The push on the government to revamp the country’s moribund steel industry is gathering support from key stakeholders who see the sector as critical to achieving Nigeria’s plan to diversify the economy and boost economic growth.
For, the government has also realised that the over-dependence on oil is risky, especially when the country is import-dependent.
The need to revamp the steel sector is now more compelling as the global oil price continues to drop. Oil producing nations, especially those whose economies depend so much on oil export as major income earner as Nigeria, are now critically looking inwards to boost the non-oil sector by mobilising resources to grow key areas like agriculture, mining, small and medium businesses, steel and energy sectors.
The steel industry is a very important sector in the nation’s economy. Or it should be but it is not. The industry produces items such as iron rods, steel, barb wires, coils as well as metal doors and windows. As an industry, it is the bedrock of any country’s industrialisation framework.
The sector also provides employment to a good number of Nigerians particularly in steel rolling companies which produce steel materials.
Over the years, the steel industry has been facing some harrowing experiences which inhibit its growth and analysts insist that pragmatic efforts must be made to address the challenges and save the sector from total collapse.
These problems include erratic power supply and excessive importation of iron and steel products.
At a session in Lagos, the CEO, Steel Business, African Industries Group, Sanjay Kumar noted that the steel industry was on the verge of total collapse just like what happened to the textiles industry.
He said government must urgently come to the rescue of the sector noting that the sector would require about N60 billion bailout.
“Today, there are over 30 private steel plants, producing various steel products in Nigeria. This sector has invested over N100 billion into the Nigeria economy since inception. Our group (Africa Industries) alone has invested well over N20 billion in Nigeria.
“Already, about four steel plants have completely shut down and more will follow soon because many are currently operating below 30 per cent of production capacity. Most of these steel plants are now operating two weeks a month and are closed for the remaining two weeks of the month due to lack of demand,” he disclosed.
He noted that steel consumption was largely driven by government initiative on infrastructure projects and for the government to rescue the sector, it will have to make a definite policy on the need to patronize made-in-Nigeria steel products.
Also speaking at the forum, Director-General, Manufacturers Association of Nigeria (MAN), Mr Remi Ogunmenfun, commended the African Industries Group for bringing the stakeholders together, noting that the industry had critical problems which they must continue to highlight to get the attention of the government.
According to him, “Nigerian products are of good quality and it can stand anywhere in the world; for every product that is brought into Nigeria, we are exporting Nigerian jobs,” he said.
He condemned the complete neglect of the involvement of the players in the steel sector in the formulation of the Nigeria industry policy, saying, “Government should create policies that will encourage diversification.
“All over the world, due to the importance of steel in the development of the economy, the views and opinions of the key players from steel industry are usually sought and obtained by the government in the formulation of economic policies as being done for the oil or financial sectors. Unfortunately in Nigeria, the steel sector has been left out all these years.”
The Group Executive Director, African Industries, Mr Uche Iwuamadi also highlighted areas that needed intervention by the government to include, creating a local content policy of using made in Nigeria iron rods in all small and big government projects; prevention of the dumping of steel products in the country; construction of roads linking manufacturing sites; creating a special power tariff for the steel industry; make available an intervention fund at low interest to prevent the immediate collapse of this private steel industry where many are operating below 30 per cent capacity and over-burdened with high interest costs; while waivers/concession may not stop completely for certain infrastructural development, the portion of iron rod importation in any waiver should be expunged; curtailing of multiple taxation imposed by the Federal, state and local government agencies; review of the high cost of gas: the cost of gas in Nigeria is US$7.31/mmbtu as against US$4.2/mmbtu in USA.”
On his company’s contribution to the economic growth of Nigeria, Mr Sanjay Kumar explained, “With the investment of over N20 billion in steel plants, African Industries Group has generated employment for well over 7,000 people and is supporting livelihoods of over 100,000 Nigerians.
“It has helped conserve precious foreign exchange by way of import substitution. It has contributed significantly to government revenue through various taxes. We are actively involved in various corporate social responsibilities and also engaged in increase of skill acquisition and training of Nigeria youths.
“African Foundries (AFL), the flagship company of African Industries Group is the only steel plant in Nigeria that is ISO 9001, ISO 14001 and OHSAS18001 compliant. Also, it is one of the few steel companies in Nigeria producing iron rods that meet (BS 4449-2005 Grade B500B).
“It has capacity to produce 0.5 million tons of BS 4449-2005 Grade B500B iron rods. AFL has international standard testing laboratory, equipped to mechanical and chemical properties of iron rods and automatically tests its geometry in European steel plants.”
On his part, Mr Bede Obayi, Director, Inspectorate and Compliance, Standard Organisation of Nigeria (SON), commended African Industries saying, “Steel produced by the company in Nigeria can compete at international standard because they comply with SON-prescribed standard.”
He noted that the key issue in the industry was that of proper identification and quality, adding that the steel specification mainly produced in Nigeria is the reinforcement bar.
Obayi also encouraged the manufacturers about the need to diversify into other specifications.
Similarly, Oseme Ohighiagbe, Chairman, Automobile and Allied Products Trade Group of the Lagos Chamber of Commerce and Industry (LCCI) said steel remains the single veritable product that drives industrialisation because of its numerous impacts in engineering, both infrastructure, communication and all forms of engineering that develop advance technology.
The Federal Government in recognition of the role steel plays in building a virile industrial sector, initiated the Nigeria Industrial Revolution Plan (NIRP) as part of government intervention, which industry observers say, is beginning to achieve the desired result.
This is exemplified by the recent commissioning of a N60 billion integrated steel mill, built by the Standard Metallurgical Company (SMC) in Shagamu, Ogun State.
The then Minister of Industry, Trade and Investment, Mr. Olusegun Aganga, who commissioned the mill, said government was committed to repositioning the steel sector to access a substantial share of the global wealth, estimated at $10 trillion.
With the implementation of the right sectoral policies under the Nigeria Industrial Revolution Plan (NIRP), the number of functioning steel rolling mills in Nigeria has increased to about 30 currently, from less than five a few years ago.
The initiative launched in 2014 is seen in economy circles as the most ambitious industrialisation programme ever pursued in the country.
Shortly before the government intervention, many of the existing companies were operating below 30 per cent of installed production capacity.
The initiative was designed to accelerate growth in those industries where Nigeria has comparative and competitive advantages like oil and gas, steel, light manufacturing, solid mineral and construction, among others.
Experts consider the move, which has generous tax concessions, cheap funding, through long term bank loans and single-digit lending rates from Bank of Industry as a move with genuine renewed commitment to industrialisation.
Before now, there were less than five functioning steel rolling mills with no cold rolled steel mill. But with the NIRP initiative, there are more than 15 functioning steel rolling mills, producing reinforced bars; about three functioning cold rolled steel mills producing cold rolled flat sheets; and about three producing wire coils.
According to Ohighiagbe, steel is at the heart of any country’s economic development and is one of the most important materials widely used for both domestic and industrial purposes throughout the world; hence the priority given to the sector in the NIRP.
He notes that a vibrant steel sector contributes to the growth of the gross domestic product and exploitation of Nigeria’s abundant natural resources as it generates economic activities in downstream industries, creates job opportunities and acquisition of technical skills, and helps in the transfer of technology and provision of machine parts and tools.
Prior to this policy intervention, Nigeria had automobile assembly plants from before independence, producing cars, trucks and buses.
But by the 1980s the sector plunged into difficulties owing to the Structural Adjustment Programme (SAP) which curtailed consumers’ purchasing power and made many Nigerians to settle for imported, fairly used vehicles.
However, due to positive policy shift, the sector has attracted over six international car manufacturers.
“We as a country should be at a position of comparative and competitive advantage in using steel to propel our industrial policy and plan.
“For us in the automobile industry, steel cannot be negotiable, about 35-40 per cent of vehicles are made of steel as at today, which means that steel is a major component. Either from the flagship point of view, there is a linkage directly in the two sectors,” Ohighiagbe said.
Speaking further, he said, “We have about 20,000 parts in a vehicle and half of it is from steel in most of the components, even from configuration.”
The steel sub-sector of the economy has attracted over N100 billion investments in recent years. But experts say the industry despite government’s promise to boost the sector is still facing various challenges and would need about N60 billion bailout.
Ohighiagbe said the country is hugely blessed with iron ore, but government should move in the direction of processing the resource to develop steel as flagship which is a major component in the automobile industry.
The government of the day is not oblivious of the huge revenue it can accrue from the steel industry. Minister of Solid Minerals, Dr Kayode Fayemi, recently assured that the federal government would revive the Itakpe National Iron Ore Mining Company and the Ajaokuta Steel Company to boost the nation’s economy.
Fayemi, who gave the assurance after a tour of plants at the two companies, said that President Muhammadu Buhari was committed to harnessing the nation’s solid mineral potentials.
He said he was at the companies on a mission to ascertain the situation to fashion out the way forward to revamp the plants for better productivity.
The minister expressed concern over the condition of the companies and declared the determination of the present administration to address the challenges.
In spite of the minister’s assurances, only time will tell if the present administration will find the political will and provide the required funding, issues the management of the two companies have identified as the major impediments to the progress of the companies.
-Leadership