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Non-oil business, still threatened


The inability of Nigeria not only to fulfil its dream of launching a full scale production of its iron ore potential, but successfully privatize the iron ore industry, is no doubt raising concern just as there are rumours of government’s plan to initiate an out-of-court agreement in the arbitration.

ABUJA—Iron and steel industry is of strategic importance to any developing economy. Its place is of great significance in any meaningful national effort towards industrialisation. The pivot role of iron and steel products in a nation’s economy is attributed to their widespread utilization in all facets of the manufacturing industry.

Nigeria had expected significant iron ore production from the Itakpe iron ore deposits to reduce its dependence on oil and gas revenues.

Since the country discovered oil, all its attention has been on the oil, neglecting other areas. But of recent, the Federal Government found out that mining would be one of the key areas that the country can pick on to diversify from the oil and gas sector.

Nigeria, which gets nearly 80 per cent of its revenues from oil and gas production, was to start receiving revenue from iron ore production as Itakpe iron ore deposit is said to contain three billion tonnes of iron ore reserves.

Initial production from the mine was expected to be 2 million tonnes a year, ramping up to 20 million tonnes annually in five years, a development that will help Nigeria establish a track record in the mining industry and allow it to attract more investors.

The mining of minerals in Nigeria at present, accounts for only 11 per cent of the country’s GDP, due to the influence of its vast oil resources. The domestic mining industry is under-developed, leading to Nigeria having to import minerals that it could produce domestically, such as salt or iron ore.

The foundry workshop at a Steel Company.

This became so only when Federal Government made it possible through mining leases, that rights to ownership of mineral resources in the country is held by it. The law made it that, it is only the Federal Government that grants titles to organisations to explore, mine, and sell mineral resources.

The National Iron Ore Mining Project, NIOMP, at Itakpe is earmarked to supply the total 2.155 million tons per year iron ore requirement of the Ajaokuta Steel Project.  In addition, it is contemplated that the project would also supply about 40 per cent of the requirement of the Delta Steel.

But all the efforts at realising these dreams have remained futile. The hope of making the nation’s iron ore company, located at Itakpe, Kogi State to come to full work became bleak when it was concessioned alongside the Ajaokuta Steel Industries to an Indian firm, Global Infrastructure Holding Limited, GIHL.

The agreements entered before the two companies were given out to the firm were terminated when startling revelations later emerged that there were certain irregularities as well as non-adherence to due process, a development the Indian firm is challenging currently at the arbitration.

But with the seeming unending case at the arbitration, the Federal Government is said to be frustrated and hence planning  to go back to the controversial concession agreement with a view to  re-instating the Global Infrastructure Holdings Limited, GIHL, to commence production in the firms.

This development, which seems to show Federal Government’s confused state on how to resolve the lingering crisis on the revocation of the concession agreement with the Indian firm, experts in steel industry said, would be against the country’s interest, considering the revelation of shoddy deals that were said to be carried out by government before the official concession and the company which had removed most essential components of the firms after the concession.

Sources said correspondences to the effect has gone round to concerned parties informing that the Federal Government would revisit agreements with GIHL and fine tune the contract to favour both sides.

The rumoured return of GIHL, as learnt, was part of the outcome of the out-of-court settlement adopted by the two parties owing to the huge judgement cost which was still high after arbitration.

The Federal Government had in 2008 revoked the concession agreements with GIHL, citing asset stripping and failure of the group to comply with the major provisions of the agreement. This became a subject of litigation at the instance of the group; with a judgement debt hanging over the Federal Government which sources informed is still outstanding.

“The return of GIHL seems to be government’s way out of the logjam because government cannot pay the judgement cost which runs into millions of dollars. Government cannot also sell both Ajaokuta Steel and the Iron Ore and Mining Company in Itakpe without settling the issue of GIHL. So this is the problem”, said a source.

The government further faces a dilemma on what to do with the Ajaokuta staffers that have not been paid since the concession agreement.


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