The Grey Chronicles

2009.July.13

Understanding GSHL: The Nigerian Negation



NigeriaIn 1967, Soviet experts conducted a feasibility study to setup an iron and steel plant in Nigeria. A joint USSR-Nigeria magnetic surveys in 1970 found reasonable quantity of raw materials suitable for steel production: over 200 million tons iron ore deposits at Itakpe; 120 million tons coking coal at Lafia, Nassarawa State; marble at Jakura and Ubo in Kwara State; limestone at Mfamosing Cross River State; dolomite at Barum and Osara; and refractory clays at Onitbode/Oshiele. The Nigerian Steel Development Authority [NSDA], which metamorphosed into the National Steel Raw Materials Exploration Agency in 1987, was commissioned in April 1971. Ajaokuta Steel Co. Ltd. [ASCL] was established on 18 September 1979 in Kogi State. Delta Steel Co. [DSC], commissioned in January 1982, was followed in December by the establishment of three inland rolling mills at Katsina, Oshogbo and Jos, each with 210,000-mtpy capacity, to manufacture iron rods, bars and wires using DSC billets.

Ajaokuta Steel Company Ltd. [ASCL] was planned to be built in three stages. 1.3 million tons per year [Mtpy] of liquid steel in phase one, 2.6Mtpy in the second and 5.2Mtpy in the third phase. Subject to demand, the plant can be expanded up to 10-Mtpy. The plant, a joint venture between ASCL and Ferrostaal AG, is about 95% technically completed whereby commercial activities take place in the light section mill, the wire rod mill, the power plant, the engineering workshop complex, and the manufacturing and erection base (Chigbue, 2006).

The 1.0-Mtpy Delta Steel Company [DSC] was established in Ovwian-Aladja in March 1979 for the realization of an Integrated Steel Plant based on Direct Reduction Process. It was mainly designed to produce Steel from Iron Ore through Midrex Reduction cum Electric Arc Furnace technology. Delta State presents strategic advantages for its nearness to natural gas fields, a navigable sea channel, and large-scale electrical power generating stations (Chigbue, 2005). It stopped operations in 1996 due to lack of working capital, government incentive and patronage plus other incessant interferences (ISSAN, 2007)


Sometime in 2004, Pramod Mittal was introduced to Nigerian President Olusegun Obasanjo by one of the president’s sons. Pramod Mittal convinced the president that he could resuscitate Nigeria’s steel industry and cause it to work on the following terms:

a) The sale of Delta Steel Company [DSC] to GIHL,
b) With the purchase of Delta Steel Company, GIHL would be given the management contract of both Ajaokuta Steel Company [ASCL] and Nigeria Iron Ore Mining Company [NIOMCO] at Itakpe, and
c) Concession of NPA port facility at Warri for the exclusive use by GIHL (Umar, Sahara Reporters 2007).

Delta Steel Company [DSC] was sold in February 2005 under Nigeria’s privatization programme to Global Infrastructures Nigeria Limited [GINL], a subsidiary of Global Infrastructure Holdings Ltd [GIHL]. Nigeria’s BUA Investments Ltd., which had offered $31 million ($20.5 million, per Sahara Reporters), was initially named preferred bidder at a public auction in the capital Abuja but the deal was revoked weeks later by Bureau for Public Enterprises [BPE] after Pramod Mittal offered $30 million, which was not even part of the bidding process (The Business Standard, 2008). GINL bought 80% shares while 10% each have been for workers and community. Accordingly, GIHL absorbed 1800 workers out of 2800 it inherited. (ISSAN, 2007). Ubochi of Nigeria World (2007) lamented later that Nigerian government spent $1.45 billion on DSC, then renovated it for $45 billion and sold it to GIHL for $30 million to be paid over three years.

Earlier, in August 2004, GIHL signed a 10-year management contract of Ajaokuta Steel Company Ltd. [ASCL] (Mbachu, LiveMint, 2009). Similarly, GIHL retrenched 1417 workers out of about 4000 it inherited. (ISSAN, 2007).Nigeria spent $4.4 billion on ACSL, but, sold it for paltry $300 million to GIHL (Ubochi, Nigeria World, 2007). In February 2006, SOLGAS USA revealed to have brought GIHL in as a subcontractor to ASCL and claimed that the new Concession Agreement was fraudulently conceived; whereby GIHL management, including Love Kumar Sharma, Power and Steel Minister Liyel Imoke, and Dr. Gbenga Obasanjo, son of President Obasanjo, conspired on 14 August 2004 the successful removal of SOLGAS from ASCL (Igbikiowubo, Vanguard, 2006).

In 2002, Nigeria entered into a concession agreement with SOLGAS Energy Limited, a subsidiary of SOLGAS USA, for a period of ten years to manage and operate the plant (Chigbue, 2006). After about two years of dismal performance Nigeria was forced to unilaterally terminate the contract, for which SOLGAS instituted legal action against the government in a London court demanding damages worth billions of dollars (Umar, Sahara Reporters, 2007). Nigeria terminated the $3.6 billion deal citing SOLGAS’ failure to come up with the money within the stipulated time (The Business Standard, 2008).

Moreover, a network of civil society groups seeking to ensure transparency, disclosure policy and business confidentiality, Global Transparency Initiative [GTI] petitioned the Nigerian National Assembly on 17 July 2006 to investigate. GTI accused Obasanjo of using Imoke to mastermind the termination of the SOLGAS contract and to install GIHL as the new ASCL holders. It alleged that “Imoke had confessed that he was acting under the instructions of Obasanjo, Pramod Mittal of GIHL and Seun Oyefeso, Executive Vice Chairman of SOLGAS Nigeria and former ASCL Vice Chairman, to conspire to forge/create documents to legitimize their actions.” Obasanjo and Imoke knew of a confidentiality agreement between GIHL and Solgas, GTI insisted (Udo, 2006).

Less than three months to the end of Obasanjo presidency, GIHL proposed a joint venture partnership in which the GIHL will own 60% of ASCL, the federal government, 30% and the Nigerian public, 10%. Reciprocally, GIHL promised to build a new 3.0-Mtpy steel plant within ASCL to complement the existing 1.3-Mtpy. In the proposal, GIHL asked Nigeria to fund its proposed shareholding in ASCL by turning over some of the existing assets, priced at $300 million, to GIHL. If the assets of the steel plant are not enough to pay for government’s 30% stake, the balance will be recovered later from government’s earnings. It also asked for government support in form of finance or granting it the right to lift 160,000 barrels of oil per day, land allocation of 50,000 acres, supply of natural gas at subsidized rates and long-term rights to some iron ore mining plants located across Kogi State. Dr. Sanusi Mohammed, Secretary-General, African Iron and Steel Association, AISA, said it was ironic that the proposal clearly reveal that the objective of GIHL is not to produce liquid steel at all, but to take Nigerians for a ride. Unfortunately, Obasanjo government approved the proposal in very unclear circumstances (Odunlami, The News, 2007).

In 2005, GIHL signed a ten-year management contract to run National Iron Ore Mining Co. Ltd [NIOMCO] in Itakpe (Handique LiveMint, 2008). GIHL retained 1200 workers out of 1800 staff (ISSAN, 2007). Since it took over Itakpe GSHL has not paid a dime to Nigeria in accordance with the Concession Agreement for 138,504 metric tons Iron Ore Concentrate, valued at $15 per ton, it took over when it came. GSHL has carried and made use of the products in Aladja (Delta) but have refused to pay for it (Melah, 2007).

All the terms enunciated by Pramod Mittal were met by the Federal Government of Nigeria. Furthermore, Nigerian government decided to make GIHL business environment even more conducive. Julius Berger was given the contract for the construction of a 25km rail line between Agbarbo to Delta Steel jetty and Warri port, to be completed by April 2007 just before Obasanjo’s departure. A contract was also awarded for the dredging of parts of Warri River and moving out of oil pipelines to create lanes for the movement of goods by GIHL. This clearly indicates president Obasanjo’s personal interest in the business (Umar, Sahara Reporters 2007).


Notes:

Chigbue, Irene & A. Udofia (2005). Delta Steel Company (DSC). Lagos: Bureau of Public Enterprises, 27 April 2005. back to text

Chigbue, Irene & A. Udofia (2006). Ajaokuta Steel Company Limited. Lagos: Bureau of Public Enterprises, 10 February 2006. back to text

Handique, Maitreyee (2008). Global Steel owes salaries, answers. New Delhi: LiveMint, The Wall Street Journal, 02 April 2008. back to text

Igbikiowubo, Hector (2009). Solgas USA condemns Ajaokuta’s ‘new’ concession pact. Lagos: Vanguard Media Ltd., 20 February 2006. back to text

Iron and Steel Senior Staff Association of Nigeria [ISSAN] (2007). A Brief Summary of the Nigerian Public Iron and Steel Industry in Perspective. Online: ISSAN, October 2007. back to text: 1 | 2 | 3 | 4

Mbachu, Dulue (2008). Nigeria revokes sale of firms to Global Steel. New Delhi: LiveMint, The Wall Street Journal, 04 April 2008. back to text

Melah, Bonaventure (2007). Mega Fraud at Ajaokuta. Elendu Reports Online: Elendu Reports, 18 April 2007. back to text

Odunlami, Tayo (2007). Privatisation Scams Of OBJ’s Era. Lagos: The News, 24 September 2007. back to text

The Business Standard (2008). Nigerian shock for Global Infra, Kolkata: The Business Standard, 04 April 2008. back to text: 1 | 2

Ubochi, Temple Chima (2007). Nigeria: Are We Not Giving Too Much Ourselves Away?. Abuja: Nigeria World, 23 August 2007. back to text: 1 | 2

Udo, Bassey (2009). Dr. Gbenga Obasanjo, Imoke named in Ajaokuta scandal. Online: Jelsoft Enterprises Ltd., 24 July 2006. back to text

Umar, Col. Abubakar (2007). How Obasanjo and Co. Looted Nigeria in 8 Years. Sahara Reporters, 2007. back to text: 1 | 2 | 3

Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 LicenseDisclaimer: The posts on this site do not necessarily represent any organization’s positions, strategies or opinions; and unless otherwise expressly stated, are licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

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4 Comments »

  1. THIS IS WHAT HAPPENS WHEN CORRUPT LEADERS SELL OUR COUNTRY. NOW AGAIN AJAIKOUTA IS BEING PRESENTED ON A PLATTER TO BE STRIPPED AGIN AND UNFORUTANELY OUR LEADERS ARE PAYING SOME MONEY TO OVERSEAS COMPANY THIS TIME.
    GOD HELP US NIGERIANS.2010 IS GOING TO BE BAD FOR US, OUR LEADERS HAVE PUT US IN SHAME AGAIN.

    Comment by obama — 2010.March.29 @ 08:13 | Reply

  2. I am workinng for a worldwide operating refractory companny.
    I am interested, if you would have some need for refractories, engieering annd innstallation / supervision.

    We are active in BF´s (relining and casthouse), Iron, Steel, Reheat-Furnaces (up to full refurbishment), Kokeovens, etc.

    We supply all kinds of bricks, concretes, special techniques as shotcrete and special drycrete.

    I am looking forward to hearing from you soon.

    best regards

    Frank

    Comment by Frank — 2010.February.15 @ 23:32 | Reply

    • Sorry but I am not in a purchasing position dealing with refractories. I am also an engineer and I believe we have the expertise locally available.

      Comment by reyadel — 2010.February.18 @ 09:39 | Reply

  3. Good Day,

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    please fell free to contact us via my email addres and via phone number 08032443292 or 08055134715. you can also visit our website http://www.stonehill-ng.com/

    THANKS.

    Comment by bede — 2010.January.26 @ 10:42 | Reply


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