Failure Of The Ajaokuta Steel Rolling Mill Project Construction Essay

In the quest to develop its policy in the steel sector the Federal Government of Nigeria under General Gowan epoch promulgated Decree No.19 on April 14, 1971 puting up the Nigerian Steel Development Authority ( NSDA ) which was charged with the duty for the planning, building and operation of steel workss in the state. It was in add-on tasked with transporting out probes related to geological studies, market surveies and metallurgical research. The NSDA besides embarked on short and long-run preparation of staff in abroad states such as India and the Soviet Union on the operation and direction of an Fe and steel works. Hence, in 1973, Tiajpromexport ( TPE ) of the so USSR was commissioned to fix a preliminary undertaking Report ( PPR ) on the Fe and steel industry in Nigeria. The Report submitted in 1974, studied alternate production strategies based on both local and imported natural stuffs and was accepted in 1975.

A contract for the readying of the Detailed Project Report ( DPR ) signed in 1975 with the USSR was submitted to the Nigerian authorities in October of 1977. With the aid of Sofresid of France as advisers, a discrepancy of the steel works was accepted in June 1978.

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The DPR specified loosely the general layout, composing and demands every bit good as a probationary maestro agenda of the Ajaokuta Steel Plant. It was on the footing of this Detailed Project Report that the Global Contract was signed on the 13th of July 1979 between Nigeria and Tiajpromexport of the Soviet Union for the building of the Ajaokuta Steel Plant. The sign language of this contract signified major committednesss on the portion of the Nigerian authorities and the USSR to the development of an Fe and steel industry in Nigeria.

The Nigerian authorities on 18th of September 1979 promulgated the National Steel Council Decree No.60 fade outing the NSDA. The new edict provided for the formation of the Ajaokuta Steel Plant every bit good as five other limited liability companies. These are the Delta Steel Company Ltd. , Aladja ; the Jos Steel Rolling Mill, the Oshogbo Steel Rolling Mill, the Katsina Steel Rolling Mill, and the so Associated Ores and Mining Company Ltd. , now, National Iron Ore Mining Company ( NIOMCO ) at Itakpe. However, the really long gestation period of the Ajaokuta undertaking meant that the turn overing Millss had jobs of unequal supply or deficiency of notes to run optimally. This contributed significantly to the hapless public presentation of the Nigerian steel sector. The steel companies, turn overing Millss and the excavation company have all now been incorporated as limited liability companies and are expected to be self-funding ( BPE, 2005 ) .However, the authorities of Nigeria wants to to the full deprive its equity retentions in the peal Millss. It seeks prospective core/strategic investors with an initial sale program of acquisition of 80 per cent portions of the turn overing Millss, while the staying portions will be offered to the staff of the company every bit good as the local community ( Bureau of Public Enterprises, 2003 ) .


The Ajaokuta undertaking was established on the 18th of September 1979, with formation of Ajaokuta Steel Co. Ltd. Which was charged with the duty of building and runing the Ajaokuta integrated Fe and steel works. The undertaking at origin was envisaged to bring forth 1.3 million metric tons at its first phase, 2.6 million metric tons at its 2nd phase, and 5.2 million metric tons per annum at the 3rd stage of long and level merchandises. The chief units of the Ajaokuta Plant include the Fe devising works, steel devising works, the turn overing Millss, fix installations, subsidiary installations and the electric power supply system. The envisaged characteristics of the Plant include 150mm Wire Rod Mill, 320mm Light Section and Bar Mill, 700mm Medium Section and Structural Mill and 900/630 semi-continuous Billet Mill Cross Section of ASCL: Beginning: Julius Berger Plc ; Construction period, 10/1980-06/1990

ASCL, 1990 ) . The Ajaokuta integrated works, which is based on the blast furnace procedure of Fe devising, has a natural stuffs readying unit that includes the Sintering works, Coke-oven and By-product unit under the

iron-making unit. The peal Millss are four, two of which, viz. , the light subdivision and Wire Rod Millss were supposed to be the precedence turn overing Millss. In footings of merchandise mix, the Preliminary Project Report ( PPR ) , proposed equal sums of level and long merchandises. However, during this period, the national economic system was floaty with the building industry basking a roar, and this led to the determination that the first phase of the works would be devoted to hanker merchandises merely, while the 2nd phase – an enlargement to 2.6 tens 106 tones, would be for the production of flats. The first stage was hence designed to bring forth long merchandises like Fe bars, wire rods, angles, squares, channels, beams, and constructions. Most of the merchandises were expected to be used in the civil technology building industry. However, hindsight shows that the alteration of the original construct of the works was a serious mistake ( Ogbu, 1995 ) .


Several consecutive disposal of the federal authorities had taken steps in the completion of the Ajaokuta undertaking since its origin yet till day of the month the undertaking had non attained the first stage of its installed capacity. In line with the industrial policy of the civilian disposal, a Joint Venture Agreement ( JVA ) between FGN and a Nipponese house, Kobe Steel Ltd, was entered into on May 31, 2002 – to supply a Fastmelt Technology for the completion of the plant-phase I. Six months subsequently, another understanding ( Financing Agreement – F.A ) was reached with SOLGAS of USA to finance the undertaking between the FGN and Kobe Steel Ltd on the 29th November, 2002. In a infinite of another seven months ON June 30, 2003 the Federal Government signed yet another understanding with the same SOLGAS: to snuff out earlier understandings reached and to travel in front to pull off the undertaking go forthing in the aftermath excessively many loopholes, thereby seting into serious inquiries our techno-managerial ability. As this agreement was in advancement, there was on standby TPE to present a come back. TPE really submitted to the ministry to rehabilitate the works at the cost of $ 300million. The recent attempt of the authorities is the fundamental law of the 16-man Interim Management Committee after the grant of Ajaokuta steel company to an Indian based company, Global Infrastructure Nigeria Limited ( GINL ) failed in 2008 on the land that the Indian house was short-changing the involvement of the state ( Olaitan, 2010 ) . The Ministry of Mines and Steel Development received the concern program of the Interim Management Committee for re-operationalising. With this, the seed fund of Six hundred and 50 ( N650 ) million naira merely was approved by the federal authorities to be released to the Interim Management Committee for re-operationalising the Light subdivision factory, the Wire rod factory, the technology workshops, the Thermal Power Plant at the Steel Plant. Harmonizing to the Minister aa‚¬A“the immediate stage is re-operationalising, the 2nd is completion of the workss and the 3rd stage is privatizationaa‚¬A? , ( Mukhtar, 2010 ) .


The major jobs suppressing the proper functionality of Ajaokuta Steel Company can be categorized under the followers:


Natural stuff development.


High cost of energy and natural gas.

Inappropriate capital construction.

1.3.1 Support.

aa‚¬A“Many ex-regimes save the Shagari Ekwueme epoch of the Second Republic had had but a handful on the importance of the steel dream. Suffice it to state that in the Abacha government the undertaking was said to hold been mortgaged much to the humiliation of compatriots in the industry and the state in general.aa‚¬A? , ( Omonihgo, 2004 ) . It could be concluded that the authorities has spent a batch on the undertaking, but hapless support has been the curse of completion agendas of the undertaking

Second to it is the deficiency of working capital for the operation of the Rolling Mills and other units of the steel undertaking led to the shooting down of these workss resulted in idling and impairment of the completed units. There is no addition stating that for a reactivation of these units, significant working capital is required.


Mines development, entree roads, procurementinstallation of works and equipment are still outstanding for a figure of natural stuffs input in steel production apart from Fe ore. There besides, lies the job of identifying and finding beginnings of imported natural stuffs like bauxite and manganese, cooking coal etc.

1.3.3 Infrastructure:

Apart from natural stuffs, external substructures to and from Ajaokuta steel are missing. The completion of Warri-Ajaokuta rail line, dredging of, River Niger, and installing of majority handling installations at the ports are still outstanding.

1.3.4 Inappropriate Capital Structure:

Ajaokuta steel company being a populace sector steel company has found it highly hard to beginning for financess in the fiscal market. Consequently, the authorities has been their beginning of financess. Sadly, the dwindling economic lucks of the state via mal disposal have made the authorities incapable of run intoing the fiscal demands of these companies adequately.

However, in every bit much as the state is over independent on oil and its non variegation of the economic system, political relations both local and international, corruptness has been the Bligh of the realisation of the steel dream, it remains inevitable that the completion and commissioning of the Ajaokuta steel works remains the bed stone to Nigerians quest towards industrialisation.

2.0 Theory

2.1 Per Capita Consumption of steel

The per capita ingestion of steel is the index used to find the degree of industrialization of a state. The per capita ingestion of steel in Nigeria is deplorably really little: 10kg, some say it is less than that ; while the universe norm is 130kg. Statisticss show that Nigeria is dawdling behind even other African states, with lesser gifts ; like: Zimbabwe ( 25kg ) , Egypt ( 42kg ) , Algeria ( 38kg ) and South Africa ( 112kg ) . But Nigeria is richly endowed with extended sedimentations of metallic and nonmetallic stuffs across the state, which is why confronted by this glooming economic mentality, the African Iron and Steel Association, AlSA, in May 2002 advised the Nigerian authorities that the state can deploy her resources to raise up her degree of per capita ingestion of steel to 100kg, so as to jump-start industrialization within the following 10 old ages, Adding that Nigeria, with a population of over 150 million has “ a really big room and immense domestic market that can prolong such rapid growing ” . The state will besides salvage for herself a batch of foreign exchange net incomes if ASCL and DSC can come on watercourse, harmonizing to AISA.

From the foregoing hence, Nigeria ‘s demand for steel is estimated at about 12.0million metric tons per annum – to get down industrialization proper. If ASCL and DSC are runing optimally, so, they would lend yearly 5.2 million and 1.0 million metric tons severally or cumulatively 6.2 million metric tons per twelvemonth to the domestic market. It behooves, hence, that the staying 50 per centum will still necessitate to be imported or, another Ajaokuta and Delta Steel Complexes are required to argument the short-fall in supply.

2.2 Build Own Transfer Solution

2.3 Corporate Administration



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