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Ajaokuta: Solgas Moves From Rhetoric to Action


December 2, 2003

Seun Oyefeso

Effort is being geared towards the commercial operation of
the Rolling mills, particularly Light Section and Wire Rod Mills. Towards
achieving this task, the reactivation of the Light Section and Wire Rod Mills
have been scheduled to be completed by the end of December 2003, and thereafter,
go into commercial operation. Towards this end, one hundred specialists from
Ukraine are expected by 15th of November, 2003, to complement our effort in the
completion of the reactivation works required in the Light Section and Wire Rod

Billets: A contract for the supply of 30,000 tonnes of
Billets for production in the Light Section and Wire Rod Mills has been signed.
Other contracts for the supply of additional billets for continuous commercial
operation in the mills are at various stages of discussion with potential

Contract for the Rehabilitation and Completion of the
Steel Plant: The contract for the rehabilitation and completion of the Ajaokuta
Steel Plant was signed between Solgas Energy Limited and Zarubezhstroimontazh (ZSM),
a Russian company on the 13th of October, 2003. The initial schedule of
deputation of ZSM personnel for the rehabilitation of the steel plant has been
agreed as follows:

* December 2003 , 60 personnel

* January 2004 , 80 personnel

* February 2004 , 100 personnel

Re-Structuring of Management: In order to lay proper
foundation for effective implementation of the Concession Agreement, management
of the company is being re-structured. Five coordinating groups have been formed
to operate as semi-autonomous bodies for effective management and achievement of
higher productivity. The coordinating groups are: Production, Engineering
Services, Management Services, Steel Territory Authority and Metallurgical
Training Centre.

Modifications of Ajaokuta Steel Plant: Efforts are on to
incorporate Pulverized Coal Injection facilities in our Blast Furnace. When this
is achieved, importation of cooking coal will be reduced by 50 per cent. It will
consequently afford us the opportunity of utilizing our local coals with all the
attendant advantages.The incorporation of an Iron Carbide Plant is equally being
studied. This will increase our annual output by 400,000 tonnes and reduce scrap
importation as well in addition to the high quality steel that will be produced.
Community Relations:

ASCL under SOLGAS management has been able to link up with
all our neighbours and some of the surrounding villages in order to foster an
understanding and cooperation with each of them for the benefit of the nation.
This is in line with the policy of the present management which is to live
peacefully with all our neighbours and assist all neighbouring communities as
much as we can.

Housing Development: In order to accommodate our technical
partners, the Board has concluded a plan to make available 300 housing units
immediately. This involves the issue of power and water supply and furnishing of
the houses at Raccaform – one of our housing areas. Plans are equally afoot to
make available over 6,000 housing units for staff occupation by the time of
commissioning the steel plant. Ajaokuta Steel Company Limited is strategic for
the industrial development of Nigeria and is rightly termed the “bedrock of
Nigeria’s industrialization”. It is important to highlight some of the
potentials of the Steel Industry in the economy.

UD-Stream Industrial Linkages: Development of Steel
Industries promotes the exploitation and utilization of steel-based raw
materials, such as iron ore, coal, limestone, dolomite and refractory clay.
Apart from generating employment opportunities, these activities would bring
about much development such as construction of roads, provision of electricity,
provision of drinking water, a boost in the transportation industry,
construction of markets, etc.

For instance, the development of the iron ore mines at
Itakpe, the limestone and dolomite deposits at Ikpeshi and Jakura, have direct
linkages to the Ajaokuta Steel Project. The mining of these deposits for
utilization in iron and steel plants have far reaching economic implications for
the immediate vicinity and Nigeria in general. Provision of infrastructural
facilities such as roads, rail lines (Itakpe-Ajaokuta-Warri rail

line), electricity, employment opportunities etc are
catalysts to the development of the neighbourhood of the mines and beyond.

Downstream Industries: The downstream industries of steel
are those that process the products and byproducts further into other high
revenue-yielding materials. The industries can be grouped into heavy, medium and

Heavy industries include those that engage in production
of equipment and machinery, that is, capital goods, while medium scale ones
consist of those that produce consumer goods like tins, cans, drums, containers,
auto-bodies, refrigeration equipment and other consumer items. Small scale
industries on the other hand, are those that produce wire fasteners, wire
gauzes, nails, bolts, nuts, hand tools, steel doors and windows, etc. The
supportive role of steel in the establishment of heavy strategic industries
deserves special emphasis in this paper by reason of its long-term indirect
benefit in transforming many economies from the status of under-development to
the rank of developed nations. Some of these spin-off industries cannot be
embarked upon without a reliable local production of iron and steel, which
constitute great proportions of their input requirement. Obviously, importation
of large quantities of steel for utilization in such strategic projects would
lead to a great drain of our capital resources to other economies. Among such
projects are those involved in the manufacture of ships, railway lines,
automobiles, as well as defensive and offensive weapons.

Ancillary Industries: Small scale industries that supply
spares and consumables tend to cluster around steel plants because of various
incentives and opportunities that abound in the location of the plants. These
incentives include among others, availability of ready market, allocation of
land in industrial estates; assured required raw materials source; greater scope
for specialisation of products and availability of economic and social
infrastructure. Thus, small foundries, light forge shops, small machine shops,
auto-workshops, etc. are usually found within steel industrial plants. These
industries further contribute to the overall development of nations by way of
employment generation and increase in the GDP. Below is a list of some ancillary
industries that normally cluster around iron and steel plants. Steel fabrication
shop, Small lancing pipe fabrication, Machine shops for spare parts and
non-standard fasteners, Steel and cast iron foundries, Small forge unit, Bolt
and nut shop, Aluminum shot and notched bar production, Non-ferrous foundry
electrical spare part production, e.g. carbon-brush, switch-gear part,
link-chips, contacts, junction box, etc. Safety equipment production unit,
Leather and cloth hand gloves, Safety boot production unit, Wire rope sling.

Benefits of the project to the nation and the populace:

Technological Acquisition And Human Resource Development:
Operations in steel plants are complex and require high level of technology and
industrial discipline. Hence, in nations where the plants exist, special
technological skills of manufacturers of the Steel Plant abound. Furthermore,
entrepreneurial skills and management techniques necessary for the development
of long-term technologies are developed.

Besides, almost all types of production techniques are
practised in steel plants. This makes the plant a veritable basis for scientific
and technological research for industrial application and for developing skills
in operating, maintaining and managing almost all types of industrial

Provision of Infrastructure for Industrial Development:
Establishment of steel plants require enormous investments in provision of
economic and social facilities such as hospitals, roads, bridges, schools,
electricity and telecommunications. The projects also attract other economic
activities in the region where they are located, such as banks, insurance
companies, markets, and artisans. The positive externalities that result from
the development of steel plants act as incentives to entrepreneurs for the
establishment of medium and small-scale industries within the vicinity of the
steel plants.

Generation of Financial Resources for Industrial
Development: A substantial amount of steel products is exported directly and
indirectly for purposes of foreign exchange earnings. In this way, many
steel-producing nations have been able to maintain favourable balance of
payments with their trade partners. Furthermore, the foreign exchange earnings
are very useful in funding other development programmes.

In addition, steel-producing nations are saved from
massive importation of steel products in the form of producer and consumer
goods. This import substitution releases huge amount of foreign exchange needed
for industrial development programmes. An indirect import-substitution effect
also accrues when the products are utilized by down-stream manufacturing firms
to produce other goods. Furthermore, proceeds from these products contribute
significantly to increase the Gross National Product (GNP) of nations directly
or indirectly with the resultant effect of increase in economic growth.

Provision of Employment Opportunities: When the first
phase of the project is completed, the company will generate about 10,000 jobs.
This will progressively increase to 20,000 at the 3rd phase. The linkage effects
on the economy, which serves as catalyst for industrial activities, through
upstream, downstream and ancillary industries, will create far more jobs
thereby, reducing unemployment.

From the foregoing, it is hoped that in the next few
months when you pay us a visit again, the progress in the plant reactivation and
completion would be very obvious.

Seun Oyefeso is the Executive Vice-Chairman of SOLGAS

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