Russia may give a new lease of life to Nigeria’s biggest steel plant after decades of inactivity, the West African nation’s mines minister said.
Construction of Ajaokuta Steel Co. began in 1979 with assistance from the then-Soviet Union, but the facility never started production and has sucked up $8 billion of public money. Repeated attempts to revive the flagship project by transferring it to private investors failed and the government terminated the concessions.
Now, Russian engineering and construction group MetProm will undertake the necessary work to bring the facility into operation, financed by the state-owned Russian Export Center JSC and the Cairo-based African Export-Import Bank, Mines & Steel Development Minister Olamilekan Adegbite said in an interview.
Ajaokuta’s output would go some way to realizing President Muhammadu Buhari’s plans to diversify the economy away from oil and encourage local production. Africa’s biggest producer of crude gets 90% of its export earnings from the commodity. Ajaokuta was designed to produce as much as 3 million metric tons of steel a year, and would have largely eliminated the need for imports.
“We’ve come to the realization that it’s best to go back to those guys who did it initially,” Adegbite said in the capital, Abuja. Earlier talks on the plant were sealed when Buhari and his Russian counterpart Vladimir Putin struck a government-to-government agreement last week at the Russia-Africa summit in Sochi, Adegbite said.
Adegbite didn’t provide more details about the financing. “We are going to sign the details later,” he said. MetProm will complete, operate and eventually transfer the plant back to the Nigerian government after “training our engineers to take over.”
The two governments plan to conclude the deal by January, after which it should take a maximum of two years to complete the blast furnace, the key component of the facility that will turn domestic iron ore into liquid steel, Adegbite said. While that work takes place, they are considering whether to “kick-start” some of Ajaokuta’s smaller manufacturing units using imported steel billets, he said.
“The Russian Export Center and the African Export-Import Bank are considering taking part in financing Ajaokuta,” the Moscow-based development institution said in an emailed response to queries, declining to elaborate further.
In April, Buhari refused to disburse $1 billion from the state’s oil savings, as voted for by lawmakers, to complete Ajaokuta. “No public funds is his priority,” Adegbite said. “As for the exact method of solving the problem, that was left open.”
Boosting steel-making and mineral production feature prominently in Buhari’s plans to diversify Nigeria’s economy and Adegbite is aiming for mining to contribute 3% of the country’s GDP by 2025. While Nigeria has sizable untapped deposits of commodities including iron ore, gold, zinc and lead, the nation doesn’t have any large-scale industrial metal production and the sector accounts for less than 0.1% of GDP.
.Bloomberg
