UNIVERSITY OF NIGERIA, NSUKKA DEPARTMENT OF HISTORY AND INTERNATIONAL STUDIES
TITLE AJAOKUTA STEEL COMPANY, 1979 – 2007
A PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF MASTERS OF ARTS (M.A) DEGREE IN HISTORY AND INTERNATIONAL STUDIES
BY DANGA, JAMIU YUSUF REG. NO: PG/MA/15/78146
SUPERVISOR: DR. C.C. OPATA
AUGUST, 2018
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TITLE PAGE
AJAOKUTA STEEL COMPANY, 1979-2007
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CERTIFICATION
This is to certify that this research work has been examined and approved for the award of the
Degree of Master of Arts in History and International Studies.
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Dr. C.C. OPATA DATE
SUPERVISOR
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REV. FR. PROF. A.N. AKWANYA DATE
HEAD OF DEPARTMENT
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EXTERNAL EXAMINER DATE
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DEDICATION
To
My Late Father and late Brother
Barr. Yusuf Isah Danga and Yunusa Adeiza Danga
Continue to rest in peace.
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ACKNOWLEDGEMENTS
I begin my acknowledgements by sincerely appreciating the Almighty Allah whose infinite mercy has been a source of inspiration and strength throughout this programme and beyond. My sincere appreciation goes to my supervisor, Dr. C.C. Opata for the motivation, direction and his promptness throughout this research process.
I appreciate the critical input of my Internal Reader Professor R. Ejiaga. I thank
Professor U.C. Anyanwu for his kind words of encouragement and guidance throughout my stay in the university. More so, I appreciate my lecturers, Prof. C.J. Korieh, Prof. Paul Obi
Ani, Prof. Victor Ukaogo, Prof. R. Ejiaga, Dr. C. Ajaebili, Dr A. Apeh, and the Post graduate coordinator Dr. Uche Okonkwo for his vigor, tirelessness and efficiency.
I sincerely appreciate the officer in charge of data at the National Bureau of statistics
Mr Leo Ade for guiding me through the plethora of data relevant to my work. I thank the departmental librarians, Miss Ifechi Sandra and Dennis A. for their patience and services rendered to me while using the library.
And my Loving mother Hajia Sefinat Danga Oyiza for everything I have so far achieved in this life.
I also appreciate the unwavering friendship and camaraderie of Mr Anagwureyi Pius
Joseph, Mr Andrew Angbah, Mr Philip Aina Oluwafemi, and Onoja Daniel. Finally I appreciate the entire staff of Government Secondary School Wuse Zone 3, Abuja. I also appreciate all my family members for their support and prayers.
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ABSTRACT
Steel is an important element of the industrialization process. A nation with a highly developed steel industry is often characterized by heavy industrial development. Countries like USA, Britain, Japan, China and Russia were known to have particularly paid keen attention to steel development. Using historical method and modernization framework, the study found that Nigeria has been pursuing industrial policies that are externally propelled. From the ISI to ESS, Nigeria has been unable to attain industrial developments. The failure of policy development as well as policy implementation is major causes of the inability of Nigeria to attain industrial development. The consequences are that unfavorable balance of payment, less than 6% contribution of manufacturing to GDP and underdevelopment remain the norm. Though Nigeria attempted to jumpstart her industrialization through the Ajaokuta Steel Company since 1979, it has remained unproductive. ASC was conceived as an integrated steel plant with a production of capacity of 2.1 million tons of steel per annum in the first phase which was to be expanded to over 5 million tons in the final phase. Despite huge financial and material wealth of the nation being expended on the company, it has remained a monument that exemplifies the failure of purposeful governance in Nigeria. The study using oral interview, archival materials and relevant literatures found that there are many challenges facing the company; governmental policy inconsistency, monumental corruption, external factors, and lack of governmental will to actualize the project. The study is relevant to the ongoing discourse to diversify the economy from the mono-culture of dependence on oil. Whereas the West continues to discourage state participation in development enterprise, companies like ASC are hardly known to have been handled by private companies in other climes. This is as a result of massive investment requirement which has a long gestation period; therefore exploring concessions by the FGN has proved to be unproductive. The dependence on foreign preferred solution to problems in Nigeria has been met with catastrophic failure. The study proposes and inwardly developed industrial policy to solve the problem of Nigeria’s industrialization problems.
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TABLE OF CONTENTS
Title page ...... i
Certification page ...... ii
Dedication ...... iii
Acknowledgements ...... iv
Abstract ...... v
Table of contents ...... vi
List of Figures and Tables...... ix Glossary of Terms ...... x
CHAPTER ONE INTRODUCTION Background to the study ...... 1 Statement of problem ...... 6 Purpose of study ...... 7 Significance of study...... 7 Scope of the study ...... 8 Source, method and organization ...... 8 Theoretical framework ...... 9 Literature review ...... 13 Notes ...... 24 CHAPTER TWO NIGERIA AND THE QUEST FOR INDUSTRIALIZATION Nigeria’s policy on Industrialization ...... 27 Rationale for the Steel Industry ...... 46 Steel Industries in Nigeria before Ajaokuta Steel Company ...... 52 Notes ...... 55 CHAPTER THREE THE BIRTH OF AJAOKUTA STEEL COMPANY Geographical location of Ajaokuta steel company ...... 61
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Geological formations and the Choice of Sitting the Industry ...... 62 Major sites in the Ajaokuta steel company ...... 68 Environmental Impact Assessment of ASCL ...... 73 Notes ...... 76 CHAPTER FOUR PRODUCTION AND CHALLENGES Major players in the Steel Company ...... 80 Contract Termination and Concessions of the Company ...... 92 Challenges of Ajaokuta Steel Company ...... 94 Ramification of the Concessions ...... 94 What Went Wrong? ...... 100 Prospects of the Ajaokuta Steel Company ...... 105
Notes ...... 110 CHAPTER FIVE CONCLUSION AND RECOMMENDATION Conclusion ...... 114 Recommendation ...... 119 Notes ...... 121 SOURCES AND BIBLIOGRAPHY
PRIMARY SOURCES ...... 123
Oral Data ...... 123
Archival Materials ...... 123
SECONDARY SOURCES ...... 124
Textbooks ...... 125
Book chapters...... 126
Journal Articles ...... 127
Official Publications and Periodicals ...... 128
Newspapers ...... 128
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Unpublished Works ...... 128
Internet Sources ...... 129 Appendix 1 ...... 132 Appendix 2 ...... 134
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List of Figures and Tables Fig 1: A chart showing % of manufacturing to GDP in various African countries………….…..30
Fig 2: A chart showing world steel production by region……………………………………….51
Table 1: Table showing contribution of manufacturing to GDP in various African countries…..30
Table 2: Showing the cost of steel imports from 2001-2010 ..…………………………………..41
Table: Showing challenges to industrial policies………………………………………………...42
Table 4: Showing steel consumption percentage in selected African countries (2006-2010)…...50
Table 5: Total Production of world steel by continent (regions) of the world (2006-2010)…….51
Table 6: Total Production of world steel by continent (regions) of the world (2006-2010)…….51
Table 7: Showing name of steel companies in Nigeria before 1979…………………………….53
Table 8: showing locations of exploration work for Iron Ore…………………………………...64
Table 9: showing locations of exploration work for Coking Coal……………………………….65
Table 10: showing chemical pollutions………………………………………………………….74
Table 10: showing water pollutions……………………………………………………………...75
Table 11: listing the challenges of ASC at inception…………………………………………….88
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GLOSSARY OF TERMS
ASC: Ajaokuta Steel Company
ASCL: Ajaokuta Steel Company Limited
ASP: Ajaokuta Steel Project
BF: Blast Furnace
CKD: Completely Knocked Down
DPR: Detailed Project Report
DSC: Delta Steel Company
EAF: Electric Arc Furnace
ECLAC: Economic Commission for Latin America and the Caribbean
EPI: Export Promoting Industrialization
EU: European Union
FDI: Foreign Direct Investment
FGN: Federal Government of Nigeria
GC: Global Contract
GIHL: Global Holding Limited
IBRD: International Bank for Reconstruction and Development
ICC: International Chambers of Commerce
IMF: International Monetary Fund
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ISI: Import Substitution Industrialization
ISS: Import Substitution Strategy
LEEDS: Local Economic Empowerment Development Strategy
MAN: Manufacturers Association of Nigeria
MNC: Multinational Company
NAK: National Archives Kaduna
NDP: National Development Plan
NEEDS: National Economic Empowerment Development Strategy
NIRP: National Industrial Development Policy
NSDA National Steel Development Authority
OBF: Oxygen Blast Furnace
OECD: Organization of Economically Developed Countries
RD: Research and Development
SABER: Sub-Saharan Business Environment Report
SAP: Structural Adjustment Programme
SEEDS: State Economic Empowerment Development Strategy
T/Y: Tonnes/Year
TPE: Tiajpromexport/TyajPromExport
USA: United States of America
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USSR: Union of Soviet Socialist Republic
WWII: Second World War
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CHAPTER ONE INTRODUCTION Background to the Study
The importance of steel has led to its being used as an index for measuring economic advancement. This is because of its direct and indirect linkages. Iron and steel are the most important requirements for all manufacturing, development of machinery, metal products, transportation or agricultural equipment among others.1Indeed, all industries depend on steel.
Steel development has been widely regarded as a vital requisite for industrialization.2
Successful industrial countries such as China, England, Japan and America among others have identified the centrality of development of iron and steel to industrial development.
They placed the development of steel industry at the top of their priority. This can be buttressed by the position of Attah N.E., who opined that the importance of iron and steel cannot be overemphasised as it has the capacity to foster the industrialization, especially as it has direct and indirect linkages to other sectors of the economy.3
Osita Agbu noted that one of the most important factors inhibiting Sub-Saharan
African development is her inability to organize her technological development, which primarily should have been a basis in the development of her iron and steel industry.4 The industrialization of Nigeria however has been a constant policy pursuit of all the various administrations that have governed the country since 1960.5Njoku O.N. noted that the place of steel as the heartbeat of modern industrialization was not lost on the Nigerian government as a result of their awareness of the opportunity it provides for limitless range of industrial and construction works.6
The early attempt to industrialize Nigeria started at the tail end of colonialism. At the closing moments of colonization and early periods of Nigeria’s independence, there was a
1 concerted effort at Import Substitution Industrialization (ISI) which is a strategy aimed at increasing domestic production or developing local production capacities in areas where importation of goods were previously done.7 The aim of ISI is to help facilitate industrialization, while also plugging leakages. The ISI strategy proved to be inefficient for
Nigeria’s industrialization because it lacked the proper linkages that could have transformed
Nigeria technologically.8The strategy equally failed in Nigeria because it came at a high cost, it was non-competitive, and it was focused on producing consumer products rather than a more sustainable intermediate industry. It equally fostered more dependency as Nigeria at the time lacked the necessary requisite knowledge of installed technologies.9Obi-Ani P. particularly argued that the import substitution strategy can only delay Nigeria’s ascendance to industrial knowledge, a fact which he argued the Nigerian political elites recognized overtime.10
Although few countries especially (Brazil and India) were able to carefully apply the
ISI to grow internal production capacity, by carefully extending it to intermediate and capital goods, but these are largely exceptions.11 Evidence show that most countries that attempted the strategy especially in Sub-Saharan African countries (Nigeria for instance) could not use the strategy to achieve industrialization. More so, one of the main objectives of the ISI is to save scarce foreign resources, again this failed, as experience suggests that the development of industry or assembly operations saved little foreign exchange for Nigeria.12
Despite the relationship that has been established between iron and steel development and industrialization, Agbu argued that African leaders have not utilized the window it creates for development. He argued that Africa’s problem cannot just be associated with economic growth, but the process of fundamental transformations which has made it impossible for African leaders to cope. He pointed out that the society is unable to catch up
2 with the technologically advanced countries who give no room to “technologically disadvantaged entities”.13
Nigeria particularly has produced very little steel since 1980. In figures, Nigeria produced a sum total of two million, eight hundred thousand and two (2,800,002) tonnes of steel between 1980 and 2004; producing only twenty thousand (20,000) tonnes in 1980, and forty thousand (40,000) tonnes in 2004 respectively. Whereas in the same period under study,
Brazil produced fifteen million, three hundred and thirty seven thousand (15, 337000) tonnes of steel in 1980 alone, this was doubled in 2004, as figures show that thirty two million nine hundred and nine (32,909,000) tonnes of steel was produced in 2004 alone. Similarly India produced nine million, five hundred and fourteen thousand (9, 514,000) tonnes of steel in
1980 alone, while in 2004 alone, production jumped to thirty two million six hundred and twenty six thousand (32,626,000) tonnes of steel.14
Theoretically, Nigeria’s quest for economic growth and social transformation can be located in the theory of modernization. Nigeria has been seeking to radically transform her society from an economy based on traditional methods-- to a modern economy based on advanced technology, and general social transformation through the development of her human and material resources. Modernization theorists such as W.W. Rostow viewed modernization as multi-faceted stages of social and economic transformation. He argued that there are specific stages of modernization in which a traditional society moves to a modern society.15
However, the Dependency theory argues that the unequal world economic system have only accentuated the positions of poor states. Developed in Latin America through the
Research of the Economic Commission for Latin America and the Caribbean (ECLAC), dependency theorists such as Andre Gunder Frank, have argued vehemently that development
3 in third world countries are not necessitated by internal dynamics but as a result of historical process of colonialism that has lumped the third world countries into the capitalist system, this has led to a development of core versus periphery relationship.16
While the modernization and dependency theory appear to have divergent view of development, a major converging point especially in the case of Nigeria’s development is the fact that both the Modernization and Dependency theories puts industrialization as a core element of development. However, while the modernization theory places industrialization as a condition for Takeoff, the Dependency school argue that industrialization in the third world countries will rather be stifled as a result of her engagement with the developed world. This appears to be the case, as Nigeria’s engagement in the world capitalist economy has not resulted in the development of her industrial base. The absence of a developed iron and steel industry is a pointer to this fact.
More so, Nigeria has been pursuing an economic model based on the neo-liberal economic policy. This has become part of her crises of development. Nigeria thus had been taking instructions and advice from the capitalist West on how to develop her economy through attracting foreign direct investment (FDI), liberalization of her economy and democratization.17 However, this appears not to have had the “desired” effect, considering that despite adopting a western economic model, the structural foundations necessary for the transformation of the society is absent (example, lack of viable capital industries).
Indeed, Brett E.A had warned that as Third World countries seek development models that will provide the intellectual and structural basis for the development of her economies, they must be wary that Western models can only provide a reference point, they cannot be transplanted unmodified from Western societies to the Third World.18
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Nigeria’s industrialization drive did not reflect a synergy with indigenous knowledge; this led to her seeking of technological transfer. By cooperating with countries such as Russia to develop her steel industry, Nigeria had hoped that it will amount to an immediate translation to industrialization. This development pattern appears unsustainable; this is because the practical knowledge of time and place which would have led to the utilization of knowledge was absent.19 Indeed, it has led to the creation of an expensive but useless monument.20In other words, Nigeria has neither been industrialized nor has she been able to recover the huge financial losses that followed the attempt at developing her steel industry.
While colonialism hindered industrialization in the Third World, Nigeria’s colonial experience does not appear to have shaped the drive of the national leaders towards development, especially in the industrial sector. India emerged out of colonialism as a technologically disadvantaged country with high rate of poverty and economic challenges.
However, by careful planning and a conscious development of her industries using cultural and geographic resources, as well as investment in capital industries such as steel, China and
India have emerged as global leaders in industrial development especially in the steel industry.21
The Nigeria government conceived the Ajaokuta steel company as the bedrock of
Nigeria’s industrialization. It was meant to be an integrated steel plant developed to produce
1.3 million metric tons of steel per annum in the first phase, 2.6 million tons per annum in the second stage and 5.1 million tons per annum at the third and final phase, through the blast furnace technology.
However, the inability of Ajaokuta Steel Company to produce liquid steel despite the huge financial and human resources committed to it amounting to over ten billion dollars presents a problem. Certain questions thus needed to be raised: first, what are the rationales for a steel industry, how can governmental policies explain Nigeria’s quest for
5 industrialization? To what extent did monumental corruption and high stake politics at local and international levels undermine Nigeria’s attempt at industrialization? What went wrong with the Ajaokuta steel company? In the light of such allegation that Russia intentionally delayed the construction of the company and even adopted an out-dated blast furnace technology for the development of Ajaokuta Steel Company, it is necessary to ask: does an outdated blast furnace technology amount to a useless technology? Was it not possible to use the technology in the meantime to even test run the site and change it subsequently?
Also, how have the various concessions of the steel company to contractors such as
SOLGAS (American), Global Holdings Limited (GIHL)(India) and Kobe steel (Japan) fostered or undermined the company? An immediate answer to these final questions can be located in the actions of the GIHL which carted away several vital technologies from the
Ajaokuta steel company for use elsewhere.22Indeed, these questions are relevant in understanding the challenges of developing a viable steel industry in Nigeria.
The study argues that above others, governmental decisions were the most potent factors that have undermined the Ajaokuta steel company, in addition to other challenges it has faced. From the conception to the location and subsequent developments in the company, the Nigerian government had entangled the company in politics. More so, the government had not envisioned the company to tap from the versatile human resources abundant in the country. Rather the government planned a wholesale transfer of alien technology, thus it backfired tremendously.
Statement of Problem
Nigeria has not been able to develop a viable steel industry despite the huge financial investment, Ajaokuta steel company which was meant to be the bedrock of Nigeria’s industrialization has not been developed to roll out liquid steel. Scholars gave approached the issue of Ajaokuta Steel Company from various perspectives. Osita Agbo argued that
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Ajaokuta Steel Company failed to function because of the nature of cooperation sought to develop the company, he averred that Nigeria should cooperate with Japan in order to develop the company.23 Marietu Tenuche and N.E. Attah argued respectively that the concession policy of government did not allow the steel company to function optimally and produce liquid steel.24 However, these scholars have not adequately examined the political perspectives of government that have shaped policy development and implementation and how it affects Ajaokuta Steel Company.
This research thus is an effort at examining the policies of government, implementation and failures using a political perspective. The main problem of the research is to examine how political decisions influenced policy development and implementation with regard to the Ajaokuta Steel Company.
Purpose of the Study
The purpose of this study is to examinethe development of Ajaokuta steel company from 1979 to 2007. the study reviews industrialization policies in nige4ia and how it affected the development of the Company. The study also identifies the challenges to Ajaokuta steel company, finally, the study recommends how these challenges may be mitigated.
The significance of the Study
The significance of this study is as follows:
- To indicate how the revival of Ajaokuta Steel Company can help diversify
Nigeria’s economy.
- To encourage government and stakeholders to examine previous pitfalls that
havehindered the attainment of the goals of Ajaokuta steel company in order to
avoid such mistakes going forward.
- To contribute to existing knowledge on Nigeria’s steel development.
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The scope of the Study
The focus of this study is on Ajaokuta Steel Company 1979-2007. The choice of the topic was informed by the growing interest in Nigeria’s industrial development and the cooperation to be sought to attain industrial growth,especially in the steel industry.
The time span of the work is 1979-2007. The choice of 1979 is informed by the fact that the contract for the development of Ajaokuta steel company was signed in 1979 by the
Shehu Shagari led administration. It terminates in 2007 because that was the year the
Obasanjo led administration concession the company to Global Holding Limited. The year also helps the analysis of the consequences of the concession on the company.
Sources, Method and Organization
To carry out a study on industrial development in Nigeria, historical sources and other relevant sources from economics, science, political science, and other relevant disciplines were sourced. The study thus adopted a multidisciplinary approach, in the collection of data while the descriptive method was used to analyse the data collected. The study employeda qualitative and quantitative method of research, thus journal articles and other textual materials were utilized in this study. More so, numerical data collected from the annual abstract of statistics from the NBS, Abuja were used in the study.
The data for this study were derived from primary and secondary sources. Primary sources includedoral interview with workers and administrators in Ajaokuta Steel Company as well as relevant stakeholders and the academia; also, primary sources used include government documents and archival materials. Archival materials from the National Archives
Kaduna was especially useful to this research, one of such materials is the report of R.A
Bones on the feasibility of locating a Steel company in Ajaokuta.
Oral information was checked with what has been written, and written sources were compared with opinions of active participants in the Ajaokuta Steel Company administration.
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This was in order to (in)validate any of the sources. Secondary sources that wereemployed in the study included a number of literature such as books, journals, seminar papers, magazines, newspapers, and theses among others which are relevant to the present study.
Organization
This thesis is divided into five (5) chapters. Chapter one is the introduction and covers the background to study, the statement of the problem,the purpose of the study, significance of the study, scope of the study, method, source and organization, as well as the theoretical framework and literature review.
Chapter two discusses Nigeria and the quest for industrialization, rationale for the steel industry and steel industries in Nigeria before the Ajaokuta Steel Company.
Chapter three explains the birth of Ajaokuta steel company geographical location of
Ajaokuta steel company, geological formations and the choice to locate the industry in the area as well as the major sites in the Ajaokuta steel company.
Chapter four looks at the challenges ofmeeting the mandate of the steel company, contract termination and concessions of the company, as well as seek answer to what went wrong?
Chapter five explores alternative development strategies for the Nigeria steel industry by way of a recommendation. The chapter contains the summary, conclusion and recommendation.
Theoretical Framework
Matunhu J. argues that the way states and development specialists rationalize how to commit economic resources is influenced by their level of persuasion towards specific theories.25 GoranHyden, on the other hand, contends that the debate around development has only had little input from Africa, This, according to him was as a result of the power relations
9 in the world. He argued that the strategies African leaders have adopted so far only exacerbate the situation. And that it is the international community that has helped set the
Africa development agenda.26
To aptly capture the aim of this study, two theoretical tools are applied namely, dependency theory and international cooperation theory. These theories are important as it will help explain the reason why Nigeria started her industrialization process and in doing so, sought assistance from Russia by way of cooperation.
Dependency, according to scholars such as Osvaldo Sunkel, Vincent Ferraro and
Theotino Dos Santos, is a historical economic development in the world in terms of external influence which favours some countries to the detriment of others, thereby conditioning the economy of a certain group of countries to the development and growth of another.27
Dependency theory intellectually emerged in Latin America among scholars who were dissatisfied with the status of Latin American economies. However, the development of the theory is often credited to the Director of the United Nations Economic Commission for
Latin America, Raul Preibisch and his colleagues. They contend that despite the promise of economic growth beneficial to all according to the neoclassical economic theorists, economic growth in the richer countries did not benefit or lead to growth in the poor countries.28In fact, economic growth in those industrialized countries often led to serious economic problems in poorer countries.
Therefore, the dependency theory was developed as a coherent criticism of the dependent and modernization theory. It was established as an entirely new approach for explaining and understanding the political and economic world order. Andre Gunder Frank who was among the pioneers of the theory viewed the world economic system as an extension of imperialism and colonialism hitherto perpetrated by the World Great Powers.
Using Latin American countries as a basis for analyses, Andre Gunder Frank ‘validly’
10 explained that capitalist countries in the ‘North’ gave rise to the underdevelopment of the
‘South’ by maintaining an order of dominance and supremacy over the South.
The basic assumption of the theory that is of importance to this study is that the state is the unit of analysis, dependency characterises the international system, which fosters the unequal relations. Also, external factors are important to economic activities within the boundaries of a nation and That the relations between the centre and periphery are dynamic and reinforced or intensifies the unequal patterns.29
Indeed, as Garbielyan Akop explains the dependency theory: “...the whole world is presented as an artificially unified system of amalgamated socio-economic order with the overwhelming supremacy of the leading developed countries...that exert imperialism toward the rest of the world.30 This scholar viewed imperialism as constraining the development of the periphery, whose main responsibility is to work and satisfy the needs of the developed countries.
Some criticisms of the theory are that the dependency theory has lost its relevance among modern theories of development; that it has been unable to prove its basic thesis scientifically and it does not provide exhaustive empirical evidence to support its conclusion.31
Indeed, Nigeria as a state in the world economic system is inextricably caught in the web of the unequal World Economic System. This perhaps is the cause of her dilemma in her quest for development. As a result of her industrial backwardness, Nigeria is unable to partner with her Western allies to develop her economy, particularly her industrial base, since it will ‘endanger the supremacy’ of the West over Nigeria.
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The dependency theory is relevant to this study as Nigeria is used as a unit of analysis in her relations with the developed countries. Nigeria’s quest to develop her industrial base tangles her in high stake politics that saw her running to Russia for assistance while contesting with the stiff resistance of the agents of imperialism (International Monetary Fund
‘IMF’) that arguably do not hope to see Nigeria attain industrialization.
John Rapley argued that in those days, development was considered largely synonymous with industrialization.32Rapley explaining development enthused that development had the dual aim of raising the standard of living while at the same time aiding the industrialization of a country’s economy.33Michael Sodaro and Steven Smith argued that theorists of the 1950s and early 1960s viewed the process of development as a series of successive stages of economic growth through with all countries must pass, this was based on the Rostovian conception of modernization.34 They pointed out that it was primarily an economic theory of development in which the right quantity and mixture of saving, investment and foreign aid were all that was necessary to enable developing nations to proceed along an economic growth path that historically had been followed by the more developed countries. Development thus became synonymous with rapid aggregate economic growth.35
In the light of this, Nigeria’s aim at developing her industries was to quicken the pace of development and follow the path to modernity. Construction of Ajaokuta steel company was an attempt at providing a solid base for the industrialization of the country which will, in turn, lead ultimately to development. In doing this, Nigeria sought the assistance of Russia resulting in the signing of the Global Contract in 1979, this cooperation can be explained using the International Cooperation Theory.
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Literature Review
There is a need to review relevant literature in order to locate the existing knowledge on the subject and situate the gap the present study intends to fill. The review of literature will commence from the real needs that drove Nigeria to seek industrialization, then the ideological motive of cooperation is explored as well as literature on steel development in
Nigeria and challenges the industry has faced.
Faluyi E.K in “Industrialization under Colonial Rule” explained the nexus between colonialism and industrialization in West Africa (by extension Nigeria).36 He averred that the general policy of the British colonial rulers was aimed at fulfilling the imperial mission of obtaining markets for products of the British industries. This policy ensured that the British colonialists invested very little in the industrial development of the colonies. Faluyi posits the reasons for this as not farfetched: if industries were encouraged, the cheap raw materials, labour and unprotected markets for industrial manufactures which dominated the motives for exploitation would have been shared between the imperial and the home industries. In order to avoid such sharing or competition, they ensured industries were not established or encouraged.
Faluyi’s work explains the reasons for the underdeveloped industrial base inherited from the colonial governments. He further noted that even where attempts at industrialization were made, it was mere tokenism, it was only aimed at securing a balanced economy that will ensure production at lower costs. This led to the introduction of processing factories such as cotton ginneries in Kano, Palm oil mills at Apapa and Opobo among others.37 In all, Faluyi noted that most of the industries established were merely import substitution which has very low linkages and was not aimed at developing industries or any form of manufacturing in the colonies. The essay explains the historical reason behind Nigeria’s lack of industrialization, thereby supplying the present study with reasons for Nigeria’s industrial drive.
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Ugbor F. “Twenty-Five Years of Industrial Growth in Nigeria” compared and contrasted the nature of Nigeria’s industrialization before and after independence.38 He noted that prior to independence, almost all critical sectors of Nigerian economy were controlled by a few (large) colonial trading enterprises, who were not willing to establish manufacturing industries since it was capable of undermining their interests. Thus, the pre-independence industrial sector was based on semi-processing of primary raw materials for export. After independence, Nigerian leaders became directly involved in the industrialization process by huge investment in industrial enterprises and projects. Thus manufacturing facilities were established which led to a progressive increase in the number of industrial enterprises.
The author considered the development of the various national development plans between 1962 and 1983 and their impacts on industrial development. The author revealed that in line with these plans, efforts were made towards the development of the Basic Metal
Sectors which culminated in the Nigeria Steel Development Authority (NSDA) which attempted to develop various steel plants in Nigeria such as the Ajaokuta Steel Company,
Delta Steel Company and the Rolling mills at Katsina, Osogbo and Jos respectively. The author, however, highlighted the constraint of industrial development in Nigeria, some of which include institutional and administrative bottlenecks, dependence on imports, foreign exchange constraints and infrastructural problems among others. The work is useful to the present study as it highlights the constraints to industrialization in Nigeria. Some of these constraints will be interrogated in the present research.
Ohimain E.I. in “The Challenge of Domestic Iron and Steel Production in Nigeria” argued that Nigeria has had development in the oil and gas industry, telecommunication, and cement manufacturing industries; however, there has been inadequate development in the steel industry.39 The author noted that Nigeria’s aim to achieve her potential of being the strongest economy in West Africa has been hindered by her inability to develop a vibrant
14 steel industry. The author averred that despite the huge investment in the steel sector, the
Ajaokuta steel company and the Delta steel company are moribund, thus, the nation has been forced to meet her steel needs by the importation of steel materials from countries like Japan,
Germany, and China among others.
The Author reviewed various policy and legal frameworks on steel development in
Nigeria and noted that there are policy inconsistencies, especially in the vision 2020 document that forecasts a steel production that will amount to 12.2 million tonnes of steel. He noted that the privatization of various steel infrastructures in Nigeria was not done in a transparent way that would have ensured optimum productivity in the long run. He noted that though there are inadequate raw materials for steel production, the enabling environment has not been created for the adequate utilization of the available ones such as coal, iron ore and limestone among others, and thus has not led to steel production in Nigeria. The author concluded that the challenges of steel production in Nigeria were numerous, some of which include inadequate raw materials, inadequate policy and lack of policy implementation, technical inadequacies among others. He argued that except these challenges are overcome;
Nigeria will be unable to reach her desired projection for steel production in long run. The author’s argument is useful to this study as it shows some of the major challenges that confront the development in the Nigeria steel industry. However, the author did not examine cooperation in the development of Nigeria’s steel industry which is the aim of this study.
From the 1970s onward, there was a growing sense of cooperation between Nigeria and Russia; this led to several treaties on technical and scientific cooperation being signed.
Nwani.A.Oand Kuznetsov G. sought to explain this cooperation and how it helped the development of Ajaokuta Steel Company.
Nwani.A.O “Technical and Scientific Cooperation between Nigeria and Eastern
European Countries” traced the motive of Nigeria’s technical cooperation with Eastern
15
European Countries.40Nwani reviewed the relations between Nigeria and Eastern Europe and revealed that though there was a measure of hesitation in the 1950s and early 1960s to relate with countries of Eastern Europe, tremendous changes occurred between the late 1960s and
1970s that led to tremendous engagement and cooperation in different fronts (trade, economy and industries); this led Nigeria to leverage on the cooperation to promote technology transfer. However, Nwani argued that it is erroneous to believe that technology can be imported from industrially advanced countries. Technological development, he argues, requires the translation of knowledge into concrete production, taking note of the issues of designing, practical and useful scientific knowledge to the receiving country. Nwani concluded that any form of technology transfer without a base for stimulating indigenous entrepreneurs and technical base with necessary linkages will be unsuccessful. Thus, the attempt at cooperating with Eastern Europe to develop Nigeria’s technology was only a guise for the accumulation of economic gains on the part of the Eastern Europeans. The essay is useful to the present study as it enables one to understand the motive behind Eastern
European motive for cooperating with Nigeria to develop her industries. The essay, however, was generally discussing the cooperation between Nigeria and Eastern Europe, it was not specific about Russia, nor did it treat the development of Ajaokuta Steel Company; this study intends to fill this gap.
Kuznetsov G. in “Economic Cooperation between Nigeria and the Union of Soviet
Socialist Republic”41 explained the development of friendship between the USSR and
African states as having elements of anti-imperialistic struggles, genuine equality, political and economic dependence. He argued that Nigeria and USSR have been developing their economic and technical cooperation on a long-term and mutually beneficial basis; pointing towards the development of Ajaokuta Steel Company as a major indicator of that mutual economic basis. The author also described the cooperation between Nigeria’s Nigeria
16
National Petroleum Company (NNPC) and USSR that led to the construction of two oil product pipelines of over 900km with a capacity of 18.7 million litres. Indeed, the author concludes that due to the reciprocal efforts, economic cooperation between Nigeria and the
Soviet Union was getting more fruitful. However, one can question these assertions, considering Nigeria’s experience with the Ajaokuta Steel Company which has failed to produce steel as envisaged during its construction. How mutually beneficial is Nigeria’s technical cooperation? This study will engage this question in order to get a balance sheet.
In a similar vein, Kuznetsov G. in “Technical Cooperation Involving Training
National Personnel between Nigeria and the USSR”42 describes how Nigeria and the USSR entered into technical cooperation that translated into the training of Nigerian nationals by the
USSR. The author noted how through technical cooperation in schools and specific institutes, the USSR has been training Nigerians in the area of construction, development and operation of industrial projects. The author revealed that between 1975 and 1985, over 1600 personnel have been trained through the USSR. This personnel were to serve as the base for the
Ajaokuta Steel Company. These training covered various aspects of steel making; also, the establishment of the metallurgical training complex in Ajaokuta was noted by the author. The work is relevant to this study as it provides relevant data about Ajaokuta Steel Company.
However, the work was generally reviewing the impact of technical cooperation between
Nigeria and USSR, it did not specifically isolate Ajaokuta for critical study, neither did it reveal the fact that Ajaokuta Steel Company did not meet up with the expectation of all and sundry, an area this study will cover.
Some scholars have studied the Nigerian steel industry with interest in locating the challenges and options available for steel development. John Ade Ajayi et al explained the challenges facing the Nigerian steel industries, while Noah Echa Attah examined the consequences of failed cooperation’s using Ajaokuta steel company as a case study, Osita A.
17 on the other argues vehemently that Nigeria should pursue cooperation with Japan in order to seek development in her steel industries.
Ajayi J.A et al in “Sustainable Iron and Steel Production in Nigeria: The Techno-
Economic Backbone of the National Development”43contend that the continued importation of steel to Nigeria cannot lead to the development of the country. They aver that importation of steel is harmful to the Nigerian economy as it leads to unemployment, dwindling of foreign exchange, and the high cost of construction among others. They pointed out that despite steel production rising globally from 28 million tonnes in the early 20th century to about 781 million tonnes at the end of the century, steel production in Nigeria has remained virtually a mirage. They argued that as economies grow, steel consumption equally grows, thus there is a need for a complementary growth in steel production and consumption.
Some of the challenges of steel production in Nigeria as alluded to by the authors are; lack of political will; weak technological base; lack of systemic manpower development; and lack of synergy among the various sectors involved in the process of steel making in Nigeria.
Thus, they recommended that more positive, proactive, pragmatic and progressive action should be taken in the development of Nigeria steel industry. The essay is important to the present research because it highlights some challenges facing Nigeria steel industry.
However, it was generally capturing the challenges of Nigeria steel industry. The present attempt is focused on Ajaokuta steel company, it is hoped that by using a specific case, one can understand the broader challenges the Nigeria steel industry is confronted with.
Attah N.E. in “Ajaokuta Steel Company of Nigeria and concession: Counting the
Human Cost, 2003-2010”44 discusses how liberalization policy of the Nigerian state has hurt the Nigerian economy. The author explained the liberalization policy of the Nigerian government as causing discontinuity and lack of growth in the Nigerian steel industry. The author connects the nexus between political decision and failure of Nigerian industries on one
18 hand, and the failure of the Western proposed policy of liberalization (privatisation) on the other. Attah revealed that concession of the Ajaokuta Steel Company to private companies
(other than Tiajpromexport which was the original contractual company) led to the steel company being pilfered rather than invested on. Attah demonstrated that the concession led to the deterioration of the company and none payment of workers for a long stretch of time.
Indeed, the author argued that Western capitalist interests are not concerned with Nigeria’s industrialization through the development of her own steel industry, which will, in turn, curb
Nigeria’s import of steel from those countries. Companies such as SOLGAS (America), Kobe
Steel (Japan) and GIHL (India) that were concessionaires in the steel company, did not only fail to inject the needed capital for the turnaround development of the company for production, they further deepened the crisis of the company by removing critical spare parts from the company for use in other places. The article is thus important to the present study as it helps to understand the role of governmental decisions especially on concession and how it has affected the Ajaokuta Steel Company. The article equally creates a basis for comparing the involvement of other countries in the Ajaokuta steel company and that of Russia.
Oyeyinka O.O. and Adeleye O. in “Technological change and Project Execution in a
Developing Economy: Evolution of Ajaokuta Steel Plant in Nigeria”45highlighted the plans made and agreements reached with regard to the construction and subsequent operations of the Ajaokuta Steel Company. The authors reviewed these agreements and reached the conclusion that the agreements reached for the construction of the Ajaokuta steel Company had implication for technology transfer. They argued that several governmental interferences in terms of appointment to technical areas had implications for the smooth functioning of the company. They pointed out that even the choice of locating the company is questionable, arguing that it is a political compromise aimed at depriving the Eastern part of Nigeria such sensitive project and not borne out of technical realities. The article is useful to this research
19 as it adds evidence to the purpose of this research. However, the paper did not cover the concessions of the steel company, which had tremendous consequences as the present research will reveal.
Tenuche M.S. in “Foreign Direct Investments, Strategic Assistance and Sustainable
Development: A Critique of International Investment in Nigeria’s Steel Sector”46 examined the implication of Foreign Direct Investments (FDI) in Nigerian steel industry. Tenuche noted that FDIs have been identified as a major stimulus for developing economies like that of Nigeria; however, she noted that there are indications that it may have negative impacts on these economies, corruption, unethical behaviour and environmental degradation fostered by
Multi-National Corporations (MNCs). Tenuche noted that through the activities of the
MNCs, sovereignty over policy-making investments are lost, and the direct control ofthe management of programmes into which investments are falls under the dictate of foreign capitals. Tenuche particularly demonstrated that investment in Nigeria’s steel industry has only led to stagnation. She revealed that with regards to Ajaokuta Steel Company, SOLGAS intervention through an agreement reached on 30thJune 2003 demonstrates the interest of international capital to exercise exclusive control over their areas of interests. She noted the imbalance reached in the agreement which she pointed out favoured the American company
SOLGAS.
Tenuche equally examined another such agreement reached with Global Holdings on
13thAugust 2004 and reached the conclusion that the agreements have exploitative implications for Nigerian development. She argued that the agreements have the implication of denying the Nigerian populace the benefits derivable from the development of a viable steel industry. She particularly opined that if the agreements were implemented, it would have defeated the hope of employment generation, since the companies had control over staffing, as they often hire expatriates. Also, she noted the agreements had implications for
20 technological transfer and the long run repatriation of profits without hindrance. Although the agreements did not succeed, it is important to note that these concessions had complicated the prospects of completing the Ajaokuta Steel Company as the present research will point out.
Ifamose F.O. Industrial Policy Implementation in Nigeria: A Case Study of the
Ajaokuta Iron and Steel Complex, 1958-200447historically examined technological policies and the Nigeria steel industry, the nature, characteristics and the various policies as well as institutional support for their implementations since independence, Ifamose noted that technology is central to any development strategy adopted by a nation as it provides the goods and services needed for survival and growth of an economy. Thus, she affirmed that the weakness or strength of a modern nation is hinged on the basis of her technological capability. She noted that three methods of technological acquisition can be adopted: first, by self-developing: this is by discovering relevant knowledge consciously and/or unconsciously, and inventing the necessary tools and machines through Research or Development (RD) and even by chance; second, by copying, learning, technological transfer, stealing from countries that already possess relevant knowledge; and third, by combination of the first and second ways.
Ifamose particularly discussed the Nigerian steel industry and revealed the techno- economic considerations in setting up a steel industry. She opined that the availability of raw materials, choice of location, market availability, structure and government intervention are all necessary factors in establishing a steel plant. She, however, noted that political consideration became the most important factor in setting up the Nigeria steel industries. She reviewed the progress of the Nigeria steel industry and concluded that lack of raw materials, importation of necessary inputs, lack of power supply and lack of replacement capacity for major equipment among others were the major challenges of the steel industry. This resonates
21 with other literature so far discussed, thus giving a sound perspective to the problems of
Ajaokuta steel company.
Paul Obi-Ani in the book titled ShehuShagari’s Presidency 1979-1983: An
Appraisal48 critically examined the role of Shagari’s regime in the development of Ajaokuta steel company. He described the importance the administration attached to the industrialization of Nigeria, which culminated in the construction of Ajaokuta Steel Company from 1981. Obi-Ani noted that beyond economic reasons, the Shagari regime recognized the strategic importance of steel development.
Describing Ajaokuta Steel Company, Obi-Ani said: “…the ASC has been a case of misplaced priority…”. This is because of the huge foreign exchange that has been expended on the project without commensurate productivity. He noted that the project was not founded on productive reality but for “prestige”, arguing that the lack of adequate raw materials and over-reliance on technology transfer leading to dependence were the major challenges of the company. Obi-Ani’s work is a critical view of the Nigeria steel industry, it is relevant to the present study; although the work was a cursory view of the Ajaokuta Steel Company, there is a need to deeply interrogate these challenges he highlighted above.
Agbu O. “The Iron and Steel Industry and Nigeria’s Industrialization: Exploring
Cooperation with Japan”49 argued that the importance of iron and steel technology cannot be overemphasized. He demonstrated how advanced countries of the world such as Japan,
Germany and the USA, among others applied to iron and steel technology to develop their industrial base. He lamented that despite the fact that African coal fostered industrial development elsewhere; the discovery of iron ore for making steel has not been properly harnessed in Africa. He pointed to the poor development and application of technology for societal uses and for industrial production as being the most important factor inhibiting developmental efforts in Africa. He pointed to two main reasons behind this, namely, lack of
22 political will among African leaders and lack of technological transfer from technologically advanced countries who he argued are protectionist in their actions. Therefore, he argued that there is a need for cooperation between industrialized countries and developing countries in
Africa in the area of developing basic industries. He specifically argued for cooperation between Nigeria and Japan in Nigeria’s steel industry. The study is very critical to the present research as it recognizes the critical importance of cooperation in developing Nigeria’s steel industry. However, the author did not recognize the negative impact of Kobe Steel, a
Japanese company that was given the concession to rehabilitate the Ajaokuta Steel Company, a factor that has contributed to the recession of steel development in Nigeria, as this study will point out.
In conclusion, these literature are critical to understanding the factors that led to
Nigeria’s drive for industrialization through the development of her steel industry. They revealed the ideological and realistic reasons behind Nigeria’s drive to cooperate with other countries to uplift her steel industry. However, the literature did not critically assess the role of Russia in the development of the Ajaokuta steel company. More so, critical issues relating to the Ajaokuta steel such as the technical and financial roles Russia played, and factors that led to the recession and concession of the company as well as the effectiveness of those concessions are not properly explained. The present study thus contributesto the understanding of the Nigeria steel industry, the outcome of cooperation with Russia and recommends the way forward to policymakers as they seek alternatives to Nigeria’s mono- economy through the steel industry.
23
Notes
1R.S. Bight, and M.P.N., Namboodripad, "Iron and Steel Industry", in Singh V.B. (ed.) Economic History of India: I857-1956, New Delhi: Allied Publishers Pvt. Ltd., (1975), pp. 201-222, (208) 2 Bight, and Namboodripad, "Iron and Steel p.201 3N.E., Attah “Ajaokuta Steel Company of Nigeria and concession: Counting the Human Cost 2003-2010” African Journal of Economic and Sustainable Development Vol. 2, No. 2,(2013) pp. 157-131 4O. Agbu “The Iron and Steel Industry and Nigeria’s Industrialization: Exploring Cooperation with Japan” Institute of Developing Economies, Japan: VRF Series, No.418 (March 2007) p.1, 4 5R.J. Gavin and W. Oyemakinde “Economic Development Since 1800” in Obaro Ikime (ed.) Groundwork of Nigeria History, Ibadan: Heinemann Educational Books (1980) pp. 482-517 6O.N Njoku Economic History of Nigeria 19th and 21st Century, Enugu: Magnet Business Enterprises (2014) p.236
7Agbu “The Iron and Steel” p.4
8Paul, Obi-Ani Shehu Shagari’s Presidency 1979-1983: An Appraisal Makurdi: Aboki Publishers, (2010) p.79-83
9R. Bamidele “Nigeria’s Industrial Policies, Sustainable Development and the Challenges of Globalization” Paper presented at the 21st Annual Nigerian Anthropological and Sociological Practitioners Association (NASA) Conference., (Nov.2016)At Kaduna State University, Kaduna, Nigeria, https://www.researchgate.net/publication/311451163Obi-Ani, Shagari’s Presidency... p.63
10Obi-Ani Shehu Shagari... p.63
11D. Kamarka, Impact of Economic Liberalization on the Indian Steel Industry A PhD Thesis submitted to the Department of Economics, The University of Burdwan, West Bengal India, (2007) p. 20
12Kamarka, Indian Steel Industry p.22
13Agbu “The Iron and Steel” p.7
14World Steel Association “Crude steel production, 1980-2014”
15 W. W. Rostow “The Stages of Economic Growth” The Economic History Review, New Series, Vol. 12, No. 1 (1959), pp. 1-16 http://www.jstor.org/stable/2591077 Accessed: 16/11/2017; J. Matunhu, “A Critique of Modernization and Dependency Theories in Africa:
24
Critical Assessment” African Journal of History and Culture Vol. 3(5), (June 2011) pp. 65- 72,
16Matunhu, “A Critique” p.66
17Matunhu, “A Critique” p.66
18E.A. Brett, Colonialism and Underdevelopment in East Africa: The Politics of Economic Change 1919-1939 New York: NOK Publishers, (1973), p.vii
19Brett, Colonialism… p. 15
20Brett, Colonialism… p. 15
21World Steel Association “Crude steel production, 1980-2014” World Steel Association “Crude steel production, 1980-2014”
22Matunhu, “A Critique” p.66
23Agbu “The Iron and Steel” p.7
24Attah “Ajaokuta Steel Company” p.159; M.S. Tenuche “Foreign Direct Investments, Strategic Assists and Sustainable Development: A Critique of International Investment in Nigeria’s Steel Sector” Journal of Politics and Law Vol. 3, No. (September 2010) pp. 139-147
25Matunhu, “A Critique” p.70
26G. Hyden “Changing Ideological and Theoretical Perspectives on Development” in U. Himmelstrand, K. Kiyanjui and E. Mburugu (eds.) African Perspectives on Development London: James Currey Ltd (1994) pp.308-319
27S. Osvaldo, "National Development Policy and External Dependence in Latin America,"cited in Vincent Ferraro, "Dependency Theory: An Introduction," in Giorgio Secondi (ed.) The Development Economics Reader, London: Routledge, (2008), pp. 58-64; Theotonio Dos Santos, "The Structure of Dependence," cited in Vincent Ferraro, "Dependency Theory: An Introduction," in Giorgio Secondi (ed.) The Development Economics Reader, London: Routledge, (2008), pp. 58-64;
28Gabrielyan Akop “Development, Globalisation and the Dependency Theory in South Caucasia”World Affairs: The Journal of International Issues Volume: 19, Issue : 3 ( 2015)108-117
29Matunhu, “A Critique” p.70
30Akop “Development, Globalisation and the Dependency Theory...” p.109
31Akop “Development, Globalisation and the Dependency Theory...” p.109
25
32J. Rapley Understanding Developments: Theory and Practice in the Third World, 3rd Edition Boulder: Lynne Rienner Publishers (2007) p.1
33Rapley Understanding Development… p.1
34M.P. Sodaro and S.C. Smith Economic Development (11thed). Boston: Addison Wesley (2012) p. 40
35Sodaro and Smith Economic Development p.40
36K. Faluyi, “Industrialization under Colonial Rule” in G.O. Ogunremi and E.K. Faluyi (eds.) An Economic History of West Africa Since 1780,Apapa: First Academic Publishers (1996) pp. 211-220
37Faluyi, “Industrialization under Colonial Rule...” p.213
38F. Ugbor “Twenty Five Years of Industrial Growth in Nigeria” in U. Eleazu (ed.) Nigeria: The First 25 Years, Lagos: Infodata Limited (1988) pp. 117-127
39E. I. Ohimain “The Challenge of Domestic Iron and Steel Production in Nigeria” Greener Journal of Business and Management Studies Vol. 3 (5), (July 2013) pp. 231-240,
40A.O. Nwani, “Technical and Scientific Co-operation between Nigeria and Eastern European Countries” in A.B. Akinyemi (ed.) Economic Cooperation between Nigeria and Eastern Europe Lagos: Macmillan Nigeria (1984) pp. 92-100
41G. Kuznetsov “Economic Cooperation between Nigeria and the USSR” in A.B. Akinyemi (ed.) Economic Cooperation between Nigeria and Eastern Europe Lagos: Macmillan Nigeria (1984) pp. 128-130
42G. Kuznetsov “Technical Cooperation Involving Training of National Personnel between Nigeria and the USSR” in A.B. Akinyemi (ed.) Economic Cooperation between Nigeria and Eastern Europe Lagos: Macmillan Nigeria (1984) pp. 128-130
43J.A. Ajayi, M. Adegbite and R.I.A. Iyanda.“Sustainable Iron and Steel Production in Nigeria: The Techno-Economic Backbone of the National Development” A Paper Presented at WECSI 2014 Technical Proceedings on MDGs& Post 2015 Challenges (5 Wed., Nov. 2014)
44N.E., Attah “Ajaokuta Steel Company of Nigeria and concession: Counting the Human Cost 2003-2010” African Journal of Economic and Sustainable Development Vol. 2, No. 2, (2013) pp. 157-131
45O., Oyeyinka and O., Adeloye “Technological Change and Project Execution in a Developing Economy: Evolution of Ajaokuta Steel Plant in Nigeria” A Report Submitted to IDRC Communications Division Canada. (April 1988)
26
46M.S. Tenuche “Foreign Direct Investments, Strategic Assists and Sustainable Development: A Critique of International Investment in Nigeria’s Steel Sector” Journal of Politics and Law Vol. 3, No. (September 2010) pp. 139-147
47F.O. Ifamose Industrial Policy Implementation in Nigeria: A Case Study of the Ajaokuta Iron and Steel Complex, 1958-2005 an Unpublished PhD Thesis Submitted to the University of Ilorin (2005)
48Paul, Obi-Ani Shehu Shagari’s Presidency 1979-1983: An Appraisal Makurdi: Aboki Publishers, (2010)
49O. Agbu “The Iron and Steel Industry and Nigeria’s Industrialization: Exploring Cooperation with Japan” Institute of Developing Economies, Japan: VRF Series, No.418 (March 2007)
27
CHAPTER TWO NIGERIA AND THE QUEST FOR INDUSTRIALIZATION Nigeria and the Quest for Industrialization
Industrialization is at the heart of modern economic growth in most countries of the world. Structural changes in developed countries (and developing countries alike) are known to have been informed by technological changes in those countries. This is because aggregate productivity in an economy is known to have been fostered by technological advancement.
Thus, advancement in technology has often led to an increase in the overall wellbeing of the overall population of the world. Matleena Kniivilä captures this aptly when she enthused that industrial development has helped to reduce the share of poor people globally, she noted that whereas one-third of the world population lived in poverty in 1981, the share was 18 per cent in 2001. Economic growth has fostered these reductions as a result of the rapid industrialization of countries such as Taiwan, South Korea, China and Indonesia.1
Again this was further reduced by 2012, as data showed that less than 14% of the world population lived in poverty, which shows a further reduction in the figures from the first decade of the 21st century.2 Indeed technological advancement has been attributed to this advancement in the economic wellbeing of the world population.
It should be said that while there is a tremendous reduction in the poverty rate of countries in Asia as a result of technological advancement or industrialization, in Sub-
Saharan Africa, the case is not the same.Matleena Kniivilä again noted that ...Sub-Saharan
Africa is lagging far behind and the share of poor people in the population has even increased...3Several reasons can be adduced for this low level of industrialization in this region. Belhadj A. and Beji S. pointed to the fact that industrial development has not adequately been given the necessary attention it deserves and there is a tendency to
28 underestimate the real potential derivable from the industrialization of the continent by
African leaders.4
The impact of industrialization is far-reaching and novel. Atul Kohli observed that the impact of industrialization can be classified as both narrow and far-reaching. Narrow in the sense that there is an increase in production from old or new factories, the transformation from an agrarian society to a manufacturing society, which marks a shift from primary production to secondary production. On a broader sense, Kohli observed that industrialization is either preceded or accompanied by social change.5 He enthused that social change includes a situation of political stability, the availability of experienced entrepreneurs, as well as the development of a class of trained workers and mobilizable capital.6 As these changes continue, there is an emergence of a market for industrial goods as well as a continuous growth of technical knowledge.
There are structural deficiencies in the industrial policies of many African countries.
Some of these deficiencies as noted by scholars are: lack of sufficient information to make the right choices in developing industrial policies; rent-seeking, which fosters corruption and embezzlement of allocated resources to industrial development; the manner in which African governments tended to displace private initiative in the industrialization process; technological dependency, with little emphasis on research and development, especially the dependency on technological manpower, and imported raw materials as inputs to industries.6
Indeed, these structural deficiencies are inimical to industrial development in Africa.
Africa’s industrial output remains abysmally low, and dependence on imported consumer goods remain the norm. Indeed,the majority of African products remain raw materials, thus, depriving the states of the economic potentials in secondary and tertiary production.8 The effect is that manufacturing has a very little contribution to the GDP of many African
29 countries. Between 2012 and 2013, for instance, the figure and table below show that the share of manufacturing in the GDP of various countries in Africa are as follows, in Nigeria it was 2.6%, while in Ghana it was 6.78%, in South Africa it was 13.4%, in Sudan it was 6.9%.9
Fig 1: A chart showing % of manufacturing to GDP in various African countries
A Chart showing the percentage of Manufacturing to GDP in various 30 African Countries 21 20 16.5 14.0813.6 13.4 12.6 10.2 11 8.2 7.5 10 6.7 6.9 6 2.6 3.7 3.28
0
% of Manufacturing to GDPto Manufacturing of %
Kenya
Sudan
Congo…
Ghana
Gabon
Angola
Nigeria
Uganda
Senegal
Namibia
Tanzania
Equatorial…
Cameroon
IvoryCoast SouthAfrica Mozambique
Source: Anita Spring, Robert Rolfe and Levy Odera “Sub-Saharan Business Environment Report (SABER) 2012-2013”
Table 1: Table showing the contributionof manufacturing to GDP in various African countries
Country % of Man. to GDP Sub-Region in Africa Nigeria 2.6 Ghana 6.7 Ivory 21 West Senegal 14.8
Equatorial Guinea 13.6 Cameroon 16.5 Central Congo Republic 3.7 Gabon 3.28 Uganda 8.2 Tanzania 10.2 East Sudan 6.9 Kenya 11.0 South Africa 13.4 Angola 6 South Mozambique 12.6 Namibia 7.5
Source: Anita Spring, Robert Rolfe and Levy Odera “Sub-Saharan Business Environment Report (SABER) 2012-2013”
30
There have been arguments as to the reason why there are variations in the development status of African countries and those in South Asia and Latin America.
However, there appeared to be a misunderstanding of the industrialization and development strategies adopted by African leaders. First, there was an attempt at state control of development strategy in the 1960s and 1970s among African leaders.11 However, a sudden change in the pattern of industrialization to suit donor countries of the West as a result of the
Structural Adjustment Programme (SAP) of the 1980s altered the earlier pattern. Indeed, SAP emphasized liberalization of the economy and state withdrawal from the industrialization process. The SAP was a failure; the failure further accentuated African development problems.13 Atul Kohli observed that it would have been difficult to achieve meaningful industrialization among late comers (such as Africa) without state participation in the programme.14He argued that
...the preponderance of evidence indicates that late-late industrialization has always commenced under conditions of protection. As to the laissez-faire claim, there is a stunning lack of evidence for the proposition that less government facilitates more rapid industrialization in the developing world. On the contrary, the evidence shows that state intervention aimed at boosting investor portability is strongly associated with rapid industrialization...15
Unlike early industrializers like England which did not follow a single development pattern but a series of factors that spanned several centuries starting from the late 1600s, other industrial nations “did not reproduce” England’s model of industrialization.16 Again Kohli observed that other states industrialized by mobilizing capital, creating a workforce and facilitating technology transfer.17
States go throughfar-reaching extents because as much as industrialization leads to economic growth, it also leads to the development of agriculture, wealth creation and redistribution, as well as maintenance of sovereignty.18 Dependency leads to loss of political
31 and economic clout, as there is a tendency of a dependent state to adjust their policies to accommodate external exigencies. Dependency fundamentally deepens state constraint.19
Nigeria is a resource-rich country that has the abundant and mobilizable population for productivity. However, Nigeria’s experience with colonialism which transformed Nigeria from an agrarian society without adequate modernization in terms of industrialization has remained an albatross to her development.20 In addition to this is the perennial leadership failure the country has endured since independence.21
Nigeria’s policy on Industrialization The Nigerian industrialization process precedes 1960.22 The British colonial government recognized the conflict of interest in an industrially developed colony as a source of competition and capital retention in the colonies.22 The international agents who were more interested in export of primary products and importation of manufactured goods (often consumer goods) were content with relegating a mass of the Nigerian population tosmall- scale farming and eventually colonial low-grade civil servants.23 Ann Paula et al captures this succinctly when they opined that until the 1940s the colonialists did not encourage introducing a rapid industrial policy in African colonies because it has a capacity of altering the disadvantaged positions of the metropolis, which were ordinarily set up to market for industrial products for the Europeans on one hand, while serving as source of raw materials for the European manufacturers on the other.24
Nevertheless, the colonialists started improving the infrastructure of their colonies.
For instance in Nigeria, the British colonial government invested in the development of transportation infrastructures such as rails, inland waterways and ports, as well as roads. But any notion that these infrastructures were aimed at hastening the development and industrialization of these colonies were lost. This is because, from the onset, the geo-location of these infrastructures were aimed at linking sources of raw materials directly to the
32 ports.25Ana Paula et al observed that the overall aim of colonial infrastructures was improvement in transportation which in turn will lead to connecting the satellites with the metropolis, thus reducing the costs of evacuating manufactured goods from the metropolis to the satellite on one hand, and outward reduction of the transportation cost of raw materials to the metropolis on the other hand.26s
For instance in Ghana, the construction of two railways in Sekondi to the Gold mines of Tarkwa in 1901 as well as the construction of the Kade lines from Humi Valley connected the cocoa farms and diamond production valley.27 The same pattern of rail development can be observed in Nigeria; the Lagos-Kano railway which was completed in 1912 was aimed at linking the groundnut pyramids with the ports of Lagos. The colonial government, in essence, saw no need for an Eastern line until the discovery of coal at Udi escarpment. This discovery led to the construction of an Eastern line to Port Harcourt by 1916, which was further extended to link the Northern line through Markurdi in 1918. In essence, one can argue that colonial infrastructure investments were only activated if the economic potentials justified them.28
Nigeria’s industrialization thus can be seen as having certain determinants, namely,
Nigeria’s colonial experience which made Nigeria serve as a source of raw material and markets for finished goods with little industrialization. Existential realities, which entails the need to modernize Nigeria’s economy in order to improve the standard of living of the people. Governmental policies emerging out of careful planning over lengthy periods and the personal idiosyncrasies of the leaders as a result of their interpretation of what they view as important to the nation.
The colonial government in Nigeria initially determined the pattern of industrialization; it was they who started the experiment of Import Substitution
Industrialization (ISI) in Nigeria as in other African colonies. Although the strategy had been
33 successfully applied in industrialized countries through the careful application, it failed in
Nigeria. In Britain, the USA and Germany among others the strategy was used as part of the many processes of industrialization.29 This was done through various protectionism adopted enroute to industrialization. Aregbesola A. observed that ISI originated in the policy strive of industrialized economies as epitomized by the economic policy interventions of those nations in form of protectionist measures, high tariff, subsidies, and targeted import control and export orientation strategy. It was a careful and wilful design as well as targeted implementation, as a result of local exigencies.30
The British colonial government adopted ISI for colonial convenience. First, the commodity market was unstable and unpredictable, thus capable of depriving local farmers of disposable incomes that were taxable.31 Second, the agricultural sector had grown and was generating profits that could be invested in the development of factories to produce manufactured consumer goods. This was because the home government would rather not invest directly in the colonies. Third, the international politics was affecting colonial administration in no small measure.32The WWII (1939-1945), as well as the Korean war of
1950-1953, had serious ramifications for the colonies. The production of manufactured goods in the home country was geared towards sustaining the war efforts. Thus, the manufacture of consumer goods declined,causing shortages for exports.33
It was in these environments that the IS was seen as convenient. The strategy in
Nigeria was targeted at the primary sector such as the agriculture, the processing of crops and production of direct consumer goods. Indeed, industrial inputs led to dependency as the technologies were imported. Where manpower was trained, it was at a very low level of manipulation of machines not the production of such machines. Between 1940 and 1950,
Nigeria’s share of manufacturing grew; however, it was obvious from the onset that it was a relative growth that can only stifle Nigeria’s industrialization process.34 There was no basic
34 industry, more still an intermediate industry that could have buffered the transition to a full- fledged industrialization.35
Consequently, IS under colonialism was equated with the encouragement of a fewBritish companies relocating some stages of their productions to Nigeria. According to
Daniel A. Omoweh, it involved relocating those end-product activities to Nigeria, ostensibly to reproduce locally some of the goods that were previously imported.36 Omoweh went further to state that there was no attempt to duplicate parts of heavy machines by the companies; rather they sourced their raw materials and spare parts by direct import.
This type of policy undermined Nigeria’s economy in various ways.37 First, it retarded
Nigeria’s industrial development as what existed was an illusion of industrialization. Second, since it was few British companies that were encouraged to set up certain aspects of their production, repatriation of capital was the norm, rather than the exception. Third, the companies were unwilling to make long-term investments as they saw the British policy as one of a temporary nature. The overall effect was that Nigeria’s industrialization drive was not actualized in the colonial period.38
In 1960, Nigeria attained independence; this led to a renewed drive by Nigerians to dictate the future of their country. Indeed, the political leaders at the time were aware of the precarious structure of Nigeria’s economy in terms of her industrial backwardness as well as the prospects of industrialization.39 This perhaps informed the decision of the leaders to promote industrialization in the First National Development Plan (NDP) which projected 1 billion pound investment in development efforts.40
The first task of the economic policies that dominated the thinking of the Nigerian leaders was how to transform the country into a modern economy. Thus, the First National
Development Plan from 1962 to 1968 placed industry as one of the four priority areas that needed attention. Certain areas of the first NDP needs to be highlighted. First, the plan
35 allocated 65% to economic development expenditure. Second, it emphasized certain areas of priorities such as investment in Education, Mining, agriculture and industry. To industry particularly, 10.1% of the expenditure projected by the plan.41
The plan encountered serious challenges in its implementation. First, the government was unable to secure the finance to execute the plan. There were internal and external shortfalls of capital inflow. There was a reluctance by the International Development
Association of the IBRD to finance the project. In addition to this, the cataclysmic nature of the Nigerian politics which eventually led to a military intervention also undermined the implementation of the plan. 42
Generally, the industrial policy of the time supported Import Substitution
Industrialization (ISI) which was a carryover from the colonial government. According to a publication of the Federal Ministry of industry and trade, the underpinning policies of the time were numerous, chief of these were fiscal measures, protectionism against imports on areas that have domestic production, export promotion and the introduction of development bank such as the Nigeria Industrial Development Bank Limited in 1964.43
An assessment of the industrial policy of the first NDP (1962-1968) shows that the three regions in Nigeria (North, West and North) equally channelled their efforts towards industrial development, through manufacturing activities. There was an overall increase of small and medium industries from 150 plants at independence to 380 before 1968. Also, an average GDP contribution of 6.1% by the manufacturing sector compared to the 4.2% contribution in the pre-independent years.44 However, the Nigerian Civil War between 1967 and 1970 undermined much of these achievements as a result of wanton destruction and stagnation of production for much of the period.45
As from the 1970s, there was a renewed vigour in the development of Nigeria. The end of the civil war had provided an atmosphere of destruction, mutual hatred among the
36 regions of the country and a sense of insecurity. It was in this atmosphere that the Federal
Military government launched a three-pronged programme of Reconciliation, Rehabilitation and Reconstruction. In order to actualize this, the Second National Development Plan of 1970 to 1974 was launched. What gave the impetus to launch this plan was the oil boom of the
1970s which saw a windfall of petrodollars into the country. Dagogo W.D. commented on the plan as providing for a nationwide distribution of industries, promoting the manifesting sector, and engaging indigenous producers to embark on industries, as well as ensuring that heavy industries are increased and the manpower base is improved.47
There was a high involvement of government in the industrial policy of Nigeria; the government emphasized heavy industries, by directly investing in such industries as the agro- allied, cement and textile industries among others.48 The period witnessed the establishment of certain public and private enterprises such as Nitrogenous Fertilizers Projects, Calabar
Cement Company, Nalagu Cement Company, Ikot Ekpene Sunshine Batteries, Nigeria
Newsprint Manufacturing Company, Petrochemical Complex, the Kaduna and Warri
Refineries, Calabar and Iwopin Pulp and Paper Mills, Peugeot automobile.49
The indigenization programme of the 1970s period equally needs mention. In 1972 the Indigenization Decree was promulgated, this decree was strengthened in 1977. The aim of the indigenization decrees was to ensure that Nigerians have the ownership of enterprises or there were in the managerial positions of enterprises in Nigeria. It was also aimed at creating more employment opportunities so that the national economy will be improved while ensuring that foreign dominance of the economy was reduced. 50
The indigenization policy equally failed to industrialize Nigeria. Rather it caused other problems for the Nigerian economy such as the reduction in the Foreign Direct
Investment (FDI) in Nigeria’s industry.51 Some of the companies in the façade of ceding control to Nigerians only appointed Nigerian executives as fronts, without necessary ceding
37 control of companies to these Nigerian, in essence, it led to a further growth of comprador bourgeoisie class in Nigeria, who amassed wealth through rent-seeking behaviours.52 The dominance of government enterprises without adequate involvement of private entrepreneurs also caused failures. The enterprises were not profit oriented, leading to huge loss of funds.
More so, the overdependence on foreign exchange accruing from the sale of crude oil set
Nigeria on the path of a mono-economy, the implication was that upon the fall of oil prices from 1982 upwards, Nigeria experienced a deficit in her foreign exchange, leading to a persistent debt crisis .53
As a result of the failure of Nigeria’s indigenization policy and the fall of global oil prices, the structure of the Nigerian economy which was dependent on external finances was weakened. Indeed, this necessitated the Structural Adjustment Programme. The SAP culminated in wide-ranging reforms that led to the economic liberalization of Nigeria as dictated by the International Monetary Fund/World Bank.54
SAP was not an indigenous economic development strategy. Rather, it was a neoliberal economic strategy devised by the international financial institutions (Washington
Consensus) to incorporate national economies into the global market. The core aspects of
SAP entail the liberalization of the economy, limited governmental participation and intervention, privatization and deregulation.55 From 1986 to 1993, under the program over 88 of the 111 public enterprises were privatized or commercialized. This programme which was earlier promulgated in the Privatization and Commercialization Decree of 1988 was further strengthened in 1993 with the enactment of the Bureau of Public Enterprise (BPE) decree in
1993.56
With SAP Nigerian economy was immediately subjected to international economic politics. This can be immediately seen in the contradictory views expressed over the Ajaokuta steel company by a Soviet Russian and the World Bank.While in Nigeria in 1983, Vladimir
38
Snegirev the Russian ambassador to Nigeria was quoted (regarding AJSC) as saying that “we agreed to build this project for your country at a time when no other country in the world wanted to.”57 By 1986 onwards, the Nigerian military leaders were being pressured by the
Western lenders to hands off the project because it was a “...a drain on resources with very minimal economic viability.” Perhaps, this informed the Babangida led military government to withdraw over 12 billion dollars from the excess crude fund which was earmarked to fund the ASCL project. Whereas the money was adjudged stolen by the public, the FMG argued that it was rather transferred to other viable national projects.58
The loss of policy autonomy left room for external dictation from the IMF and donor countries. The programme of SAP on industrialization was expressed in the National
Industrial Policy which was initially hailed upon its presentation.58 The policy was aimed at promoting private sector to engage in the development and use of local raw materials, ensuring that local technology was utilized to installed capacity while developing small and medium scale industries to accelerate export as well as creating employment opportunities for the teeming population. For this to be achieved, the government recognized that there were some bottlenecks that needed to be removed such as bureaucracy, lack of trained manpower and ensuring that the economy is liberalized to ensure private and foreign initiatives.59Thus
Export Promotion Industrialization (EPI) was adopted as the main strategy to achieve the industrial policy. This strategy included private investment promotion, stimulation of non-oil sectors, utilization of local rather than imported technologies and inputs.
However, despite the novelty of the policies and strategies as outlined by the government, they failed to “…transform the economy from agrarian to industrial economy…”60The effect of SAP on Nigeria’s industrialization was far-reaching. It informed the lacklustre attention paid by the military government to the ASCL. While the West was pressuring Nigeria on state withdrawal, the Nigerian industry was being pressured into
39 fringes of lack of productivity, by 1991, the contribution of manufacturing to the economy was averaging 6.5% only.
More troubling is that despite the prospect for steel production in Nigeria as a result of the presence of adequate raw materials, the Nigerian state has not developed this potential, thus, the steel requirement of the country is met through import. From table 2 above, Nigeria has imported over 23 trillion naira worth of steel between 2001 and 2010. Steel import in the year 2004 amounted to about 986 billion naira. This is a whopping sum compared to the value of the Nigeria budget between 2001 and 2010, which amounted to about 25 trillion naira.62 This unsustainable importation of steel has gulped Nigeria a huge chunk of her finances, yet, the government has not taken a bold initiative to develop the industry and save
Nigeria a measure of her financial resources.
Upon the return of democracy to Nigeria, it was expected that the policy failures of the past will be avoided and industrial development will be accelerated. This was the case in
1999-2003 when the Olusegun Obasanjo led government drew hisindustrial policy.63 Some of the major introduction of the policy was the introduction of the Bank of Industry (BOI) in
2000.
The aim of the bank was to finance Small and Medium Enterprises that can add value to Nigeria’s industrial growth. This was concretized in the National Economic Empowerment and Development Strategy (NEEDS) of 2004. Each tier of government was to replicate this strategy at their various levels such that there were State Economic Empowerment and
Development Strategy (SEEDS) and Local Economic Empowerment and Development
Strategy (LEEDS). The Manufacturers Association of Nigeria (MAN) saw a green light in these policies and quickly drew a 4-year strategic plan; this plan was aimed at stimulating increased capacity utilization, increased contribution of manufacturing contribution to GDP, employment generation and poverty alleviation and eradication.65
40
TABLE 2: Showing the cost of steel imports from 2001-2010
YEAR VALUE OF STEEL IMPORTS N
2001 463,672,123,086
2002 3,870,710,146,758
2003 1,228,919,767,136
2004 986,407,622,391
2005 607,281,016,895 2006 2,040,175,251,786
2007 2,518,271,791,503
2008 2,693,355,531,909
2009 3,383,511,084,679
2010 6,001,091,216,268
TOTAL 23,793,395,552,411
Source: National Bureau of Statistics (NBS) “Annual Abstract of Statistics” (Various Years). Abuja: Federal Office of Statistics; National Bureau of Statistics “Nigeria Foreign Trade Summary” (Various Years) Abuja: Federal Office of Statistics These policies were bedevilled by many problems. The National Industrial Revolution
Plan 2012 (NIRP 2012) summed up the major challenges of lack of adequate measures to mitigate issues affecting competitiveness, Nigeria manufacturers were being protected through tariff without making them competitive globally. 66 Policies were not being backed up by the requisite reforms such as governmental transparency and reduction in bureaucratic bottlenecks, neither were the needed infrastructures such as power, access roads and rail networks being put in place to ensure that sectors were connected.
41
Table 3: Showing challenges to industrial policies
SN Policy Challenges Consequences
1 Import substitution Systemic issues: lack Lack of industrialization of power, local competitiveness and freight cost, the high cost of investment climate production by local manufacturers despite the protectionist tariff
2 Indigenization policy Inadequate There were Nigerians implementation in management positions, but they did not own companies.
3 Export Promotion No strategic Over-dispersion of industrialization selection of specific efforts leading to sector failure of policy.
4 ISI, Indigenization policy The absence of Lack of monitoring, Export Promotion robust measurement policy changes were industrialization and feedback not made on accurate mechanisms information and lack of continuity.
Source: Ministry of Trade and Industry, National Industrial Revolution Plan
(NIRP)(2014)
On the whole, several factors can be identified as the reasons for the low performance of the industrial sector in the Nigerian economy. First is the nature of the country’s politics and economy that elevates patronage above merit. This is capable of discouraging talents who will go ahead to seek alternatives (abroad) to practice their trade.
The Import Substation Strategy (ISI) for instance failed not because there was a problem with the strategy itself, (as in Brazil, India and other Asian economies it was used to transform the economy) but because of the manner in which it was implemented. While it is true that the ISI lacked relevant linkages, however, through careful implementations of the four processes, it can be used to attain industrialization. The four major phases that have been identified by scholars in the ISI production processes are consumer non-durable goods sector
(foods, beverages, clothes, pharmaceuticals), consumer durable goods sector (appliances,
42 autos, etc.), intermediate goods sector (pressed steel, sawn wood, prefabricated plastic structures with versatile end uses) and capital goods sector (e.g. blast furnaces, pressure molds, and robotic assembly devices).
Nigeria was able to begin the first process of the ISI, as a considerable number of the consumer goods sectors were noted to have been developed, this stage was supposed to provide the impetus for the durable goods sector, namely the automobile and appliance sectors, here, Nigerian recorded little progress, as assembly plants in the automotive sectors
(such as PAN)were given incentive to exist. However, on the movement to the intermediate goods sector, Nigeria encountered serious problems.67These problems appear to have been shared by other Sub-Saharan African countries that attempted the ISI, some of the problems included: lack of stable business environment as a result of unstable politics, military interregnums and wars, high inflation as a result of ineffective monetary policies, lack of export competitiveness of manufactured products, ineffective education policies and inability to acquire the relevant technological knowledge to advance to other stages of the ISI.
In terms of industrial financing, evidence shows that whereas rent was created by the state in countries like Malaysia, India and Brazil, to motivate private entrepreneurship, in the
ISI. The case was different in Africa, as rent became an excuse for patronage and unbridled corruption.69 A case on how the Indian government in the 1960s promoted industrialization can be seen in the steel industry. Government policies and credits were used to encourage private participation in the steel industry in order to harness that sector for the furtherance of the industrialization objectives. The Indian government was fully aware that steel industry used the Blast Furnace (BF) for most of the steel production generally, which was consistent with the global production of steel, however, government equally noted that there is a deficit in the supply side of steel over the huge demand.70 The Indian government encouraged the private sector through credits and policy to go into production using the Electric Arc Furnace
43
(EAF) which was less expensive. As Kamarka A. noted India strategically bridged the gap of investment, the government allowed a measure of private investment in ingots, this led to licenses being issued to willing investors. This was also replicated in the steel scrap and electric power, the overall aim of this strategy was ensure that while private investments were stimulated, government retained control of the industry. The effect was that many private investors were able to set up small capacity electric arc furnace therefore making up the steel requirement of the country. 71
The immediate impact of this policy by the Indian government in steel production was that, whereas the amount of steel produced by privately produced steel through the EAF was
160,000 tons per year as of 1960, by 1974, the figures jumped to 3 million tons per year of installed steel production capacity using EAF by private entrepreneurs.72
Again, the haste to liberalize the Nigerian economy without adequate consideration to the industrial sector was problematic, again using the steel industry, most countries that were developing at the time, carefully controlled and protected the industrial sector from external influence using several policies, India for instance did not allow effective private competition with public steel companies, this was to enable the companies attain profitability.72 However, as the Indian steel sector reached a high production rate of over 15 million tons per year, liberalization started in 1990. By then, some of the public enterprises were privatized to enable adequate competition and profitability.73 These liberalization policies of the 1990s ensured that by 2000, the total production of steel in India (public and private) witnessed an exponential growth and estimates stood at over 30 million tons per year.74
It is yet to be seen if the 2012 National Industrial Revolution Plan (NIRP) will be implemented adequately. In fact, the opening statement of the objectives of the plan has already been defeated. The NIRP objective is to ensure that Nigeria’s industrial capacity is increased in a period of 5 years. Thus, it placed emphasis on manufacturing which was
44 projected to progressively increase from 6% in 2015 to 10% by 2017. This was to be achieved by focusing on the areas where Nigeria has comparative advantage, especially in the agric sector as well as the oil and gas sector.75
What is immediately observable from this statement is that, by 2015, Manufacturing stood at less than 6% in terms of contribution to the GDP. This was especially as a result of the decline in the oil sector in 2015, which adversely affected Nigeria leading to contraction and recession of the economy. The economy remains undiversified, and agro allied industry have not been positioned to contribute to the economy.
There are several deductions one can make from the industrial policies of Nigeria since 1960. First, the industrial policies has failed to lead to Nigeria’s industrialization,it manufacturing has not grown, reduce dependence and lead to the overall well being of citizens. Considering the SAP, the idea that a developing state like Nigeria needs little government participation especially in her industrial development was a conspiracy advanced by the West and furthered by the patrimonial leaders. That SAP era economy constrained
Nigeria’s industrialization that has led to her present situation of low industrial output.
The fact that “the developmental state” was unable to provide the enabling environment for industrialization in Nigeria posed a big a challenge. The citizens remain impoverished as the industrial sector and the manufacturing sub-sector is unable to employ the teeming population of the country made up of vibrant but technologically disadvantaged youths.
The lack of implementation of a viable industrial framework to channel the energy of private entrepreneurs have equally derailed national development and wealth creation; thus leading to penetration of external capitals in form of multinational companies (MNCs) .
More so, the lopsided creation of rent had led to the creation of favoured groups and individuals. This is because credits and rewards controlled by the state do not allow equitable
45 access or distribution of contracts; loans and credits are only accessible through lobbying, connection or ethnic affiliation to the powers that be.
The overall implementations of these failed industrial polices have had a lot of ramifications in the Nigerian economy such as institutional weakness as a result of absence of industrial policies, absence of enabling laws, and monetary policies that support industrial growth. Infrastructural deficits occasioned by very low power (electricity) generation and distribution to service available industries; Institutional corruption discouraging private initiatives and Foreign Direct Investments (FDIs). Technological weakness; owing to lack of institutional support to grow human development and security problems as a result of perennial unemployment. These have earned Nigeria a notorious status as an uneasy place to do business.
The rationale for the Steel Industry
The steel industry is an important sector in a nation’s industrialization drive.
Countries like Britain, France, USA and Germany placed particular emphasis on steel development in their industrial development.76 The critical inputs of the inventions and innovations of modern steel making process such as the Bessemer reduction process and the
Blast Furnace technology propelled modern steel making in large commercial quantities.77
From the 1870s, heavy steel was used in various industrialised countries as they invested in the development of their railroads and heavy factories. Russia followed this pattern of huge steel consumption as she began her industrial drive from the 1870 onwards.
Indeed, the manufacturing industry of any country can only succeed in the face of a viable steel industry. It is no surprise then that the longest manufacturers globally are equally the highest producers of steel. Steel industry can thus be recognised as the most important element of any industrialization drive. Industrialization is occasioned by high consumption of
46 steel. Thus, as countries construct roads, railways and develop heavy machineries their per capita steel consumption increases. Currently, the global average stands at 180% per capita steel consumption.78
For a country like Nigeria, there are lots of benefits that can accrue from developing a viable steel industry. The steel industry is capable of boosting the urgent technological needs of the country. In addition to seeking technological development (or transfer), the industry can socially transform the country through increased employment of citizens and enhancement of capacity utilization.
The steel industry is a dynamic industrial infrastructure in any country. Apart from the direct impact on manufacturing capabilities, it is capable of saving foreign exchange resources of a country. Nigeria for instance have been importing steel from countries like the defunct USSR (Russia), Germany, USA, Britain, and recently the shifting pattern of import since the 1990s is towards China, Japan and India as these countries combine as the largest of producers of steel.80
Nigeria has been meeting her steel demands by importation since independence.
Whereas the cost of importing these steel products are in millions of dollars per annum , the value of producing steel would have saved billions of foreign exchange with a positive effect on Nigeria’s balance of trade.
The steel industry also propels the intellectual capital of a nation; through technology transfer or research and development, steel development is a highly skilled technological endeavour that requires training and retraining of expertise in scientific and technological areas of steel development. An average steel company requires the employment of many metallurgical engineers and technicians in various aspects of the steel making process. Thus, it is as a high employer of labour both skilled and skilled.80 The multiplier effect is that, as a
47 nation invest in her steel industry, she must (in)directly invest in her educational system to meet up with the man power demands of their country. This is why Japan invests over 2% of her GDP on education.81
But the great impact of steel is understood in terms of its direct and indirect linkage capabilities. Osita Agbu succinctly puts it that to the national economy, the direct application of steel smelting triggers off a number of auxiliary industries. The needed raw material industries will spring up, such as the mining of iron ore, coal and limestone, as well as the manufacture of oxygen, for the furnace of a steel complex.82 It also triggers the electricity production capabilities, as well as the development of railway for the evacuation of heavy materials used in the steel process as well as the by-products. It immediately leads to construction of heavy roads and other modes of transportation generally (Sea ports and rail lines). 83
The steel industry also has a direct consequence on the strategic position of a country.
A country with a developed steel industry, and generally a country with a developed technology influence global dynamics. In a globalizing world, in whichscience and technology is a major part of the global production system as well as the global economy, those who control and direct global production set the agenda and direction of development.
The politics of technological acquisition and retention becomes a strategic affair of countries.
The effect is that countries with lower capabilities are in left to be dependent on countries with more developed technologies. Nigeria remains at the bottom rung of technological development, as a mere consumer and not producer of value added technology. This has left
Nigeria as an economically dependent country.
Steel is often used as measurement of a country’s productive and industrial capability.
The per capita consumption of steel of a country determines the level of industrializing going
48 on in that country.85 This is because modernization of a country is highly dependent on industrialization, construction of railways, roads, as well as setting up of factories for equipment and machinery. The current world average of steel consumption per capita stands at 150 kg.86
Africa performs dismally in terms of per capita consumption of steel compared to other regions of the world. This sums up her industrialization crises, the low per capita steel use of African countries (which could be as low as 2.0 kg in some countries) shows that industry is under performing in this region. Many countries in Africa remain primary producers, with agriculture and mining dominating economies. There is also a very slow pace of movement to production of consumer goods, thus making the vast majority of African countries dependent on imports.
A comparative analysis of steel use in 2016 from World Steel Association shows that the European Union consumed 331 kg of steel, Asia 266kg, America 282 kg, South America
112 kg, Middle East 244kg Africa 35 kg. Data show that China and Japan consume over 500 kg of steel respectively, while the United states consumed 336kg, Brazil 113kg, Iran 262 kg,
Iran 262 kg, Saudi Arabia 443 kg and Malaysia 383kg.87 In Africa, the figures are poor as the use of steel by countries (table 3) show that Algeria consumed 167kg, South Africa 107 Kg,
Kenya 39 kg. Whereas Nigeria’s steel consumption was abysmally lower than the African average of 35kg, indeed, Nigeria consumed 10kg of steel in 2016.88
The low level of industry and industrialization efforts of African countries has direct impact on their manufacturing capabilities as well as the overall influence over their national economies. African countries remain dependent on imports in various fronts, thus leading to a marginal loss of sovereignty. Especially in terms policy formulation and development, thus as the world shrink into a so-called global village and as technologies continue to dominate
49 modern processes of production, Africa’s disadvantaged position in terms of technology continues to be sustained.
Table 4: Showing steel consumption percentage in selected African countries (2006-2010)
COUNTRY 2006 2007 2008 2009 2010
Algeria 1158 1278 646 543 688
Egypt 6045 6224 6198 5541 6676
Ghana 225 25 25 25 25
Kenya 220 20 20 20 20
Libya 1151 1250 1137 914 825
Mauritania 5 5 5 5 5
Morocco 314 512 478 479 455
Nigeria 100 100 100 100 100
South 9718 9098 8246 7484 7617 Africa
Tunisia 75 80 82 155 150
Uganda 30 30 30 30 30
Zaire 30 30 30 320 30
Zimbabwe 24 23
Source: World Steel Association
50 continue to implement development strategies prescribed by the West (perpetrated through
IMF/World bank), Africa will continue to be chained to Western dependence.90
Table 6: Total Production of world steel by continent(regions) of the world (2006-2010)
Continent 2006 2007 2008 2009 2010
European 206903 210179 198195 139366 172630 union
Other Europe 28205 30608 31760 29106 33595
C.I.S. 119906 124169 114345 97645 108200
North 131789 132618 124494 82578 111406 America
South 45298 48232 47354 37776 43873 America
Africa 18695 18675 16997 15326 16621
Middle East 15376 16452 16646 17656 19590
Asia 672252 756861 771013 806901 903201
Oceania 8691 8783 8424 6014 8149`
Yearly Total 1,247,115 1,346,577 1,329,228 1,232,368 1,417,265
Source: World Steel Association
Fig 2: A chart showing world steel production
2 M. World Steel ProductionEast by Region 6 EU 1 Africa 2% 11% 1% 5 S.America 3% 4 N. America 8%
3 Asia 75%
Source: World Steel Association
51
Africa remains at the fringe of global production. Table 4 above shows the various tonnage of steel produced by African countries between 2006 and 2010. Whereas in 2006,
South Africa produced over 9718 thousand tonnes of steel, Algeria produced over 1158 thousand tonnes of steel, Nigeria produced only an estimated 100 thousand tonnes of steel, while Zimbabwe produced 24 thousand tonnes of steel. The rest of the steel needs of these
African countries were met by steel imports from Asia, USA and EU.
It can thus be argued that modernization has not found a footing in Africa. African states continue to be economically dependent on primary production for their economic sustenance, while the West continues to kill local innovations by always sustaining the argument that economic liberalization and privatisation would help Africa modernize (the one-size-fits-all approach).91This approach is not nuanced as it does not take the peculiarities of African conditions into consideration. These Western strategies cannot sustain African modernization attempts. Liberalization has simply been interpreted as an avenue for African economies to be opened for Western imports.992
The impact of liberalization on African industrial growth is well noted; the progressive balance of payment deficit, reduced capacity utilization, endemic corruption and an overall loss of sovereignty.93 The forceful integration of Africa into the World Capitalist
System overtime has led to many African leaders to believe the fictitious Western sustained argument that the market system is the most efficient means of economic development. The consequence is noted in the privatisation of critical industrial companies which are at an infant stage.94
The immediate implication is that directly or through African proxies, western companies buy African companies, yet refuse to infuse the needed capital to sustain these industrial companies. Typical examples are the ASCL and DSC which have been privatised
52 several times but yielded no development returns. The long term implication is that African remains at the lower rung of industrialization.
Steel Industries in Nigeria before Ajaokuta Steel Company There were some steel companies in existence between 1960 and 1979. Some of these companies were vestiges of the colonial entrepreneurs, while others were the product of indigenous businessmen. However, they shared certain similarities. They were mostly dependence on imports of various kinds.
The companies were privately owned and they faced similar challenges, low per capita steel consumption in Nigeria, high level of imported steel product by the government.95 The companies were equally dependent on imported steel billets for their production. Some of these early rolling companies included:
Table 7:Showing name of steel companies in Nigeria before 1979
S/N Name of Steel Company Location 1 Niger Steel Company Enugu
2 Continental Steel Company Ikeja, Lagos
3 Universal Steel Company Ikeja, Lagos
4 Pressed Metal Works Company Limited Ikeja, Lagos
5 Metal Furniture Nigeria Limited Ikeja, Lagos
6 Roadside Engineering and Foundry Limited Ilupeju, Lagos
7 Sanusi Brothers Ibadan
8 John Holt Lokoja, Lagos
Source: D. Omoweh, Political Economy of Steel Development in Nigeria: Lessons from South Korea Trenton: New Jersey (2005) p. 270
53
In conclusion, the previous industrialization policies in Nigeria were reviewed; evidence indicated that there was a lack of proper implementation of policies of government overtime. The needed reforms were carried out by the government, thereby posing institutional challenges to the various plans. Other constraints to the successful actualization of the industrial plans were lack of strategic identification of crucial sectors such as the steel industry, in order to ensure that government do not exert themselves too much on various sectors. Also, there was a lack of proper policy coordination and continuity as succeeding administrations are all too eager to dispose of previous efforts and begin implementation of new ones.
54
Notes
1Matleena Kniivilä “Industrial Development and Economic Growth: Implications for Poverty Reduction and Income Inequality” in D. O’Connor and M. Kjöllerström (eds.) Industrial development for the 21st century London and New York: Zed Books for the United Nations (2008) pp.295-332
2 Kniivilä “Industrial Development” p.295
3 Kniivilä “Industrial Development” p.295
4S. Beji and A. Belhadj “What are the determining factors of Industrialization in Africa?” A Paper presented at the Conference of the Courant Research Centre “Poverty, Equity, and Growth in Developing and Transition Countries” Gottingen, Germany (July 2014)
5Atul Kohli State-Directed Development: Political Power and Industrialization in the Global Periphery Cambridge: Cambridge University Press, (2004) p.8
6 Kohli State-Directed Development...p.8
7Kohli State-Directed Development…p.8
8Kohli State-Directed Development... p.8; U.N. Anyanwu, A.U. Kalu and B. K. Obioma “The Effect of Industrial Development on Economic Growth (An Empirical Evidence in Nigeria 1973-2013)” European Journal of Business and Social Sciences, Vol. 4, No. 02, (May 2015) 127-140, (127)
9Anita Spring, Robert Rolfe and Levy Odera “Sub-Saharan Business Environment Report (SABER) 2012-2013”
10Spring et al “SABER” P.4
11Mike Kwanashie, Isaac Ajilima and Abdul-Ganiyu Garba “The Nigerian economy: Response of Agriculture to Adjustment Policies” AERC Research Paper 78 Nairobi: African Economic Research Consortium, (March 1998) P.13
12Kwanashie et al “The Nigerian Economy…” p.13
13Kwanashie et al “The Nigerian Economy…” p.13
14 Kohli State-Directed Development…p.6
15Kohli State-Directed Development...p.6
16 Kanayo Ogujiuba, Uche Nwogwugwu and Enwere Dike “Import Substitution Industrialization as Learning Process: Sub Saharan African Experience as Distortion of the “Good” Business Model” Business and Management Review Vol. 1(6) (August 2011) pp. 08 – 21,
17Kohli State-Directed Development...p.6
55
18 R.H.Jackson and Carl G. Rosberg “Sovereignty and Underdevelopment: Juridical Statehood in the African Crisis” The Journal of Modern African Studies, Vol. 24, No. 1. (Mar. 1986),pp.1-31
19Samir Amin “Revolutionary Change in Africa: an Interview with Samir Amin”
20R.J. Gavin and W. Oyemakinde “Economic Development Since 1800” in Obaro Ikime (ed.) Groundwork of Nigeria History, Ibadan: Heinemann Educational Books (1980) pp. 482-517 21S.P. Idakworji “Leadership, Corruption and Development” Canadian Social Sciences Vol. 6 No. 6 (2010) pp.12-17 22C. J. Korieh The Land Has Changed: History, Society and Gender in Colonial Eastern Nigeria Calgary: University of Calgary Press, p.256; Remi Jedwab, Edward Kerby and Alexander Moradi “History, Path Dependence and Development: Evidence from Colonial Railways, Settlers and Cities in Kenya” The Economic Journal Vol. 127, Issue 603, (August 2017) pg 1467-1495, R.J. Gavin and W. Oyemakinde “Economic Development…” 483
23 National Archives Kaduna/Min of Internal Affairs/R.G 5803 (hereinafter referred to as NAK) Duties and Protection of Nigerian Industry (Laid before the House of Representatives as Sessional Paper No.1) Lagos: Government Press (1956) p.4 24A.P. F. Mendes, M. A. Bertella and R.F.A. P. Teixeira “Industrialization in Sub- Saharan Africa and Import Substitution Policy” Brazilian Journal of Political Economy, vol. 34, no 1 (134), (January-March/2014) pp. 120-138,
25Korieh The Land Has Changed… p.256; Jedwab et al “History, Path Dependence…” p.1468, R.J. Gavin and W. Oyemakinde “Economic Development…” 483
26Mendes et al “Industrialization in Sub-Saharan Africa…” p.121
27 Jedwab et al “History, Path Dependence…” 1468
28Korieh The Land Has Changed… p.256
29Henry Bruton “Import Substitution” in H. Chenery and T.N. Srinivasan (eds.) Handbook of Development Economics Belview: Elsevier Science Publishers (1989) pp.1600- 1644
30 R. Adewale Aregbesola “Import Substitution Industrialization and Economic Growth Evidence from the Group of BRICS Countries” Future Business JournalVolume 3, Issue 2, (December 2016) Pages 138-158
31 R.J. Gavin and W. Oyemakinde “Economic Development…” 483
56
32 J. Gylych, I.H. Enwerem and A. Abdurahman “The Impact of Industrialization on Economic Growth: The Nigeria Experience (2000-2013)” BritishJournal of Advanced Academic Research Volume 5 Number 1 (2016) pp. 11-20
33Gylychet al “Economic Growth…” p.12
34Gylychet al “Economic Growth…” p.12
35 Gylychet al “Economic Growth…” p.12
36 D. Omoweh, Political Economy of Steel Development in Nigeria: Lessons from South Korea Trenton: New Jersey (2005) p. 29
37 Omoweh, Political Economy…” p.29
38 D. Awarowo, “Costly Neglect: Technology, Industrialization and the Crisis of Development in Nigeria.” Journal of International Social Research Vol. 4, Issue 17, (Spring 2011) pp. 269-281; O.N Njoku Economic History of Nigeria 19th and 21st Century, Enugu: Magnet Business Enterprises (2014) p.236
39NAK/Min of Industries/MOI.84/National Development Plan 1962-1968 p.264; NAK/Trade and Industry/QT:424: Visit by United States Trade Mission
40O.B. Forest “Notes on Nigeria’s First National Development Plan” http://unesdoc.unesco.org/images/0018/001850/185029eb.pdf Assessed 12/7/2017
41Forest “FNDP”
42Federal Ministry of Industry & Technology (FMI&T) Industrialization in Nigeria: A Handbook, Ikeja: Sahel Publishing & Printing Co. (1992) p.19
43FMI&T p.19
44Federal Ministry of Information (FMI) (1970), Second National Development Plan 1970 – 1974, Lagos: Government Printer
44 U. N. Ekpo “Nigeria Industrial Policies and Industrial Sector Performance: Analytical Exploration” IOSR Journal of Economics and Finance Volume 3, Issue 4. (May- Jun. 2014), PP 01-11
45Ekpo “Industrial Sector p.6
46Murray Last “Reconciliation and Memory in Post War Nigeria” in Veena Das, Arthur Kleven, Mamphela Ramphede and Pamela Reynolds (eds.) Violence and Subjectivity Berkeley: University of California Press, (2000) pp. 315-332
47D.W. Dagogo “Nigerian Industrial Development between 1943 and 2013: Challenges and Opportunities” International Review of Research in Emerging Markets and the Global Economy (IRREM) Vol. 1 Issue 3 (2014) 132-148
57
48 Dagogo “Nigerian Industrial Development…” p.133
49 Udo N. Ekpo “Nigeria Industrial Policies and Industrial Sector Performance: Analytical Exploration” IOSR Journal of Economics and Finance Volume 3, Issue 4. (May- Jun. 2014), PP 01-11
50A. Otoghile and I.Ebomoyi “Crisis of Industrialization in Nigeria” Developing Country Studies Vol.6, No.8, (2016) 111-116 51Otoghile and Ebomoyi “Crisis of Indus…” p.112 52 Ogujiuba et al “ISI as Learning Process…” p.9 53 N. Ikpeze, C. Soludo, and N. Elekwa, “Nigeria: The Political Economy of the Policy Process, Policy Choice Implementation,” in C. Soludo, O. Ogbu & H. Chang, eds., The Politics of Trade and Industrial Policy in Africa: Forced Consensus? New Jersey: Africa World Press/IDRC, (2004) p.157 54 I.O. Olagbaju, O.E. Falade and O.O. Bodunde “Structural Change, Economic Growth, and Industrial Policy in Nigeria” Ife Social Sciences Review Special Issue, (June 2016) 1-25 55 A. Tabiu and A.A. Nura “Assessing The Effects of Human Resource Management (HRM) Practices on Employee Job Performance: A Study of Usmanu Danfodiyo University Sokoto” Journal of Business Studies Quarterly Vol. 5 No. 2 (2013) 257-258
56 L. N. Chete, J. O. Adeoti, F. M. Adeyinka, and O. Ogundele “Industrial Development and Growth in Nigeria: Lessons and challenges” Brookings Institution, Working Paper 8 (2014) < https://www.wider.unu.edu/sites/default/files/wp2014-019.pdf> assessed 24/8/2017
57 J.J. Ojochema Governance and Accountability Issues in Nigerian Parastatals: The Case of Ajaokuta Steel Unpublished Doctorate Thesis in Accounting and Business Finance, University of Dundee (July 2015)
58 R. Bamidele “Nigeria’s Industrial Policies, Sustainable Development and the Challenges of Globalization” Paper presented at the 21st Annual Nigerian Anthropological and Sociological Practitioners Association (NASA) Conference., (Nov.2016) At Kaduna State University, Kaduna, Nigeria,
59Bamidele “Nigeria’s Industrial Policies…” p.2
60 Bamidele “Nigeria’s Industrial Policies…” p.2
61 Chete et al “Industrial Dev…” p.7
62National Bureau of Statistics (NBS) “Annual Abstractof Statistics”(Various Years). Abuja: Federal Office of Statistics;National Bureau of Statistics “Nigeria Foreign Trade Summary” (Various Years) Abuja: Federal Office of Statistics
58
63Suraj Mudasiru and Olusola Adabonyon “The Nigerian Economy under Obasanjo" Development Policy Management Network Bulletin Vol. VIII, N° 3, (September 2001) pp. 10-13; H.E. Nnebe (ed.) Policies of the Federal Republic of Nigeria: The Obasanjo Years Kaduna: Joyce Printers and Publishing (2006)
64 M.O. Ikeanyibe “Development Planning in Nigeria: Reflections on the National Economic Empowerment and Development Strategy (NEEDS) 2003-2007 Journal of Social Sciences, 20(3): 197-210 (2009)
65Ministry of Trade and Industry, National Industrial Revolution Plan (NIRP)(2014) p.10; S.N. Essien “The Iron and Steel Industry in Nigeria: An Assessment of Performance” BULLION: A Publication of the Central Bank of Nigeria Vol. 21, No.3 (July/September 1997) pp.40-54
66NIRP p.11
67J. Gylych, I.H. Enwerem and A. Abdurahman “The Impact of Industrialization on Economic Growth: The Nigeria Experience (2000-2013)” BritishJournal of Advanced Academic Research Volume 5 Number 1 (2016) pp. 11-20
68Carlos Lopes “Industrialization: The Good Road Ahead” Ernesto Zedillo, Olivier Cattaneo and Haynie Wheeler (eds.) Africa at a Fork in the Road: Taking-Off or Disappointment Once Again? New Haven: Yale Centre for the Study of Globalization (2015) pp. 45-51
69 Mendes et al “Industrialization in Sub-Saharan Africa…” p.121
70D. Kamarka, Impact of Economic Liberalization on the Indian Steel Industry A PhD Thesis submitted to the Department of Economics, The University of Burdwan, West Bengal India, (2007) p. 20
71Kamarka, Impact of Economic Liberalizationp. 20
72Kamarka, Impact of Economic Liberalization p. 20
73Kamarka, Impact of Economic Liberalization p. 20
74Kamarka, Impact of Economic Liberalizationp. 41
76NIRP p.11
77 D. Omoweh, Political Economy of Steel Development in Nigeria: Lessons from South Korea Trenton: New Jersey (2005) p. 270
78 World Steel Association
79Ajaokuta Steel Company “Overview of Ajaokuta Steel Company” p.5(2017)
80 Omoweh, Political Economy… p.12
59
81 OECD “Japan: Educational Policy Outlook” (2015) p.5
82 O. Agbu “The Iron and Steel Industry and Nigeria’s Industrialization: Exploring Cooperation with Japan” Institute of Developing Economies, Japan: VRF Series, No.418 (March 2007) p.12 83 World Steel Association “Crude Steel Production” p.3 84 G. Gereffi and T. Sturgeon “Global Value Chain-Oriented Industrial Policy: the Role of Emerging Economies” K.D. Elms and P. Low (eds.) Global Value Chains in a Changing World Geneva: WTO Publishers (2013) 329-360
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CHAPTER THREE THE BACKGROUND OF THE AJAOKUTA STEEL COMPANY Geographical location of Ajaokuta steel company Ajaokuta Steel Company is located in Ajaokuta in the present Ajaokuta Local
Government in the Central Senatorial District of the present Kogi State. Ajaokuta has a land mass of 1,362 km2 (526 sq mi), and a geographical coordinate of 70 28’ 0” North and 60 42
0” East.1 The location of Ajaokuta Steel Company in this area is founded on several factors.
First is the fact that the area is richly endowed with materials for ore, which is used in the process of iron and steel making. Second, the area is in the Niger/Benue confluence; hence, the company stands to benefit from the available water, not only for steel production but also cheaper transportation of steel products through the Niger/Benue Rivers to other destinations.
Third, Ajaokuta is strategically located in a cross-road, namely, the North to East, West to
North and vice versa. Finally, Ajaokuta is close to Itakpe where iron deposits of commercial value are available.2 The Ajaokuta Steel Company Limited (ASCL) is located on the west bank of the River Niger. The plant site resembles a trapezium and covers an area of approximately 800 hectares.3
Geological formations and the Choice of establishing the industry in Ajaokuta Area According to Audu, the choice of Ajaokuta as the location of the steel company should not be surprising, considering the fact that historically, Ajaokuta has been a location of iron ore mining activities from the earliest times. In his opinion, there was an abundance of ironstone, which was used in the production of items of cultural and traditional significance. He further stated that “…the name Ajaokuta was derived from the word stone, which as literarily translated in Igala language means the market of stone. (Aja in Igala language means to market and okuta means Stone)…”He thus concluded that the availability of ironstone in
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Ajaokuta certainly gave impetus to the Federal Government’s decision to site the company in the area, in order to effectively utilize the available iron resources.4
Ajaokuta area where the steel plant is located is a rural area consisting of settlers from different parts of present Kogi State. Some of these settlers are the Bassa-Nge, Igala, and
Ebira among others. The main occupation of the groups that dwelled in Ajaokuta was peasant farming. The major crops cultivated were maize, cassava, groundnut, beans and yam. They are equally engaged in riverine occupations such as fishing, boat construction and water transportation, occupations known among indigenous Nupe. Besides these occupations, they are good hunters and the women are astute traders, especially fish trade, apart from pottery production. The people are still actively involved in the occupations that have been identified.
Ajaokuta Steel Company (ASC) was established in order to put Nigeria on the path of industrial and technological development. The importance of steel to the technological growth of any nation cannot be over-emphasized. The history of industrialized nations of the world is mostly linked with the history of steel development. It is therefore pertinent for any nation, which aims to become developed to plan and execute strategic policies towards steel development. According to ShehuShagari a former president of Nigeria, steel is an indispensable tool for economic growth, as no nation can attain industrial take-off without acquiring steel technology and developing metallurgical industry generally.
Njoku noted that Western European firms were contracted in 1958 to conduct a feasibility study on the prospects of a viable steel industry in Nigeria. According to him, the feasibility study revealed that there was little prospect for a steel company at the time.8
However; three major developments led the Federal Government of Nigeria to establish an iron industry in Nigeria. First was the discovery of iron ore in large quantity in Agbaja and
Udi. The second was the discovery of coal in large quantities to shore up the energy
62 requirements of an iron industry. Third were the steps taken at the time to establish a hydro- electric dam at Kainji.9
Another major constraint that delayed the development of the steel industry was the lack of market as well as the need to adopt the mill techniques of iron production. However, the constraint was tackled by the fact that “…development in other parts of the world of a new direct reduction process that would neither depend on a large market nor the use of coking coal seemed at that time to meet the country’s requirement for an integrated plant…”10
In 1959, R.A. Bones submitted a report on the extraction of Iron from Nigerian Iron
Ores to the Colonial Federal Ministry of Commerce. This report is crucial for the understanding of the foundations of the steel industry in Nigeria. The report submitted that it was possible to establish a steel plant in Nigeria based on the fact there are available sources of raw materials to support the industry. The report noted that coal, which is a major requirement of a steel plant, was in large supplies at Enugu. However, the coal was non- cokable, considering the technology at the time.11 The Enugu coal was noted to have too much volatile content, such as ash, carbon, and moisture (which were too high). The conclusion was that as technology improved, the reduction of the volatile contents of the
Enugu coals was possible, thus making it cokable. Another source of coal noted by the report was that available at Ogboyaga in the Igala area (of present Kogi state). The volatile contents of the coal were also noted to be non-cokable.12
Bones added that it was possible to meet the coking needs of a steel plant through import, as this was consistent with prevailing situations internationally. It should be said that though Bones was writing a long time ago, his prognosis appears to be correct. India currently imports 61% of her coking requirements while Japan is totally dependent on
63 imports of coke from China, USA, and Canada among others for their steel industries.
Moreover, the coal in Enugu could have been briquetted used in a blast furnace system,
Bones noted that the briquetting technology was already in advanced use in Britain.13
In terms of Ore, the report noted that ore was in commercial quantity at Enugu with a
42% iron content, While another deposit was at Agbaja (this was before the discovery of Ore in Itakpe area). The Agbaja ore was noted to have 50% iron content, making it more suitable for steel production than that of Enugu.14
Though, proposals were received from expatriates, especially from the United
Kingdom (UK), United States of America (USA), Germany and Canada, it was not until 1967 when a team of Soviet experts from the defunct Union of Soviet Socialist Republic (USSR) carried out a study into the feasibility of setting up an iron and steel industry plant in
Nigeria.15 This was followed by extensive geological surveys sponsored jointly by the
Nigerian government and the Soviet government involving aeromagnetic surveys and drilling for more suitable types of iron ores and coking coal.16 Unongo revealed that the exploration work was concentrated mainly in the following areas:
Table 8: showing locations of exploration work for Iron Ore
FOR IRON ORE
SN Location State (present)
i. Birnin Gwari and Ayagba Kaduna
ii. Ejigbo anomaly Osun
iii. Itakpe, Chokochoko, Ajabonoko, Agbado-Kudu Kogi anomalies
Source: Unongo, Paul, “Text of Welcome Address” by Honorable Minister of Steel Development on the Occasion of the Visit of His Excellency AlhajiShehuShagari to the ASCL. 18thFebruary 1980. Pp.1-12. P.2
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Table 9: showing locations of exploration work for Coking Coal
FOR COOKING COAL
SN Location State (present)
i. Afuze Coal deposit Edo
ii. Lafia Coal deposit Benue
iii. Gombe and Dandiya coal deposit Gombe
Source: Unongo, Paul, “Text of Welcome Address” by Honorable Minister of Steel Development on the Occasion of the Visit of His Excellency AlhajiShehuShagari to the ASCL. 18thFebruary 1980. Pp.1-12. P.2 Unongo further observed that these exploratory efforts stemmed from an understanding between Nigeria’s government and that of the USSR termed “The Moscow
Protocols of 1970.” He also noted that“…the feasibility studies returned a favourable verdict…” By 1972, the exploration succeeded in proving that good iron deposits were available at Itakpe, Ajagbonoko, and Chokochoko all in the Lokoja-Okene region.17 Thus the report prior to this discovery, the promising views expressed by the Soviet geological experts had led the Nigerian government to take the steel project seriously. This was translated in
1971 into the establishment of the Nigerian Steel Development Authority (NSDA) through
Decree No. 19 of 1971. It was charged with the responsibilities of not just establishing a steel mill, but indeed the general development of the steel industry in the country as a whole.18
The NSDA having been established commenced exploratory works immediately. It had two major offices. The main office was located in Lagos while an exploratory division was set up in Kaduna. This was in order to benefit from facilities of geological survey department and because of its first areas of operation and metallurgical laboratory in Jos where it could similarly benefit from the facilities of the Jos school of Mines.19NSDA worked with the Soviets in various explorations activities in Nigeria, especially in search of iron ores, coking coals, limestone, dolomites, refractory clays in areas such as Birnin Gwari and Ayaba
65 in Kaduna State as well as Afuze in the present Edo State. It was not until 1973 that quality iron ore deposits were discovered at Itakpe, Ajagbonoko, Chokochoko among others between
Okene, Kabba and Lokoja areas.20
NSDA explored possibilities of establishing steel plants in Nigeria based on markets surveys, which it had been carrying out since its establishment. From the feasibility studies it carried out, a reasonable conclusion was reached that about 2.6 million tons of steel would be demanded in 1980. However, the Soviet technical experts had a different opinion when they proposed 1.3 million tons of mixed products of steel, namely; flats and longs in their report. It should be noted that TiajPromExport (TPE), a Soviet company was commissioned in 1973 to carry out Preliminary Project Report (PPR) on the establishment of a steel plant. It was based on this report that their recommendations (that the proposed plant should produce 1.3 million tons of mixed products of steel namely; flats and longs per annum) were made.21
More so, SOFRESID a French Engineering company, which was also serving as consultants on the establishment of a steel plant at the time rejected the recommendation of the types of products to be produced at the proposed steel plant. SOFRESID thought the scheme was not feasible and thus recommended that the proposed products should either be all longs or all flats. The reason for this recommendation was not clear as market surveys carried out by NSDA revealed that the country’s requirement of steel was 55 per cent flats while another 45 per cent demand for long was projected. However, the Nigerian authorities adopted the amended preliminary report submitted in 1975 by TPE. The preliminary project report recommended 2.6 million tons of steel per annum based on the direct production of flats products and Ajaokuta was proposed as the location of the steel plant.22
TPE was again commissioned in 1975 to carry out a Detailed Project Report (DPR) based on its earlier recommendation, which was submitted in October 1977. Again the
66 government and SOFRESID of France produced a variant of the steel plant proposed by the
Soviet’s TPE. In June 1978, the report for the proposed steel plant was accepted, the specifications for the steel plant included; the general layout, the composition of the plant and the requirements, as well as a tentative master schedule (of commencement and conclusion of construction). On the whole, ASC plant was designed to produce 1.3 million tons of steel per annum at the first stage, with an immediate plan for expansion to 2.6 million per annum and the final stage will be the expansion to 5.2 million tons of steel per annum.23
To show its commitment to the project, the government of Nigeria signed what was known as “The Global Contract” with the Soviet contractorsTiajpromexport (TPE) on
13thJuly 1979. It was projected that the steel plant would be completed by 1983.24 The contract covered the preparation of working drawings, supply of all equipment, structures and materials and execution of all erection works and training. The contract was signed at a cost of N1.355 billion (at the 1979 exchange rate of N1 to US$1.5). The steel plant covers a
Greenfield site area of about 800 hectares and involves 21 million cubic metres of earthworks in total levelling and terracing. It also involves the pouring of 1.7 million cubic metres of concrete, the installation of 210,000 tons of steel structures and 181,000 of equipment and the laying of 52,000 tons of refractory bricks. In addition, a total of 65 kilometres of the standard railway was to be constructed within the plant’s perimeter.25
By 1983, four rolling mills, namely one 320 mm light section mill having a capacity of 400,000 tonnes per year; one 150 mm wire rod mill of 130,000 tonnes per year; one
900/630 mm billet mill of 795,000 tonnes per year; one 700 mm medium section mill of
560,000 tonnes per year were commissioned by the former President Shehu Shagari.26 Other mills were to follow. The construction of houses, township and camps were equally completed. In all, the work done in the steel company had reached 95 per cent. However, the blast furnace had never worked at any time as the necessary inputs had not been provided.
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Apart from a welfare and administrative building constructed during the tenure of Military
President, General Ibrahim BadamasiBabangida in 1986, there has been no addition to any construction work of any kind in the steel company.27
FIG 3: President Shehu Shagari laying the foundation stone of ASCL Source: Ajaokuta Steel Company Public Relations Office Major Sites in the Steel Company
There are many units in the steel company, though many have now been abandoned, it is pertinent to point out the major units in the steel company:
(i) Coke- Oven and by-product plant:
This plant has a production capacity of 880 thousand tons per year of dry run of oven coke and the by-product recovery plant comprising coke oven Gas condensation, Ammonia
Sulphate department, department for final Gas cooling and the purification from Naphthaline, tar and solar oil among others.
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(ii) Blast Furnace Plant
The blast furnace operates under high pressure with natural gas injection, which enriches the blast with oxygen to reduce coke consumption. The iron making plant (blast furnace) has the capacity of 2,000 cubic meters that could produce 1.35 million tons per year or 3,860 tons per day of liquid metal. There are also two cast houses with an in-lined motor transport drive-in and 2 bottom houses.
FIG 4: Blast Furnace Plant Source: Ajaokuta Steel Company Public Relations Office
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(v) Raw materials preparation plant with sintering plant This was designed to produce fluxed sinter to meet the requirements of the iron making plant and steel making plant. The total output is 2640 thousand tons per year in terms of bin sinter.
(i) Steel Making Complex
This was designed for the production of 1300 thousand tons per year of cast blooms. It is set up thus; 2 oxygen converters (one operating, one standby) having the capacity of 130 tons each. There is also 3 stands curved mould of continuous casting machines, producing 260 x
260 mm and 260 x 335mm blooms.
FIG 5: Steel Making Complex
Source: Ajaokuta Steel Company Public Relations Office (vi) Rolling Mill Shop
This complex includes four mills, namely, one 320 mm light section mill having a capacity of 400,000 tons per year; one 150 mm wire rod mill of 130,000 tons per year; one 900/630
70 mm billet mill of 795,000 tons per year; one 700 mm medium section mill of 560,000 tons per year.
(vi) Auxiliary units which include:
(a) Refractories, Lime and Dolomite plant
These plants comprise aluminosilicate factories shop which is designed for making 37000 t/y of foreclay product, with two rotary kilns, 1.6m in diameter, 34m long.
(b) Repair Shops
There is foundry block of forge and steelwork fabrication shops, a block of mechanical repair, heat treatment and hard surfacing shops, power equipment repair shop, a block of pattern making and building repair workshop, departmental mechanical repair workshop.Other sites in the area that deserve mention here are the Thermal Power Plant and
Turbo Blower Station (TPP-TBS) and the Oxygen Plant.
The ASCL has the installed capacity of approximately 2000 cubic metres, capable of producing 1.3 million tonnes of steel per annum. While the steel making plant consists of two oxygen converter of 135 tonnes each that capable of refining hot metal to steed. The plant was to be executed in three phases, of which the phase on was to enable the plant produced
1.3 million tonnes of steel per annum, while the second phase was to increase the tonnage to
2.6 million tonnes of steel per annum. And the third and final phase of the company was to produce 5.2 million tonnes of steel per annum.28
Suffice to say, the first phase of the company has not been completing owing to a plethora of problems the company has endured. In fact, the first phase was initially put at
98% completion by 1994 based on installed equipment and structures, prior to the termination
71 of the Global Contract in 1996. This was further downgraded to 95% in 2000, following the technical audit by TPE as requested by FGN.29
The direct impact of the steel plant as envisaged was employment generation, which was estimated at 15000 direct employment and 500,000 indirect employment. The plant through its linkages was to propel the iron mining industry, the coal industry and the development of a vast array of transport system including marine, rail and road transport.
Further development was to be in the agricultural sector through the production of cheap fertilizer obtained from the by-product plant, namely ammonium sulphate fertilizer which was estimated at 12000 tonnes per annum.31
It should be said that operating an integrated steel plant in nature of the ASCL requires the movement of materials and products that are estimated at 8 times the capacity of the plant. That is a movement of products daily estimated at about 30,000 tonnes daily; whereas, the ASCL was to produce 3,680 tonnes per day of metal.31
The massive movement of products to and from the company requires enormous external infrastructures. The absence of these infrastructures has been detrimental to the operation of the company. Indeed, TPE complained and wrote to the FGN before 1994, on the need to develop these external infrastructures.32 The need to connect Ajaokuta to the sources of raw materials through several rail networks such as the Ajaokuta-Warri line,
Eganyi-Jakura Rail Line, Ajaokuta-Otukpo rail line, and Ajaokuta-Burum-Ikpeshi lines.
While a road network to the dolomite mines at Osara, Okene and Obajana are critical external infrastructures that need to be put in place.33
Also, an integrated steel plant has campaign times, during which it must run uninterrupted. In the case of the ASCL, the installed BF technology was expected to run between 7 and 10 years. The fact that the BF is estimated at 95% completion is not enough to
72 make it run, as it must be fed raw materials throughout the campaign periods. The infrastructure requirements to achieve this have not been put in place by the
FGN.33Environmental Impact Assessment of ASCL
Nriagu J.O. and E.M. Essien in a 1983 preliminary report of an Environmental Impact
Assessment of Ajaokuta Steel Company and Delta steel company noted several environmental issues arising out of the two integrated steel plants in Nigeria.34 They discovered that the location of the company in the Ajaokuta area presented some environmental challenges such as carbon emissions, and environmental and atmospheric pollutions. This was further buttressed by the findings of Mudiare E in 1995 as well as that of
Ofili in the same year.35
The major findings of these assessments were that the ASCL as a result of the nature of use of chemical components such as carbon, steel, nitrogen and sulphur have many consequences on the environment.36 Some of the immediate environmental problems were grouped as follows:
These pollutions were as a result of foundry operations in the steel plant and other processes. As various chemical elements interact, such as carbon, sulphur, and nitrogen, emissions are inevitable.37 This does not just have an impact on the environment, it also affect the health of the workers. Another impact is that the industrial effluent or waste are thrown into the atmosphere.38 As coal, steel, and fuel are used, there are emissions or wastes which go into the atmosphere as a liquid or solid wastes.
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Table 10: showing chemical pollutions
SN Pollutions Source of Pollution
1 Dust Steam granular particulate generated in mining
2 Crushing and grinding Spread during transportation
3 Fumes Produced in basic oxygen steelmaking
4 Steam Generated by wet quenching of coke
5 Acid Emissions Acidic oxides of nitrogen and sulphur (NOx. Sox) and fluorides and chlorides.
6 Heavy visible due to the presence of oil in scrap or mill emissions scale
7 Toxic gases Toxic Carbon Dioxide produced in t furnaces, steelmaking furnaces and sinter plant gases
Source: J.O. Nriagu and E.M. Essien “Environmental Impact Assessment of the Iron and Steel Industries at Ajaokuta and Aladja” Preliminary Report p.27, 120; E. Mudiare “The Nigeria Contribution on the EGM Cooperation on Environmental Management in The Iron and Steel Industry for the Africa Region”; H.N. Ofili “Management of Environmental Pollution in the Iron and Steel Industry-The Nigerian Experience” WATER POLLUTION
Water for cooling and purification of coke oven gas and wet quenching of coke with pollutants such as tar oils, ammonia, phenols, cyanides, thiocyanates and thiosulphates turned to waste and returned into river Niger.Olatunji O. and Osinajo O. found that exposure to heavy metals by Tilapia fish in the Niger river near ASCL shows that Tilapia fishes are exposed to contamination, which could lead to such Biotic factor as death.39
Another impact of water pollution is that water for cooling and cleaning in the company in contact with blast furnace gases which may be laden with cyanide, fluorides, lead and zinc compounds and dust particles.40
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Table 10: showing water pollutions
SN Pollutions Source of Pollution
1 Water from fume, cooling and cleaning of steelmaking furnaces, usually carrying particulates, fluorides and zinc compounds.
2 Water in scale lubrication oil and hydraulic fluids contamination of water in continuous casting units, rolling mills and scarfing operations.
3 Fungal bacterial in cooling water and biological: inorganic growths corrosion in water circuits.
Source: J.O. Nriagu and E.M. Essien “Environmental Impact Assessment of the Iron and Steel Industries at Ajaokuta and Aladja” Preliminary Report p.27, 120; E. Mudiare “The Nigeria Contribution on the EGM Cooperation on Environmental Management in The Iron and Steel Industry for the Africa Region”; H.N. Ofili “Management of Environmental Pollution in the Iron and Steel Industry-The Nigerian Experience” SOLID WASTES
Materials rejected as waste in iron ore/coal washeries, slag, dust recovered from the cleaning of gaseous effluents. sludges from chemical treatment circuits; mill-scale; used refractories; oil and grease residues. Waste of by-products of cooling, discarded tools and equipment.
NOISE AND VIBRATION
Noise pollution could have a debilitating impact on health. Ajaokuta steel plant as a result of the heavy equipment generates noise and vibration. Several sources of noise exist in the company, according to Mudiare, noise is generated from sinter plant fans, ultra high power electric furnaces, as well as the various burners, installed.41 Also, noise from metal rubbing against metal and rolling mills processing lines truck and rail movements. E. Aluko and V. Nna noted that prolonged or frequent exposure to excessively loud noise is can lead to human organ related problems such as spiral organ deficiencies, and deafness.42
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Since the human resources of the Ajaokuta Steel Company are the most susceptible to the consequences of this pollution, before the environment, it is imperative that several mitigating factors be put in place. Also, the environmental challenges posed by the steel plant are equally important. Mudiare E, Nriagu and Essien E.M., as well as O. Olatunji and O.
Osingbajoall found that several factors can be used to mitigate some of the impacts revealed above pollutions. The Establishment of Environmental Monitoring units in the company will ensure that there is a measure of compliance of regulations that will reduce the health and environmental impact of these pollutions. 43
Eco-friendly technology should equally be adopted such that while optimum production is being guaranteed, the environment does not continue deteriorating. Workers and visitors should be continually educated on the best safe practices so as to ensure that at all time in the plants, helmets are worn and warning signs are placed at strategic positions where danger might exist. There should be a consistent testing of water bodies, so as to ascertain the extent of pollution and combative measures to be taken.44
In conclusion, Ajaokuta steel company was conceived to be an integrated steel plant, capable of producing 1.3 million tons of steel in the first phase. Tiajpromexport was responsible for the erection of the steel structures in conjunction with other companies such as Dumez, Julius Berger among others. By 1983, the quick pace of the work meant that four rolling mills were commissioned. However, the Blast Furnace has never been operated since it was installed and the vision of producing liquid steel by the company has not been achieved as a result of many reasons as will be analysed in the next chapter.
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Notes 1N.A. Chinyere “Determination of Natural Radioactivity in Soil around Ajaokuta Iron and Steel Industry of Nigeria” Academic Journal of Science Vol. 4, Issue 3 (2015) pp. 323– 328; "Ajaokuta";
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19National Steel Development Authority (NSDA) “General Information: Ajaokuta Steel Project” February, Lagos: NSDA(1980) P.4 20NSDAGeneral Information: Ajaokuta Steel Project P.4 21Inuwa. Foreign Involvement, Development Problems and Achievements.” Pp.4 22General Information: Ajaokuta Steel Project pp. 6 23General Information: Ajaokuta Steel Project pp.7 24General Information: Ajaokuta Steel Project, O.N. Njoku. Economic History 235,Unongo, Paul Welcome Address. Pp. 6 25N.E. Attah. “Ajaokuta Steel and Concession pp. 162 26General Information: Ajaokuta Steel Project. Pp. 3 27N.E. Attah “AjaokutaSteel and Concession pp. 167; Oral Interview with Zakari Oguche 45+ ASC staff at ASC Camp on 11th September 2017 28F.O. Ifamose Industrial Policy Implementation in Nigeria: A Case Study of the Ajaokuta Iron and Steel Complex, 1958-2005 an Unpublished PhD Thesis Submitted to the University of Ilorin (2005) 29M.S. Tenuche “Foreign Direct Investments, Strategic Assists and Sustainable Development: A Critique of International Investment in Nigeria’s Steel Sector” Journal of Politics and Law Vol. 3, No. (September 2010) pp. 139-147 30Natasha Akpoti “Time to Break the Conspiracy Concerning Ajaokuta Steel Company Limited”
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37Mudiare “Cooperation on Environmental Management” p. 34; Nriagu “EIA of Ajaokuta and Aladja p.27 38Mudiare “Cooperation on Environmental Management” p.35 39O.S. Oladele and O. Osibanjo “Eco-Partitioning and Indices of Heavy Metal Accumulation in sediment and Tilapia Zillii Fish in water CATCHMENT of River Niger at Ajaokuta, North Central Nigeria “ International Journal of Physical Sciences Vol. 8(20), pp. 30 (May 2013) 1111-1117 40Nriagu “EIA of Ajaokuta and Aladja p.27 41Nriagu “EIA of Ajaokuta and Aladja p.27 42E. Aluko and V. Nna “Impact of Noise Pollution on Human Cardiovascular System”International Journal of Tropical Disease and Health Vol. 6, No. 2 (2014) pp. 32- 43, Nriagu “EIA of Ajaokuta and Aladja p.27;Oladele and Osibanjo “Eco-Partitioning…” p1116 43Mudiare “Cooperation on Environmental Management” p.35, Oladele and Osibanjo “Eco-Partitioning…” p1116 44Mudiare “Cooperation on Environmental Management” p.35, Oladele and Osibanjo “Eco-Partitioning…” p1116
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CHAPTER FOUR CHALLENGES TO THE DEVELOPMENT OF THE AJAOKUTA STEEL COMPANY Major players in the steel company
The ASCL had persons or organisation that shaped the fate of the company. It is necessary to inquire about the nature of these persons and organizations and to understand if they had the requisite power to propel the company into productivity.
First, Shehu Shagari, the former president of Nigeria under whose administration the
ASCL project was started deserves mention. In his autobiography, he justified the need for thee company by stating that the development of industries was one of the cardinal objectives of his administration.1 In his view, there was a need to develop Nigeria’s industry in order to eliminate or minimize dependency on imported products for the building of auto-bodies, rail and other consumer products.2 Indeed, steel development was central to the government’s plan to industrialize Nigeria. This was why the government committed huge resources to the development of the ASCL.
The Shagari administration created a Ministry of Steel Development to oversee the development of steel in Nigeria. Indeed, there have been arguments that the name given to a ministry determines the seriousness given to such ministry. If this is true, one can argue that the Shagari administration was serious with steel development.
However, it is curious to note that in managing a complex sector like the steel industry, one expects that government would select the most experienced and competent individuals with requisite experience especially in the area of science and technology. This is because management of technological development needs a high level of expertise. Tenuche amplified the importance of a competent management in the development of the technology sector in Nigeria when she noted that management is not a passive factor, but a critical aspect
80 of technological acquisition.4 This is because a manager is faced with making critical choices about the components of technologies to adopt, partners to seek, as well as the content mix of such technologies such as size, chemical composition, physical consideration, equipment, capacities among others. Critical aspects of management include the allocation of resources to determine priority areas and effective monitoring.5 Indeed, Tenuche conceded that management seeks to integrate skills for different purposes in the area of technological acquisition. Thus, the expertise of a manager is uppermost in the execution of their duties.6
The analysis of the importance of management in technological acquisition can be easily applied to the Nigerian steel industry. Aside from the president, the ministeroversees their areas of assignment. The ministry of steel was headed by a minister named Paul Unongo upon its creation. A cursory look at the resume of Paul Unongo shows that he was a psychologist. His competence as a psychologist had already been proven when he helped develop the No Victory, No Vanquished, the slogan for Nigeria’s Civil War reconciliation efforts. It is very curious that he was appointed a minister of steel without any requisite experience in the technological sector.
Curious still was that his successor in the ministry of Mines and Steel, Dr Audu Ogbe was an agricultural economist. The position of the minister of steel was to oversee the overall success of government policies. The appointment of these ministers appears not to have taken into consideration the importance of experience and competence in this critical sector.
The implications were notfarfetched; there was a lack of effective coordination and supervision of the ASCL project. This led to the shifting of the date for the commissioning of the project several times. Indeed, by 1983, only the light mill section was commissioned by
Shehu Shagari. That there were indications of installation of outdated equipment in the company tells on the manner of experience and competence of the supervisors. The lack of
81 requisite knowledge of steel and technology by these men is telling, as they could not have had the knowledge of what technology was current or outdated. These perhaps continued to plague the company in later years.
Other awkward appointments in the company were those of Rt. Air Commodore
Umar Ndatsuby the Ibrahim Babangida administration as well as that of Tom Miachi as the sole administrators of the ASCL. This was an affront on the intelligence of competent engineers in the ASCL. This led to a number of resignations (as silent protests by some foreign trained metallurgical engineers of the company in 1984).
There was an argument that the Babangida government appointed Ndatsu to carry out the objectives of the SAP era. This was a result of the adoption of the International Monetary
Fund’s (IMF) Structural Adjustment Programme (SAP) by the Ibrahim Babangida led government. Several austerity measures were embarked upon by the government of the day in the country.7 Thus workers in the Ajaokuta Steel Company were not exempted from this country-wide rationalization exercise. Massive retrenchments affecting over 300 workers were carried out. There was no exemption in terms of specialization. Highly skilled workers and semi-skilled workers were sacked by the government. In 1989, another retrenchment was carried out, even if it was not on a massive scale when compared with the previous one, again about 198 persons were sacked.8
The implication of such retrenchments on the stability and continuity of a nascent company like ASCL was telling. The company was letting go of many experts who had been trained both internationally and locally. It should be said that by 1983, the company had engaged 22000 engineers, technicians and artisans.9 While 1400 persons were trained in
Soviet Russia (and satellites) as well as another 400 highly skilled personnel trained in India,
France and Italy.10
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Some of these professionals were quickly lured out of Nigeria. This appeared to be happening in other sectors of the Nigerian economy such as the education sector. Indeed, the era became synonymous with the term brain-drain.11 Indeed there was large-scale unemployment of skilled manpower at this time. The fact that the sole administrator could not differentiate between surplus workers from critical workers in the ASCL was telling of his qualifications. His expertise was on military intelligence and not technological development.12
Tom Miachi, on the other hand, was appointed as the sole administrator of the company with a qualification of Doctor of Anthropology. He was a university don at the time of his appointment to the position. There is a wide divide in terms of anthropology as a discipline and steel development which falls under the discipline of pure science
(metallurgy). It is not certain whether it was an intentional design to always appoint people with little or no expertise in metallurgy to the position of sole administrator of the company.13
What was obvious was that each of these persons did not have the wherewithal to oversee a highly specialised and skill requiring job as the sole administrator of the ASCL. Their failures in that position are telling on the company, which has made no headway.
Again, there were companies that played critical roles in the development of the
ASCL to the present state. A few would be given attention here. There were several stages in the construction of the company as earlier discussed; this was the civil work stage and the engineering stage. The civil works were done by Messrs Fougerolle Nig Limited, Dumez and
Julius Berger Nig Ltd. These companies had clout in civil engineering as they had proven their mettle in the construction industries of Nigeria. Indeed, they completed their works timely in 1981 and 1985 based on the job description. This was supervised by the Pan
African Consultancy services of India who served as project managers.14
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Tiajpromexport of USSR was a major player in the company. In addition to supplying the engineering requirements of the company, they designed, imported and installed the technology of the company. They imported most of the technologies from Russia and
Ukraine.15 Almost all equipment and networks were brought into Ajaokuta as Completely
Knocked Down (CKD) parts. The company has a reputation for steel construction in India,
China and Egypt. This initially attracted the Nigerian government as partners in the steel industry. Indeed, the company has helped installed, managed and services over 50 steel companies worldwide. 16
The termination of the contracts with TPE in 1996, left the company in quicksand.
The deterioration of installed plants and equipment owing to lack of direction and maintenance by the remaining staff of the company was witnessed.17 The change of government in 1999, brought in new players. President Olusegun Obasanjo vigorously sought to reposition Nigeria for economic development. The options available were few, he adopted privatisation and liberalization in what might be viewed as a compromise to the West in exchange for Nigeria’s exit as a pariah nation. Indeed, the President in the spirit of privatisation quickly signed several concession contracts with different partners. The outcome of the concessions is discussed below. However, the introduction of players such as
SOLGAS and Global Holding Infrastructures deserve mention.
SOLGAS energy was operating in the Nigeria energy sector since 1992. Headed by
Mr Thomas Russel, the company had expertise in the oil industry and was also involved in the importation of generating sets into Nigeria.18 The company as of 2001 was capitalised at
60 million dollars. There is no known record of the company being involved in any steel industry in any part of the world. It is curious that this company with no experience in the steel industry was given an integrated steel plant such as ASCL to manage in 2003.
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Some of the curious clauses inserted in the agreement signed on June 30th 2003 between the
Federal Government of Nigeria (FGN) and SOLGAS Energy Limited (SOLGAS) are partially highlighted in Appendix 1.
From the clauses inserted in the agreement,it is obvious that the intent of SOLGAS was to take over the company totally and use the components as they will, considering that the major components of the agreement were to be kept secret. It was uncertain at what cost the company took over ASCL from the government, and the amount they were expected to invest in the company.
The seventh clause is equally instructive, the repatriation of profits meant that the very aim of establishing the ASCL which was to ensure that excessive importation of goods leading to capital flights are defeated. (See appendix 1) Thus, the company will be in
Nigeria, while the profit will be flown abroad, such as the implication of the agreement. What is curious is that the agreement was written in a clear and comprehensive language, yet the national leaders were willing to append their signature.
When the SOLGAS agreement failed to materialise, because they were unable to invest capital in the company, despite the dubious agreement, the FGN had to withdraw the concession, and offer to a different partner. But the government was not prepared to learn from experience. In fact, it appeared that the managers of Nigeria’s asset did not have the interest of the country at heart. This is because rather than learn from the SOLGAS experience, a worse agreement was signed with the GIHL.
Global Infrastructures Holding Limited (GIHL) initially known as ISPAT is an Indian company with Mr Primod Mittal as the head. This company is not known to have been involved in the steel industry in any part of the world. However, Primod Mittal is a cousin to
Lakshimi Mittal, the head of a giant Indian Steel Plant called Accellor Mittal. Although it is
85 speculative, it is possible that Primod Mittal presented his company as an affiliate of Accelor
Mittal as a pretext to acquire ASCL. What is certain however is that the FGN did not do due diligence before accepting GIHL as concessionaires of the ASCL. Some of the clauses extracted from the agreement are in appendix 2.
One might wonder if the FGN and their representatives were in their right frame of mind upon signature of this kind of bizarre contract. Again, certain parts need to be highlighted; the contract made for a special waiver being granted to GIHL, taxes, levies and other charges were to be borne by the Federal Government of Nigeria.19 The implication is that GIHL rather investing in the Nigerian economy becomes a parasite on the economy. One wonders what the contribution of the GIHL will be to the economy if it does not pay tax and if profits accruable to the economy are repatriated abroad.
A juxtaposition of this clause with another which says that To the fullest extent permitted by law the FGN shall facilitate so that neither Global nor their agents be required to withhold or account for payment of any tax or any fiscal charge in respect of the profits, earnings or dividends or the distribution thereof.20 This in all sense does not mean well for the economy of Nigeria. Whereas the GIHL and partners will not be required to pay tax on their profit, the FGN using public funds is expected to pay the tax on behalf of the company.
This is inimical to national development.
Curious still was the choice of location for the arbitration of disagreement, which was
London. Whereas the GIHL has confidence in taking charge of the company in Nigeria, it does not have confidence in the legal system of Nigeria. It remains a myth as to how the FGN signed this kind of obnoxious agreement with GIHL despite the huge foreign resources expended on the company since its inception.
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Challenges of Ajaokuta Steel Company
The company has been bedevilled by several challenges since its inception in 1980.
As from 1984 onwards, the pace of the works done in the Ajaokuta Steel plant began to slow down considerably. Several factors were responsible for this. First was as a result of the world economic depression, which affected considerably the demand for crude oil (a major foreign exchange earner for Nigeria). This had a tremendous effect on the Ajaokuta steel company as funds were no longer forthcoming. The ascension of the military to the helm of affairs in the country through a forceful change of the civilian President, Shehu Shagari (by
Gen Buhari, later overthrown by Gen Babangida) further exacerbated the already precarious situation faced by the company.
The Ibrahim Babangida led military government thought it necessary to borrow money from the International Monetary Fund to shore up the economy of the country. This loan came with the condition of accepting a Structural Adjustment Plan (SAP) of the economy as proposed by the IMF.21This singularly had a profound effect on the iron and steel company, as the IMF had earlier opined that the steel company was a project too ambitious and not viable. This led to an almost known pattern of the government abandoning the project entirely. Expensive machines and construction works were left with minor routine maintenance being carried out. Some of the machines that were never used became out-dated and some simply became rusty and were rendered obsolete. Many machines and equipment were rather taken away from the company and sold out at outrageously cheap prices.
As a result of the importance attached to the development of steel industry by the citizens of Nigeria, reasons that have been suggested as being responsible for the recession of the Ajaokuta Steel Company ranged from theoretical, analytical, logical, to emotional, traditional and sentimental. Perhaps it should be understood that there is no one particular
87 reason that can be pointed out as being responsible for the recession. Rather, it should be seen as a convergence of reasons that have led to the company’s quagmire.
Oyebanji and Oluwole had noted that the problems can be grouped not only by phase but by focus. The problems observed at the early stages include the problem of design, lack of infrastructures such as rail lines, and port around the location of the plant.
Table 11: listing the challenges of ASC at inception
SN Problems Implications
Finance, including a shortage of foreign exchange high indebtedness, complete or almost total importation of capital goods, technology, and engineering services Planning and management resulting from inexperience Low level of technological and organizational skills, and lack of precedents. Political control, bureaucratic interference, and Bureaucratic interference and shifting government policies. shifting government policies. Mode of execution, The behaviour of contractors involved with project implementation in terms of perceived advantages and commitment.
Lack of critical inputs Conceptual design, fabrication, and modifications. as raw materials, spare parts, and consumables, power supply, etc.
The final decision on the site for the plant deserves mention.22Oyebanji and Oyelade observed that NSDA predicated its choice of location for the Ajaokuta Steel Project primarily on the source of iron ore. The location study contained in the preliminary project report presented a detailed techno-economic analysis based on scenarios in which local or imported ores were used. The locational considered several factors such as operating cost and other costs such as gas, plant, water supply and raw materials.24
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Oyebanji and Oluwole also noted that cost of construction of the township was also considered. Two suitable zones were defined: the coastal zone stretching for about 100 km between' Forcados and Port Harcourt and the central zone of the country along the banks of
River Niger south of Lokoja for 50 km to Onitsha. They found that eleven (11) possible locations in these areas were distilled down to three: Warri, Onitsha, and Ajaokuta. The report recommended Onitsha on the premise that the use of local ores would save precious foreign exchange. Oyebanji and Oluwole concluded that techno-economic reasons aside, it was the political factors that greatly informed the choice of location of the Ajaokuta Steel plant, in their thinking, a project of such magnitude could not have been located in the
Eastern Part of Nigeria considering that less than a decade before the establishment of the plant, Nigeria had fought a Civil War to prevent the East from breaking out. Therefore, the policymakers could have considered the security implication of locating such a plant in the
Eastern part of Nigeria (Onitsha).5
As has now been revealed, the problems that would eventually lead to the recession started right from the conception of the steel company. It is not surprising therefore to notice the effect of further political consideration in staffing too. Nigeria often trivializes or politicizes questions that often require meticulous judgments. The effects of this have often been damning in all ramifications. The lack of political will to explore opportunities presented by available resources has therefore been historical if not resurgent albatross to the successful development of the country.
Another reason that has been offered by analysts is that Ajaokuta Steel Company is too centralized. This, according to them, has been a stumbling block for the company. Thus, they argued that the idea of having a single management for the company does not support the growth of the company. For the company to work, Obikwelu and Nebo suggested that
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Ajaokuta Steel Company should have been decentralized into Blast Furnace Operations,
Metallurgical and Steel Management Training, Rolling Mills, Administration (planning and logistics), Marketing and Sales and each should have a Technical General Manager. They further averred that since the company is technology based, the post for the managerial position should have been left to be competitive in order to attract the most qualified candidates within Nigeria and around the world.28
Njoku had also argued that Ajaokuta Steel Company from the onset was bound to fail.
This according to him is because of reasons that were obvious. The utter foreign dependence of the company on foreign technology and personnel as well as the lack of proper coordination had created room for the impending doom.29 Personnel could have been trained prior to the establishment of the company in order to have experienced hands working the equipment. However, the government focused on establishing the company, and hastily training personnel in Soviet Russia and France among others.
Njoku further noted that the Ajaokuta Steel Complex scarcely produced anything after over $3 billion had been spent on it. He pointed out that in August and September 1996,
Wakawa, the Managing Director of the Ajoakuta Steel Complex auctioned vital equipment of the company at “ridiculously give-away prices” and with impunity. By 1997, ASCL owed
Tiapromxport (TPE), the contracting Russian firm $3.1billion. The Abacha government arranged for a debt buy-back deal in which Panar Shipping Corporation (PSC) of Liberia bought the debt for $500 million. Surprisingly, the Nigerian government bought back the bills from PSC (which was obviously working on behalf of the Abacha family) for the original price of $3.1 billion. The difference of $2.6 billion was said to have been shared between the
Abacha family, Bashir Dalhatu, the Minister of Power and Steel, and Anthony Ani, then
Minister of Finance. Pointing out further that by the end of 2002 the iron and steel industry in
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Nigeria remained comatose, producing nothing and bogged down by billions of dollars of debts. The nagging problem of corruption would, therefore, need to be tackled for Nigeria to make any meaningful progress in its industrial development efforts.30
Oyelade and Adeboye also observed that the recession of the company can be traced to political instability, culminating in frequent changes in the leadership of government, ministries and in the portfolios, boards of directors, general managers and senior management staff, which make continuity almost impossible. For example, writing in 1986, Oyelade and
Adeboye noted that direct ministerial control of the company meant that managers were changed incessantly without considering the implication for continuity and experience.31As the government was changing so were the heads changing, this is in order to place friends and cronies in positions of decision making. The effect of these according to them lies in the fact that direct ministerial control is connected with bureaucratic delays and the lack of flexibility required for the efficient running of a corporate manufacturing enterprise.32
Some indigenes of Kogi state strongly hold the opinion that the location of the company has a lot to do with the recession. They argue that since the steel company is not located in a place controlled by the three major ethnic groups in Nigeria (Hausa, Igbo and
Yoruba), the government has, therefore, had no interest in the company since it is these groups that are at the helm of affairs. They argue that the company would have been functioning if it were located within the territories of these major ethnic groups.33 However, this opinion can easily be contradicted on the ground that several industries located in the territories of the dominant ethnic groups have not fared any better. For instance, the textile industry in the northern part of Nigeria and the Cocoa industry in The West have been in gloom over the years.
Obaka averred that in addition to the location of the iron complex, there are other myth linkages to the moribund of Ajaokuta steel complex. According to him, the site of the
91 complex was hitherto an abode of an Igala traditionalist, “Egbunu,” and that at the time of establishing the company, the man refused to be relocated to pave way for the sitting of the proposed iron complex. The Government however resorted to the use of force. This forceful attempt eventually made the project incur a curse in line with Egbunu’s spell. He was said to have declared that no plan on the land where he had been driven from will prosper.34
It is further revealed that the community commonly holds the belief that since the site also extends into the River Niger, the marine creatures were also displaced from their habitation. Sequel to this, some indigenes of Ajaokuta community hold that these creatures at the early stage of the steel company do visit the section of the complex that connects to the river at intervals. These entwined myths have been attributed as being responsible for the misfortunes that Ajaokuta steel company suffers today. It is consequently held that it will be difficult if not impossible for any meaningful project to succeed on the land if the aggrieved spirits are not adequately appeased.35
Contract Termination and Concessions of the Company
However, this plethora of reasons is not comparable to the concession that nearly dealt a fatal blow to the company. It should be said that since the late 1980s, the various administrations in the country had without success attempted to concession the company, citing the need for a public-private partnership. By 2002, an agreement was signed with a
Japanese company Kobe Steel Ltd with SOLGAS Ltd serving as the financiers. This did not prove to be effective. Again, on the 30th June2003 the government signed a full concession agreement with an American company SOLGAS Ltd. Attah noted that the concession had not been propelled by pure economic reality informed by Nigeria’s experience, but by the effort to liberalize the economy of Nigeria in line with pressures from the custodians of the Bretton
Woods institution, namely, the “West.” Concession policy adopted in the company was
92 simply bending to the whims of the West without adequate consideration for of the implication on the company.36 Industrialization is a gradual process that requires government coordination, investment and control. Ceding governmental control through concession meant that private investors determine input and output in the company. This is because private investors take decisions based on rationality and expected profits.
Suffice to say that the notion of western conspiracy has always lingered in the minds of many analysts in Nigeria and even Africa as a whole. It is believed that the West does not have the interest of Africa (Nigeria) at heart. In fact, there is a direct accusation that the inability of Ajaokuta to work is as a result of a western conspiracy.37This may explain why the Babangida administration did not invest adequately in the critical part of the company.
IMF had argued that the project is not feasible, it is, therefore, logical if loans collected by the government were not invested in the project, therefore denying the project of needed financial commitment.
Attah further pointed out that the concession agreement did not in any way benefit the country and its populace, as SOLGAS did not possess the wherewithal to tackle the challenges of the company. As a result of the failure of the concession agreement between the federal government and SOLGAS to provide a solution to the problems facing the company, a new partner in “progress” was found. A new contract agreement was thus signed with
Global Holding Infrastructure Limited on 13th August, 2004.38
The results of the 2004 concession agreements were damning to the progress of the company. Retrenchments were carried out on a massive scale, salaries were reduced or stopped, and pensions were left unpaid, workers were hired on casual bases and high handed administration became the order of the day. More damning was the manner the Ajaokuta
Steel Company was cannibalized and its equipment moved away. In fact, the workers had to
93 constitute themselves into groups to guard the facilities of the company, thereby preventing the total emptying of the company’s facility. Therefore, the concession contributed in no little way to facilitate the declining fortunes of the company.39
As has been said, the effect of several actions and inactions of the various administrations in the country led to the recession of the Ajaokuta Steel Company. The inability of government to remove politics from critical economic decisions such as the sitting of the Ajaokuta Steel Company, not to interfere in the administration of the company and give freedom to the better experienced administrators of the company, coupled with corruption, and the detrimental role of international agents, have all led to the non- actualization of the steel industry in Nigeria.
The ramification of the Concessions
Several consequences followed the concession of the company. The company was immediately seen as private property under the whims of GIHL, and the company did not fail to treat ASCL as such. From gross administrative highhandedness, culminating in massive retrenchments, to pilfering of some of the installed equipment of the company and continuous engagement of government on litigation over characterising the effects of the concession.40
The change of ownership of companies is often accompanied by structural changes which could range from financial to administrative changes. One of the major structural changes companies use in justifying a financial position is retrenchment. Though retrenchments of workers have been identified as ways giant firms can rationalize and manage finances, it is often done with the careful application.41 Thus, retrenchments can be applied when certain aspects of the firm are seen as surplus or the company is in a precarious financial situation. Indeed rationalizing is a major object of retrenchment.42
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However, it is possible that other aspects of strategic management approach could be applied in place of retrenchments. In this case, redirection or rechanneling of finance to viable and profitable aspects of the company is an option to retrenchment.43 One of the objectives of privatisation in Nigeria is to ensure that resources allocated to companies are productively used for the purpose it is allocated. The government has been recognized as bad for business, thus privatisation was seen as a magic wand. In the case of ASCL, privatisation has only worsened the potentials of the company.44
GIHL upon taking over the ASCL immediately embarked on massive retrenchments of workers.45 This retrenchment was far-reaching as no aspect of the company was spared.
From an unskilled workforce in the administration to professionally trained technical manpower of the company, GIHL laid-off workers with reckless abandon. The staffs affected were in total disarray and anguish as they had invested most of their adult life in the company.
Massive retrenchment in any organization is known to affect employee morale; this is as a result of uncertainties and job insecurity by the remainder of the employee.46 ASCL was noexception. During the period of rationalization in ASCL, the staff knowing they could be left without their jobs engaged in self-help measures, some of them removed the equipment of the company and sold.
By 31stDecember 2004; 1517 members of staff were retrenched by the company.47
This included top management and technical staff that have had many years of experience and training in various aspects of steel making especially Soviet Russia and Ukraine. This accounted for a huge loss to the national economy as the government had used public funds to train this personnel. More so, it was also a huge loss of human capital as the experience garnered by these sacked professionals was never properly harnessed.
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The immediate reaction of some of the employed staff in the ASCL was to organize themselves through the unions to protest the manner of the retrenchment.48 There were accusations that the retrenchment was against the spirit of the agreements signed in the concessions. The workers thus embarked on strikes and protests over the perceived unfair treatment of their ex-colleagues.
These protests were immediately followed by further retrenchments. By April of
2005, another 148 personnel of the company were dismissed by the company. This time, the affected staffs were those perceived to have spearheaded the protests. The aim was to remove them and ensure that there was compliance with the company’s directives.49
The retrenchments had far-reaching social consequences; it grew the number of unemployed people in Nigeria which was already at an alarming rate. The over 1,500 staff not in their prime, thus finding employment was a difficult affair. The company equally suffered tremendously as experts with knowledge of the installed equipment in the company were laid-off. For instance, in 2006 when the Light Mill section was to be put to use, the company maintained and switched on the mill, only for it to go off several times. This was because the company had let off the technicians that had the know-how in the company.
Whereas, they employed casual staff that had no technical experience whatsoever in the complex process of steelmaking.50
The retrenchments rendered some of the former staff homeless. ASCL had provided a considerable number of the staff members with quarters, however, as they were dismissed, they were no longer entitled to the houses. Some of these staffs, who had worked for over 20 years without an official mortgage, neither were the remuneration enough to build decent houses before their dismissal.51 The sacked staff was unable to pay for their bill as they were owing on foodstuffs and rent for long durations.
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The dismissed staff were forcefully ejected from the staff quarters immediately, despite the fact that their gratuities were not paid. Indeed, it took long months of toil between
Dec. 2004 to June 2006 before the gratuities were paid to the laid-off workers. At this point, some of the workers had incurred massive debts, while some took ill, and others died.
But that was not the only tribulations the workers went through in the hands of GIHL.
Between 2005 and 2007, the workers were owed salaries for 13 months. Their salaries were not paid and the company gave no reason for this development.52 One would have thought that having cut the members of staff during this period, the company would have been financially responsible considering they are paying fewer workers, but that was not the case.
The workers were left to fend for themselves.
The lack of remuneration had social implications; some of the workers were separated from their wives as they could no longer keep their homes together, while some of the female children embarked on commercial sex works (prostitution), this is because some of them were already in tertiary institutions and were unwilling to drop out. More so, some children became dropouts as their parents could no longer afford their school fees, there were few who took to learning handworks such as barbing, hair styling and laundry services. Attah again captures the social implication of the concession when he wrote that
…a fall-out of the non-payment of staff salaries has been an upsurge in anti-social activities such as robberies, prostitution, etc due to the fact that their parents were not paid salaries for many months...Young men and women who fell into this category were mainly those in tertiary institutions who were unwilling to drop out of schools due to the predicament of their parents.53
Some of the workers had to fashion out a coping measure, some of the coping measures of the worker were to form cooperative to embark on rice farming. This is because
ASCL is a large piece of Greenland, the Geregu village close to the plant is very suitable for
97 agriculture.54 It is the Geregu village which has an abundance of arable land that these workers in their cooperative acquired for lease, and embarked on rice farming. It is not certain how profitable it is, however, some of the workers acknowledged that it helped them navigate the hard times as a result of the concessions and the underlying consequences.55
The concession agreement between the Federal government and GIHL was brought to an end in 2008 when President Umar Musa Yar’Adua set up a committee to consider the concession and the progress made in the ASCL, the committee reported back with critical findings. It was found that the agreements was done in a way that it favoured GIHL to the detriment of the national economy, that as a result of several actions of GIHL, the agreement had been breached an instance is that rather than invest in the Nigerian economy by bringing investments, GIHL was borrowing from Nigerian banks using Delta Steel Company as collateral. More so, GIHL pilfered the installed equipment of Ajaokuta Steel Company by moving it to their private companies.56
These findings by the committee inevitably led the Federal Executive council to terminate the concession agreements with the GIHL. In fact, new findings by the National
Assembly revealed that at the time of signing the concession agreement, the Federal
Government did not involve the Bureau of Public Enterprise (BPE) the sole entity responsible for the privatisation of public enterprises.57This development confirms what was already viewed as a shady deal between GIHL which some have speculated were brought to rip the country through their connections in high places. Indeed, Natasha Akpoti, a foremost agitator for the resuscitation of the company had pointed out that it was through Senator Liyel Imoke and Gbenga Obasanjo (the son of the former president Olusegun Obasanjo) that GIHL gained access to the ASCL.58
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The Termination of the concession agreement between the FGN and GIHL resulted in a series of arbitration. GIHL sued the government of Nigeria to the International Chamber of
Commerce in Britain and demanded $1 billion dollars in damages for the contract termination.59 This arbitration lingered on, for years, thus ensuring that the FGN was unable to do any major work in ASCL. Part of the demands of GIHL was that in addition to the huge sum of money, that the FGN grant it the National Iron Ore Mining Company (NIOMCO) at
Itakpe for a 25 years period for free. The objective was to direct the iron ore in Itakpe to DSC which is owned by GIHL from the crooked concession processes.60
It is puzzling that the government was willing to bundle away a huge investment such as the ASCL, despite the company being conceived as the bedrock of Nigeria’s industrialization. Puzzling still is that the government appear not to have strategically and transparently carried out the concession in a way to attract the best offer that was capable of transforming the company.
Concession of the company could not have been the ultimate solution to its protracted completion and lack of functioning. The fact is, a company like ASCL requires huge investment, and it is doubtful any profit-oriented concessionaire will be interested in accepting. More so, investment in an integrated steel like ASCL has a long gestation period, in fact, it is possible that the company does not make a profit, however, the profit lies in the multiplier effect the company has.
What Went Wrong?
African countries confront double threats, of bad leadership, and of international system content with letting Africa occupy the fringes of the international production system
(that is, as primary producers and as the market for finished goods). Thus, a quest to achieve technological development by African countries is seen as a quest to pull out of their certified
99 position. Technological attainment by African countries is capable of propelling them from their dependence on western technologies (and the attendant costs), thus leading to sustenance (and/or competition). Thus, there is an apparent resistance from the west whenever African countries are attempting to carry out industrial projects. The World Bank, for instance, has been pressuring Nigeria to abandon the ASCL, the same way they had pressured Egypt to privatise the Egypt Iron and Steel Company. The Egyptian government vehemently opposed this pressure. Today Egypt produces over 5 million tonnes of their steel requirements while augmenting with imports.61
The World Bank often argues that such projects as ASC should be privately driven profit oriented. However, that argument is often a decoy to pressure African countries to abandon the projects totally. This is especially so when they use aids as leverage.Again, western dictates have endured that African governments are unable to drive the modernization agenda with the vigour it demands. Using aids and sanctions, they often dictate the projects African leaders can invest or not invest on. Samir Amin explains this approach as “economic rationality”. He argued that the policies proposed by the west and implemented by African leaders are policies of crisis management and not strategies to move beyond the crisis. He pointed out that the policies prescribed by the west are short-run policies aimed at serving specific targets of ensuring western retention of capital, thus, causing unsustainable development in the long run to the African countries.62
Considering that Nigeria (and some other African countries) has been implementing western policies aimed at modernization, one can argue that the modernization project as prescribed by the west is a failure in Sub-Saharan Africa. The consequences of this failure are dire; African countries remain tied to the apron string of the west. Dependence on imports, aids, and economically subversive policy prescriptions are the main, rather than the exception. Amin summed this failure up when he posit that “...this recipe is well known and
100 includes high rate of interest, flexible rates of exchange, and the third world debt, privatisation...”all setting up what he viewed as a neo-liberal conception of an unbridled globalisation.62The West is all too guilty of imposing ‘alien’ agenda to the SSA context; they have often believed that ‘what worked elsewhere can work everywhere’ however, limiting the milieu in which African countries can achieve their modernization objectives. As soon as
African countries attempt different approach other than that prescribed, they have often been met with western tools for ensuring conformity, namely; sanctions, reduction of aids, and trade embargos.64
Western conspiracy aside, the Nigerian state has been engrossed with a self- destructive epidemic, namely, corruption. Corruption has eaten deeply into the fabrics of the country, thus ensuring nothing works, except corruption. Corruption expresses itself glaringly and unfettered, aided by the very people it hurts the most. From the political sphere to the nation’s public institutions corruption sits deep. Even the educational institution that is expected to frame and reframe the individual shape and nurture the character of the individual for the overall good of the society is now the purveyor of corruption in various form.65
It appears that in the absence of its capacity to produce liquid steel, ASCL has been producing corruption in large quantum. Highly placed politicians have used the company to syphon billions of naira in national wealth, through fictitious allocations to the company that have often ended up in private hands.
The company has intentionally been made dormant by powers that be, in order to continue to rip the country of her wealth, the structure of the company is not aimed at transparency and accountability especially in the areas of finances. The fact that the company has been used by the Babangida and Abacha regimes to launder money with fictitious schemes (example the infamous debt buy-back) shows that the company is seen as an avenue
101 for personal aggrandisement rather than for national development. Again, the manner in which the company was bundled to incapable private hands in the name of concessions equally speaks to the nature of corruption in high places.
Again, utter dependence on foreign technology does not fully express the ambition of the country’s modernization ambition. There is nothing wrong with seeking technology transfer, however, experience shows that technology transfer has eluded African countries as a result of the approach to it. Technology transfer can only work, when a repository of technological knowledge has been developed to its full potential, namely, the human resources. Humans are the repository of technological knowledge. In Nigeria’s case, rather than foster the training of the human resources in anticipation of a steel industry, the leaders thought it was better to install a steel plant before training the workforce that was expected to make the plant functional. This is an unsustainable approach that has turned to haunt the company. The Soviet experts that installed the equipment and technologies of the company did not adequately train the Nigerians to be able to handle, maintain and replicate the equipment. Rather what they were thought were the processes of manoeuvring few of the equipment. Again, some of the equipment were coded in Russian, making it even more cumbersome for their operation
The will of the Nigerian was not translated to the company, rather it was the will of the Soviet experts that were translated in the company, some parts of the equipment are in the language of the Russians, thus making it difficult for Nigerians, schooled in the English language to manoeuvre the equipment adequately. This can only sustain dependency, as only
Russians or those trained in Russia can dissect the equipment properly. The implication has been that, since the Russians left, Nigerians (as well as Indians and Americans) have been unable to really run the equipment adequately, most times, depending on trial and error.
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On the whole, the ASCL has been bedevilled by many problems. The project which was conceived as a symbol of Nigeria’s ambition to industrialize her economy has been eclipsed by fundamental problems. The overall effect is that the failure of the ASCL and other similar projects in Nigeria has led to socio-economic inequality, as a result of wrong choices, which has been the hallmark of the Nigerian leadership. Instead of a political class that galvanises the population and resources of the country to foster a prosperous nation, what has been available are leaders who have failed to propel Nigeria to great heights.
ASCL could not have failed if there was a political class committed to the development of the country. The lack of vision and direction, as well as the lack of will to express the collective resolve of the country to develop, has been unachievable. This lack of vision is expressed in the fact that a sustainable approach to modernization would have factored the development of manpower through technical qualitative, critical and scientific education. What is obvious is that there is no culture of developing the inquisitive psyche of the populace; rather what exists is a culture to awe the citizens with grandeur projects aimed at serving as conduits for the primitive acquisition of the collective wealth of citizens.
The concessions embarked upon by the government shows that the government did not fully appreciate the potentials of the company. More so, that GIHL a company owned by an Indian who has ties to the biggest steel company Accelor Mittal should definitely know the importance of steel to modernizing a country like Nigeria. The company and its owners through the connection in high places succeeded in robbing Nigeria and the ASCL critical parts of the company. The fact that the government stood for GIHL as guarantor for various loans collected from local banks is an indication of corruption in high places. GIHL was expected to bring in foreign capital investment, not collect loans from local banks.
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Tenuche observed that generally, the concession agreement with GIHL was capable of undermining Nigeria’s quest for development. The GIHL eventually proved itself incapable of running the company.66 Again, there is an accusation by some quarters that
GIHL was given access to the ASCL through the Olusegun Obasanjo family and that that of
Senator Liyel Imoke.67 This is an indication that highly placed individuals are often willing to serve as agents to entities that seek to loot the company. Even if this is not the case, many questions beg for an answer, what is the actual aim of GIHL in its involvement in Nigeria steel industry? How did they succeed in convincing Nigeria of their capacity to run an integrated steel plant without showing any evidence of previous experience of having run steel plants? How did the GIHL succeed in holding the Nigeria steel industry to ransom, by including obnoxious clauses in the concession agreements? How did the administrators fail to see these clauses? More worrisome is the fact that recently, GIHL was given a concession of the National Iron Ore Mining Company (NIOMCO) at Itakpe. Iron ore is the most critical raw material for an integrated steel plant, why then is the government willing to part away from it?
One may not be able to respond to the questions objectively, as the activities of the government of Nigeria are shrouded in the utmost secrecy and the flow of information controlled. The impact is that rather than being armed with concrete evidence, researchers are left with scanty information which mostly sprinkles out of government officials and stakeholders, thus leading to speculations.
From the little information available,however, what is clear is that GIHL has no interest in developing the Nigerian steel industry, it is part of a larger conspiracy by highly placed individuals in Nigeria and beyond who are bent on ensuring that the ASCL does not roll out liquid steel. Finally, GIHL must have been willing to dole out bribes to highly placed government officials who ordinarily should meticulously scrutinize concession agreements,
104 making them to turn blind eyes to obnoxious clauses in the concession agreements.There were crooked clauses inserted in the agreements, some of which have already been highlighted.
Internal politicking among workers in the company has equally been a distraction.
Accusations and counter-accusations have led to the Presidency being petitioned by different workers in the company, while copies of petitions and who wrote them are not readily available to the public, it is obvious that the immediate past sole administrator Engr. Joseph
Onobore who had shown interest in continuing his position was unwilling to relinquish his post, this is having sought and received permission to continue as Sole administrator on temporary bases, despite reaching the retirement service years (having served for over 35 years). In order that he may not continue, some factions of the company petitioned the
Presidency which led to his removal in October of 2017.
Onobore, on the other hand, was unwilling to hand over to the next in line to succeed him, namely Engr. Suru, this is despite his years of experience in the company, consequently, another petition was orchestrated against Engr. Suru, the presidency in their wisdom thus appointed Engr. Abdul Akaaba as the substantive Sole Administrator. This form of politicking has been one of the banes of the company, rather than focusing on the factors that can lead to resuscitating the company; the heads are engrossed in unnecessary bickering capable of making the company stagnant.
Prospects of the Ajaokuta Steel Company
There was a technical audit carried out in 2010 when the debate on what government should do about the ASCL was ongoing, several key findings emerged from that audit. Indeed, it showed the prospects of the ASCL as well as what was needed to complete.68 Key findings from the technical audit were numerous:
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The reported noted that the Ajaokuta Steel Project was conceived and steadily developed with the vision of erecting a Metallurgical Process Plant cum Engineering
Complex. This makes it an integrated steel plant with various component units capable of functioning on their own. It has an erection base where all the steel plant equipment and facilities were sub-assembled before erecting them in the plant.
Another key finding of the audit report was that company remains the most important
(single) plant in Nigeria that is capable of generating upstream and downstream industrial and economic activities critical to the diversification of the economy of the country into an industrial one. This is because there are unique features of the company that gives it potential if well explored, namely:
i. Ajaokuta Steel Project is located on a 24,000 hectares Greenfield land mass.
The Steel Plant is built on 800 hectares of land, on three platforms dovetailing into the
bank of the River Niger.Therefore, there is vast land for expansion into the 2nd and 3rd
phases of the plant.
ii. The Metallurgical institute integrated into the project if functional is capable of
continuously training over 2000 persons annually that will serve as manpower to
the company and other Nigerian industries.
iii. If there is government will, the Ajaokuta Steel Project has an Engineering
Workshops that can provide most of the spares for the urgently needed Turn
Around Maintenance (TAM) with little import needed to supplement the TAM.69
Indeed it is in the interest of the country to have a viable steel industry, and key pointers to the viability of the company have already been noted, however, few are highlighted here: First, the imports of over 4million tons of rolled steel products and over
12million tons of other steel products at the present rate will stop, leading to savings of
106 several billion in foreign currency per annum. Nigeria’s steel production is presently estimated at about 300,000 tons per annum while her consumption as shown by recent studies is above 20 million tons per annum.70
Second, the company will aid the transportation and communication industry directly because in the area of transportation (rail) – With rail track production in ASCL, more than
$5billion imports of rail for railway expansion and maintenance will be saved per annum, while in the communication industry, communication towers (mast) can be produced in
Ajaokuta; saving the country billions of dollars, this is because Nigeria currently imports most of the mast installations.
But the overall contribution to the economy of the country if the Ajaokuta Steel
Project is completed is numerous. In Nigeria that indices of unemployment stand at a very high rate, any act of government and private sector to aid the employment capacity of the teeming youths should be embraced. The Ajaokuta Steel Company has the capacity for employment generation. This is because the company requires Over 10,000 highly trained staff in the first phase in addition to over 150,000 employment opportunities from the downstream and upstream industries that will naturally come about with the commissioning of Ajaokuta Steel Plant.71
What is obvious upon a visit to the Ajaokuta Steel Company is that notwithstanding the long years of none operation of the steel plant, the technical readiness already achieved has not diminished significantly as the preservation of equipment and facilities are constantly undertaken. This was confirmed by the Technical Audit Report of 2010. This is because
Ajaokuta Steel Plant equipment and facilities are robust, rugged and designed with 25% safety factor. Similar plants in Russia and Ukraine have been in operation for over 100 years.
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Again the argument as to the relevance of the blast furnace technology installed in the company continues to linger. Indeed the choice of technology, Blast Furnace - Basic Oxygen
Process (BF=BOF) remains the most important and widely used technology. It has a campaign period of 7 to 10 years when switched after which it will be turned off for maintenance and upgrade.72 Since its installation in the 1980s, it has not been effectively used in the steel-making process of the project. Indeed several factors make the choice of technology remain relevant till date, the BF technology remains the most applied technology
I steel making around the world, it is equally efficient and flexible in operation, it has a capacity of processing several variants of ore regardless of quality. This is the main reason why about 70% of world steel is produced using the BF technology, more so the technology is well suited for the Ajaokuta Steel Company because it is an integrated steel plant.73
There are indications that given the necessary attention, especially in terms of identifying the key partners in the Ajaokuta Steel Project and given the necessary funding, the project is feasible and viable. More so the object of the steel project in Nigeria is bigger than the immediate returns in terms of monetary value it will bring. If the object of the
Government is to look for a quick fix to the project that is capable of generating immediate returns, it will likely be a futile attempt because the steel project needs a huge investment of capital at this rate, and the gestation period for the project is estimated to be over 50 years.
However, the critical aspect of the project is its capability to have a direct contribution to the economy of the country, as well as saving the country of billions of foreign exchange used in the import of steel products. There is a huge market for the products of the steel company, within Nigeria, steel demands are at ever-increasing rate, however, the West African Sub- region which meets their steel needs by imports will potentially serve as a market for the
Nigeria steel industry.
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Notes
1Shehu Shagari Shehu Shagari: Beckoned to Serve, An Autobiography Lagos: Heinemann Educational Books (2001) p.310
2Shagari Beckoned to Serve… p.310
3D.O.N. Obikwelu and C.O. Nebo “A Critical Look at the Nigerian Steel IndustryA Dark Page on the History of Nigeria and the Metallurgical Profession.” Plenary Paper Presented at 28th Annual Conference And Annual General Meeting of the Nigerian Metallurgical Society (NMS), 2012. pp. 1-12
4 M.S. Tenuche “Foreign Direct Investments, Strategic Assists and Sustainable Development: A Critique of International Investment in Nigeria’s Steel Sector” Journal of Politics and Law Vol. 3, No. (September 2010) pp. 139-147
5Tenuche “Foreign Direct Investments…” p.141
6Tenuche “Foreign Direct Investments” p.141
7Oral Interview with Abel Ada Musa 54+ Journalist at Graphics, Lokoja on 27 August 2017; Oral Interview with Ameh Anih 57+ ASCL retiree at ASCL Camp on 19th February 2017, ASCL retiree at Oral Interview with Etudaye Ilyas ASCO retiree at ASCO Camp on 19th February 2017,
8N.E. Attah, “Ajaokuta Steel Company of Nigeria and Concession: Counting the Human Cost, 2003–2010”African Journal of Economic and Sustainable Development, 2013‘Vol. 2, No. 2, pp.157–171. 9B. Olusola, S.S. Salami and Moshood Babatunde “The Impact of Ajaokuta Iron and Steel Industry on the Okene Community of Kwara State” Unpublished B.A Thesis Submitted to Ahmadu Bello University (1983) p.17; Oral Interview with Ivaju Sani ASCL Retiree at his residence in Okene 27thAugust 2017
10 Olusola et al “The Impact of Ajaokuta…” p.17; Oral Interview with James Iyasu Retiree at his residence in Okene 27thAugust 2017
11S.M.G. “The Uprooted Emigrant: The Impact of Brain Drain, Brain Gain and Brain Circulation on Africa’s Development Okeke Toyin Falola and Niyi Afolabi (eds.) Trans- Atlantic Migration: The Paradoxes of ExileNew York: Routledge (2008) pp.119-140
12Oral Interview with Momoh Sani 52+ ASCL Worker Interviewed at Admin Building ASCL 12th March 2017
13Oral Interview with Badams Yakubu 48+ PRO ASCL at Admin Building ASCL 12th September 2017
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14Ajaokuta Steel Company Publication (PowerPoint Presentation); Badams Yakubu interview cited
15G. Kuznetsov “Economic Cooperation between Nigeria and the USSR” in A.B. Akinyemi (ed.) Economic Cooperation between Nigeria and Eastern Europe Lagos: Macmillan Nigeria (1984) pp. 128-130
16Natasha Akpoti “Time to Break the Conspiracy Concerning Ajaokuta Steel Company Limited”
17Attah “Ajaokuta Steel and Concession” p.159
18Akpoti “Time to Break…”
19 See Appendix 1
20See Appendix 2, Marietu Tenuche “Foreign Direct Investments, Strategic Assets and Sustainable Development: A Critique of International Investment in Nigeria’s Steel Sector” Journal of Law and Politics Vol. 3, No. 2 (Sept 2010) pp. 139-147
21 C.A. John “President Babangida's Structural Adjustment Programme and Inflation in Nigeria” Journal of Social Development in Africa1992 Vol. 7 Issue 1 pp. 5-24
22Oyebanji, Oyeyinka and Oluwole, Adeloye “Technological Change and Project Execution in a Developing Economy: Evolution of Ajaokuta Steel Plant in Nigeria" A Report Submitted to IDRC Communications Division Canada. April 1988 1-69.
23Oyeyinka, and, Adeloye, “Technological Change” p. 25
24Oyeyinka, and, Adeloye, “Technological Change” p. 25
25Obikwelu and Nebo “A Critical Look...”. p. 7
26O.N. Njoku Economic History 233
27 David, Aworawo. “Costly Neglect: Technology, Industrialization and the Crisis of Development in Nigeria”The Journal of International Social Research. Volume: 4 Issue: 17. (Spring 2011) pp.269-281
28Oyeyinka, and, Adeloye, “Technological Change” p.57
29Oyeyinka, and, Adeloye, “Technological Change” Execution p.57
30 Oral Interview with Hajia Abdulrahman A. 50+ Legal Unit ASCL Interviewed at ASCL Admin Building 12th March 2017
31Oyeyinka, and, Adeloye, “Technological Change”
110
32Oyeyinka, and, Adeloye, “Technological Change”
33Oral Interview with Hamzat Lawal 60+ a politician Interviewed in Abuja 29 September 2017
34I. Obaka “Ajaokuta Steel Plant as Catalyst for Growth.” Daily Sun Newspaper. Tuesday, December 25, 2012. p4
35Obaka “Catalyst for Growth...” p.4 36Attah, “Ajaokuta Steel Company and Concession...” p.169
37Attah, “Ajaokuta Steel Company and Concession...” p.169
38Akpoti “Time to Break…”
39 Attah, “Ajaokuta Steel Company and Concession...” p.169
40 Tenuche “Foreign Direct Investments…” p.141
41 N. A. Nyaberi and N. Kiriago “Effects of retrenchment on the morale and job security of surviving employees of Telkom Kenya Limited” International Journal of Academic Research in Business and Social Sciences September Vol. 3, No.9 (2013) PP. 16- 23
42 Nyaberi and Kiriago “Retrenchment...” p.17
43 Nyaberi and Kiriago “Retrenchment...” p.17
44 Tenuche “Foreign Direct Investments…” p.141Akpoti “Time to Break…”
45Attah, “Ajaokuta Steel Company and Concession...” p.158
46Nyaberi and Kiriago “Retrenchment...” p.17
47Attah, “Ajaokuta Steel Company and Concession...” p.158; Oral Interview with Paul Okpanachi 45+ ASCL Staff interviewed at ASC premises on 11th September, 2017-10-29
48Attah, “Ajaokuta Steel Company and Concession...” p.158
49Attah, “Ajaokuta Steel Company and Concession...” p.166
50Oral Interview with Badams Yakubu 48+ PRO ASCL at Admin Building ASCL 12th September 2017
51Attah, “Ajaokuta Steel Company and Concession...” p.167
52Attah, “Ajaokuta Steel Company and Concession...” p.166
53Attah, “Ajaokuta Steel Company and Concession...” p.166
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54Oral Interview with Mr Shuaibu Salawu 55+ ASCL Retiree interviewed at ASCO bump on 12thSeptember 2017
55 Shuaibu Interview cited
56Akpoti “Time to Break…”
57Akpoti “Time to Break…”
58Akpoti “Time to Break…”
59Akpoti “Time to Break…”
60Akpoti “Time to Break…”
61World Steel Association “Steel Statistical Year Book 2016”
62Samir Amin “ The Implosion of Global Capitalism: The Challenge for the Radical Left” p.14
63Amin “The Implosion...” p.13
64 Raul Caruso “The Impact of International Economic Sanctions on Trade An Empirical Analysis” Paper prepared for the European Peace Science Conference, June 1- 3 2003
65A.O. Olutayo MA.O Olutayo and A.O. Omobowale “'TINA', Aids, and the underdevelopment problem in Africa”Brazilian Journal of Political Economy, vol. 28, nº 2 (110), (April-June/2008) pp. 239- 248
66Tenuche “Foreign Direct Investments…” p.141
67Akpoti “Time to Break…”
68Ajaokuta Steel Company Publication (ASC) (PowerPoint Presentation); Badams Yakubu interview cited
69ASC
70ASC
71ASC
72ASC
73ASC
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CHAPTER FIVE
CONCLUSION AND RECOMMENDATION Conclusion Most development scholars agree that for a nation to transform from an underdeveloped economy to a developed economy with a high level of economic indicators, industrialization is at the core of such transformation.1 Nigeria’s economy is a typical example of an underdeveloped economy as her gross domestic product is characterised by a massive dependence on primary products with agriculture playing a prominent role as employer of labour. Though oil continues to account for about 85% of government revenue and foreign exchange earner, the contribution of industry to Nigeria’s economy remains abysmally low, averaging only 6% till date. Worse still is the manufacturing sub-sector which is supposed to be the fulcrum of wealth creation and economic development averaging only
4% contribution to the country’s GDP.2
Indications are that policy pronouncements and actions on industrialization since independence has failed to produce any meaningful impact on Nigeria’s industrialization.
Identified problems include policy duplicity, characterised by the repetition of earlier failed policies, starting with the ISI, which was attempted in the colonial era. What is obvious is that the national leaders have lacked the will to carry through on promises to liberate Nigeria from the shackles of wanton poverty and neo-imperialism.
There is no bigger evidence of failed industrialization efforts than the fact that there is no viable steel industry. The Nigerian energy has not been channelled to the development of steel policies that are driven by the governmentwith access to private investment. Rather what exists are conduits for colossal corruption in form of giant steel projects such as the ASCL and DSC as well as other rolling mills that do not roll steels.
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The steel industry is the very foundation of any serious attempt at industrialization.
China, India, South Korea and Brazil that transitioned from undeveloped countries to industrialized countries paid close attention to steel development from the onset. Where these countries succeeded in policies such as the ISI, Nigeria failed woefully to emulate. Where these countries created rent through their industrial policies such as huge public investments in enterprises, subsidized tariff, protective measures, and finance to the industrial sector in order to encourage private investment, Nigeria created rent to bolster patrimony, corruption, and the development of a certain class that have held the country to ransom by undermining every efforts that could have transformed the country meaningfully.
What is worse is that there is an abundance of resources to develop the steel industry.
Iron ore is in abundance at various places in the country including Itakpe which is less than
50km away from the ASCL. There is enough coal at Enugu, and the river Niger provides ample water resources. There is a vibrant population that are trainable and can adapt to new ideas. However, what is lacking is the governmental will to galvanise available resources that will translate to a viable steel industry.
Nigeria’s policies on industrialization over the years have helped undermined the possibility of a steel industry. From the ISI of the first republic to the indigenization policies of the 1970s to the SAP/export orientation industrialization in the 1980s. What is obvious is that these policies have not only been inconsistent, they have proven to be unviable, lacking foresight, thus a catastrophic failure. Worse still is that policies, as unsound as they were, were not matched with any serious attempt at proper implementation. The little effort at policy implementation was lopsided and dysfunctional. These had serious implication for the steel industry which remains undeveloped in Nigeria.
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While Shehu Shagari’s government began the construction of the ASCL, the huge dependence on external forces proved to be of serious consequences. Huge foreign debts were accumulated in the process, and the strategy proved unsustainable. The lack of consistency in policy implementation again was another bane of the company. While the
Shagari administration showed serious interest and vigorously pursued the actualization of the project, the successive governments failed to take up the initiative. Indeed, despite the company gulping a whopping sum of over $10b since the beginning of the construction in
1979, it has failed to roll liquid steel
If the steel industry has been identified as the fulcrum of industrialization, one wonders why the Nigerian leaders have failed to develop the industry. With a potential for linkages such as the provision of direct employment in the thousands, to the fact that it can propel other industries such as the coal, transport and agricultural industry since derivatives from an integrated steel company like ASCL can be converted to fertilizer. Suffice to say the government does not take industrialization seriously.
Again, the attempt to deregulate the steel industry which is at an infant stage is problematic. The government of India carefully protected the steel industry for forty years from private hands before it opened up. Why then is Nigeria in a haste to privatise ASCL?
The steel industry is capital expensive that requires long gestation periods for investments. As much as investments must be justified, profit was not the main driving force for governments like India, Brazil and Korea as they were developing their steel industry.The privatisation of the ASCL did not lead to investment from the concessionaires, SOLGAS and GIHL rather were interested in the profits to be gotten from the company than the investment they were supposed to make. Indeed GIHL having pilfered the company of important spare parts went ahead to sue Nigeria for terminating the wayward concession agreement.
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The case of Indian steel development should be understudied and adopted with variation to suit Nigeria’s steel industry. Indian steel development in the first forty years was under tight governmental control. The government took charge of licensing private investors in the steel industry, thus the industry enjoyed a favourable environment which was well protected from rent-seeking behaviours of private investors. There was hardly any competition as production, price and distribution were regulated. It was in the 1990s that the
Indian government deregulated the steel industry; this was after they had achieved a status of one of the world leading steel producers.
The foundation needed for the industrialization of Nigeria has not been well established. A highly skilled workforce trained in the educational sector with requisite experience in critical aspects of science and technology appears not to be in abundance. The few available technocrats have not been utilised by the Nigerian state. Indeed, qualitative education in Nigeria is at an all-time low, and adequate attention through policy have not been directed to education in the science and technology. It is not enough to establish universities of science and technology, the question is what is expected of the products of such universities.
The budgetary allocation to education remains paltry, surely this cannot help a nation seeking industrialization. Nigeria is not close to meeting the UNESCO threshold of 25% budgetary allocation, neither has the government even allocated up to 5% to the education sector since 1999. It may be concluded that any industrialization policy that fails to recognize the education sector as the backbone is bound to fail; industrialization cannot thrive when there is no adequate manpower that is highly trained in the several processes.
But to understand what went wrong with Ajaokuta is to attempt an inquiry into the psyche of the average Nigeria leader. As futile as such attempts may seem, some things are
116 rather obvious: the leaders of Nigeria (save for a few) are content with selfish aggrandisement, crude accumulation of the country’s wealth through dubious means with local and western connivance. They tend to forego the future for the now, thereby potentially jeopardising the future of the country. These are not baseless whining; one may question why the vast majority of the Nigerian roads remain un-tarred? Why is there no adequate electricity generation and transmission despite huge investments since independence? Why is there massive poverty despite so much wealth accruing from the oil wealth since the 1970s? One may not be able to readily answer these questions, but they can be discerned by examining the character of Nigerian leaders from the local, state to the federal level. What is clear is that there has been a governmental failure since independence. Succeeding administrations in
Nigeria tend to outdo the other in terms of failure.
Nigeria appears to have an unbreakable bond with corruption. In fact, there is a feeling that to end corruption in Nigeria, there must be an apocalyptic disaster that can wipe off the present generation in order to produce a fertile ground for a corrupt free society.
Colossal corruption in high places has eaten up much of the about 10 billion dollars that have been invested in ASCL since 1979. ASCL remains a conduit for laundering funds through unrealistic budgetary allocations, dubious privatisation and sheer recklessness. As stated earlier the excess crude fund amounting to over 12 billion naira earmarked for the project
(and two other projects), was pilfered by the Babangida administration. Again in March 2010,
FGN having made an allocation amounting to about N 1 billion, the federal ministry of mines and steel rejected the approval of the fund for the ASCL arguing that it was being managed by an Interim Management Committee (IMC) which the ministry was not in support of.
Again the whereabouts of the money remains unknown as it was neither given to the management of ASCL nor returned to FGN.
117
The Nigerian Society of Engineers, Nigerian Metallurgical society and other professional stakeholders in the Nigerian industrial sector have made a good case of canvassing for the return of the Russian experts that developed the ASCL to the current level.
Their case is arguably strong given that the Russians were successfully involved in the development of the steel industries of countries like India, Egypt, and China. TPE particularly was very much involved in the successful development of the Indian steel industry. Thus, the agitation for the company’s return is based on sound argument supported by facts.
There is a fear that the world is leaving Nigeria far behind, as technologygy is approaching an age when the economy of the climate is dominating the discourse. Indeed, some countries are already seeingking an eco-friendly solution to their steel production, while
Nigeria is rambling about a technology that was fixed in the 1980s. Suffice to say, the BF technology remains the dominant method of steel production the world over.
ASCL needs only one ingredient to function, namely governmental will, backed up with proactive measures to resuscitate and make the company functional for the country. Any other thing that will be done about the company can only be predicated upon governmental will. Privatisation should be done away with, as it has been an exercise in futility.
Recommendation
The study examined Ajaokuta Steel Company Limited from 1979 to 2007. The study observed several issues that have led to the company’s inability to produce liquid steel, which was the main aim of establishing the company. Based on the findings of the study, the following recommendations are made:
First, the government must locate the centrality of the steel industry, and allocate the seriousness which it deserves to it if any policy on industrialization must succeed. There is no
118 excuse for Nigeria not have a viable steel industry as the majority of the resources required for the industry such as coal, iron ore, water and manpower are available in the country if properly harnessed.
Second, the FGN must disembark from the unsustainable efforts to privatise the steel industry generally and the ASCL particularly as such efforts have failed so far. The government should rather summon the political will backed up by patriotic zeal to see Nigeria industrialise by redirecting her efforts to rejuvenate the ASCL with the honest involvement of the TPE to oversee the completion of the company. TPE should be offered the chance to complete the project, train manpower over a certain period of time (experts suggest 20 to 50 years). This will ensure smooth inclusion of Nigerians in the process of steel production that has a long run impact of technological transfer.
Third, any meaningful attempt at ensuring ASCL functions must be backed up with a will to root out the foundations of corruption that have plagued the company since its inception. Funds must be allocated transparently and accounted for adequately. Failure to disclose allocated funds publicly will only promote the looting of funds by parties involved in the company.
Fourth, the government must learn to divest political interests from the company. The continuous interference of the government in purely techno-managerial issues have always hurt the company. This has ensured that professionals are sideline from the company while mediocre have been installed as heads of the company. Technology is too specialised, thus specialised manpower is required. Thus competent people with particular knowledge in metallurgy and specific technological requirements should be given the chance to engage in the running of the company. The hiring or firing of managers and administrators of the company through patrimony (ethnicity or political loyalty) must be stopped. The key
119 positions in the company should be advertised globally in order to attract the most capable hands in the running of the company.
Fifth, there is no shortcut to technological development. Therefore as much as technology transfer is being sought, the most sustainable technological attainment is directed the policy of manpower development for the technological industry. The Institute of
Metallurgical development located in the ASCL must be reawakened with vigour to train manpower for the steel industry generally and the ASCL particularly. This centre which has the capacity of training 2000 individuals for the steel industry is very vital for the resuscitation of the ASCL. More so, theMetallurgical training centre in Onitsha must be repositioned to function adequately, while other similar centres should be established. This will reduce Nigeria’s technological dependency which has been a major bane of the steel sector. Indeed, rapid and sustained investment in education is crucial to the sustainable industrial development
Finally, the fight against corruption must be strengthened and extended to the steel industry. The current economic environment in which anything goes is unsustainable. The country cannot keep up with the present state of affairs in which there is external dependency through the import of steel and other industrial products that could be produced the country.
The government should take the driving seat of policy formulation and implementation in the industrial development of Nigeria. The idea that privatisation is the solution to all problems in the country further heightens the source of Nigeria’s dependency. The country must look at homegrown solutions to her problem, not foreign direct policies that have furthered Nigeria’s development issues.
120
Notes
1G., Akop, “Development, Globalisation and the Dependency Theory in South Caucasia”World Affairs: The Journal of International Issues Volume: 19, Issue : 3 ( 2015) 108-117; U.N. Anyanwu, A.U. Kalu and B. K. Obioma “The Effect of Industrial Development on Economic Growth (An Empirical Evidence in Nigeria 1973-2013)” European Journal of Business and Social Sciences, Vol. 4, No. 02, (May 2015) 127-140; J. Rapley Understanding Developments: Theory and Practice in the Third World, 3rd Edition Boulder: Lynne Rienner Publishers (2007) p.1
2Ministry of Trade and Industry, National Industrial Revolution Plan (NIRP)(2014)
121
SOURCES AND BIBLIOGRAPHY A) PRIMARY SOURCES Oral Data
Name Age Occupation Mode of Place of Date of interview interview interview
Abel Ada Musa 54+ Journalist Oral Lokoja 27 August 2017
Adejoh Momoh Enejo 40+ ASC Staff Oral Ajaokuta 13th Sept. 2017
Ameh Anih 54 ASC Retiree Oral Ajaokuta 12th Sept. 2017
Badams Yakubu 45+ PRO ASC Oral Ajaokuta 12th Sept. 2017
Etudaye Ilyas 50+ ASC Retiree Oral Ajaokuta 19th Feb. 2017
Hajia Abdulrahman 50+ Legal Staff Oral Ajaokuta 12th March 2017
Hamzat Lawal 60+ Politician Oral Abuja 29 Sept. 2017
Ivaju Sani 60+ ASC retiree Oral Okene 27th August 2017
James Iyasu 55+ ASC Retiree Oral Okene 27thAug. 2017
Momoh Sani 52+ ASC Staff Oral Ajaokuta 12th March 2017
Ozavize Ige 40+ ASC Oral Ajaokuta 13th Sept. 2017
Paul Okpanachi 45+ ASC Staff Oral Ajaokuta 11th Sept. 2017
Shuaibu Salawu 55+ ASC Retiree Oral Ajaokuta 12th Sept. 2017
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That the FGN and ASCL have together executed a joint venture partnership to undertake the rehabilitation, completion, commissioning and operation of Ajaokuta Steel Project (ASCL). Under the said agreement, the FGN/ASCL has granted to SOLGAS the authority to undertake the management and constitute the Board of ASSCL for the purposes of financing and executing the various projects specified in the agreement 2. By the terms of the agreement, SOLGAS shall provide 100% of the financing required for the projects specified in the agreement and the FGN’s share of the fast melt project. 3. The parties also agreed to keep strictly secret and confidential and not to disclose to any third party or to use any valuable an proprietary information acquired from any of the other parties hereto, pursuant to the agreement, except to the extent that disclosure or use of such information is expressly permitted or provided for by the agreement or the project agreements. 4. The parties mutually acknowledge that all formula, drawings, specifications, business plans, manufacturing processes, products, customer lists, price lists employed both at present and as developed for executing any project specified under this agreement are trade secrets and confidential information of this agreement. 5. Any dispute, controversy or claim arising out of, connected with or relating to the agreement which cannot be settled by mutual agreement between the parties within thirty (30) days shall at the request of either party be referred to arbitration in 131 accordance to the rules of the International Chambers of Commerce (ICC). The venue for arbitration proceedings under this agreement shall be London, England. 6. All funds owed SOLGAS, the said funds being principal and interest therein for the purpose of financing the execution of any project in accordance with the terms of the agreement, shall become due and payable by the FGN or constitute a first charge upon the proceeds of privatization in the event of the sooner privatization of ASCL than the tenure granted in the agreement. 7. The Federal Government of Nigeria is to guarantee unhindered access to repatriate profits accruing to SOLGAS and provide security for SOLGAS to operate. 132 APPENDIX 2 Excerpts from Concession Agreement between (1) Federal Government of Nigeria (2) Ajaokuta Steel Company Ltd and (1) Global Infrastructure (Nigeria) Limited (2) Global Infrastructure Holdings Limited (2003) • The FGN and ASCL have agreed to grant a Global concession pursuant to the terms and conditions of this Agreement for inter alia, the rehabilitation, completion, commissioning and operation of the ASP to achieve 1.3 million t/y of production of steel and its by-products including the commissioning of the 10mw. TPP and subsequent direction, management, operation, maintenance and control thereof and the exportation and sale of the steel products therefrom. • The concession includes the terms and provisions without limitation, set out in the schedule hereto, to return and transfer possession and control of the said project to FGN/ASCL in accordance with the terms and conditions of this Agreement. “Management” under the agreement shall mean the management of ASCL and shall include full responsibility for all technical, commercial and financial operations of ASCL directly within the ASP project. • Global shall have the right to introduce and implement a management structure and salary schedule which is independent of the structure operated by government for the departments and personnel employed for the ASP project. • Global shall have the exclusive right and authority to appoint suitably qualified and experienced personnel to fill management, technical and other staff positions in ASCL provided that Global shall in selecting the staff favourably consider existing staff of ASCL, subject to the qualification, knowledge, skills, experience and personal merit of such staff. • Global shall only finance the balance of the works and supplies necessary to achieve the purpose of this agreement in respect of the ASP project and shall not extend to or 133 include any existing debts, obligations, bills or accruals relative to the ASP or any part thereof before the effective date. • The FGN/ASCL, shall be under obligation to: Take all steps, perform all such acts and comply with all conditions necessary and required to put Global ineffective and actual control (as required by Global) of the management of ASCL and give unfettered or unencumbered possession of ASP to Global in accordance with this Agreement and enable Global to beneficially implement the ASP project and the concession. • Put in place such fiscal policies and incentives as will be favourable to the local production of steel and its by-products and enhance the ability of Global, under the ASP project, to compete in the global market made by Global enjoying all benefits available under Nigerian law including but not limited to pioneer status. • Be responsible for facilitating all necessary possible exemptions from fiscal charges required to enhance the profitability of the ASP project including but not limited to import and export duty waiver for equipment, spares and parts (save for the existing rate of import duty for billets and raw material(s). • Be responsible for ensuring domestic market protection based on Federal Government policies to facilitate the early achievement of stability for the ASP project. • Provide reasonable security for all ASCL and Global operations referable to the ASP project. • At the request of Global, to make its best efforts to assist Global to repatriate all earned profit within a reasonable time in accordance with the laws of Nigeria. • Not restrict, hinder or prevent Global (or any of its employees, advisors or subcontractors) in any manner or at any time from beneficially implementing the ASP project and/or the concession. 134 • FGN and ASCL shall provide full and complete access to ASCL’s books, records and accounts and all title documents regarding the ASP and fully cooperate with Global nominated financiers. • Ensure that neither FGN nor any competent authority in Nigeria or any part thereof will, directly or indirectly, levy or impose on Global, and each such company shall be exempt from any power duty or other fiscal charge or the economic burden thereof, being a fiscal charge arising out of the generation and/or consumption of power and energy made available from the 110 MW TPP, provided that such power and energy is consumed within the plant and the township. • Permit the exportation of all products of any kind produced under or from the ASP project from time to time, subject to applicable laws. • FGN shall ensure that Global enjoys all the concessions and incentives for new investors, including pioneer status, on fiscal charges on export but Global will endeavour to first meet the local market demand to the extent that this would be commercially viable for Global. • Agree to facilitate entry and exit, re-entry into and re-exit, throughout, from Nigeria or any part therefore of the directors, employees, officers and shareholders and agents of Global and/or their contractors, together with their respective families and dependants for or n connection with the ASP project. • Global shall, subject to applicable laws, have the right, for purposes connected with or in relation to the ASP project, to provide and operate its own telegraph, telephone and facsimile transmission system (and other systems) whether operated by radio or otherwise. 135 • Global is free, to use any ship or vessel of any nationality for the transportation of materials, machinery, equipment and products and to receive the same in ships or vessels of any nationality, subject to applicable laws. • To the fullest extent permitted by law, the FGN shall facilitate so that neither Global nor their agents be required to withhold or account for payment of any tax or any fiscal charge in respect of the profits, earnings or dividends or the distribution thereof. • FGN undertakes that Global shall not be restricted or prevented by FGN to any manner from borrowing or repaying with or without interest any loan (whether in foreign currency or not) in connection with the ASP project and (ii) the payment of interest and repayment of principal to any person not ordinarily resident in Nigeria on loans made to Global or promissory notes issued in respect of the loan agreements in connection with the ASP project shall not be subject to any fiscal charge and Global shall not be required to deduct or account for the payment of tax in respect of such payments of interests and repayments of principal. • FGN undertakes, for the period beginning on the date hereof and ending on the date of expiry of this Agreement, not to expropriate, nationalise or intervene in or permit or cause the expropriation of, nationalisation of, or intervention in, any property, right or interest whatsoever of Global (including but not limited to, its rights under the ASP Agreement or hereunder or any share in or Security of Global and./or held by any persons. • FGN shall provide assurances satisfactory to Global regarding the supply of power in priority and of natural gas, raw materials and water at competitive and reasonable rates/tariffs for the beneficialoperation of the ASP project. 136 • FGN recognizes the importance that Global places concerning a reliable and uninterrupted source of supply at pricing which is economic for Global of iron ore, limestone, dolomite and clay, without which the ASP project cannot be implemented. • In that connection, FGN shall do everything within its power and control to facilitate the prompt grant the Global (or its nominee) separate mining concessions as may be required by Global for satisfactory operation of the concession. • FGN further recognizes the importance to Global of, and its interest in, supply and control over the supply of natural/associated gas and in Global (or as it directs) establishing gasification/gas processing plant and using and/or selling the resultant products there. In the light of this FGN shall facilitate Global (or as it directs) being permitted to establish such plant and operating with a firmly committed source of supply delivery of the gas to such plant for a minimum tariff of twenty years at a fair and reasonable price to be agreed upon. • All taxes, step duties, dues, filing fees, other fees, levies, customs or other charges levied in the Federal Republic of Nigeria in connection with the perfection of this Agreement shall be borne and paid for, by the FGN or a special waiver for such charges shall be procured and granted by the FGN • This Agreement shall come into effect immediately upon the execution of the Agreement and shall endure for ten (10) years, commencing from the effective date, provided that such term shall be extended at the request of Global by the aggregate period during which force-majeure circumstances have arisen under this Agreement. • The parties shall agree on an extension of the tenure of this Agreement, on terms and conditions to be agreed upon on a fair and reasonable basis, if Global has not recouped all its investments at the expiration of the first ten (10) years. 137 • Thereafter Global shall have the first and last right of refusal on a fair and bonafide basis for a concession and agreement thereafter for the operation of the ASP project assets. That it is expressly agreed between the parties that Global shall continue in possession of the ASP for the period of this Agreement, and • FGN shall not take any action that might have the effect of derogating from this great concession (Section 12.). • The venue for arbitration proceedings under this Agreement shall be London, England. 138