By NBF News
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Reviving the steel plants
Monday, March 15, 2010
Federal Government's recent approval of a N650 million lifeline for the reopening of the Ajaokuta Steel Company Ltd. (ASCL) and the National Iron Ore Mining Company (NIOMCO), Itakpe, has raised a glimmer of hope that the vision for setting up the plants has not died.

The steel plants were set up by the government in the seventies with a strategic plan to erect a Metallurgical Process plant and engineering complex to generate upstream and downstream industrial and economic activities in the country. But for years, the plants have been in ruins due to a combination of factors, including lack of funds, maladministration and successive governments' lack of commitment to the completion of the projects.

As a result, in April 2008, the Federal Executive Council (FEC) revoked the concession agreements between the Federal Government and Global Infrastructure Holdings (Nigeria) Ltd (GIHL) that was appointed to manage the two plants, and the Aladja Steel Company located in Delta State. GIHL was accused of non-compliance with the concession agreement signed with government.

This followed the indictment of some of its officials by the anti-graft agency, the Economic and Financial Crimes Commission (EFCC), which probed the affairs of the companies. In its stead, government appointed interim managements to oversee the operations of the derelict plants. The concession agreement with GIHL was signed during the Obasanjo administration.

Nonetheless, Minister of Mining and Steel Development, Mrs Diezani Allison-Madueke, who announced the approval of the N650 million grant, underscored the reason for the lifeline. She said it would be used to restart the plants and re-operationalize some of their completed units. These include the thermal power plant, the light section rolling mill, the wire rod mill and engineering workshop. A bigger chunk of the money will go into the Ajaokuta Steel Plant which has suffered the most neglect.

It has the greatest potential to contribute to government's blueprint on Metallurgy. For example, the Ajaokuta Steel Company, which was established on September 18, 1979, in Kogi state, was designed to produce 1.3m tons of cast steel in the first stage annually, with an expansion of between 2.6m tons and 5.2m tons in subsequent years. That projection has remained a pipe dream. Agonizingly, the initial hope that it will add 110 megawatts of electricity to the national grid remains a forlorn hope.

All the same, we heartily welcome the present effort to restart the plants. Considering their derelict nature due to long years of neglect, we advise government to carry out a comprehensive assessment of the damage done to them over the years. Some of the key components of the plants have either been vandalized or carted away by unknown persons. A detailed assessment of the damage done is necessary to determine the losses and how much is actually needed to restore them. A thorough scientific approach is necessary for the execution of the plan. This is not the time for a cursory approach, because steel plants are at the nexus of any industrial breakthrough. The present effort should be extended to other moribund plants such as Katsina and Osogbo Steel Rolling Mills, respectively.

We believe government has sought expert opinions and options available for the resuscitation of the projects. The way forward should involve necessary legislation that will ensure that the companies managing these plants adhere to the law. Besides, government should continue to enforce the current ban on steel scraps.

This is necessary to make available sufficient raw materials for local foundries. But tax relief on imported foundry raw materials such as ferro-alloys, resin and machine parts is necessary to boost the steel and engineering industry. Over all, rehabilitation of the steel plants is an ambitious project in the quest for indigenous steel production. As a result, it requires clarity of purpose and strategic planning by those entrusted with the execution of the projects.