The Federal Government’s recent decision to pay $496 million to Indian-Nigerian company Global Steel Holdings Limited over a failed concession deal adds another disturbing chapter to the troubled history of the Ajaokuta Steel Company (ASC). Attorney-General Abubakar Malami confirmed that the settlement resolves a protracted dispute surrounding the Share Purchase Agreement between the government and Global Steel, dating back to 2004-2008. This massive payout for breach of contract has shocked a population already accustomed to financial mismanagement by its leaders.
President Muhammadu Buhari (retired) and the National Assembly must immediately scrutinize this deal to ensure that Nigeria’s losses are justified and minimized.
Nigeria has long been short-changed in the ASC project. Despite spending between $8 billion and $11 billion over four decades (with officials providing conflicting figures), the gigantic steel complex, now tantalizingly close to completion, has yet to produce a single ounce of steel. The nation’s aspiration for a thriving domestic industrial backbone remains a distant mirage.
This payout comes at a particularly unfortunate time, with public revenues plummeting and companies shutting down. By March 2022, Nigeria’s national debt had ballooned to N41.6 trillion, and over 90 percent of all government revenue was being used to service debts. The prospect of handing over nearly $500 million due to controversial concession deals is excruciating. Nevertheless, Malami justified the payment as necessary to resolve the contractual dispute and claimed it represents a 91 percent reduction from Global Steel’s original demand.
It appears the government may have found itself in a legal quagmire. Nigerian officials often sign contracts that place the country at a disadvantage, benefiting foreign or local companies. Buhari and the National Assembly should investigate how a company that failed to make the first payment for Ajaokuta’s shares, and was liable to pay $26 million to the government if it had waited 55 more days, managed to emerge victorious.
Questions remain about how Global Steel was allowed to retain control of the National Iron Ore Mining Company, Itakpe, after the government revoked its concession in 2008. Nigerians deserve full transparency about the handling of this debacle.
Given the substantial sum being paid out, Malami’s positive framing of the resolution seems misplaced. Nigeria faces a double blow: deprived of its steel production potential, the country remains reliant on costly steel imports while now being forced to compensate failed concessionaires. Officials responsible for dragging the country into this legal trap should be held accountable. A report in PUNCH revealed that Nigeria spent N1.03 trillion on steel imports in just nine months, while the National Bureau of Statistics reported that the government injected N21.3 billion into ASC between 2016 and early 2022.
It is perplexing how Global Steel, which failed to meet its initial payment obligations and faced accusations of asset-stripping at ASC, walked away with such a windfall. The Economic and Financial Crimes Commission and relevant National Assembly committees must thoroughly investigate the facts. In 2013, then-senator Smart Adeyemi claimed that the government had recovered ASC from Global Steel with “no attendant financial obligation.” Likewise, former Minister of Mines and Steel Development, Kayode Fayemi, stated in 2017 that ownership of ASC had reverted to the government and a new investor would be sought. These assertions seem to contradict the necessity for a $496 million settlement.
The Ajaokuta saga exemplifies Nigeria’s chronic leadership failures and the derailment of its industrialization goals. ASC, which was reportedly 98 percent complete by 1994, remains unfinished, plagued by dubious concession deals and poor leadership decisions.
Nigeria is now the only country aspiring to develop an automotive industry without a functioning domestic steel sector. Steel imports cost the country $4 billion annually, making locally assembled vehicles non-competitive. Moreover, the continued reliance on imports strains foreign reserves.
In stark contrast, Egypt, with an annual steel production of 10.3 million metric tons (MMT), ranks as the world’s 20th largest producer of steel. South Africa follows closely behind with 5.7 MMT, and Algeria produces 4.2 MMT. Ajaokuta was initially designed to produce 1.3 MMT of steel annually, creating 500,000 jobs down the value chain. The failure to realize this vision is a stark reminder of how national aspirations have been squandered.
The only viable solution for ASC is outright privatization, handing over operations to a competent international steel producer. The government must devise a new strategy for a private-sector-led revival of the steel industry, ensuring that the sale process is transparent and free from corruption.
To prevent further asset stripping and incompetence, transaction managers need up-to-date assessments of ASC’s functional state and current value to protect the country from fraudulent asset transfers.
A robust domestic steel industry is crucial for industrial growth, economic diversification, job creation, and import reduction. Nigeria has the resources: the World Steel Association estimates the country holds over 3.0 billion metric tons of iron ore, while the Ministry of Mines and Steel Development confirms proven reserves of 2.54 billion metric tons with an average iron content of 36 percent. Nigeria also has abundant supplies of other key materials like limestone, dolomite, clay, and coal.
The government should seek fresh investments from reputable global steel players and explore new opportunities to build a modern steel industry. However, the failed concession deal and the accompanying $496 million payout must be investigated thoroughly and without delay.
