Connect with us


Why Ajaokuta Cannot Make Steel

Nigeria is blessed with all the major raw materials needed to produce steel.



galvanised sheets

No Nigerian can visit Ajaokuta Steel Company (ASC) and see investments of more than $8 billion rotting in the African sun and not cry. I went there, I cried. what exactly is the problem? I have written severally on this topic, but today let me do a comprehensive post.

Ajaokuta Steel Company is massive, she has a 68km road network, 24 housing estates on the project. Some of the estates have over 1,000 homes, a seaport, a 110mw power generation plant, there are 43 separate plants in Ajaokuta alone. It is estimated that if Ajaokuta becomes operational, it will create 500,000 jobs.

There is no industrialised nation on earth that does not have a steel sector it’s that simple. A report by the Central Bank of Nigeria (CBN) shows that Nigeria currently imports steel, aluminum products and associated derivatives of approximately 25 metric tonnes per annum estimated at $4.5 billion, this figure will continue to rise, and the Nigerian economy continues to expand. Ajaokuta is an integrated steel company, it was designed by the Russian to be self-sufficient to get all its inputs from Nigeria and make steel. Ajaokuta strength is also its weakness, Ajaokuta can only work with all inputs available.

This will be a slightly technical post, but please try and follow.

GTBank 728 x 90

Steel is an alloy of iron and carbon amongst other things, iron is the base metal in steel, to make steel, you need Iron Ore, Coke from Coal, Limestone as main components. these components are mixed in a blast furnace to produce liquid steel which can be long steel for rail lines or flat steel for automobile making etc.

To give a simple example, look at steel as making jollof rice, iron ore is the rice, the limestone and coke are the pepper and salt the pot is the blast furnace. At a steel plane, the blast furnace is ONLY turned on when the steel company is ready to make steel. Blast furnaces operate continuously and are never shut down. The raw material to be fed into the furnace is divided into several small charges that are introduced into the furnace at 10 to 15 minutes intervals. This means everything must be in place BEFORE the blast furnace is turned on, the iron ore, the coal, the limestone, everything, why? Because you do not switch off a blast furnace for another 10 years or however its campaign life is.

Nigeria is blessed with all the major raw materials needed to produce steel including iron ore in Kogi, coal and limestone in Enugu.

GTBank 728 x 90

Nigerian iron has very low iron concentration. Agbaja has the largest iron ore deposit in Nigeria with about 2 billion tonnes but the Agbaja iron ore has a high phosphate content. Phosphate can cause brittleness in steel making it fracture, thus Agbaja was abandoned for Itakpe. Itakpe iron ore has no issues with phosphate but has low iron content, thus to make steel with Nigeria iron ore, a process called “beneficiation” has to be done to process the Itakpe ores to raise its iron content to meet the required standard for steel production.

Coal? Most of the coal found in Nigeria is non-coking, thus, unsuitable for steel production. Coal deposits in Enugu, have no impurities but are non-coking. The good news? Nigeria has an abundant deposit of limestone and we have natural gas to provide power

So back to Ajaokuta, what really happened? Why can Nigeria not make steel anytime soon? let’s link up the elements.

  1. Policy Failure: The Ajaokuta contract was signed between the Nigerian government and the Soviet state-owned company, Tiajpromexport (TPE) the company was scheduled for completion in 1986. In 2012, the Federal Government launched her backward integration policy. Going forward import licenses for steel products was only granted to companies producing steel locally. TPE to ensure they could import steel parts for Ajaokuta simply went ahead and built the rolling mills in Ajaokuta before the actual steel plant was completed, they imported billet from Ukraine to accomplish this.  Thus, Ajaokuta was producing steel before the actual steel plant was started. Thus, amazingly Ajaokuta has functional rolling mills but no operational blast furnace, Ajaokuta cannot produce steel from basic iron ore found in Nigeria in her blast furnace.…this is the definition of cart before the horse.
  2. NIOMCO Factor: The iron ore in Nigeria earmarked for Ajaokuta is from Itakpe, it has low iron content, thus, the FG built National Iron Ore Mining Company (NIOMCO) a 2.15 metric tonnes beneficiation plant designed to process the low-quality iron ore from Itakpe to iron ore suitable for Ajaokuta Steel. Simply put, if NIOMCO does not operate, Ajaokuta CANNOT operate (unless Ajaokuta uses imported iron ore). As of today, NIOMCO is not operational.
  3. Railway: 15 million tonnes of iron ore cannot be moved by road, as it will destroy the roads, thus, a railway was to be built from Itakpe to Ajaokuta to take iron ore from the beneficiation plan in Itakpe to the Ajaokuta. Itakpe to Ajaokuta by rail is just 52km, the rail line was to be delivered by March 2019, but the Minister of Transportation, Rotimi Amaechi revised the delivery date to June 2018 and converted the purely commercial railway to also carry human passengers. These changes meant the cost of the project and delivery dates had to change as passenger wagons and train stations had to be built. To achieve this, 12 new passenger stations and 12 access roads had to be designed and built. The Itakpe to Ajaokuta (IA) has two stations. As at June 2018, The station IA1 – Eganyi to Itakpe, is still under design. Station AW1 – Ajaokuta (standard station), zero percent work done. Thus, the railways are not functional.
  4. Blast Furnace: The furnace in Ajaokuta is the heart of Ajaokuta, it is the pot where the jollof rice will be cooked, however, it has never been turned on, why? Because there has never been any time Ajaokuta has had raw materials available to ensure the continuous day in day out production for 5 years. Why has there never been materials? Because there is no railway to take iron ore from Itakpe to Ajaokuta. Why is there no railway from Itakpe to Ajaokuta? Because NIOMCO in Itakpe is moribund and not functional and cannot convert Nigeria iron ore to high-grade ore for the furnace in Ajaokuta.

So, it follows that for Ajaokuta to work, we MUST have three key critical paths:

  1. NIOMCO must be functional
  2. Itakpe to Ajaokuta Railway line must be functional
  3. Blast Furnace operational

All three are not functional, so its clear Nigeria cannot make steel in Ajaokuta. Nothing, however, stops a corrupt government official from importing billets and running them in the rolling mills to deceive taxpayers. So, when anyone tells you Ajaokuta will soon work ask them, can a steel plant work without NIOMCO, railways and a blast furnace?

All is not gloom, Kayode Fayemi as Minister was able to secure an out of court about Ajaokuta, we must build on this.

Fidelity ads

In closing, Ajaokuta is the only steel plant in the world built by the USSR, sold to Americans, then to Indians, all these teams have come and gone with their own technical style, there have even been accusations of asset stripping by the Indians.

So why this post? Because I am a patriot, I will not sit by and watch scarce resources be wasted in a grand deceit. Probably some corrupt folks have told Mr President that Ajaokuta can produce economically viable steel if “small” dollars are spent. You can already see how the critical rail line delivery dates were moved back to ensure it is done in time for 2019 elections, yet it is still in design stage. Ajaokuta is Nigeria and probably Africa biggest failure. It has failed. Can it be made to work? Yes, but the cost to integrate Ajaokuta with her mines and rails can be used to build new smaller modern turnkey functional steel mills. The government should get out of Ajaokuta, sell the place and allows the private sector capital and expertise to restructure and own it.

If you want to make jollof rice and there is no rice the solution is not to keep boiling water without rice but to go and get rice.

This article was written by Kalu Aja. Aja is a Financial Planner and Economic Strategy Consultant with over 20 years expertise in the financial services industry.

Nairametrics frequently publishes articles from experts such as financial analysts, economists, researchers and investors. We also feature articles from guest writers and bloggers who wish to push their views and opinions through our platform. To get your articles on Nairametrics, kindly send an email to [email protected] and we will publish it within 24 hours of approval by our editorial team.



  1. Anu

    August 23, 2018 at 9:04 am

    Q: Are you suggesting the government is just playing lip service to rail development along that corridor?
    Also Buhari Govt has always said that thatthey dont intsnd to spend a dime on Ajaokuta, tgey want to sell…. So are you representing a buyer?

  2. Charles

    August 23, 2018 at 10:55 am

    This is one of the best articles written about Ajaokuta. Very easy to understand for the layman like me.

    Kudos to the author

  3. Seun from Ajaokuta, I read metallurgy

    August 24, 2018 at 2:22 am

    I think this article is from the pit of hell mix with the truth and lies.
    The 3 reasons you have stated are baseless.
    You say the iron ore are low grade and so must be beneficiated, most of the iron ores in the world are beneficiated, that is the reason why they built the beneficiation plant before ajaokuta mines were ever found. And note ajaokuta iron ore content is between 45-65%iron content; this is not low at all.
    You said Niomco is not operational, true but all equipment’s are on ground although they are rusting out because of many years of abandoning
    And the the track to bring materials, that one has already been completed since 1980s.
    This article should not been written at all by a patriotic Nigerian,only a bastard Nigeria will write this.
    Nigerians please remember No Steel no Country no better lives,No Economy.
    Seun from Ajaokuta read metallurgy and materials Engineering

    • Anonymous

      August 24, 2018 at 4:46 pm

      Oga u are a goat Ohhh from what you said is anything working

  4. TJ

    August 24, 2018 at 11:47 am

    Very enlightening. Thanks for this.

  5. Anodebenze

    August 24, 2018 at 12:46 pm

    Only a Nigerian can curse like a Nigerian, Look at the strenght and the forces of the language.only those who have a stake and a moral stand in this issue can speak in nigeria “a pit of heel mixed with half-truth”there is some truth in the article Ajaokuta was set-up for several reason,nigeria do have raw iron material in udi in enugu state
    When a raw iron core is purified,you can get any stage you want,as if your iron is not purified,the iron rod will break up like sand.THe ajaokuta complex was the most recent and mordenized steel complex till date,ever designed
    The speaker of the house of representative did visit ajaokuta and said we need ajaokuta,now the important question,why is ajaokuta is still dormant after almost 30 yrs,when about 80 % to 96 % of the work almost completed,which means the federal govt needs to revisit it’s steel policy,importaton tariff and demand,which I think is the problem and the full completing of the railway that needsi.e the fund to complete the complex and it’s attendant problem,in about 2 yrs,there will be a complete new steel policy

  6. Anonymous

    August 24, 2018 at 4:52 pm

    Who wrote this article God bless you. I have been trying to find reasons why is not working since . Thank you . For those persons that will not write to educate us but only comment rubbish should go and sit inside the dustbin

  7. Olusola Ogunnaike

    August 25, 2018 at 7:10 pm

    You failed to discuss Coke; Metallugical coke, without which all else would pointless – unless a redesign to untilise Natural gas is done- and futile. Metallurgical coke is highly prized and supply contracts exceed 20 years. Thanks

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.


Strong performance from Stanbic IBTC, despite weak retail banking position

Will Stanbic IBTC be able to generate profit from its personal banking division by full year? 



Stanbic IBTC made a profit after tax of N45.2billion, growing its profit by 24.7% when compared with this period last year.

The feat is remarkable; given that majority of financial institutions responded as expected to the economic downturn triggered by inflationary pressures, oil price instability, and lack of notable business activities, necessitated by the corona-virus pandemic that has characterised the 2020 business calendar year.

These other organizations reflected positions worse off than their escapades in 2019. In cases where improvements in bottom-line were seen, it was only marginal. 

READ: STANBIC IBTC posts Profit After Tax of N45.2 billion in H1 2020

Stanbic IBTC was not exempted from these economic trials, their immensely diversified business portfolio boosted their numbers on multiple fronts. Robust presence in Asset Management paid off, as commissions and fees represented a massive 62% of general fees and commission income. It’s Corporate and Investment division continues to produce astoundingly, contributing the highest and growing profit after tax of 49.2%. 

GTBank 728 x 90

This focused and efficiently monitored diversification, is turning Stanbic IBTC into world-beaters, reflecting in the expansion of its gross earnings by 7.8%, from N117.4billion in HY’2019 to N126.6billion so far this year.

This position could have appeared even better; had STANBIC been able to demonstrate in its personal and business banking segment, the same excellence, noticeable in its other business segments (Wealth, Corporate and  Investment).  

READ: Jaiz Bank: First shared-profit bank in Nigeria approaches 10 years

GTBank 728 x 90

It’s Personal banking (generally regarded as Retail banking), encompasses the provision of banking and financial services to individual customers and SME’s (Small and Medium scale enterprises), mortgage lending, leases, card products, transactional and lending activities such as telephone banking, ATM’s, etc. The segment suffered this year, closing with a loss of N3.2billion, despite being responsible for over 58.4% of general staff costs. This poor position was sponsored by a reduction in income levels, especially non-interest income from fees and commission.

Unsurprisingly, given CBN’s policy at the start of the year to implement a much-reduced transfer fee rate, an increase in Non-performing loans is another causal factor for its loss this half-year. STANBIC cannot afford to bask in the euphoria of the massive successes of its Wealth and Corporate segment, at the expense of Retail banking.

READ: Zenith Bank blows past Access Bank as customer deposits cross N4 trillion

Retail banking is fundamental to any bank looking to be a force, or preserve its going-concern status in this critically competitive economic environment. It has been the subject of immense research in the last decade, with many banks devising strategies to acquire a large chunk of the market share in this business segment. The banking landscape is evolving amidst growing competition, such that a bank that generally does well in its retail banking segmentis perceived as strong by the public. This has an underrated capacity to effortlessly attract more customers. Banks need to revisit the drawing board and re-embrace their sacred purpose of serving the basic and pure needs of their individual customers. 

Michael Lafferty, Chairman of the Lafferty Group, whilst describing Retail banking said, Retail banking is the foundation on which global banks are built,” It is a vast retail and consumer banking market, pointing out that the world’s biggest banks built their financial empire from the mass market. 

READ: Foreign investment inflow into banking sector falls by 95% in Q2 2020

Fidelity ads

Stanbic IBTC must be conscious in its quest to provide universal banking and find a balance in product and service offerings across its business segment. 

A summary of the performance parameters in its financial statementshows growth in gross earnings, from N117.4billion to N126.6billionand improvement in earnings per share from 342kobo to 419kobo. 

Attention now shifts to the impact of the bank’s new super app, supposedly a one-stop-shop for its diverse offerings, including banking, investing, pensions, trading, and insurance, and how it affects the bottom line in subsequent quarters.  

Explore the Nairametrics Research Website for Economic and Financial Data

Lastly, will Stanbic IBTC be able to generate profit from its personal banking division by full year We await their H2’2020 results. 

Continue Reading


Is Zenith Bank thriving on the strength of sound financial indices?

Zenith Bank posts N103.8bn profit in half-year financial result.



Zenith Bank reaffirms market dominance and leadership with Q3 2019 results, Zenith Bank Plc, Access Bank Plc and United Bank for Africa Plc, Zenith Bank reports 7.9% profit increase for full-year 2019

Sound financial indices have made Zenith Bank one of the largest banks in the Nigerian banking Industry. It was recognized as the Most Valuable Banking Brand in Nigeria 2019, in the Global Banker magazine Top 500 Banking brands; and Best Commercial Bank in Nigeria 2019, by the World Finance.

Zenith Bank has successfully bolstered this narrative even further with the release of its Half Year 2020 Financial Report, where it closed with a profit of N103.8 billion.

Growing profit position in these perilous times, speaks remarkably of the suppleness and elasticity of any establishment. A lull in economic activity caused by inflationary pressures, precariousness of the market, and the coronavirus pandemic has forced most Deposit Money Banks (DMBs) to cave in, and reveal achievements worse off than their 2019 results y/y – but not Zenith Bank Plc. The institution has showcased beyond reasonable doubt, that the apparent limitations are incapable of distorting its active growth pattern.

Zenith Bank closed H1 2020, 16.8% better off than it did in 2019 y/y, in terms of profit after tax. Although this massive leap, hugely resulting from tax paid as profit before tax, noted just a 2.2% growth. Further analysis of its HY’2020 results, demonstrates more efficiency, a focused cost of fund optimization, and an aggressiveness in generating income across its business heads and segments. This strategy had begun since 2018, and was shared by the bank when it disclosed planned implementation of an improved core banking system, hoping it would ultimately enhance efficiency while reducing costs.

Zenith Bank has thrived on the strength of its sound business model, corporate governance, conservative risk management, and strategic corporate social investment. The bank has been very forceful in the market, improving massively across all of its income generating segments, despite the plausible and obvious hindrances. This is a testament to its superiority, and sponsors its claim for supremacy.

GTBank 728 x 90

The bank made N22billion from foreign exchange revaluation gains and despite evidence to the contrary, it endeavored in operating expenditure (OPEX). OPEX may have grown by 7.7%, but disclosures and note to the accounts shows that in virtually every expense head, costs dropped. The 7.7% was triggered majorly by Information Technology related costs, fuel and maintenance, and an increase in the compulsory banking cost fund, set up for the Asset Management Company of Nigeria (AMCON) by the CBN.

Now, like every hero susceptible to their hubris, Zenith has its own problems, which questions its position at the top. Yes, the bank may have an amazing and constantly improving interest expense to interest income ratio, but it does not possess the finest result in this regard as of yet. HY 2019 interest expense took as much as 33.6% of its income, while HY 2020 dropped to 27.4%. This is good, but still considerably high, if we carry out a peer-to-peer analysis with Guarantee Trust Bank Plc (masters of low-interest expenses), whose ratio stands at 16% for HY 2020.

However, Zenith has sustained the momentum of positioning itself as the crème de la crème in the Nigerian Banking Industry for quite some time. The bank’s pattern of growth and performance, strongly indicates its capabilities to manage its interest expense in subsequent quarters. It will be interesting to see how this pans out by year end.

GTBank 728 x 90

In summary, despite economic difficulties this year, with most bank’s bottom-line at a worse position than the corresponding period last year, Zenith posted improved profit yet again. Could this be enough to portray supremacy?

Continue Reading


UBA Plc H1’2020 results, a true reflection of its rightsizing decision? 

UBA’s H1 2020 result is yet another demonstration of the resilience of its business model.




The upward review in benefits of some employees and directors this year, coupled with the rising operational costs, constitutes the hot topics from the 2020 semi-annual results released by UBA Plc. 

Widely regarded as the banking sector’s largest employer of labour in Nigeria, the bank in December 2019, embarked on a ‘rightsizing’ exercise, which partly resulted in new hires, as well as promotions, improved remunerations, and benefits for existing employees.

READ: Zenith Bank’s Profit After Tax in H1,2020 rises by 16.8% to N103.8 billion

The Group Head, Media and External Relations, UBA Plc, Nasir Ramon commenting on this said, over 5000 staff of UBA Plc, started the new year with a lot of cheer, as the bank promoted to new grades, coupled with salary upgrades. Beneficiaries of this exercise will receive up to 170% increase in their salaries and benefits, whilst a good number have been moved to higher grade levels.” 

Directors saw their emoluments amplify by 177.7% (Fees and Sitting allowances) as demonstrated in the financial statements of the bank. Rising to N50million in June 2020, from N18million in 2019 y/y. 

GTBank 728 x 90

READ: Access Bank posts Profit Before Tax of N74.31 billion in H1 2020

Now, Deposit Money Banks (DMB’s) might be adjudged to be honorable in all of their objectives, but the truth is they are neither self-sacrificing nor are they expected to be. DMB’s are established for profit, and would incessantly prioritize business good sense over social empathy, for the sake of their owners The import of this is, UBA Plc expects its colossal investments in employees and directors to overwhelmingly reflect in its bottom-line. 

Half-year 2020 results is clearly not in sync with this philosophy, as it reflects a weakened position compared to the corresponding period last year, despite the investments in human capitalProfit before tax dropped by 18.7%, from N70.3billion recorded in HY’2019 to N57.1billion in the current period. Profit after tax waned as well by 21.7% to N44.4billion from N56.7billion in HY’2019. 

GTBank 728 x 90

READ: Are tech talents Africa’s ‘new export’?

Interestingly enough, the top-line fared pretty well. Interest income and fee income showed improvements, albeit marginally by 0.3% and 6.7% respectively. This makes it illogical to attribute the entirety of the decline in profit to the recent austerity measures put in place by the CBN, reducing funds transfer fees and card maintenance charges 

The Coronavirus pandemic played a big role too, by widely stunting the economy in the second quarter of 2020, and negatively impacting profit. But even these do not provide substantial and sufficient convictions as to why the Tier-one bank did not hit the profit-bar it set for itself, from its truly emphatic 2019 financial year. Does this mean that UBA Plc got the decision wrong at the start of the year? 

READ: FUGAZ; Nigerian banks considered too big to fail

Six months seem too short a period to immediately class management’s decision to jack up the benefits and emoluments of its internal customers as a failed one. Although, no one anticipated the travails of COVID-19 and its resulting consequences, investments in human capital is widely proven to yield tremendous growth in the long haul. Besides the fact that it has given UBA Plc a solid reputation in the market place, it also makes the company very attractive to the very best of industry talents. Furthermore, employee engagements of this nature, foster brand loyalty which ultimately trickles down to how passionately these personnel undertake their tasks and deliverables. The true bearing of this investment is expected to reflect in due course, in subsequent quarters.  

Commenting on the result, UBA’s Group Managing Director/Chief Executive Officer, Mr Kennedy Uzoka said, “Our H1 2020 results is yet another demonstration of the resilience of our business model in an extremely uncertain and tough operating environment. We recorded commendable growth in our underlying business in terms of customer acquisition, transaction volumes, and balance sheet whilst inflation, depressed yield environment and exchange rate volatility impacted our net earnings as anticipated.” 

Fidelity ads

READ: GTBank, Access Bank, 11 others pay workers N271.64 billion in H1 2020

Rising cost

In today’s increasingly aggressive marketplace, where consistently generating revenue, is paramount to preserving the longevity and going-concern status of any establishments, costs must also be accorded as much attention and significance. Tightening and managing costs with the aim to improve and generate profit is genius strategy especially in today’s banking industry. The banking industry is under threat from ruthless competitions. Multifarious streams that had hitherto been available for generating income for DMB’s are being severely hindered by the ‘austere’ policies (from the perspective of commercial banks) from the apex bank, making effective cost management a survival mechanism. 

Explore the Nairametrics Research Website for Economic and Financial Data

Employee benefits rose by 20% from N37.2billion in HY’2019 to N44.6billion in HY’2020, while Directors’ emoluments (Fees and Sitting Allowance) as earlier stated, surged by 177% from N18million in 2019 to N50million in 2020 y/y. The total operating expenses increased 22.6% in 2020UBA Plc, unavoidably expended N22.4billion on Banking Sector Resolution cost trust fund, in compliance with the CBN’s requirement to contribute to the cause of the Asset Management Company of Nigeria (AMCON). Security and other payments for core services experienced increase as well compared to the preceding year. 

Avoidable expenses like Penalties and Premises Maintenance Charge, should be extensively reviewed and extinguished wherever possible, to improve bottom line. UBA plc has forked out N565million in penalties so far in 2020representing 6177.7% increase from just N9million in 2019 y/y. This is a prime example of the operational brick walls, UBA Plc must properly address to improve its fortunes in subsequent quarters. 

Continue Reading
ikeja electric
FCMB ads
Fidelity ads
first bank
deals book
financial calculator
deals book