The industrialization of the Nigerian economy has remained a mere wish until now. However, in this interview, the Minister of Mines and Steel Development, Arc. Olamilekan Adegbite, told Vanguard how the Ajaokuta Steel Mills will change the story. He also explained that work has been going on to sign the proposed agreement with the Russians to complete and put the plant into operation.Excerpts:
By Emma Ujah, Abuja Bureau Chief and Gabriel Ewepu
WE have seen that you are passionate about the development of the downstream sub-sector of the solid minerals industry. What is the driving force and why do you think the downstream sector requires a new focus?
That we derived from the original mandate of the Ministry and the mandate of the President is create employment and to increase the revenue base. If you look at the industry, value is lost by exporting raw ore. By exporting minerals as they are mined we lose a lot of money. Minerals require value addition and of course such lessons have been learned from the oil industry.
Cost of bringing back refined petrol
Look at the export of crude oil and look at the cost of bringing back refined petrol, diesel, kerosene and all that. If we could just add the value locally we could now export refined products and that would make a lot of money for us and save us foreign exchange as well.
We don’t want to go down the same road in mineral export. People export raw ore, for instance when you export other minerals let’s say one tonne of raw tin as mined, if you convert that to tin ingots what you probably get from exporting the ore is a mere 35 per cent .
If you refined and get the real property of tin and you export it, you will sell it at a higher value and you would have reduced your cost.
Meanwhile, when you export the raw tin you are exporting a lot of impurities which is of no value. The buyers are going to buy it cheaply and now whoever you sell it to will have to do the smelting to get out what they need which is the tin-ingot.
So if you do that locally you get better value and you also create employment in that process, because that process itself goes through some certain stages which will need human resources.
Therefore, essentially, we are trying to focus on the downstream to create that value and also to create jobs for our people. That is why we are reviewing development policy for the downstream sector.
Why are miners and traders in minerals sector exporting them in their raw forms?
One, government has not focused on it, so there is no policy in place. What we are doing now is that we are drafting a policy that is on my table right now. It has to go through some processes. It has to go to the (Federal Executive) Council before we can gazette and put it out for implementation. It does not have to go to the National Assembly, but it needs to go to Council for approval. There was no focus so people could do whatever they wanted. Two, the fact that mining is largely on informal side- it is mostly artisanal mining that our people do.
These are people who are doing subsistence mining and not the right investments into mining. Now they use crude methods, simple implements to get minerals out and they cannot invest in the kind of effort that you need to process these materials. All they want is to get something out and make a little money to take care of their families and immediate needs. That is why they are called artisanal miners.
Now, Nigeria is reaching a point that we are attracting the large investors, the majors are beginning to focus on Nigeria and they want to come in. We need this kind of policy in place so that the time they are here, you don’t start exporting the raw minerals. Nigeria will not benefit, we get the rough end of the stick because they will pay us very low, we lose all the jobs in the value chain downstream.
That is what I am saying- let us put this in place now and as we progress, we also encourage the artisanal miners to sell to what government has created now. We have created approved Buying Centres. Whatever you realize in the raw form, sell it to our Buying Centres. They buy it from you at the right rate, they would not cheat you.
Right now there are some charlatans who cheat people they go to them because this people are desperate. They pay them next to nothing for their efforts. But if you go to our accredited Buying Centres, they will not cheat you.
Now these Buying Centres are now linked to the downstream people, people who have smelting plants. For instance, now we have given license for two gold refineries in Nigeria and they are already been built, one is in Abuja and the other in Ogun state.
Therefore, instead of taking your gold out in that raw form, gold can be refined in Nigeria, to the value of what is quoted in the stock exchange. Gold is now having the highest rise. Gold is now selling for $1,600 per ounce.
So Nigeria can participate in that, when we refine the gold in that line it’s called the four nines (99.99), but when you export your gold in the raw form, people will buy it cheaply from you and they will get the rich end.
You have talked about the inability of the artisanal miners to invest in large plants requiring huge capital outlays, what steps are you taking to not only attract foreign investors- the big majors you are talking about, but even Nigerians to see that there is an opportunity in this sector so that they can massively in the sector and that could even encourage foreigners to invest?
It is because mining itself comes with some risk and mining itself is not yet understood in Nigeria, we have lost mining for a while. The solid mineral industry was the mainstay of the nation’s economy in 50s, 60s, and even 70s, but since we discovered oil in 1956, mining has been on the decline.
The knowledge of mining is not there and people want to put their money in what they know and that’s what the ministry is doing now. We are embarking on advocacy and sensitization to let people know that there’s so much in the sector.
All people know is that gold sells so much that’s why you have a lot artisanal miners in gold, but you see beyond gold there are so many minerals. Nigeria has identified 44 minerals till date and still counting because we are still spending more on exploration. So Nigeria has a lot and while people are focusing on gold, there are even gem stones that are even more expensive than gold, and people don’t know.
That is why artisanal miners are focused on gold, but there are other minerals they don’t know that we have in Nigeria that can be tapped into.
Use mining licences or lose them
There are a lot of Nigerians who have licenses but are holding unto mining licenses, they don’t want to commit because of the risk. That’s another advocacy we are doing. We want to clean up the sector because the law says if you are not doing anything with it will be revoked. The law of mining licence is “use it or lose it.”
I think recently we revoked about 1, 800 licenses and it is a continuous process. We go through the list to find people who have it and have not used it because when you are doing the right thing you are supposed to be filling a report to the Cadastral Office and the mining Inspectorate. When you are not filing such reports, it means you are not doing anything with it. The law says you use it or lose it.
Sir, following on that line, when you announced a plan to have an agreement with Russians towards the completion of the Ajaokuta Steel Complex, there was a lot of euphoria because Ajaokuta is considered a low hanging fruit. What exactly is the status of the planned agreement with the Russians?
It is good that we went to town then, it was something that was worth celebrating.
The President went to Russia with the basket of requests, that was during the Russia-African summit in Sochi in October last year. On the sideline of that summit, we had a bilateral with the Russian President.
One of the requests that was tabled was for the Russians to come back and complete Ajaokuta, minding the fact they built it in the first place, when they were Soviet Union. It was essentially the Russians and the Ukrainians under the Soviet Union- it was big country then, that built Ajaokuta, to about 95-98 per cent completion.
The request that we made was, we’ve tried some commercial to complete Ajaokuta avenue in the past which have failed, so now we want to try a government to government arrangement.
And president Putin acceded to that and promised that the Russian government will do that. The beauty of it is that we got funding- the Russian Export Centre which is akin to what is called EXIM Bank in other countries pledged a sum of $460million towards this project, while Afrixim Bank which is the bank that we are also shareholders, also pledged a billion Dollars.
The beauty of it is that the money is not tied to Nigerian revenue. It is tied to revenue from that company. So Ajaokuta is beholding to pay back the money that is used to complete it. That is why this is a Build-Operate-Transfer. It is the details that we are going to work out. The kind of money it needs to be running. Ajaokuta is such that we do it properly. There’s a business case for that and it can pay for itself.
Catapulting into the industrial era
That was too good a news to keep to ourselves and so we went to town and that’s why that was celebrated because Ajaokuta is something that is just waiting to catapult us into the industrial era. Nigeria is not industrialised because to produce simple implements, complicated tools, vehicles, aircraft parts you need steel.
And that’s the problem we have in Nigeria, we have not been able to manufacture those things because we do not have steel.
We need to produce liquid steel which can now be manipulated into many other things. Once you produce liquid steel, you can do anything you want with it, you can alloy it- that is add some metals because you want to have some benefits from that alloy. You can change it to flat sheets, which of course goes to form other shapes, you can start making body parts for cars. That is why everybody is excited about it.
What is the status of Itakpe in this new arrangement?
Itakpe and Ajaokuta shoud have even been the same company. Itakpe was created solely because of Ajaokuta. For you to produce steel you need iron ore. Now when the steel policy was being formulated in the 60s or so. The iron ore deposit in Itakpe is so vast but it is not the biggest in terms of reserve. The biggest is actually also in Kogi, it is Agbaja, but that comes with a flaw in it because it has phosphorus in it. Phosphorus in iron makes the steel to be brittle.
In Agbaja the iron content is higher but it has phosphorous the richer the ore in terms of iron content the better for making steel. Itakpe iron content is lower but it is pure so they settled for Itakpe and why that company was now built, the company was built as a beneficiation plant. What is found in Itakpe is about 35% pure iron. With the beneficiation that is enrichment that is done at Itakpe through a process that’s why it’s a whole company, it upgrades to about 65%, 68% iron content which is now sent to Ajaokuta and that’s why a rail line is built between them. Like I said NIOMCO and Ajaokuta are tied together. NIOMCO just needs a few refurbishments.
Don’t we have issues about the Indians who took it….
The Indians issue is actually with Ajaokuta itself and not with Itakpe, Itakpe is clean.
And has the legal issue around Ajaokuta been resolved?
Its ongoing, it’s a parallel issue, it is been resolved. The Bureau Public Enterprises is handling that so it is been resolved and we are making progress, we had a meeting in December towards the resolution of that, so that legal process is been resolved legally while this process to revive Ajaokuta is also going on.
What’s the update on BOI loans for miners?
The beauty of it is as of now two have been granted but I think about 20 loan applications have been approved and those 18 people that have not been disbursed are to fulfill one or two requirements. Till date, the total application for the loan even exceeds the money that we have there. The government put N2.5 billion, BoI has a marching fund of another N2.5 billion making it N5 billion. But the application till date is about N9.8 billion so even far in excess of what we have there but those who have met the criteria and have been approved areabout 20.
Essentially people are just realizing that this is not your share of the national cake. This is something to help you. The interest rate is very low, it is five per cent and it is supposed to help you in your mining operations so that it can contribute to the bottom line for Nigeria in terms of revenue, employment. That is why government put this money in place.
A lot of people had that mistaken impression that this is their own, so they went there with the intention of not having the proper paper, means of paying back. So if you took the money and unable to pay back others won’t be able to benefit, it suppose to be a recycling thing.
How are you going about resolving the friction between the federal and state governments in the industry? The states claim ownership of land while minerals are on the exclusive list?
We are resolving that problem and it is through advocacy. I went to the NEC (National Economic Council) which is of course chaired by the vice president, something in October last year to present our problems. You know NEC is made of governors and the Vice President. So the governors also expressed their grievances against what federal government is doing and all that.
Resolution ofthe problem
We all agreed that for this to work, all governors accept that this is a constitutional matter -that mining belongs to the federal government exclusively. But they have a few things that they think we should do to carry them along. So a committee was set up to be headed by the immediate past Minister (Kayode Fayemi), who is now a governor now. Wearing those two caps, he knows where the shoe pinches, so to speak.
He is the chairman of that committee which was formed by NEC to help us resolve all these. I am a member of that committee and a few other governors. It is for us to harmonize our positions. I think it is something that we are working out. Beside that myself and the minister of state will be visiting a lot of states on advocacy. I was in Lagos, Osun, Nassarawa, and I think the Minster of State has been to a few other states also. We are getting good responses from all these governors and everything seem to be going on very well.