Ajaokutagenerationalchallenge

No Comments » December 28th, 2006 posted by // Categories: Chemical Industry in Nigeria



 

Ajaokuta: a Generational Challenge

 


Vanguard
(Lagos)

ANALYSIS
January 27, 2004

Hector Igbikiowubo & Emma Ujah
 

The exact figure can hardly be ascertained given the
enormous corruption with which the project has been identified. It is said that
the project which is about 95 per cent completed, has gulped funds which are
enough to have built two similar companies.

The company was established under Section 2 of the
National Steel Council Decree 60 of 1979. It was a dream-child of General
Olusegun Obasanjo, then a military Head of State. The vision was to build a
company which would utilize the nation’s abundant iron ore deposits to create
wealth for Nigerians and provide job opportunities to varying categories of
skilled, semi-skilled and others with no special prior training before joining
the company.

Itakpe has the Banded Iron Ore (BIF), mostly haemalite and
magnetite, as well as, Oolitic/Pisolitic ironstones. The reserves there is
estimated at about 200 million tonnes. The plan was to mine these reserves to
feed ASCL and by extension, Aladja Steel Company in Delta State.

Besides Itakpe, iron ore occurs in Agbaja also in Kogi
State, with an estimated reserve of 30 million tonnes; Birnin Gwari in Kaduna
State, as well as, Enugu which holds another 50.8 million tonnes of lateritic
ironstone.

When the federal government awarded the contract to build
the company to engineers from the former Soviet Union, the expectation was that
the first phase of the company would commence production in 1986 with an
installed capacity of producing 1.3 million metric tonnes, per year.

It was planned that the company would steadily expand to
the second phase which would bring production to 2.6 million tonnes per year.
The vision was to complete the building of the third phase which was meant to
bring ASCL to its full potentials with production peaking at 5.2 million tonnes
per annum.

Unfortunately, although work started in 1979 as scheduled,
and progressed steadily until 1983, commitment to the project waned with an
attendant poor funding by successive administrations. By 1990, the Russian
contractors, Messrs Tyazpromexport (TPE),

pulled most of their staff from site. They started by
reducing their presence at site and by 1990, the staff strength was cut from
1,000 to a mere 20. By 1996, the contractors completely demobilized after the
federal government had spent about $4.66 billion on the project.

Ajaokuta has ever since remained like an abandoned city.
The ASLC has attached to it 10,000 housing units. Out of these, 3,700 units are
already completed while the rest are at various stages of completion. Access
roads, a rail line, water ways and various other facilities made Ajaokuta “a
place to be”, had the project been completed.

THE TECHNOLOGY: The traditional mode of steel making was
the technology used in the company, which is Blast Furnace-oxygen converter.
Based on its backward integration construction concept, the company has its
finishing mills, wire rod mills, as well as, the Medium Section and Structural
Mills (MSSM) which have all been completed.

The complex consists of Coke ovens, sinter plants, blast
furnaces, converter shop, bloom casters and a series of other downstream mills.
The blast furnace and the liquid steel making facilities were yet to be
completed when the contract ran into troubled waters with the Russians. The
company also has its own metallurgical school to train both Nigerian and foreign
students when operations commence fully.

If the construction continued as planned, the company
should have taken over the Nigerian steel market and even go beyond that to
capture some of the nations of the West African region. By so doing, the huge
waste that the economy has been subjected to in terms of imports of steel, would
have become a thing of the past. Steel is a very expensive commodity and Nigeria
spends an estimated $4 billion annually to import both steel and steel related
materials.

CONSTRAINTS:

Successive Ministers of Steel, Mines and Power (as the
portfolio was then called) saw ASLC as a gold mine through which they looted
public funds with reckless abandon. Project managers and their officials were no
better. Hence, having spent what it took to establish similar plants elsewhere
in the world, ASLC was abandoned.

The project became an enigma to virtually all governments
that ruled this nation until the second coming of Gen. Obasanjo, now as a
civilian president. Even deceased Gen. Abacha attempted to find a way out of the
imbroglio, although in a manner that was later discovered to be against the
economic interests of the nation. He was said to have bought back the debt owed
the Russian contractors in circumstances that left much to be desired. The scam
was said to have involved about $2 billion.

When the President was sworn-in, in May 1999, the Ajaokuta
challenge was identified as one area he promised to record success where others
failed, probably because he was the one that started the project as military
Head of State.

The first step was to set up an inter-ministerial
committee to look into the project with a view to finding the best way to
complete it to enable Nigerians reap the benefits therefrom. Following the
completion of its assignment, the government drew up a plan towards
rehabilitation and completion of the plant.

The first thing it did was to engage TPE, the original
contractors to undertake a technical audit aimed at putting the state of the
project in perspective. TPE was paid $1.2 million to carry out the audit. At the
end of the 18 months it was given by government to complete the exercise, TPE
came out with an estimated $460 million to complete, rehabilitate and commission
the first phase of the plant. That estimate did not include contingencies and
provisional items.

Given its limited resources and determination to divest
from businesses, the government decided to invite private sector firms with
prerequisite technological know-how and the financial muscle to complete,
commission and operate the plant. Then Minister of Power and Steel, Dr. Olusegun
Agagu, now Ondo State Governor assured, then that the company would be in full
operation within two years.

Several attempts at this failed. First, a set of five
world steel companies were invited to bid for the ASLC. But this process was
aborted. They are: Voest Alpine Industrial Services of Australia; Osaka Steels
Nigeria Ltd; Darueli Offline of Italy; Denus Nigeria Plc and Kobe Steel of
Japan. Two other firms joined the list. These are SOLGAS Energy Incorporated of
USA and TPE, the builders of the plant.

They were all requested to submit details of : the cost of
completion and rehabilitation of the plant; proposal for funding the project;
joint venture arrangement for its operation, schedule of execution of the
project; and techno-economics evaluation of the project.

At the end of the exercise, SOLGAS was selected by the
government after which a Concessionary Agreement was signed in June between the
federal government and the company. The agreement provides that SOLGAS would
provide $3.6 billion to complete the plant and run it for 10 years, within which
it would recoup its investment.

The breakdown of the total commitment is as follows:
Rehabilitation, completion and commissioning of the steel plant, $1.004 billion;
Provision of one Fast unit projected to cost $0.246 billion; and provision of
additional power plants and associated distribution facilities estimated at $
2.386 billion.

Although the agreement has been criticized in some
quarters, particularly, the leadership of the African Iron and Steel Association
(AISA) and the Nigerian Metallurgical Society (NMS) for the huge sums involved
and the fact that SOLGAS is essentially known as an energy firm, the Managing
Director (MD) of SOLGAS Energy Nigeria Ltd, Mr. Seun Oyefeso, has been assuring
Nigerians that the firm meant well for ASLC.

The Senate even asked that the agreement be put on hold
pending an investigation into the agreement, while the House of Representatives
set up a committee to investigate the issue. In his reaction, Mr. Oyefeso said
that his group was prepared to answer any questions that the federal legislators
may ask, as according to him, there was nothing clandestine about the agreement
nor SOLGAS’s plan for Ajaokuta.

The Ajaokuta project appears to be a victim of
international conspiracy. Unfortunately, those who do not want to see Nigeria
export its steel, have always found ready allies within every administration
since the commencement of the project. International conspiracy against Ajaokuta
should be expected because steel is one of the commanding heights of
international trade and the major producers will never welcome a new member.
That a developing nation like Nigeria is launching into the market cannot be
ignored.

It is on record that when World Bank Chief Economist and
Vice President, Nicholas Stern visited Nigeria last year, he was emphatic that
Nigeria should invest more funds in the project. His reason was that the
international steel market was already saturated and that it made more economic
sense for Nigeria to continue to import steel than to complete the plant and
produce steel for itself. His other reason was that the Blast Furnace technology
was obsolete and that Nigerian steel would not be able to compete in the market.
Incidentally, Mr. Stern was articulating the position of the World Bank.

Nigerians and particularly the people of Kogi State, are
already waiting for SOLGAS to Commence work. During his courtesy calls on
various traditional rulers in the state, the MD of SOLGAS was reported as having
assured that his firm would commence production of steel in December.

At one of such meetings, the Ohinoyi of Ebiraland, Alhaji
Ado Ibrahim, was reported as relating to the SOLGAS team an incidence during a
foreign trip by a delegation in which he was a member where a top government
official was said to have told a meeting that ASLC was of little importance to
the Nigerian economy. The monarch said he had to shout in protest that it was a
lie and a betrayal of the confidence of the people of Nigeria.

Mr. Oyefeso has repeatedly said that SOLGAS was leading a
consortium consisting of experts in steel and that there was no truth in
allegations that his firm would convert the plant to a power generation company.
Perhaps the SOLGAS deal may be the last chance of Nigeria to get Ajaokuta
started and working. An opportunity that should not be allowed to slip.

The opposition of most workers of the ASCL stemmed from
the fear of loss of jobs and their benefits after putting in various numbers of
years with some as much as over 20. Particularly, the transition from a
government company to a private company was seen as a sure way of reducing
staff.

However, Vice-Chairman Oyefeso at the weekend announced
that all staff of the company have been absorbed by the SOLGAS management. He
told them that there was no need for any form of apprehension as according to
him, SOLGAS was in Ajaokuta to make life better for them and not to worsen their
plights. “Nobody has been fired or will be fired unless there is a proven case
of a grievous offence,” he said. Mr Oyefeso added that he would get the Federal
Ministry of Power and Steel to write the workers a letter this week to assure
them that they remain staff of ASCL with all benefits, saying that the number of
years of service would be continuous.

He commended the SOLGAS group for being open and its
efforts and consultations with workers unions since taking over the company.

COMMUNITY RELATIONS:

The Igala and Geregu communities who host the ASC were on
hand to relate their plight to the SOLGAS team lamenting that they had for 25
years been totally neglected by the federal government as no compensations were
paid to the communities that were displaced in order to build the plant.

Mallam Usman Taidi and Mr. Michael Ataogijo who spoke for
the Geregu and Igala communities said that in spite of the unjust displacement
without compensations and total neglect of their people, the communities have
been providing security for the installations. They assured Mr Oyefeso that
their communities have never demonstrated against the government nor the ASC
management on account of the neglect. They also commended him for according
adequate recognition to the communities.

We stand solidly behind this new management. We have been
jealously guarding this project, if not, this plant would not be standing here
anymore. And we will continue to defend it “, the spokesmen said.

Addressing them, the Vice- Chairman assured them that the
locals would be considered in all major issues bordering on employment and award
of contracts.

WORK PLAN:

According to the Vice- Chairman, the two rolling mills
will go into operations in December. To this effect, he announced that billets
have been imported to be used at the mills. He also said that 75 Russian and
Ukrainian engineers were being expected in the country to commence the
rehabilitation work at the plant. He assured that ASC would commence the
production of liquid steel as from 2005.

Oyefeso appealed to all well meaning Nigerians to join
hands with his team in order to break the jinx at ASC and launch Nigeria on the
path of industrialization.

 

 

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