Nigeria’s Steel Industry In Distress

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[L-R] Group Director and Advisor, African Industries, Richhpal Singh; DG, MAN, Ogunmefun; GED, African Industries, Iwuamadi and CEO, Steel Business, Sanjay Kumar during the media parley on the challenges facing the Iron manufacturer companies in Nigeria, held at Moore House, Ikoyi, Lagos

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Africa Industries and the Manufacturers Association of Nigeria are calling on the federal government to enact policy that will save the steel industry which employ about one million Nigerians from imminent collapse

By Maureen Chigbo  |   Oct 12, 2015 @ 01:00 GMT  |

THE steel industry in Nigeria is in distress. Nigeria stands to lose more than N100 billion investments in the sector if the federal government fails to act promptly to salvage the situation. Already, four out of 30 companies in Nigeria which produces steel have shut down and more will follow soon because many are currently operating below 30 of production capacity. Most of these steel plants are now operating two weeks a month and are closed for the remaining two weeks of the month due to lack of demand. Cost of restarting each time is very high and adds to the cost burden of the ailing steel companies.

Stakeholders in the steel industry are worried about the sorry state of the sector against the background that steel is the backbone and the main thrust of all developed economies in the world. Also, Nigeria’s effort to industrialise its economy will not make a meaningful head way without a strong steel industry.

In Nigeria, the steel sector is relegated to the background except the continued mention of Ajaokuta Steel project which has remained dormant. It has not taken off despite the huge expenditure the government made on it over decades.

The fact remains that after agriculture, the steel sector in Nigeria is the highest employer of labour. Livelihood of more than 1 million people depends on these private steel companies. However, the steel industry is currently at the verge of total collapse just like what happened to textile industry if the government does not come to her rescue urgently.

Steel consumption is largely driven by government initiative on infrastructure projects. That is why Africa Industries and the Manufacturers Association of Nigeria say that the major area of rescue of the steel sector from collapse is for the federal Government to make a definite policy of patronising made in Nigeria steel products (iron rods) for all government projects and give specific directive to all their contractors to buy made in Nigeria iron 30 of production capacity.

As at now, there is complete neglect of the involvement of the players in the steel sector in the formulation of the Nigeria industrial policy. All over the world, due to importance of Steel in the development of the economy, the views and opinions of the key players from Steel Industry are usually sought and obtained by the government in the formulation of economic policies as is being done for the oil or financial Sectors. Unfortunately in Nigeria, the steel sector has been left out all these years.

This must be the reason Remi Ogunlefu, director general of the Manufacturers Association of Nigeria and the African  Industries, the largest steel manufacturing group in Nigeria decided to cry out before the fate of the steel industry becomes like that of the textile industries in the country. Textile industry which used to thrive in Nigeria is now dead and several effort by the federal government to resuscitate it have failed and more than 80,000 jobs have gone with it. In the case of steel industry, should a similar fate befall it, more than one million jobs will be lost. This figure does not include all the indirect jobs that the sector provides in the country

This is why Ogunlefu stressed that the concern being raised about the steel industry should not be wished away. “I know four companies which are already closed and many more which are on the verge of closing. Some steel companies are threatening closure. They bring the keys of the factories to show me, saying they will close.

“The problem is patronage. We are producing but there are no patronage. How are the local companies going to survive with waivers being given to foreign companies to import steel. You have to put pressure on the people to patronise Nigerian products,” Ogunlefu said.

According to him, Nigerian products are good and steels produced in the country can stand anywhere in the world. The industries are certified. So why will they not be patronised. For every product that is imported in Nigeria, we are exporting Nigerian jobs; jobs that will be used to create jobs in country is exported out. This is the age of diversification but policies have to be created to support the industry,” he said.

Agreeing, Sanjay Kumar, chief executive officer of African Industries said that Nigeria is in a position to produce world class steel. But he stressed the need for made in Nigeria policy for steel production, adding that the industry is not in the best of shape and that something needs to be done urgently. Acknowledging the challenges facing the sector, Kuma said that African Industries alone has invested well over N20billion in Nigeria.

Lending credence to above, Uche Iwuamadi, group executive director, is of the view that steel consumption is largely driven by government initiative on infrastructure projects. According to him, the major area of rescue of the steel sector from collapse is for the federal government to make a definite policy of patronising made in Nigeria steel products (iron rods) for all government projects and give specific directive to all their contractors to buy made in Nigeria iron, that is 30 percent of production capacity.

There is complete neglect of the involvement of the players in the steel sector in the formulation of the Nigeria industrial policy. All over the world, due to importance of Steel in the development of the economy, the views and opinions of the key players from steel industry are usually sought and obtained by the government in the formulation of economic policies as being done for the oil or financial Sectors, he said. Unfortunately in Nigeria, the steel sector has been left out all these years.

This situation has to change especially beause the Standards Organisation of Nigeria, SON, has certified the African Industries Limited, the largest steel manufacturing group in Nigeria. The group has four steel manufacturing plants located at Ogijo (Ogun), Ikorodu (Lagos) and Suleja (Niger). African Foundries (AFL), the Flagship company of African Industries Group is one of the few steel companies in Nigeria producing iron rods meeting British standard (BS 4449-2005 Grade 8500B). It has capacity to produce 0.5 million tons of BS 4449-2005 Grade B500B Iron rods. AFL has international standard testing laboratory equipped to measure mechanical and chemical properties of Iron rods and automatically test its geometry done in European steel plants.

AFL follows all management practices laid under IFC and World Bank guidelines. African Industries got involved in the Steel manufacturing in their quest to meet a gap between demand and supply at the beginning of democratic dispensation in Nigeria in 1999. At that point in time the government started with the rebuilding of infrastructure and there was a clarion call for direct foreign investment. There was confidence in the Federal Republic of Nigeria for foreign investors to invest because of the democratic ideals. Furthermore, we wanted to be part of the foundation of the industrial policy of Nigeria knowing too well there would not be any concrete industrial revolution without steel.

Nonetheless, the federal government of Nigeria under the present leadership can reverse the trend for the survival and resuscitation of the steel industry.

Some of the measures the federal government can take to change the industry is to create a local content policy of using made in Nigeria iron rods in all small and big government projects, prevent dumping of steel products, create a special power tariff for the steel Industry, make available an intervention fund at lower interest costs to prevent the immediate collapse of this private steel industry where many are operating below 30percent capacity and overburdened with high interest costs. There is also the need to stop all waivers/concession for certain infrastructural development. The portion of Iron rod importation in any waiver should be expunged, curtail multiple taxation imposed by the Federal, State and Local Government agencies,  review the high cost of Gas considering that Nigeria has huge gas reserves. The cost of gas in Nigeria is US$7.31/mmbtu as against US$4.2/mmbtu in USA.

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