Ajaokuta Steel Mill: A fairy (cautionary tale)

Once upon a time, there was a kingdom called Nigeria. It was a relatively new one, as it had just been wrested (relatively gently) from the hands of stationery bandits collectively known as the United Kingdom. In this newfound land, there was a lot of quarrelling. Treasure, in the form of a black liquid called crude oil, was highly sought after and a very strong incentive for rulers, causing tumult and uproar regarding who would reign. Rulers were unsure of what to do with an unprecedented influx of gold, and this was coupled with intermittent shuffling between civilian and military authorities, so sadly not much of this gold was put away for future emergencies, emergencies that would surely come.

Fast-forward to 1979. The king of the land, Shehu Shagari, and his council held the general consensus that industrialisation was important for development into a formidable force, a process that could not happen without substantial iron and steel industries. He commissioned a project to conceive the finest steel mill in all the land,and one of the largest in all the realms of that region. So it was wrought, with help from contractors from far away lands like the Soviet Union, even though there was an emergency brewing that would shake the foundations of everything.

This emergency came in the form of a debt crisis, making waves through both the developing and developed realms. Amidst all this chaos, more powerful realms concocted means to stem this crisis from becoming worse. The means of improvement was in the form of decrees called structural adjustment programmes, a tidy term describing public divestment, privatisation and deregulation, so if you had the gold, you could buy it or invest. Austerity measures ensued; suddenly the frivolous spending of earlier years began to have consequences. In the midst of all this commotion, what happened to the finest steel mill in all the land? Nothing.

Nothing happened to the finest steel mill in the land because a truly unfortunate chain of events saw that it never got off the ground. It would have been a Cinderella story, an achievement with the attractiveness of all great accounts of the victory of the underdog. Sadly, it’s just a fairy tale. A fairy tale in the sense that right from its conception, the Ajaokuta steel mill was idealised, and not firmly rooted in the harsh realities of economic uncertainties, political unrest and low levels of human capital. A healthy dose a bureaucratic red tape, vested interests and political tactics ensured that the mill would remain at the brink of operation, and never quite fully operational.

Why is the Ajaokuta steel mill relevant today? Alas, it is a cautionary tale that might just have a happy ending in sight. Recent reports that the mill will ‘resume’ production (although it never started) have surfaced. Goodluck Jonathan reportedly said “Ajaokuta steel plant is the bedrock of the nation’s industrialisation. I want to assure the good people of Kogi State that my administration is committed to the timely completion of the steel plant to serve

the purpose that it was established to serve as the bedrock of the nation development in 1979”, during a visit to Kogi in 2011, and various reports say that the mills are to start rolling by the end of the year. Nigerians we have something to look forward to! We can finally begin to contribute to global steel production; we can stop importing yet another product that we can readily produce at home, and workers of this ghost mill can be paid salaries in arrears (best case scenario).

In the mean time, now that the mills have been brought to our attention, there are several questions we need to ask ourselves. What has it cost the Nigerian people to run a steel mill that has not produced one bar of steel in 30 years? Reports indicate this figure to be more than $10 billion. Some would say it didn’t come out of their pocket, no need to complain. However, we paid a price. We paid this in the form of missing out on several key social sectors that could have been developed with that whopping sum. How long have workers NOT been getting salary to work at a ghost factory? Probably too long, but we cannot say with certainty. How much will it cost to get it up and running again? Just $1.2 billion says the federal ministry of steel and mines development. Who are the major stakeholders in this project? Reprom Nigeria Ltd, a Russian firm, in partnership with Ukrainian investors (who remain nameless). A cursory glance at current affairs news outlets will undoubtedly show that this could be problematic. What about rumours that the technology is outdated and has been from day one? The administrator of the plant Isah Onobere has assured us, “The total world crude steel production as at December 2012 was 1.5billion tonnes and 70 per cent was produced through the basic oxygen furnace technology, the blast furnace, so if as at December 2012 the world crude steel production of about 70 per cent was achieved through this technology then the technology in Ajaokuta remains the most acceptable and applied technology in iron making process which has the capability of processing even the least acceptable grades of iron ore and it’s quite flexible in operation.” Very reassuring, we will find out just how viable the technology is come 2015. Lastly, what will be done to avoid further dormancy? We would need a detailed study to see the differences and similarities in the political and economic environment and the incentives that they have generated to be able to answer that question robustly.

In my view, the demise of the mills can be boiled down to poor governance intertwined with global economic unrest and changing attitudes in Washington towards what developing nations need to focus on in order to grow. What prevailed in the 60s and 70s was the view that rapid industrialisation precedes sustained economic development, and that capital accumulation was required to feed a market economy. The debt crisis that ensued in the 80s reminded folks in the West that social sectors like health and education were also crucial (the basic needs strategy), and investments were shifted away from industrial sectors into these areas. At the same time, there was also a prevailing belief that major infrastructure projects could be handled by the private sector, resulting in a drive towards privatisation and deregulation. However these countervailing schools of thought leave us with hordes of unfinished, underdeveloped and useless projects that yield no returns at all. What’s more, have we really learnt from the past 30 years? These ‘white elephant’ projects should be providing us

with valuable lessons on development strategy; ‘The real Achilles heel of Nigerian industrialisation is very limited indigenous technical capacity’. There it is, the glaring fact that we need people who will tend to the seeds that we often rely on international investors to plant. What’s more, ‘an efficient economy needs literate, healthy workers to make a country function correctly; without them, new machinery and infrastructure are useless.’ Before more money is poured into shiny new equipment and mega factories, we need to think about how much money we are NOT pouring into the development local skilled workers. Finally we get to the crux of the matter; policy makers are to strike a balance between investing in physical infrastructure, and investing in human capital over a longer time horizon. At this point, the scales should tip more towards the latter.

** ‘WILL IT ALL END IN TEARS? INFRASTRUCTURE SPENDING AND AFRICAN DEVELOPMENT IN HISTORICAL PERSPECTIVE’, journal of International development, 24:2, pp. 237-254**

**’ Evaluation of the Foundry Properties of River Niger Sand Behind Ajaokuta Steel Company Limited, Ajaokuta, Nigeria’, American-Eurasian Journal of Scientific research’, 3:1, pp. 75-83, 2008.**

**http://www.economist.com/node/273185**

**http://businessdayonline.com/2014/10/steel-workers-commend-fg-for- reviving-ajaokuta-steel-company/#.VGuJ1ZOsW18**

**http://www.thisdaylive.com/articles/revamping-ajaokuta-steel- plant/190762/**

**http://www.ajaokutasteel.com/site/pagef.php?cnt=Background%20of%20Or ganization**

**http://businessdayonline.com/2014/10/nigeria-revamps-32-year-old-steel- mills-project-to-gulp-1-3bn-before-completion/#.VGnaUpOsW1-**

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