Honourable Members, it is again my great pleasure to be invited to contribute to the discourse on how to resuscitate, complete and operate the Ajaokuta Steel Plant. Ajaokuta no doubt is strategic to our nation’s industrialization and indeed the steel industry.  As enumerated in my earlier submissions, there are many options opened to us as a nation to achieve this important assignment. We only have to be truthful and diligent on the implementation of any of the options in order to realize this .

I have already in my presentations to the Ad-hoc Committee at the interactive session expounded on these options, their merits and demerits. I therefore attach my   presentation of 12th March 2018, to this new submission.

1. Concession and Privatization

1.1 Concession is not synonymous with privatization.

When you sell a property for example, it is as if you privatize the property, you sold the property and it never comes back to you, it is not yours anymore! The concession is as if it were a rent, the person will pay a monthly payment during a period and at the end of that period is obliged to return the house under the previous or better conditions”  Nelson Barbosa.- Brazilian Professor and one time State Minister of Planning and State Minister of Finance of Brazil.

Concession is also a kind of partnership between the public sector and a (usually) private company that has shown its added value in a specific area, for example developing infrastructure.  The question to be asked “is who owns the asset under each circumstance”.

For example Delta Steel Company (DSC), the rolling mills at Katsina, Jos and Oshogbo were privatized while Ajaokuta was under concession. This explains why the Federal Government could take back Ajaokuta Steel Plant while the others like DSC could not be taken back.

Privatization sells the assets of the state enterprise, the public assets, and transfers such to private ownership. The concession, by contrast, the transfer is temporary and the company has defined deadlines, which may or may not be renewed, at the end of the contract.

1.2 It could be easily inferred from the various concessions and share purchase/sales agreements for many of the concession and privatized companies were skewed in favour of the concessionaire or new owners to the detriment of our national interests. This informed the skepticism of many Nigerians to want to consider concession or privatization.

1.3 Ajaokuta like the other integrated steel plants are too strategic to our industrial development to be privatized.

1.4 Concession is not out of place as I do not have any professional reason to discredit concession of the steel plant. This is as a result of the following:

• Government after completion may have to get an operator to run and manage the plant for a specified period. Steel technology is complex and intricate hence relying on local expertise at the completion for the operation and maintenance may not be feasible.
• Getting therefore such operator to come in with her investment at this time of completion will ensure commitment on the part of operator.
• The investment to complete and operationalise which include the completion of the balance 2%, external supporting infrastructure, part internal infrastructure and working capital which are largely in foreign components may not be feasible with our budgeting and fund allocations regime.

1.5 There are undoubtedly risk associated with all the options including concession. The

ability to identify and mitigate the risk is therefore crucial. Such risks include

1. Proper Due diligence to select a Technically and financially competent operator with track records.
2. Strict adherence to consideration of Performance Guarantee Tests (PGT) for the Plant after completion as the outcome is a critical consideration  to adjudge the plant successfully completed.
3. Inclusion of Nigerians of proven track record and cognate experience on the management and Board of the Company as part of the concession arrangement.(strictly not jobs for the boys but seasoned professional engineers)
4. Effective project monitoring and control with timelines which shall include the owner of the company.
5. Guaranteed job creation and revenue generation based upon business plan.
6. Guaranteed availability of iron ore from NIOMCO as getting iron ore from other sources especially offshore will complicate the operation and cost of production at Ajaokuta.

2. The areas of focus to complete and operationalise Ajaokuta are as follows:

2.1  Completion of the balance 2%

2.2  Completion of supporting infrastructure which includes internal and external facilities such as rail link to Jakura Limestone deposit, Osara dolomite deposit,  supply of rolling stock and rail tracks etc. Limestone and dolomite constitute some of the major raw materials required for production at the Ajaokuta Steel Plant.

• Availability and readiness for National Iron Mining Company Itakpe to supply about 2.2 million tons per year of iron ore.
• The estimated cost to realize the above with the exclusion of the working capital is put at about USD 1.4 billion to commission the first phase of the Ajaokuta Plant designed to produce 1.3 million tons of liquid steel per year.
• Working capital for initial one year operation for imported coke, ferro alloys

3. Conclusion

I wish to reiterate that while the two major options being considered are quite workable that is  :

• Complete and operationalise the steel plant under the Federal Government sole ownership without concession.
• Complete and operationalise the steel plant under the Federal Government sole ownership under concession.

If however, there will ever be the need to manage and operate Ajaokuta Steel Plant after completion then concession prior to completion is more plausible. The operator will be more committed, funds that could have been utilized can be diverted to other equally important projects in the country.

We should also be modest enough even as professionals to admit that the skill and experience to effectively and efficiently operate and manage a steel plant like Ajaokuta Steel Plant is not easily available in the country. Examples abound on how such plants are operated and managed after commissioning even in advanced climes.

Thank you.

Anthony Madagua

MD Peatts Engineering and Development Co.

( Former MD Delta Steel Co. Limited