REVIVAL OF STEEL INDUSTRY – PANACEA FOR NIGERIA’S UNEMPLOYMENT AND INDUSTRIALIZATION PROBLEMS

Zik Gbemre

When it was reported recently that the Iron and Steel Senior Staff Association of Nigeria (ISSSAN) said that the “death” of the steel industry in the country, aggravated the nation’s unemployment rate, we could not help but totally agree with this statement because Nigeria’s economy, which has been driven by oil and gas wealth for decades, has practically blinded past and present Nigerian Governments to the array of opportunities in the steel industry that has the potential to address a lot of problems for the country. Rather than use the enormous oil and gas wealth to develop other sectors and industries of the Nigerian economy, our political leaders over the years, preferred to satisfy their self-centered ‘hidden’ agendas that are often to the detriment of the general masses.

While making the above comment about the steel industry in Nigeria, the Deputy-General Secretary of the association, Mr Adewale Okesola, stated that unless the steel industry was revived, unemployment problem in the country would persist. He said that the Ajaokuta Steel Company alone, if revived, could employ no fewer than 140,000 Nigerians. In his words: “If Ajaokuta alone can absorb so much unemployed Nigerians, then we can be sure that the other steel firms, if also revived, would employ much more. So, let the government ensure the revival of the steel companies scattered around the country. By the time Ajaokuta, Delta, Osogbo, Jos and Kastina steel firms are revived, we will not be talking of unemployment in the country.”

Okesola added that apart from creating direct employment, the revival of the steel sector would also create indirect employment for millions of Nigerians. According to him, the revival of the industry would definitely aid the growth of the country’s new automobile industry and the transformation of the epileptic Nigerian Railway Corporation. “Government knows the genesis of the nation’s calamity in terms of unemployment, except if they do not want to be sincere. “If the government can be sincere and focused; if they can pump money such that the steel industry will pick up, we will forget some of our current plagues,” he said. The union’s secretary stated that lack of commitment, corruption and politicization of the steel sector, were responsible for its ruin. He added that the problems had also hindered all efforts to transform the industry.

The truth of the matter is that for any nation that desires industrial and technological advancement and addresses its unemployment problems, the steel industry is said to be the fulcrum on which that desire is hoisted. This is why it has become expedient for the government to pay serious attention to the development of the sector to achieve laudable milestone in its industrial revolution agenda. Stakeholders in the steel sector agree that no country can advance without the steel sector, since it is the primary ingredient for any commercial and business activities to take place. They want government to pay particular attention to the development of the sector if Nigeria is to become one of the 20 leading economies in the world by 2020 and beyond.

For instance, Managing Director, Land Craft Industries Limited, Mr. Prakash Gupta, said Nigeria’s steel industry is still in its embryonic stage and needed to be developed because steel is the greatest infrastructure needed by any company to grow. He said capacity utilisation in the sector is currently at between 10 to 15 per cent, hence the urgent need to develop it, if the nation is to achieve meaningful growth. Gupta, who lamented the high tariff and erratic power supply in the country, noted that Nigeria’s need for power is almost 20,000 megawatt, as against the present 4,000 megawatts; representing just 20 per cent of what is needed. Gupta said: “electricity is utilized by the steel industry and the cost of electricity here is so high compared to other countries, but if the government can guarantee stable electricity supply then the industry will survive. Power is the biggest issue for the industrial sector.” There is no doubt that the quality of steel produced in Nigeria compares favourably with what is produced in any part of the world because most steel factories here have imbibed the latest cutting edge technology required for steel production in the country.

According to stakeholders, there are numerous problems inhibiting the growth of Nigeria’s steel industry, such as electricity, infrastructure, security, importation, and inconsistent government policies. According to Gupta, the steel sector is the biggest sector in terms of provision of employment, yet there is no infrastructure, noting that in places like Korea, the sector is the biggest revenue earner. He said if the government can improve power supply, especially to manufacturers, the country’s GDP and overall development would improve. Another major challenge, according to him, is addressing the concerns of foreign investors.

In Gupta’s words: “apart from infrastructure, security issues are also there and most importantly policy inconsistency. When you establish a business, tomorrow they will change the policies, if you are investing you should be given the guarantee that your investment is secured, foreign investors are ready to bring money but what about the security of their money? If I put my investment here today, tomorrow who will give the guarantee of my money?  Insecurity, government agencies and taxation are the issues faced here. The government should provide a platform so that when we have problems we go and ask questions. This is the major challenge of FDI’s. They are ready to invest in Nigeria but it depends on how the government handles issues relating to that.”

According to Gupta, “Steel mills in Nigeria can still survive if the government invests in it and determines to turn it around. Much is not happening there and it would be very difficult for them to survive because it is a long period they closed down. It needs a lot of money. If the government intervenes through investment it could survive. About Delta steel, if the company can go into partnership with other companies, Delta steel can still run, but they had issues because they have bigger capacity, but they don’t have the facility to buy much scrap to melt, so they need some mining areas. If the government can give it to good management, with the good support of government, good consensual issue with labour, if they give some mining areas to them, then Delta steel can survive.”

We would like to add here that it was past government’s and their misguided Privatization exercise that ruined the Delta Steel Company (DSC) in Delta State. DSC, which was single-handedly executed by Late Senator (Chief) Fred Brume, an expert trained in the Harvard University, was a thriving steel company some years back. Looking at its history, late Fred Brume was invited through the then Federal Ministry of Industry from the Word Bank by the then Federal Government of Nigeria under Shehu Shagari to handle the DSC Project. Brume was then seconded as the Project Coordinator and he handled the DSC Project right from its design stage, to the acquisition of land, the completion stage, and down to the commissioning by the then President Shagari, and its operational stage. Brume’s position as the then Project Coordinator, was upgraded as the first Chief Executive Officer of the Delta Steel Company Ltd (DSC), and the company functioned very well because Brume was given the free-hand to run the project exceptionally. Brume also designed the Delta Steel Townships (DSC) and their Camp Extensions.

Although he equally designed the DSC Phase two, they could not start this part of the project before the military regime of Buhari/Idiagbon took over, which led to the sack of Chief Brume. In fact, they even acquired the land opposite the DSC for the phase of the project but it never saw the light of day. And after his exit, DSC operations came down drastically and finally shut down. The place was shut down for about 19 years plus before the Obasanjo administration privatized the company and as usual, politicians took over and brought Indians as fronts to run the DSC. When the Indians came in, it was reported that it took them to only switch on the plant to discover that the company was very much functional. However, due to the way it was privatized, the DSC of today is nothing to write home about, with the workers not paid their salaries for months. Later it was speculated that the Debt Management Office (DMO) under the Presidency, has taken over the company.

It was in 2011 that we last heard something good about DSC when it was reported that the Delta Steel Company (DSC), Ovwian-Aladja, Delta State, though a shadow of its former self, still produced at about 60 per cent installed capacity. The unavailability of iron ore means the firm has to look for alternative raw material – scrap metal – which it heavily depends on to keep producing steel. But today, DSC is no more, as the management is alleged to be owing banks the sum of N31 billion and also several millions to its suppliers, workers and other service providers. It is reported that as soon as AMCON filed its litigation on Indian-owned Pramod Mittal for non-payment of multi billion Naira debts, the Company stopped meeting all its financial obligations, paying salaries, payments for goods supplied and also increased cannibalization efforts.

The deplorable situation and the pathetic neglect of the Delta Steel Company (DSC), is just one example of the sort of rot existing in the country’s steel industry. Ordinarily, one would have expected a purpose-driven Nigerian Government to resuscitate the dying DSC, start and complete its Phase Two abandoned project and expand the facility to include the production of ‘flat steel products’ that are made from Slabs, rolled and mechanized in different processes to achieve the desired final shapes, which gives us Hot Rolled Plates that are used in shipbuilding, production of pressure equipment and vessels such as boilers, as well as in engineering, construction applications and large pipelines. Others include hot rolled coils, sheets and strips; cold rolled coils, sheets and strip; pre-painted and galvanized product, etc. And by so doing, DSC will absorb countless Niger Delta jobless youths on our streets.

Though, it has been noted that the steel industry was almost nowhere five years ago, producing only 10,000-15, 000 tonnes; but now the industry has grown by 500 per cent, producing 100,000 tonnes, however, the FDI is there and can still come if the government can actually guarantee the security of lives and property and security on FDI investments, coupled with the availability of steady power supply. The steel sector will also grow more if the government can stop the importation of iron rod and increase the duty on importation of iron rod. This is hinged on the fact that importation affects the local manufacturer.

We are, however glad that the current administration of President Goodluck Jonathan is aware of the importance of the steel industry in the development of the nation. President Goodluck Jonathan who some few months back underscored the need for government and other stakeholders to create and sustain a vibrant steel sector to drive Nigeria’s industrialization programme when he commissioned the multi-million Naira WEMPCO Steel Mill Company’s 5-stand Tandem Cold Rolled Steel Plant in Magboro, Ogun State, also noted that steel was at the heart of any national economic development endeavour. And it is one of the most important materials used widely for both domestic and industrial purposes throughout the world.  “A vibrant steel sector contributes to GDP growth, facilitates exploitation of natural resources and generates economic activities in downstream industries. It also promotes job creation, the acquisition of technical skills, transfer of technology and the provision of machine parts and tools. In fact, no nation can industrialize without a vibrant iron and steel sector. The steel sector offers immense economic opportunities for our country, which we have not fully exploited,” he said.

Another stakeholder, Sanjay Kumar, who is the Chief Executive Officer of African Foundries Limited, also noted that in the next couple of years, Nigeria may be one of the largest producers of steel in the world. He said the potential is there for Nigeria because of her drives toward economic diversification; her manpower base; her intellectual base in metallurgy science; and because she possesses abundant natural resources for steel production. Kumar explained that Nigeria is one of the richest countries in the world in terms of unexplored iron ore, noting that if the steel industry is developed, it will lead to more mining and essentially more development for the nation’s steel sector and the entire economy. Kumar also said that with the efforts of indigenous steel producing companies in bridging the local demand-supply chain, Nigeria domestic rod production could increase tremendously.

Though, President Jonathan had once said that his administration would reposition the steel industry, noting that the Ministry of Industry, Trade and Investment, in conjunction with other MDAs, has developed an Industrial Revolution Plan, which has identified the Iron and Steel Industry as a focal sector, and that this plan, aims to develop the complete ecosystem of this sub-sector, however we only hope and pray that all the book talks, publicity stunts and promises of the government of the day will not end on paper, but would manifest in reality to improve the economic lives of Nigerians.

Nigerians want to see practical steps being taken by the government in revival the country’s steel industry. It is not enough for promises to be made by both the government and its agencies and ministries, there is need for them to match their words with actions. And they can do this by first, reviving the country’s moribund and comatose existing Steel Companies like that of the Delta State Company (DSC) in Aladja, Delta State. Just like the President of the Nigeria Society of Engineers (NSE), Mr Ademola Olorunfemi, had noted some time ago when he blamed the limited growth of the manufacturing sector in Nigeria to “absence of functional steel industry in the country”. He also said that the problem had continued to stall rapid development of skill and technology required to drive industrial growth. Olorunfemi said that the development of iron and steel was a key ingredient in the industrialization and development of infrastructure. He said that the steel sector in developed economies is the highest employer of labour and it is treated as a strategic sector because of the positive multiplier effect it has in employment.

In his words: “Despite the abundance of natural raw materials such as limestone, ore and coal required for the production of primary steel, Nigeria’s iron and steel sector remains comatose, having only a negligible local production. It experiences low return on investment and is heavily dependent on imports of steel. It is troubling that the nation continues to moan under the enormous burden of employment, but spends N500 billion annually on steel importations.” He, therefore, called on the federal government to urgently formulate an iron and steel development agenda. The NSE president also said there was an urgent need to revamp the moribund inland rolling mills in Jos and Katsina as well as the Delta Steel Company, Aladja. He said it was also imperative for the government to resolve the problems with the concession issues of Ajaokuta Steel Company and the National Iron Ore Mining Company at Itakpe.

Even with the present administration’s launching of Nigeria Industrial Revolution Plan (NIRP) and Nation Enterprises Development Programme (NEDEP), the nation still lacked “coherent and articulated metals policy and plans that strategically interface with national development goals in the transportation, power, oil and gas and agriculture sectors.” The bottom line is that the government and its ministries and agencies should do less talking and more actions in reviving the country’s steel industry.