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INVESTIGATION: The real reasons Itakpe and Ajaokuta steel companies are lying fallow
For eight years, the National Iron Ore Mining Company (NIOCOM) and Ajaokuta Steel Complex were under lock and keys. No mining and steel production took place, as the two parties — Nigerian Government and an Indian steel firm, Global Steel Holding Limited (GSHL) — were engaged in legal battle over a terminated concession agreement. But the signing of a modified agreement in August 2016 brought fresh hopes that trouble was over. Over a year after, not much has been done, YEKEEN AKINWALE reports.
Each time Raju Pandih (not real name) passes through the main gate of the decrepit National Iron Ore Mining Company (NIOCOM), Itakpe, he sees the ruins of the Nigeria’s multibillion-naira project and he feels sorry for the ‘Giant of Africa’.
Nigeria is believed to possess the 12th largest iron ore deposit in the world and the second largest in Africa. But this is yet to be put into best use — the country has recorded more losses than gains from the natural resources.
In nine years, N23 trillion worth of steel products were imported into Nigeria, according to Isah Onobere, a former Sole Administrator of Ajaokuta Steel Plant.
Pandih, an Indian who worked in the iron ore mining company that has been in limbo all these nine years after a concession agreement went awry, is bemused by the level of damage and wastage at the plant.
“Nothing is running in this country. Government is simply paying people; the work is not moving. People just collect salary and go home,” he said.
“There is no discipline here. It is so sad to think about it. With my experience, if you kill the steel plant, you kill employment, you kill GDP; you kill everything. You kill the intellectuality of the country,” says Pandih, who has more than 27 years’ experience in steel production and has worked for about 10 steel companies in India and Nigeria, including Global Steel Holding Limited (GSHL).
An intractable legal battle between the Government of Nigeria and GSHL has inflicted untold damage on the iron ore mining company, established in 1993 to supply raw material — iron ore — to Ajaokuta and Delta steel companies.
In 2008, late Musa Umar Yar’Adua, former President, terminated a concession agreement between the government and the steel firm that saw the Indian company run the country’s three steel plants: NIOMCO, Ajaokuta Steel Company and Delta Steel Company Limited.
Yar’Adua’s predecessor, Olusegun Obasanjo, signed the concession agreement, which was believed to be shrouded in secrecy and skewed in favour of the concessionaire.
But his decision to terminate the deal was thought to be hasty by some stakeholders in the steel sector who felt government could have waited to review the agreement.
Among other reasons, government accused Global Infrastructure Holding Limited of assets stripping and cannibalism. The botched agreement allowed the company to manage Itakpe iron ore mining plant and Ajaokuta for 10 years, but it had only done so for just three years when the deal was terminated.
So, between 2008 and 2016, Nigeria and the GSHL were in and out of International Court of Justice at The Hague and the International Arbitration Court in London. This is the real reason Itakpe and Ajaokuta have been grounded for those years.
In August 2016, Kayode Fayemi, Minister of Mines and Steel Development, said Nigeria and the company had agreed on an out-of-court settlement of the matter. This, he explained, allowed the two parties to sign a modified agreement.
“Ajaokuta was concessioned out to private investor, but that didn’t work out well.” he was quoted as saying.
“A government came and revoked the concession, which landed government of Nigeria in London Court of International Arbitration. We have now resolved that mediation.”
The modified agreement, the Minister said, allows the concessionaire to take back the National Iron Ore Mining Company, Itakpe, and manage it for the next seven years as the balance of the 10 years initially contained in the terminated contract.
This looks like a new lease of life for the iron ore mining company, but it is nonetheless wishful thinking to believe that the plant is still intact, as it was in 2005 when it was stopped from working after the termination of the concession agreement.
The Indian company is already preparing to take over the plant to commence operations, although the plant is in need of some rehabilitation.
A DILAPIDATED IRON ORE MINING COMPANY AND BRAIN DRAINED WORKERS
The sight of the wreckage of the plant with webs of machines and other equipment overgrown by bushes means that Nigeria’s dream of joining the league of manufacturing countries such as India, USA, China and Japan has remained a mirage for years.
Each day, a handful of the staff come around, sign their attendance register and sit in clusters for some idle chat, while some simply take a nap under trees or inside the broke- down units within the plant. They close for work when workers at other government ministries and agencies close for the day.
Between 2010 and 2017, the Federal Government, according to the Budget Office of the Federation, budgeted N13.1billion for the company, out of which N12.4billion was paid as salary.
“That’s a ritual we have been doing since this place stopped working,” says one of the workers, who declines to be identified because he is not allowed to talk to press.
The extent of damage done to the company by years of neglect occasioned by the nine years of litigation is beyond description. Its staff strength has dropped from over 3,000 to less than a thousand — some have retired, some have died, others have sought greener pasture elsewhere. Only a few of them still come around to carry out maintenance work. The workers, according to one of them, are “experiencing brain drain now”.
“All of us here are losing technically. We have experts here but now the brain is draining”, says a Metallurgical Institute of Nigeria, Onitsha-trained technical staff.
“If this plant must work, there must be an overhaul of its major components”, says another mechanical staff at the plant who has worked there since inception in 1992 but does not want to be named for fear of a sanction.
Sweating profusely under the intense temperature of Itakpe while carrying out a repair work on a section of the plant known as cyclone alongside three of his colleagues, the elderly staff exudes confidence that the plant can still work.
“It has worked before and it can still work. We stopped all the engines from working when the crisis started,” he says, trying to unlock a bolt in one of the valves.
“Every aspect of this plant needs to be repaired; the automation, that is the automatic part of the plant, is vandalized; the primary crusher, which is the heart of the plant, is grounded. It needs replacement. If you are going to put it (iron ore plant) back in shape, we need a lot of spare parts. Screens and reclaimers, which are other important aspects of the plants, are also damaged.”
Ebhaleme Pius, a staff of GSHL who is supervising the servicing and maintenance work at the plant, confirms that the extent of damage at the ore mining company is deep. “But if the spare parts are available they can be replaced,” he adds.
According to him, it will take up to two months or more to fix the moribund plant once the Indian firm takes charge fully.
The conveyor belt that runs through the large expanse of land across the plant like a rat track, Pius says, is obsolete and has to be replaced. The vandalized electrical cable will have to be replaced, too.
This is besides the rail track that ought to connect the plant to Delta Steel Company. which is still uncompleted. Across the plant are abandoned loads of concentrate (iron ore) on the rail track. “They have been there since 2008,” the mechanical staff says.
The magnitude of the damage and rot at NIOCOM is probably not known to Nigerians, key stakeholders and perhaps President Muhammadu Buhari — nobody wants to talk about it.
Both the Federal Government and the concessionaire have taken independent audits of the plant. The results of the audit are still being kept to their chests.
The public relies largely on the information provided by the Minister of Steel Development and Mines that the litigation had been finally and amicably settled.
ITAKPE AND AJAOKUTA …STILL HAUNTED BY SPIRIT OF UNFULFILLED AGREEMENT
On the surface, the Nigerian government and the concessionaire seem to have no have qualms about the provision of the modified concession agreement, believed to be vastly superior to the original NIOMCO concession agreement of 2005.
By this modified agreement, the government has agreed to allow GSHL run the iron ore mining plant for another seven years.
Some components of the agreement, ICIR gathered, have been fulfilled — the concessionaire as requested by the document has taken stock of the iron ore mining plant; it has conducted an audit and also has submitted a business plan for the plant to the Federal Government for consideration and approval. The Federal Government has equally audited the Itakpe plant and is contracting an independent audit firm to compare the two audit reports.
Yinka Oyebode, Special Assistant to the Minister of Mine and Steel Development, says the government is working on the implementation of the agreement, though it is over a year that it was signed.
While he wouldn’t agree that the takeoff of NIOCOM by GSHL is being delayed unnecessarily since August 2, 2016 when the two parties put pen to paper, he says “administrative procedure” is being followed by the government to ensure that the right things are done.
Oyebode believes it is wrong to say nothing is happening.
“There are so many things that are supposed to be put in place by both parties,” he says. “These are things that you cannot rush. When people say nothing has happened there, it is not something that you can just rush into; there are procedures.”
However, checks by ICIR reveal that there are still grey areas slowing down the implementation of the modified agreement.
This is the reason the investor is yet to take over NIOMCO for operation. The rehabilitation work that is expected to be undertaken by the Indian firm was yet to commence as of the time of this visit in December 2017.
The contentious issues seem to be three: In the new deal, the railway concession agreement, which is also for the Indian firm was supposed to be revalidated. The company also demands a port for operation between Itakpe, Ajaokuta, which the Federal Government insists must be bid for openly. And above all, GSHL wants the Government to return the Delta Steel Company to it.
Delta Steel Company Limited, Aladja, Delta is already concessioned to Premium Mines and Steel Company, another Indian firm. So, to grant this request, particularly returning Delta Steel Company, is a Herculean task for the Federal Government, as Oyebode says “you cannot give out what you don’t have”.
Delta Steel is not in the hands of Federal Government any longer. “I don’t know how government is going to reconcile the issue of Aladja, because you cannot give what you don’t have,” he says.
“Aladja Steel Company, as we talk today, is not in government’s hand. If someone is asking for it, maybe he has to negotiate with the owner. Construction of the railway is not part of the agreement; it’s the task of Ministry of Transportation. The original agreement does not incorporate that; it is the government that will do that.”
When asked if that will not impede the implementation of the modified agreement, he says: “I don’t think it has anything to do with it because if you are asking for what is not mine, you cannot get it. For instance, this is my laptop, if you are asking for my neighbour’s laptop, how am I going to give it to you? Is it not appropriate that you approach my neighbour?
“As I’m talking to you, technically and factually, Aladja Steel Company is not one of the assets of the Federal Government and so if they are asking for it, I don’t know about it. I don’t work for Global Steel, then I don’t know what government is going to do about it because you are asking for what government cannot do.”
On whether the Federal Government is aware that Global Steel is demanding for Delta Steel Company, he says: “I know there are fresh demands from Global Steel and I’m equally aware there are series of meetings going on. But as regards Aladja, it does not belong to government. That’s how much I know.”
ICIR gathered that the Federal Government, though foot-dragging on the Delta Steel Company being handed back to GSHL, which managed it for five years before it was sacked, has asked the latter to carry out an inter-company indebtedness review.
The review of inter-company indebtedness is being redone by Price Water House Cooper (PWC), creating the impression that the implementation of the modified agreement is on course.
Sam Nwanbuokei, a Director with Global Steel Holding, told the ICIR that the out-of-court settlement between the Federal Government and the company incorporates the renewal agreement of the concession for the National Iron Ore Mining Company, Itakpe.
He explains why there has been stagnation in the implementation of the agreement: other aspects of the signed agreement, like the rail, the port and Delta Steel are yet to be fully resolved.
“The settlement agreement incorporates the renewal agreement of the concession agreement for Itakpe, which has been done; we signed it on August 2, 2016.
“That is how we came to be based there. In addition to that, the railway concession agreement was supposed to be revalidated.
“Thirdly, you needed a port so they were supposed to use their best endeavor if a port is available to lease it or concession it to Global. A port is available, but they asked us to bid and we are doing that. Then, the Delta Steel, they were supposed to use their best endeavour to ensure that Global gets Delta Steel back.
“They said we should review inter-company indebtedness, which was done and now it is being redone by Price Water House Cooper (PWC). All these things are already in the settlement agreement; my main concern is that we are wasting so much time and resources. The Federal Government is losing resources too; manpower is there. Nobody is doing anything.”
Between August 2, 2016 when that agreement was signed and now, not much has been done to implement it.
After the signing of the agreement, Kayode Fayemi, Minister Mines and Steel Development, said the “signing of a modified agreement between Nigeria and Global Infrastructure Nigeria Limited effectively resolved the protracted litigations surrounding the ownership of Ajaokuta Steel”.
The implication of the signing, he explains, “is that Ajaokuta steel has now reverted to the Federal Government and we can now proceed to engage a new core investor with financial and technical capacity to run the complex.”
This means that the company will renounce any claims on Ajaokuta Steel Company.
He seems not to be telling the whole story and probably because of the Delta Steel Company and the railway concession. But Nwanbuokei disagrees with the claim of such settlement and readiness to allow new core investor to Ajaokuta, arguing that although GSHL expected to be party to the resolution referenced by the Minister, he was neither aware of the resolution nor any settlement reached over the matter.
The GSHL Director says he is aware that GSHL is not responsible for the delay in resolving the matter, pointing out that the company had always been open and ready to cooperate with all terms required to arrive at an amicable resolution.”
“We put in all our efforts to conclude the due diligence process in the NIOMCO Itakpe with the conviction that the next phases of compliance with the terms of the International Court of Arbitration would be speedily determined. We regret that this has not been the case”, he stated.
“We are afraid that a message of a similar incorrect formulation may grossly mislead stakeholders both in Nigeria and abroad. We, therefore, request the statement to be removed from the official website address of the Ministry of Steel.”
Nwanbuokei stresses that GSHL and the Nigerian government are still mediating on claims on assets that remained binding on all parties, warning against any investor until the matter has been determined.
In a statement by Mohammed Abbas, Permanent Secretary, the Ministry of Mines and Steel Development said there was no contention about the fact that the company belonged to the Federal Government.
“The Federal Government does not need any mediation to determine its ownership of Ajaokuta Steel Complex, as the integrated steel complex has always been the property of FGN,” Abbas says.
He argues that concessioning of the steel complex and NIOMCO does not make the Federal Government lose the ownership of these assets.
For Ajaokuta, he says despite the concessioning, the Federal Government still remains its actual owner, pointing out that nothing has changed since the entire exercise crumbled.
“The position of government is that having ceded the National Iron Ore Mining Company (NIOMCO), Itakpe to GSHL, for the remaining concession period, as part of the agreement reached during the mediation, the government would, at the appropriate time, take a decision on how best to put Ajaokuta Steel Complex to profitable use”, he notes.
ICIR’s findings reveal that talks are still going on between the Federal Government and the company on how to find a common ground.
Workers at the two plants are worried that their aspirations to start active steel production soon after the signing of the agreement may have hit another brickwall due to the inability of the two parties to agree on some terms.
“We want the steel sector to move forward, let the Federal Government and GSHL resolve the matter,” says Pius, a Vice President of Iron and Steel Senior Staff Association of Nigeria (ISSSAN).
“If we are talking of unemployment and job creation, these two plants will employ more than 75,000 Nigerians and also service about 100 other industries.”
98 PERCENT COMPLETE…WHAT IS HOLDING AJAOKUTA FROM WORKING?
Over the years, Nigerians have been told by government and other stakeholders in the steel sector that Ajaokuta Steel Complex has attained 98 percent completion.
In an examination, 98 percent is excellent mark, and this explains why many Nigerians believe that the integrated steel plant ought to be working with its level of completion.
But that is not true; the plant has remained moribund. The two percent, as insignificant as it appears, is much more crucial that it has held the steel complex to ransom for these years.
So, what constitute the two percent?
Ajaokuta has 43 units, out of which 40 have been completed since it was constructed. But the remaining three components — the blast furnace, which is the heart of any steel plant, the coke oven and the steel making shop, — are what constitute the two percent, Bello Itopa, a staff of Ajaokuta and President of ISSSAN reveals.
These three components, according to him, are major. Without them, the plant cannot operate.
Repeatedly, the government has kept allocating budget to pay workers’ salaries at Ajaokuta. In seven years, N29.9billion was spent paying workers out of the total N30.9billion budgeted for both personnel and overhead for the plant. Yet the plant wasn’t functioning.
In 2010 and 2011, personnel cost for the steel plant was the same as the total budget for the plant: N2.3billion and N4.5billion respectively.
Pandih, a steel expert, says years of neglect means that many of the units at the steel complex might be old and obsolete, but he adds that the main stumbling block to its operation is the oxygen plant that is not in place.
“If you want to run that plant, you have to put all the systems in order. Everything to me is spoilt, but the main issue is the oxygen plant, which is not completed. Blast furnace needs oxygen to run.”
But that’s not the only reason the steel complex has not functioned. Its blast furnace — the main equipment used for smelting of iron ore to produce pig irons, one of the best in the world, according to steel workers at Ajapkuta — also failed to work when it was tested.
What constitutes the significant and critical two percent, according to experts, are the blast furnace and the coke oven, which are said to be the heart of the steel plant.
“If you want to talk about the body system — the head, legs and others — and you refuse to put the heart, will the body work?” asks Okeshola Tajudeen, a steel worker and unionist in the steel sector.
The blast furnace is referred to as the primary unit of the plant.
As a unionist, he also believes that there is a conspiracy theory and or international politics behind the non-completion of the plant’s blast furnace.
He explains thus: “The first test that was carried out on the iron ore here, the percentage was low. But through beneficiation, that is improving the quality, there was great improvement and that made it better than that of the foreigners.
“When the Western power saw this, they worked against it. This is how we labour feel about it those are the invisible factors. But as labour, we want the steel plant to work.”
Another worker also corroborates Okeshola’s conspiracy theory, saying the failure of the steel plant to operate about 40 years after it was constructed is due to international politics.
Nigeria, he says, was thought would be too powerful as a nation to have oil deposit and at the same time producing steel. Therefore, superpowers like USA and FRussia were the forces behind the dysfunctional state of the multibillion-naira steel complex.
“Foreigners don’t want Nigeria to have oil and iron at the same time; it is international politics,” he says. “The furnace we have here is what they have in Russia and India and they are working.”
The conspiracy theory does not hold water, according to Nwanbuokei, who has vast knowledge of steel engineering. “There is no inter-play of anything — those are lazy men’s ideas.”
The 98 percent in this case, he argues, is not such that you can start operation. The two percent is the blast furnace and other auxiliary plants that are not ready.
Some of the workers claim that the Russians who built the furnace could not rectify it when iron ore concentrates supplied by Itakpe got stocked in it several years back. Some of the workers at the complex say there could be a problem with the design of the furnace.
“The first product Itakpe we sent there got stocked inside it and they (the Russians) could not rectify it,” says a former worker at the complex who was there in 1985 but now works at NIOCOM.
AJAOKUTA IS GOING FOR PRIVATISATION
The Nigerian government has no plan to spend any money on its “half dead humongous steel complex”. It has not estimated how much it would cost to make it operational. The only option that the government is considering after a number of failed concessions is selling the plant.
The Federal Government has expended close to $5billion on the plant and it is said to require another $1.21billion to start production. This new amount to revitalize it is $813million higher than what was needed to complete the complex 17 years ago when Olusegun Obasanjo ordered its audit.
Out of this new fund, $513million is needed to complete the construction of the steel plant and $700million for the construction of external infrastructure.
Government is not interested in running the steel plant again, Yinka Oyebode, spokesperson for the Minister of Mines and Steel Development reveals. Rather, it is available for privatization to any private firm with proven financial and technical capacity to operate it to the optimal level.
He says government does not have the capacity to run Ajaokuta Steel Plant and is not contemplating completing it. The government believes that the new investor should complete the project and run it for profit motives.
“Some will tell you that government will spend $400million to complete it. The question the government is asking is, ‘why do I want to complete it, why can’t I sell it?’
“The new owner should be the one to complete it. Government considers a more convenient option, to sell it as it is, because people will say it is 98 percent, but when you start to quantify it officially you may discover it is more than that.
“Even that two percent, in today’s market value, how much is it? Does the government have that budget? If the government has the budget, then what will it do with it? Can government run that place again? The fact is that government does not have the capacity to run that place again.”
But for a plant that was constructed in 1979, some of its components are old while others by now are obsolete. For 26 years, there were no new inputs to the plant.
Nwanbuokei, who was among the first set of Nigerian graduates deployed to work at the plant, says some modifications are needed at the plant if and when it is ready to operate.
“You need to revitalize them, modify them, modernize some or replace them definitely. The controls now are not the controls when Ajaokuta was built in 1979, so the controls you need to revive them and modernize them,” he explains.
To him, this must be carried out in earnest, as the Nigerian government keeps recording losses while the plant is left unattended to.
“But most importantly, the earlier you start, the better for the system to produce and ensure that you get some money out of it.
“The main thing is that, at the rate you are going, you probably are not expected to produce at the installed capacity. That’s at the rated capacity but you can level up as the production moves on.”
Absence of external infrastructures is also identified as one of the factors that have substantially stopped the plant from being commissioned. Roads, railway and supply are the key infrastructures that are said to be lacking for the plant to commence operation, though it has a power plant that if operational can generate power for four other states in addition to powering Ajaokuta community.
Onobere, a former Sole Administrator of the plant, attests to this, saying: “In fact, the non-completion of the external infrastructure is what has substantially accounted for Ajaokuta Steel Plant not to be commissioned till date, having reached 98 percent completion as of 1994.”
When completed and operational, the plant is expected to generate 75,000 direct jobs and one million indirect jobs.