IMMEDIATE past Nigeria’s President, Mr Muhammadu Buhari, appropriated N32.63 billion ($107m) for the dormant Ajaokuta Steel Complex, approved millions of naira in export grant for the company and paid about $446 million in judgment debt to compensate a bankrupt firm, Economy Post has found.
Mr Buhari spent the huge amount of money to save the inactive publicly-owned company despite calls for the government to concession or privatise it.
Ajaokuta has cost Nigeria over $8 billion since 1971 when it was established, but it is yet to produce a single sheet of steel.
The Nigerian Senate, in December 2018, passed a bill seeking to allocate $1 billion from the Federal Government’s share of Excess Crude Account for the completion of the steel company.
This was widely criticised, considering that there was a business case to sell the complex to the profit-focused private sector or even concession it.
There are suspicions that politicians and civil servants are using the 52-year-old company as a conduit pipe to steal public funds and compensate relatives.
Ajaokuta Steel Complex was established to generate important upstream and downstream industrial and economic activities that would be critical to the diversification of Nigeria into an industrial economy. Several raw materials were expected to be produced by the steel complex, but this did not happen as successive governments failed to make it work.
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Misplaced budgets
Rather than put more money into education or health, Mr Buhari’s administration committed N32.63 billion to the inactive steel company, out of which N29.606 billion was used as staff salaries.
Source: Budget Office of the Federation
While N3.91 billion was appropriated for Ajaokuta Steel Complex in 2016, N4.27 billion was allocated to it in 2017. The government slightly raised the complex’s budget to N4.29 billion in 2018, reducing it to N3.59 billion in 2018.
In 2019 and 2020, budgets for the firm stood at N3.59 billion and N3.73 billion respectively. From 2021 to 2023, Ajaokuta Steel received over N4 billion each year. In 2021, its budget was N4.22 billion, increasing to N4.47 billion in 2022. In 2013, N4.15 billion was allocated to the steel complex.
Huge salaries for over 200 staff
The dormant Ajaokuta Steel Complex has more than 200 staff who receive huge wages, Economy Post found.
Out of the N32.63 billion allotted to the development of the steel complex, N29.606 billion went to salaries of staff, representing 91 percent of the total.
Analysts said this was an indictment on Buhari administration and the management of the complex, saying they never had any plan to develop it.
Only N2.338 billion was deployed to capital expenditure within the period, showing that insufficient efforts were made to revivify the plant in seven and a half years under Buhari.
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High steel imports
While the Buhari government spent nearly N33 billion on the inactive Ajaokuta Steel Complex between 2016 and first half of 2023, the country invested N5.902 trillion in the importation of base metals, some of which Ajaokuta was supposed to produce.
From N482 billion in 2016, basic metals import cost rose to N1.060 trillion in 2021, before falling to N851.393 billion the following year. From January to June 2023, a total of N372.14 billion was spent on steel importation into Africa’s most populous nation. The importation took place mostly in dollars but Nigeria’s statistics agency converted the amounts to naira, Economy Post understands.
According to the Manufacturers Association of Nigeria (MAN), steel imports have been on the rise due to the non-functionality of Ajaokuta Steel Complex, which is supposed to produce metals for various real sector players in the country.
Local manufacturers have spent scarce foreign exchange on the importation of metals which Ajaokuta Steel was meant to produce. Corruption, political patronage, nepotism and stealing have stalled the plant, according to experts.
Export grants without export
Ajaokuta Steel Complex has not produced any sheet of steel and has not exported anything, but the Senate in 2019-2021, under Mr Ahmed Lawan, approved export grants for the company.
The Export Expansion Grant (EEG) was created by the Nigerian government to enable exporters to become competitive in the global market. It involves provision of tax credit grants to reduce exporters’ production and logistics costs.
Ajaokuta Steel Complex, which has neither produced nor exported a single sheet since its establishment in 1971, received N118.006 million as export grant in 2019. Economy Post investigations showed that the company also received the same amount in 2020 and 2021 despite not exporting anything.
No, we didn’t export anything -MD
Economy Post contacted Sole Administrator of Ajaokuta Steel Complex, Mr Abdul-Akaba Sumaila, to find out if the company had actually exported any by-product.
“There is no production activities in Ajaokuta Steel and hence no exportation,” Mr Sumaila replied to Economy Post’s enquiries.
The implication of this response is that the export grant requests to the National Assembly came from outside Ajaokuta Steel.
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It was difficult to get the response of the current 10th Senate as the approval was done by an ad hoc committee of the 9th Senate.
The Nigerian Export Promotion Council (NEPC), which forwarded the lists to the Senate, said it was not aware of the inclusion of Ajaokuta Steel in the list of EEG beneficiary companies.
$446m judgment debt
Under Buhari, Nigeria wasted its scarce resources on the settlement of the bankrupt Global Steel Holdings to the tune of $496 million.
In 2003-2004, President Olusegun Obasanjo entered into a contract with Global Steel Holdings’ owner, Mr Pramod Mittal, who promised to manage Ajaokuta Steel Complex and later purchase it.
Pramod Mittal
In 2008, there was a disagreement between the Musa Yar’Adua administration and the company over asset stripping allegations, leading to a revocation of the contract.
There were incessant litigations over the action, with Global Steel demanding $5.26 billion in court from the Nigerian government.
Throughout President Jonathan’s administration, there were discussions and litigations over the matter, but nothing positive came out of that.
When President Buhari in 2016, he went for a peace deal through his Attorney-General, Mr Abubakar Malami.
Abubakar Malami
Nigeria’s attorney-general controversially entered into an agreement with Global Steel to take back Ajaokuta, promising to pay $496 million to Mr Mittal, who has a string of distressed companies and is looking for a way out of his financial crisis.
“It is important that the Bola Tinubu administration review that agreement because it is a controversial and complicated deal that does not benefit Nigeria,” said a Kano-based lawyer, Mr Idris Ahmed.
“The deal makes no sense for Nigeria. This is nearly N1 trillion today and if we are paying the company, we should please stop. Given the current foreign exchange crisis, this deal makes no sense at all at this point,” he added.
Consultants get N853m
Unnamed consultants for the steel complex got N853 million under Buhari. But up till now, the concession has not happened, raising questions as to why they received the payment.
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“Council approved the engagement of transaction advisors for consultancy services for the concession of Ajaokuta Steel Company Limited and also the National Iron Ore Mining Complex in Itakpe in favour of CPCS Transform Consortium in the sum of N853,266,644.4 inclusive of 7.5 per cent VAT,” Former Information Minister, Mr Lai Mohammed, said on April 25, 2022.
“I am sure we are all familiar with the history of the Ajaokuta Steel complex. The contract was awarded in 1979 to a Russian company called TPE. By the end of 1983, the contract had reached an advanced stage, regrettably, since then it has been suffering by 1994, TPE demobilised from the site and in 1996, the contract was determined,” he noted.
“Subsequently, various administrations have tried to revive the Ajaokuta steel complex without much success. However, you will recall that Mr President was on a state visit to Russia on October 22 and 24 2019 and here it was resolved that the Ajaokuta steel complex which the Federal Government has made massive investment must be resuscitated.”
Experts ask govt to sell
Experts have asked the government of Mr Bola Tinubu to get a good private sector manager to handle the plant.
A former Chairman of the Manufacturers Association of Nigeria Steel Group and Chief Executive Officer of Qualitec Industries, Engineer Oluyinka Kufile, said the government was playing politics with the steel plant.
He said some persons were benefitting from the non-operation of Ajaokuta Steel to import all sort of steel products into the country, claiming that it was possible that some of them were not paying tariffs.
A former staff member of Ajaokuta Steel, Mr Jones Adekunle, regretted that successive governments had succeeded in killing the plant through wrong concessions, urging the government of Mr Tinubu to sell it as soon as possible.
“Get a good buyer; they are still available. Forget countries that handled it before. Get a new company that can handle it, revive it and produce. My fear, however, is that most of the plants there may have been archaic and cannot compete favourably with what we have in the global market today,” he noted.
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The Chief Executive Officer of Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, who worked in the steel plant in the past, said political interference and corruption had stalled the progress of the plant.
“Right now, what we need to do is to unbundle the plant. It is so huge, so we may need to unbundle it to separate various sections such as the machine section, the technical section, the power plant and others. After doing that, get the private sector – a competent company- to manage it,” he added.
