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Why Ajaokuta Cannot Make Steel

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

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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.

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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.

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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?

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

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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.

9 Comments

9 Comments

  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

    • Anonymous

      October 19, 2020 at 7:27 pm

      Very true indeed, very articulate.

  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

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