Harnessing potentials of Nigerian steel sector for sustainable growth
When recently President Goodluck Jonathan commissioned the multi-million naira WEMPCO Steel Mill Company’s 5-stand Tandem Cold Rolled Steel Plant in Magboro, Ogun State, he underscored the need for government and other stakeholders to create and sustain a vibrant steel sector to drive Nigeria’s industrialization programme.
Speaking at the commissioning ceremony held at the company’s premises, President Jonathan noted that steel was at the heart of any national economic development endeavour. As we all know, it is one of the most important materials used widely for both domestic and industrial purposes throughout the world.
A vibrant steel sector contributes to GDP growth, facilitates exploitation of natural resources and generates economic activities in downstream industries.
It also promotes job creation, the acquisition of technical skills, transfer of technology and the provision of machine parts and tools. In fact, no nation can industrialize without a vibrant iron and steel sector.
Continuing, the President noted: “The steel sector offers immense economic opportunities for our country, which we have not fully exploited.
This administration, however, aims to reposition this industry. The Ministry of Industry, Trade and Investment, in conjunction with other MDAs, has developed an Industrial Revolution Plan, which has identified the Iron and Steel Industry as a focal sector. This plan aims to develop the complete ecosystem of this sub-sector.
“I would like to assure existing and prospective investors of government support as we collectively strive for self-sufficiency in local steel production. I strongly believe that self-sufficiency will open major downstream sector activities with the attendant massive job opportunities and economic empowerment for our engineers, technicians, artisans, fabricators alike,” he opined.
While elaborating on the need to support the steel sector, Jonathan added that “You all may recall that a few years ago, we had less than five functioning steel rolling mills and no cold rolled steel mill, but today there are more than 15 functioning steel rolling mills producing reinforced bars and three functioning cold rolled steel mills producing cold rolled flat sheet of which Wempco is one of them.”
He urged the management of the company to continue to strive to expand its current production capacity to gradually meet the nation’s demand for flat steel sheets. He used the opportunity to encourage Wempco to embrace full backward integration in no distant time so as to produce hot rolled steel, a major raw material for producing Cold Rolled steel.”
Jonathan who spoke against the backdrop of the nation’s enormous natural endowment, including iron ore, tin, columbite and other raw materials that could boost the growth of a vibrant indigenous steel sector, believes that with appropriate incentives, Nigeria can emerge as Africa’s next industrial giant.
With Nigeria’s yearly demand for cold rolled steel flat sheets currently estimated at 1.2 million tonnes, and most of it still being imported, government’s improvement of the nation’s fiscal environment would be quite invaluable to achieving a level of self sufficiency in steel over the next few years thereby fast tracking her industrialization aspirations.
However, despite her several misadventures in steel sector development, most observers believe that the Wempco experiment presents another opportunity which Nigeria that currently imports substantial quantity of her steel requirement cannot afford to waste.
With production capacity, at 700,000 metric tonnes per annum and additional expansion capacity for 300,000 tonnes per annum, Wempco according to some commentators has enormous potentials to create jobs directly and indirectly thereby empowering many more Nigerians.
Stakeholders believe that with necessary encouragement, Wempco and other companies in the steel sector can reduce Nigeria’s imports and even make Nigeria a major exporter of various steel products in the long run.
Meanwhile speaking on how to achieve sustainable steel sector development, former President of Manufacturers Association of Nigeria (MAN), Alhaji Basiru Borodo, advocated consistent policy formulation framework coupled with implementation strategies that will give the sector the desired impetus.
According to him, the lack of policy consistency in the steel sector has been responsible for the current near demise and moribund status of key industries in the sector.
Borodo however added that with increased private sector partnership, government needs to protect genuine investors who are diring the storms of Nigeria’s harsh operating environment to revive the sector. The erstwhile MAN boss contended: “The owners of WEMPCO Group have been in this country for almost 60 years.
Though they may not be naturalized Nigerians, in their hearts, they are truly Nigerians having demonstrated true commitment and faith in investing in the country. It is important to state her that without government support, there wouldn’t be a meaningful industrialization. He further pointed out that the growth of the steel sector was a long term initiative, hence the need to create the right support and protection for the sector’s growth.
Borodo warned that it should not be a case whereby a sector drives itself to sustainability and a policy is then formulated to give undue advantage to some importers to exploit the industry to the detriment of key investors.
He noted for instance that as encouraging as the backward integration policy was, Nigeria still needs to be very careful and ensure that raw materials are sourced locally to avoid the dangers of subsidizing products from outside the country.
According to him, there is a compelling need to protect local manufacturers in the scheme in order to avoid a repeat of what happened in the cement industry, adding there was need for private investors to manage competition in the sector in order to drive the growth of the sector.
With the downturn in the sector over the last 20 years, following the marginal activities in the Ajaokuta Steel Company, private and foreign investors have since driven activities in the sector.
This necessitated the need for government to develop keen interest in the growth and sustainability of the sector through consistent policy formulation and implementation.
It must be admitted in the first place, it was government recognition of the relevance of the steel sector in the nation’s industrial development process, that prompted it to establish the Ajeokuta Steel Mill in addition to several other steel rolling mills across the country.
Unfortunately, most of these firms have become comatose or died naturally due to government’s policy inconsistency. Some observers have rightly credited former President Olusegun Obasanjo who as a military head of state set the stage to make the country self-sufficient in steel production.
Having drawn the roadmap for the construction of Ajaokuta Steel Company and Delta Steel Company (DSC). It was expected that his successors would build on such legacies after his exit as military head of state. Although, President Shehu Shagari commenced construction works on both sites in 1979, the tempo of steel development in th country later died down due to poor implementation strategies and foreign interference.
The location of DSC was considered primarily because of its coastal position as the high quality iron ore that was to form its raw materials was to be shipped from Brazil.
Industry critics have alleged that, some of the steel mills were wrongly sited for political reasons, with most of the rolling mills were producing rods instead of flats, while the mills, due to the fact that they were government companies, choice of management toed the line of political patronage and soon the companies were run aground Before then, Minister of Steel Development, Musa Sada, had urged private investors to partner with the Federal Government in steel manufacturing for the development of the country.
The minister said the Federal Government had provided an enabling environment for private investors to participate in the production of steel and other metallic alloys in the country.
He said government would only need to regulate the activities of the sector and give support to companies where necessary. “To the best of our understanding, the Federal Government has taken the right position.
No country in Africa has the highest steel manufacturing companies than Nigeria. The steel industry is the backbone of industrialization in any country and Nigeria is not an exception.
“The steel industry also has the highest employment in countries of the world and Nigeria is ready to develop its steel industry to boost the economy,” he added. The Group Managing Director of the WEMPCO, Lewis Tung noted that the company was ready to backward integrate and develop key products for both industrial and domestic use, while urging government to be consistent in its policies in order to drive industrial growth. Tung said his company was “ready to receive materials from the upstream industry.
This is a way to encourage investors to go into the upstream and back stream. The steel industry is the source of employment. Upstream is a source of huge employment opportunities. So also is back stream which accounts for spinoff industries that are not directly related to the steel industry.”
In the same vein, the Chief Executive Officer of the Company of Sun and Sand Industries, Bhushan Chandna, urged government to enact a friendly policy that would cover exports of the product to sustain a competitive environment. “We are proud to say that M.S. Wire Rod is now being manufactured in Nigeria and our company is the only one that accomplished this feat. “The manufacturing of the product in Nigeria will generate employment for the youth.
The product is friendly to the environment as it does not generate any pollutant,” he said. Similarly, Chief Executive Officer of African Foundries Limited, Sanjay Kumar, disclosed that Nigeria is on track to join the world’s largest producers of steel in the world from the year 2018, as the country’s potential for iron and steel production is progressively transformed into actual capacity.
Kumar said the company, which began steel production in Nigeria, 2010, churning out varied dimensions of iron rods for construction and other purposes, has now developed the business to a point where it has began to seek more market for its products outside the country.
“In the next 5 years Nigeria may be one of the largest producers of steel in the world. Nigeria is one of the richest countries in the world in terms of unexplored iron ore, so if steel is developed then it will lead to more mining and essentially more development for the nation’s steel sector and the entire economy,” he said.?
Explaining that the growth in the steel sector has been on the upward swing from year to year, the AFL boss noted that the industry was now heading towards the inflection point where demand for steel products will actually be outpaced by supply, stressing that this reality was the primary reason why the company began to explore the export market for other off takers for its products.
“Currently, we have an order of 5,000 tonnes of steel products and this has been produced and prepared for shipping out we are trying to get around the ancillary challenges of logistics occasioned by the large volume of the present order.
The Sun
