The Federal Government has allocated N4.45 billion to the moribund Ajaokuta Steel Company in the 2024 budget.
This is as it seeks N35 billion from funding institutions to revive the light steel mill in the Ajaokuta Steel Plant, which has been dormant for over 42 years.
N4.45 billion budget
Nairametrics observed that N4.45 billion for 2024 is higher than the N3.71 billion allocated to the company in 2023.
Personnel cost makes up over 90% of the N4.45 billion budgetary allocation for Ajaokuta Steel Company. About N4.3 billion will be spent on maintaining the personnel at the moribund steel plant. The remaining amount will be spent on maintenance of power, water and equipment.
Aside from what has been allocated to the company, there are other allocations observed by Nairametrics.
It is observed that the Ministry of Steel Development has a separate N4 billion for the concession of the steel plant.
The ministry also has a budget of N200 million to revive the Ajaokuta Steel Company Limited (ASCL) and National Iron Ore Mining Company (NIOMCO)
N35 billion revival financing
The Minister of Steel Development, Shuaibu Audu, has said that the government needs about N35 billion funding from financial institutions to revive the moribund Ajaokuta Steel Company.
To restart the Light Steel Rod Mill in Ajaokuta and begin iron rod production, Audu said the partnership with financial institutions aimed to find the most suitable funding solutions.
The minister disclosed this during his meeting with a Stanbic IBTC Bank delegation on Tuesday in Abuja, according to a statement issued by the ministry’s chief information officer, Tine-Iulun Maureen.
The statement read:
- “He [referring to the minister] noted that it has become imperative to seek funding of about N35bn to enable it to re-start the Light Mill Section of the Ajaokuta Steel Plant for the production of iron rod to achieve the Present Administration’s Renewed Hope Agenda, adding that the Ministry plan to revive Ajaokuta in phases in accordance with its set timelines and benchmark.”
Continuing, Audu revealed that the ministry has an agreement with the Works Ministry to offload the produced rod and with the Ministry of Defence to construct a military complex in Ajaokuta. He went on to say, “We have huge opportunities in Ajaokuta and potentially a lot can be achieved.”
Earlier, Wole Adeniyi, CEO of Stanbic Bank, and Debola Seriki, Head of Industrials, conveyed the bank’s readiness to collaborate with the Ministry and asked for additional information to help bring the project to fruition.
In a similar spirit, the statement stated that the minister met with senior executives from the United Bank of Africa and Voda Infrastructure Management Ltd to ensure that funding is generated for the prompt launch of the project for sustainable growth of the Steel Sector.
More Insight
The steel company, despite maintaining a consistent budget, has been unable to resume full operations for more than four decades due to the government’s unsuccessful efforts at privatization and concession.
An Indian company, Global Steel Holdings Limited, secured the 10-year concession of the Ajaokuta steel mill as part of an effort to restructure the organization. However, the agreement was subsequently revoked after allegations of asset stripping by the Federal Government, which sparked a legal dispute between the two entities.
The Federal Government ended up paying an Indian-Nigerian company $496 million in relation to a shady concession agreement.
Despite the lack of success in prior endeavours to secure concession, the Federal Government remains resolute in doing this and reviving the steel facility.
Investors, both domestic and foreign, will likely hold back on investing in Ajaokuta Steel until the Federal government overhauls its governance, making it an independent entity with a strong framework, similar to NNPC’s shift to NNPCL. Given its past of murky deals, mismanagement, and political misuse, it’s unrealistic to expect investment without a clear Federal commitment to transparency, accountability, and protective measures for investors. Only with a new, more independent governance structure will private capital consider stepping in.
NO reputable investor is going to invest in Ajaokuta in any partnership arrangement with the Nigerian government. Only P&ID-type “foreign investors” will show any interest in such an arrangement.
The Ajaokuta plant is based on outdated (1970s) Soviet-era technology and will require astronomical sums of money to revive. Accordingly, the federal government should simply SELL the plant “as is” under a competitive public bidding process to interested (foreign or domestic) investors, instead of pouring yet more scarce taxpayer funds down the Ajaokuta drain. Personally, I would’ve scrapped the whole thing years ago.
This present government should really monitor the huge amount of money allocated for reviving the steel company to it full operation since it can create more than 45 thousand job for Nigerian youth, and creating better economy drive for the nation
I see Ajaokuta like a bottomless pit. It will only swallow the cash and swallow more with nothing to show. Our leaders are not ready to work, they are playing. It’s now politics and not about Ajaokuta, recall the aluminium company somewhere in akwa ibom. We have problems