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Reviving the Steel sector

By Pini Jason
FOR any Nigerian enthusiastic about our groping our way back unto the road to industrialisation, the two pieces of news I read recently must be heart-warming. Last week, a company in Lagos, African Foundries Limited claimed that it would begin to export steel products on 27 April 2013.

This week, on Thursday 18 April 2013, President Goodluck Jonathan, GCFR, is going to Commission Wempco Steel Mills Ltd located at KM 8, Lagos-Ibadan Expressway. What makes Wempco’s 5-Stand Tandem Cold Rolled Steel Mill important is that it is going to produce flat sheets!

Let us take our minds back to the ’70s and early ’80s. Ikeja and Iganmu areas of Lagos boasted of several steel foundries and steel end user factories. I remember some companies that produced refrigerators and air conditioners in this country. We had vehicle Assembly plants that were able to fabricate some of their parts locally.

Others factories were fabricating steel chairs and steel cabinets. Today those foundries and factories are shop front churches. The same is true of many Textile and shoe factories. The products of those factories are today being imported, a great drain on the nation’s foreign exchange.

The Wempco Mills which President Jonathan will commission on Thursday is a game changer in Nigeria’s industrialisation, because it is going to produce flat sheets. We all know that steel is at the root of industrial revolution. We only need to look around our homes and appreciate the numerous household products that are made of steel, especially flat steel, from refrigerators, air conditioners, computers, printers, standing and ceiling fans, enamelware to aerosol cans.

Look outside and see the oil tank farms, oil pipelines, ship and auto bodies, tubes, pressure vessels and roofing sheets to appreciate the importance of steel in our lives. It is for this that at a time, the development level of countries was measured by their consumption of steel. Major developed countries like USA, Germany, Japan, Britain and France are still heavy consumers of steel.

The world’s steel production stood at 790 million metric tonnes in 1999-2000 and 50 per cent of this was produced in developing world. But regrettably, Nigeria was not there! India at the same period produced 1,686,700 metric tonnes and is 100 per cent self-sufficient in Cold Rolled Flat Sheets, satisfying over 50 per cent of India’s requirement in the auto sector. It is not surprising that Tata Steel of India progressed from being a major steel producer to a major auto maker in India with their  vehicle products making in roads into Nigerian market today.

In fairness, the Federal Government recognised the centrality of steel in the nation’s development and tried to address our need. It set up the Ajeokuta Steel Mill as well as several Steel Rolling Mills across the country. But politics ruined that effort. First, some of the Steel Mills were wrongly sited purely for political reasons. Secondly, most of the Rolling Mills were producing rods instead of flats.

That was understandable given the boom in the construction industry in the seventies which occasioned the infamous cement armada! Thirdly, because the Mills were government companies, choice of management toed the line of political patronage and soon the companies were run aground! Even to sell these Mills off to private hands for better management have been fraught with politics and corruption!

When the President commissions the Wempco Mills on Thursday, Nigeria would be taking a significant step towards creating impetus for our steel industry and local contents. Nigeria’s annual demand for cold rolled steel flat sheets today is estimated at 1.2 million tonnes, unfortunately, mostly imported.

The Wempco production capacity, I understand, is 700,000 metric tonnes per annum with additional expansion capacity for 300,000 tonnes per annum. With necessary encouragement, Wempco and other companies in the steel sector can reduce our imports and even make Nigeria a major exporter of various steel products in the long run.

It will be recalled that, in the ’70s, many industries thrived in the country through incentives such as refunds and duty draw back on raw materials used to produce goods for export. Nigerian industries were also protected through fiscal measures that imposed high import duties and absolute prohibition (trade) on goods produced in Nigeria and low or outright exempt on duty on essential raw materials. Excise duties were annually structured to encourage local production.

Tax reliefs were also extended to pioneer industries. The Customs had all the incentives to tackle smuggling and concealment, before some smart Alec brought pre-shipment inspection that ceded Customs job to foreigners whose companies are in competition with our local manufacturers! With the above incentives, industries boomed in Nigeria. Although some foreigners abused some of the incentives, yet our industries were waxing strong and providing the needed jobs.

But in 1973, following the post Yom Kippur war oil boom, we removed all restrictions on imports, opened our borders for dumping and the factories began to die while we watched the Excess Crude Account! Even today, Nigeria is still a dumping ground for goods we can produce here. It is mere hypocrisy to cry for investments without protecting the local industries, World Trade Organisation or not. The other day, I bought a bunch of bananas only to discover that it was imported from Camerouns! Bananas?

If you consider the number of end users that will utilise Wempco’s flat sheets and the jobs that will be created for engineers, electricians by fabricators and makers of the end user products I enumerated above, as well as artisans-mechanics, painters and drivers-we will be looking at almost 50,000 direct jobs and limitless other job opportunities.

But the company, like many others, is likely to have the usual Nigerian fiscal mismatch of its raw materials attracting the same rate of duty as similar finished imported products. I can bet that because of attendant deficit, it may have even invested a huge sum in providing power, water and bad roads, not to talk of insecurity.

These items often increase cost of production and make goods uncompetitive in Nigerian against imported ones. And that is inimical to our Made-in-Nigeria drive. So the Federal Government has a duty to jealously protect investments that provide jobs in the country. That is its primary responsibility because no government can provide all the jobs needed by its teeming unemployed.

This must be emphasised because notwithstanding that Nigeria has enormous gas reserves and even flairs enough to sustain some African countries, yet, one of the major challenges dogging our power sector is inadequate of gas supply! Nigeria is blessed with abundant iron ore, coal and gas.

Ordinarily, there should be no reason for us not to be a major player in the steel sector, except, as I said earlier, bad politics and government’s policy of inconsistency and instability. This is the time to begin to understand the needs of manufacturing industries in Nigeria and systematically solve them. Last week, the Minister of National Planning, Dr ShamsudeenUsman said that the Transformation Agenda of the Federal Government is a medium term development strategy to speed up Nigeria’s march towards becoming one of the 20 largest economies in the world by 2020.

He said the strategy is anchored on job creation and laying a foundation for robust economy (Sunday Sun 14 April 2013). President Jonathan’s trip to Wempco Mill Ltd on Thursday must not be purely ceremonial. He must go beyond the tape cutting ritual to have a private audience with the company and the Manufacturers Association of Nigeria, MAN to understand and address their problems.

 


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Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.