Steel industry debacle: Why Nigeria’s multi-billion naira investments fail to ignite industrial

The Nigeria’s steel industry has become a monumental failure, with billions of dollars sunk into incomplete projects marred by policy inconsistency, mismanagement, and corruption. From the dormant Ajaokuta Steel Complex to the defunct Delta Steel Company, the industry has been plagued with unfulfilled promises, chronic policy failures, and a dysfunctional industrial base. Among the consequences is continuous drain on national resources, symptomatic of leadership that is more focused on short-term gains than long-term economic transformation, MOYOSORE SALAMI writes.

Forty years ago, Nigeria set out to build the Ajaokuta Steel Complex, aiming to position itself as a global industrial heavyweight. Expectations were high that the project would provide the much-needed backbone for the country’s infrastructure development, creating jobs and boosting the economy. But today, Ajaokuta stands as a relic of what could have been a colossal structure that has yet to produce a single sheet of steel. Billions of dollars in investments, spanning multiple administrations, have resulted in little more than abandoned infrastructure.

The Ajaokuta Steel Complex is not the only failed project in Nigeria’s troubled steel industry. The Delta Steel Company (DSC) in Aladja, Delta State, along with the Osogbo Steel Rolling Mill, has also suffered from poor management and policy neglect. These failures are not just setbacks; they represent a critical misstep in Nigeria’s quest for industrialization.

The story of Ajaokuta Steel Complex is a microcosm of Nigeria’s larger struggles with industrialization. Established in 1979 with Russian support, Ajaokuta was designed to be Africa’s largest steel plant, producing millions of tons of steel annually. The initial phases of construction were promising, with much of the plant’s infrastructure taking shape by the mid-1980s. However, political instability, coupled with policy inconsistency and economic downturns, halted progress.Successive administrations from the 1980s to the present have made attempts to revive the complex, but these efforts have mostly amounted to lofty promises and no results.

A few months ago, the President and Chief Executive Officer (CEO) of Dangote Group, AlikoDangote, announced that the company would abandon its plans to enter Nigeria’s steel industry to avoid being branded a monopoly. The business tycoon explained that the company’s board decided to avoid the steel industry to prevent accusations of attempting to monopolize it. Furthermore, he noted that pursuing this venture would involve encouraging the importation of raw materials from overseas, which contradicts the firm’s core mandate.
“You know about doing a new business which we announced, that is, the steel. Actually, our own board has decided that we shouldn’t do the steel because if we do the steel business, we will be called all sorts of names like monopoly. And then also, imports will be encouraged. So we don’t want to go into that,” he said.

Dangote, however, urged other Nigerians to invest in the industry to help boost the country’s economy. “Let other Nigerians go and do it. We are not the only Nigerians here. There are some Nigerians with more cash than us. They should bring that money from Dubai and other parts of the world and invest in our own fatherland,” the CEO added. However, with the recent revelation and decision from the African richest man, the steel industry may linger in the shadow of underinvestment for years to come.

Former President MuhammaduBuhari, for instance, took several steps to restart Ajaokuta’s operations, including signing agreements with Russia in 2019. Yet, three years later, the steel plant remains non-functional, and the nation continues to spend billions of naira on foreign steel imports.For a nation that desperately needs industrial growth to diversify its economy, the inability to make Ajaokuta work is emblematic of deeper systemic issues.
Experts believe that Nigeria has failed to leverage its abundant natural resources due to mismanagement and corruption. As a result, a project that could have transformed the country into an industrial hub now lies dormant, a perpetual reminder of the government’s failed industrial ambitions.
The Delta Steel Company (DSC), established in the late 1970s, is another significant investment in Nigeria’s steel sector. Located in Aladja, Delta State, DSC was built to feed into the larger Ajaokuta steel project by providing basic materials for production. In its early years, DSC showed promise, producing steel products for domestic use and export. However, like Ajaokuta, the Delta Steel was soon plagued with mismanagement, financial challenges, and the government’s inconsistent industrial policies.

By the mid-1990s, DSC’s operations had slowed significantly, and by the early 2000s, it had ceased production entirely. Several attempts to privatise and revive DSC have failed, and the once-vibrant steel plant is now another symbol of Nigeria’s inability to harness its industrial potential.
Former Vice President YemiOsinbajo acknowledged the privatisation flaws, stating: “The Delta Steel Company is a tragic example of failed privatisation. We must learn from this and ensure our industrial policies protect national interests.”

Despite such reflections, DSC remains in disrepair, with deteriorating assets and a dwindling workforce. The company’s failure has negatively impacted the local economy, causing job losses and reduced economic activity.

Governor Udom Emmanuel of AkwaIbom, in 2020, noted: “Our steel industry has potential for growth and job creation. However, without adequate infrastructure and federal support, this potential remains unrealised.”

Similarly, the Osogbo Steel Rolling Mill, conceived in the 1980s to reduce steel imports, now stands as a monument to wasted potential. Poor management, underfunding, and lack of investment have diminished its production capacity, reflecting the broader malaise of Nigeria’s steel industry.The consequences of these failed steel projects are evident in Nigeria’s heavy reliance on imported steel.

According to the World Steel Association, Nigeria consumes approximately 1.5 million metric tons of steel per year. With the country’s steel plants either underutilised or non-functional, much of this demand is met through imports from countries like China, Turkey, and India. This dependence on foreign steel has drained the nation’s foreign reserves, stifled domestic production, and worsened Nigeria’s unemployment crisis.Local manufacturers have repeatedly called on the government to revive the steel industry, emphasizing its importance to Nigeria’s economy.

The Southwest Chairman of the Manufacturers Association of Nigeria (MAN), LanrePopoola, expressed concerns that the current capacity of Nigerian steel plants remains grossly inadequate to meet the demands of local manufacturers, forcing heavy reliance on imported steel.

According to Popoola, the majority of steel consumed in Nigeria is imported due to the suboptimal performance of local plants. He attributed this to sev
eral challenges, including outdated machinery, erratic power supply, poor infrastructure, and inconsistent government policies.

“This shortfall significantly hampers the competitiveness of local manufacturers, especially those in sectors like construction, automobile production, and infrastructure development,” he said. He further explained the far-reaching implications of Nigeria’s steel shortage, citing its adverse impact on various key sectors. In the construction industry, for instance, local manufacturers are compelled to source steel from foreign markets at higher costs, resulting in delayed projects, increased expenses, and reduced global competitiveness.

“In the automobile sector, where steel is critical for the production of parts and assemblies, the dependence on costly imported steel limits local production capacity and discourages investment in the industry. Similarly, infrastructure projects such as bridges, railways, and other public works are facing higher costs and delays due to an inconsistent steel supply.”These factors, Popoola warned, combine to stifle growth in industries essential to Nigeria’s economic development.

Reflecting on past efforts to establish a sustainable steel industry in Nigeria, he described them as largely unsuccessful despite significant investments in steel plants like Ajaokuta Steel Company and the Delta Steel. Operational issues in the companies have persisted over the years.

“Some of the primary reasons for the sector’s failure include poor management, inconsistent policies, lack of technical expertise, and inadequate funding. The absence of a clear roadmap for the privatization and revitalisation of these plants has further stunted the growth of the industry.”

Popoola urged the government to take decisive action, including implementing policy reforms and fostering strategic partnerships with the private sector, to revive the industry. He warned that without such interventions, Nigeria’s steel sector would continue to struggle to meet the needs of local manufacturers, ultimately hampering the country’s industrial growth.

Former Minister of Mines and Steel Development, Dr. KayodeFayemi, in 2017 stressed: “Steel is the backbone of industrialization. Without a robust steel industry, economic growth remains elusive. Urgent steps are needed to revive it and reduce import dependence.”

Indeed, steel is a critical component for infrastructure development, construction, and manufacturing. Without a domestic supply, the country cannot achieve the industrial growth needed to create jobs and boost its GDP. The continued reliance on imported steel is a significant economic burden, especially at a time when Nigeria’s naira is weakening against major global currencies.

While the answer lies in a combination of poor governance, corruption, and policy inconsistency, some administrations have made genuine attempts to address the issues plaguing the steel sector while others have used the industry as a political tool, making promises that are never fulfilled.
For instance, in 2019, Nigeria signed an agreement with Russia to complete Ajaokuta Steel Complex, with Afreximbank providing funding for the project. Yet, the outbreak of the COVID-19 pandemic, along with unresolved political issues, stalled the deal. Today, the complex remains unfinished, and the same old promises are being made again, this time under President Bola Tinubu’s administration.

Stakeholders emphasised that the government’s focus should be on creating a long-term, sustainable policy framework that transcends political administrations which would involve removing bureaucratic bottlenecks, curbing corruption, and partnering with credible private-sector investors.According to them, without these fundamental changes, Nigeria’s steel industry is unlikely to fulfill its potential, and the country will remain dependent on imported steel for the foreseeable future.

PresidentTinubu, in his campaign in 2023, emphasised the need to revive Nigeria’s steel sector as part of his industrialization agenda. “We cannot talk about economic transformation without addressing the steel industry’s challenges.”Tinubu’s administration has prioritised the steel sector, including efforts to complete Ajaokuta and revive DSC. However, these goals necessitate coordinated efforts and a departure from the past neglect. Recent discussions with Luan Steel Holding Group to revive Ajaokuta have yet to yield results.

Reviving Nigeria’s steel industry is not impossible, but it will require a strategic, coordinated approach that addresses the root causes of its failures.
Experts said the government must develop a comprehensive industrial policy that prioritizes the steel sector and ensures policy continuity across administrations.

Furthermore, private-sector participation is critical. Successful steel industries in other countries have thrived on public-private partnerships, where the government provides the infrastructure and regulatory framework, while private investors bring in the capital and expertise.Nigeria must curb corruption and hold accountable those who have mismanaged the steel industry over the years. Without transparency and accountability, the billions of dollars that have already been wasted will pale in comparison to future losses.

The success of countries like China and India, which have leveraged their steel industries for economic growth, provides valuable lessons. A strategic, government-supported approach can transform Nigeria’s steel industry from a symbol of missed opportunities to a cornerstone of economic advancement.
Deputy Director at the Nigerian Export Promotion Council (NEPC), NdubuezeOkeke, noted that the industry has potential to generate substantial foreign exchange, but stressed that certain critical factors must be addressed to unlock this potential.

“Just like every other non-oil sector, the steel industry has the propensity to generate huge foreign exchange for the country. However, this can only be achieved when other critical factors are considered such as proper regulation of the sector, incentives to attract both local and foreign direct investments (FDI), and developing a framework for effective Public-Private-Partnership and Public-Public-Partnership. In this context, states and local governments, where these resources are located, must also become key stakeholders,”Okeke sated.

To support the steel sector, the NEPC is actively collaborating with relevant stakeholders, including the Ministry of Mines and Solid Minerals. The Council has established a dedicated department for Solid Minerals to promote the export of these resources. However, Okeke acknowledged that the sector is currently hindered by significant infrastructural deficits, including power outages, inaccessible roads, and inadequate water supply.

“The huge infrastructural deficit continues to impact negatively on the economy, not just the steel sector. There is a need to address these constraints to reduce importation, which accounts for about 70 percent of the raw materials needed for steel production,” Okeke explained.

He also pointed out that Nigeria’s economy is heavily reliant on oil, with the industry accounting for approximately 90 percent of foreign exchange earnings.“Therefore, effort should be geared towards diversifying the economy to ensure robust and sustainable growth, with the non-oil export sector, including steel, playing a significant role,” he added.

Okeke noted that while the steel sector has substantial potential, Nigeria is not yet in a position to compete globally.“What should be done now is to scale up production, regulate the sector, and create opportunities for local and foreign investments to drive the sector. Once these steps are taken, then we can talk about competing in the global market.”

An Assembly Engineer, TeminioluwaFamakin,who works in a manufacturing company lamented that the Nigerian steel industry, a sector with immense potential, is
being held back by poor infrastructure, high import duties, and inadequate workforce development.He pointed out that these challenges significantly increase logistics costs and limit production efficiency, making it difficult for the sector to thrive.

Famakin, emphasising the importance of investing in infrastructure, particularly a good transportation network and energy supply, said: “If the government invests in infrastructure like ports and energy, making them easily accessible, it will reduce logistics costs and improve production efficiency,”
He also urged the government to reduce import duties on machinery essential for steel production. “The machines used in steel production, which involve converting iron, coal, and other scrap materials, are mostly imported. Reducing import duties on these machines will help the industry significantly,” he explained.

To address the issue of workforce development, he suggested that government grants and funding could be directed towards training skilled labour to address shortages in the steel industry.Famakin noted that locally produced materials often face low demand due to perceptions of inferior quality compared to international products.“There is a belief that imported products are of better quality than those made locally. For example, Innoson vehicles are still limited to Nigeria because people perceive international brands like Toyota to be superior,” he explained.He also pointed out that the instability of Nigeria’s currency further complicates the situation for local manufacturers.

“The fluctuation of our currency impacts dealings with the international market, as transactions are based on foreign currency. The instability of the exchange rate makes it difficult for local manufacturers to plan efficiently.”The intense competition with international manufacturers, particularly from countries like China and the U.S., poses another challenge.

Famakin explained that global companies, which are well established, affect local pricing. “Many international companies have a strong presence, making it difficult for Nigerian manufacturers to compete. If local companies lower their prices to compete, they won’t be able to break even,” he said.
An industry expert, Dr. Kenny Odugbemi, called for immediate review of the management and governance structures of Nigeria’s key industrial projects, citing prolonged delays and financial mismanagement in both the Port Harcourt Refinery and Ajaokuta Steel Industry.

In a statement posted on social media, Odugbemi, who is the CEO of Inspection and Facilities Management Services, lamented how the turnaround maintenance of the Port Harcourt Refinery, which began in 2021, has been ongoing for four years with no end in sight. The Ajaokuta Steel Industry, on the other hand, has been under development for over 40 years without completion.

According to him, both projects have been riddled with inefficiencies, corruption, and financial mismanagement, including reports of payments to ghost workers.“These delays are not only embarrassing but also a huge waste of resources. After over four decades, Ajaokuta Steel is still a pipe dream, and we are yet to see any real progress in the Port Harcourt Refinery,” he lamented.

Odugbemi pointed to ghost workers and financial misappropriations as key issues holding back the success of these critical industries. “The system is broken.
We need competent professionals who can get things done.” He said a comprehensive review and overhaul is necessary to restore order and efficiency.”
He also emphasized the need to appoint qualified and experienced professionals to lead these critical projects and ensure that they are brought to successful completion.

To tackle the issue of financial mismanagement, the expert stressed the importance of implementing transparent and accountable financial systems, which would help curb corruption and ensure that funds are properly utilised.He further recommended that the government provide regular progress updates on these projects, suggesting that tracking and publicly reporting their advancements would ensure timely completion.

He urged the government to take immediate action, recommending the appointment of qualified and experienced professionals to oversee the projects, as well as the implementation of transparent financial management systems to curb corruption.

“The delays and inefficiencies in these industries are not just frustrating, they’re harmful to Nigeria’s economic development. The government needs to act now before these projects become permanent symbols of failure,”Odugbemi advised.