Dan Kunle is a consultant in the energy and steel sectors, and one of the advisors to the Bureau of Public Enterprises from 2003 to 2007. He spoke to Patrick Ugeh on how the government can get the Ajaokuta Steel Company Limited, its sister outfit, Nigerian Iron Ore Mining Company, Itakpe, and the accompanying rail line to Warri working. Excerpts:

Can you give your assessment of the steel sector?
Today, with the benefit of hindsight, and comparatively, what the Ajaokuta Steel Company has is just 1.3 metric tonnes per annum of liquid steel capacity which, today in China, is not economical. The minimum capacity today in China is 3 million metric tonnes. So, I just laugh when we talk of the potential of this company. This project was good (when it was conceived) because no nation can survive without steel. If you don’t have steel production capacity, you can’t develop. Everything you see today in the construction industry is steel. In the oil and gas industry, this local content they are talking about, steel is the main issue. In ship building, the automobile industry, it is steel. That is why, when you check the history of the US, it is Bethlehem Steel that build America. Check Bethlehem Steel, how Bethlehem Steel built the US.
Recently, the Minister of Steel, Mohammed Sada, mentioned that a number of companies had shown interest in Delta Steel Company (DSC), Aladja, near Warri, and that most of them happen to be automobile companies, but you seem to have issues with that. What is it really?
People must understand the nature and the structure of the Nigerian steel industry. The Nigerian iron and steel industry is largely construction steel. We don’t have flat sheet plant in Nigeria. Ajaokuta doesn’t have flat sheet plant; DSC (Delta Steel Company) doesn’t have. People must understand that the structure that we were building on before we lost momentum in 1984 when Buhari/Idiagbon took over was solid steel – rolling mills, angle rods, wire rods, rims – all the rolls for the construction industry. Because there were no flat sheets, somewhere along the line when Abacha attempted to revisit steel in 1995, out of the pressure some of us put – I remember vividly that I was at the centre of that pressure – I put so much pressure through the then Minister of Solid Minerals – Abacha commissioned Ferrostar to do a study for the flat sheet requirement for Ajaokuta. Without flat sheets, you cannot do much for the automobile industry; you cannot do much until your country produces enough flat sheets of different grades, different qualities, because every vehicle you see on the road is a metal box. However beautiful that car is, it is a metal box. So, Nigerian automobile industry, if they are talking of going into steel, I am a little bit surprised. Because it is not just an investment that you can just … the Nigerian automobile industry today is largely import-dependent. They are all importers of vehicles – whether they call it completely knocked-down (CKD) or whatever they call it. They are all importers, and for them to manufacture, you need flat sheet; you need a flat sheet steel plant. So, if Ajaokuta and Delta Steel are all solid steel plants, where is the relationship between the automobile industry and those plants? And the whole of the automobile industry in the country today – Peugeot Automobile in Kaduna, Volkswagen in Lagos (I was part of the people who sold them), plus Steyr in Bauchi, National Truck Manufacturing and Leyland in Ibadan (I was part of the people who sold them), including ANNAMCO in Enugu. So, I don’t see any correlation unless we are just trying to --- I don’t know what type of game that we are trying to play. But you see - I am not being political here - but President Jonathan’s Minister of Steel should please not try to mislead us. This industry, some of us know it too well that we can’t be misled. Delta Steel that he mentioned in his presentation at the National Assembly is to produce billets, pellets and rolled products. I have the whole configuration of Delta Steel – the foundry there, the oxygen plant there – all these facilities are to support one million tonnes capacity. There is nowhere in Delta Steel that an automobile industry has any business that is competitive or of comparative advantage today. I don’t know how he came about that issue but that does not mean an investor in Peugeot Automobile of Nigeria in Kaduna or Volks or whichever cannot go and invest his money in the steel plant. But I am just saying that the investment is not an investment that has immediate gain because they are all rolling mills – billets and pellets and … there is no flat sheet plant among them. Even if there is flat sheet plant, the automobile industry in Nigeria does not even produce tyres anymore. Dunlop and Michelin have migrated out of Nigeria, and we have the advantage of producing natural rubber from our farms but we are not even doing that. So, I don’t want the minister to mislead us at all. The industry has suffered enough, and now we must get it right.

So…?
China today is trying to battle with excess capacity of 57 million metric tonnes of liquid steel. What is the meaning of that? It means they have that excess capacity that they don’t want their producers to produce. They want to transfer that capacity to somewhere in the world. Can’t my President and the Minister of Industry take advantage of such and say Please, bring that your excess capacity here; I’ll give you whatever you need; I have iron ore deposits. If the grades are not good enough, I have ECOWAS Economic Treaty; there is high grade iron ore in Liberia, Guinea, Sierra Leone, and I am part of the Economic Treaty. So I can take advantage of that. So, please come. You create the enabling environment. These are the things some of us have been talking about. So, for the Minister to be in the National Assembly and be telling us that some automobile industries are interested in the rolling mill… immediately I saw it, I said No,No, No, we are going wrong again.
But if the automobile companies are interested in the steel plant, they must have done their due diligence and found that it is going to be useful to them, don’t you think?
Well, okay, then the minister should allow AMCON and not tamper with the process. The minister should not interfere. That’s not how privatisation process was done when people like me were there.

Would you want to expatiate on what you mean by the Minister’s interference?
He should just say some companies are already in the process of being evaluated by AMCON, finish. He is not supposed to allow us know where they are coming from – whether they are from the automobile industry or the construction industry. For me, by that statement he has let the cat from the bag. That is my grouse with that his statement. Again, it also points to the fact that we are again going to get it wrong. Look, we got it wrong from 1984 when Buhari/Idiagbon slowed down Ajaokuta. Delta Steel survived it because they had already started producing as at that time. Ajaokuta never got out of that slow-down Gen Buhari and Idiagbon caused in 1984. Now, Obasanjo came in 1999 and tried to revive Ajaokuta and Delta Steel. Because of the full force of privatisation, the privatisation agency where I was (BPE) we pulled the hand back and said: Privatise it and give incentive for private sector to enter. Then we succeeded in privatising Delta Steel; we did not succeed in privatizing Ajaokuta. The ministry concessioned it. In the privatisation agency we attempted it. We engaged a consultant, BGL. We did everything, just to do the final bidding and make them pay and become core investor. We could not finalise it. The concession they had for Ajaokuta and NIOMCO, Itakpe, and the railway… was with Global Steel Infrastructure but Delta Steel was core investor sales. So, when that concession collapsed in Ajaokuta under Yar’Adua, eventually, it affected Delta Steel because it was the same owner.

Were you are aware that when Global Steel got the concession, they were asset-stripping Ajaokuta and taking some of the things to Delta Steel…?
Thank you. Let me say I am a student of privatisation process. The lesson Nigerian officials have not learnt I will tell you, which is why the country is in a mess. Who enforces post-privatisation or post-concession rules? BPE.
Thank you. If I sell an integrated steel complex to one owner, if he takes something from Ajaokuta to Delta and I who is monitoring – post-privatisation monitoring – I have a record of what he takes (I must know what he takes.) What is the compatibility of that thing he takes from Ajaokuta to Delta? If he brings something from Delta to Ajaokuta, what is the compatibility, what is he using it for? So, should we hold the company responsible or we should hold the people that are supposed to monitor post-privatisation responsible? The federal government of Nigeria still had interest in those investments. It was not 100 per cent sales. So, you should have stopped them from taking the assets there; and then you stop them from producing. I am not an advocate for Global Steel but I am only saying the federal government is the owner of the privatisation agency, the owner of the Ministry of Mines and Steel; the owner of all the regulatory agencies and if it cannot enforce its right in Ajaokuta, Itakpe, on the rail line, and Delta Steel, that is its headache; it is not the headache of the concessionaire because you are to police him, make him do what is right, and conform to what you are doing. Now, see the collateral damage now – they are not there to produce; you have no control over their assets because there is litigation. So, the place is idle since 2009. Those assets have been idle since 2009. You could not put them to use as government; you could not put money into them to complete them because the first goal since 1984 was not even completing Ajaokuta. Some sections were up to 98 per cent complete.
So, who should be held responsible for the non-completion? It’s the federal government that should be held responsible. The government felt at that point that it was better for it to pull out and allow the private sector do it. Why did we complete Delta Steel? Why did the Federal Government complete the refineries? Why did we complete Eleme Petrochemical plant? Why did we complete NAFCON? Why did we complete Aluminium Smelter Company? So, the reason Ajaokuta was not completed by the federal government is the reason the place is suffering. So, if I were the President, I would take Ajaokuta as it is, Itakpe and the railway – because these three assets are one; they must be together. I will call the Chinese and say, I am aware you have excess capacity in your country; please take this plant and put your money and help me complete it so that it will employ Nigerians.

What if the Chinese are not interested…?
They are interested. They are interested but there is litigation in NIOMCO, there is litigation in Ajaokuta; the rail… none of these assets is free. So, all the Chinese investors are observing what will be the outcome but they have done their studies of the entire iron and steel sector for the entire West Africa and in fact Africa. Anywhere there is iron ore in Africa, they have mapped it out. I am telling you on authority. Now, they cannot move because even the current management in Ajaokuta again are constituting additional legal bottlenecks for a future investor. Because all the units that make up Ajaokuta, they have started saying they will concession this out to this company to come and repair and put their money into it so that the place will not be idle. None of these people they are doing these things with has the resources and technical capacity to make those things functional on stand-alone basis, none of them. It is makeshift; which, again, is going to create problem. This is why I say in the last four years, the approach of the Minister of Steel to Ajaokuta and Itakpe has been a wrong approach.

In what way, because at a time several companies showed interest, but they were tied by the litigation?
No, the federal government is too big to be tied by litigation. There is no company in the world that can hold the federal government of a sovereign state to ransom. But the law is the law; if you have bought something from a state, legally you are entitled to that thing, and if you are being stripped of it and the process is not right, you are entitled to…
In view of the strategic importance of the iron and steel sector, even if the arbitration warrants that you are to pay penalty, what’s wrong in you paying? That’s the point. They have to wait for the arbitration to complete its course…
For four years? I know. I have been following the arbitration. But if I was the Minister of Steel today, I will go to the Attorney-General, the Minister of Justice, and say this is the life-wire of this country; let us resolve this arbitration. I will go to the president and say, Mr. President… I am aware that Sada has been doing that. I wish him all the best; I don’t have anything personal against him; The President should please de-bottleneck the iron and steel industry because it has employment potential; it is the only trigger for industrialisation in Nigeria.

CREDITS: THISDAY

China is d answer!