding DRI within a short time is sustainable. Ajaokuta’s location with a captive river port make it ideal for the exploitation and delivery of marine based and oil and gas operations derived scraps in addition scraps sourced from the hinterland.
I hereby make the following recommendations:
1. That the APC Government headed by President Muhammadu Buhari in whom we have absolute confidence and trust to impose high standards of accountability, transparency and inclusiveness should not rush to take decisions on the completion of Ajaokuta steel complex without carrying out nationwide consultations among stakeholders within the private and public sectors on the viability of various options to avoid being misled into wasting public funds in non viable and non sustainable business models and plans for the completion of the project.
In this regard I recommend a national conference on the future of Ajaokuta steel complex to be jointly convened by neutral and non public sector institutions such as The Nigeria Extractive Industries Transparency Initiative (NEITI), Manufacturers Association of Nigeria (MAN), Bureau of Public Enterprise (BPP) and Bank of Industry (BOI) and the Institute of Directors (ID).
2. President Muhammadu Buhari is invited to note that the old business model of patronizing wholesale foreign metallurgical plant building contractors who take advantage of lucrative contracts without committing to fabricating the plants in Nigeria nor investing in the long term sustainable running of the plants is the reason why the Government’s major investments in the steel sector have remained comatose without corresponding returns on the Government’s investment.
It is recommended that henceforth the new approach should involve Public Private Partnerships (PPPs) with Nigerians who have a proven track record of investment in the sector via Public Private Partnerships which allow Government and the private sector to jointly share risks, responsibilities and benefits.
3. The APC Government led by President Muhammadu Buhari should as a matter of policy deliberately promote the building and ownership of steel plants by Nigerians who should be encouraged to hire expertise abroad using the Dangote model to avert further capital flights in a sector highly dominated by foreigners.
4. The APC Government led by President Muhammadu Buhari is invited to note that nearly all Governments of the world have stopped direct public sector budgeting for their investments in industrial and mining projects. What most Governments now do to avoid promoting corruption is to grant loan guarantees where it is satisfied that the feasibility and business plan is convincing and viable. The managers of such enterprises are then held strictly to account for the actualization of the feasibility and business
plans and derogation there from is immediately sanctioned.
5. The APC Government led by President Muhammadu Buhari is called upon to define its national priority projects emanating from its manifestos and programmes and to detail a national infrastructural industrial and agricultural development plan which will task indigenous steel entrepreneurs with the long term supply of steel to such projects while the Government provides off take agreements and loan guarantees to facilitate the financing of capacity building to support such projects.
The APC Government led by President Muhammadu Buhari is invited to note that in public interest and in furtherance of his declared intention of blocking all leakages to our national economy he must avert the convectional public funding process where all the risks of project delivery reside 100% with the Government which bears the burden of cost overrun, time delay and performance failures. Mr.
President is called upon to establish a firm policy of integrating the designing, building, operation and financing of public sector projects in a single financing module, package and business plan which improve economies of scale and bring down the total project cost in partnership with competent Nigerian enterprises.
6. The APC Government led by President Muhammadu Buhari is called upon to prioritize the completion of Ajaokuta Steel project taking points numbers 1 to 6 above into consideration.
I conclude by urging all stakeholders in Steel Development Sector to sheath their swords and encourage a tradition of tolerance and openness under which innovative ideas can be discussed and subjected to dispassionate scrutiny in the interest of the growth and development of our sector which has left most of us Nigerians far behind many other Nationalities.
Abdulrahaman is the Chairman, Total Steel Ltd.