13 January 2009
LAST week, the new Minister of Mines and Steel Development, Mrs. Dezani Allison Maduekwe sounded an alarm about the increasing threat to the national economy of the downward spiral in oil price because of the unwarranted and near total dependence on the mineral for the nation's development.
With the price of crude falling fast and proceeds from the commodity dwindling equally as fast, it becomes very worrying to know that with no other means to substantially bolster the economy, the nation may indeed be in for a turbulent time in no distant future.
It did not require a Mrs. Allison Deziani to bring this fact to light because it has been boldly emblazoned all around us for decades.
But as a minster whose ministry all the while has had the responsibility to alter the situation but perhaps lacked the initiative or the support, it would be interesting to see how she goes about exploiting the abundance endowment of the extractive industry to create the much needed alternative sources of funds for our burgeoning economy.
There is little doubt that she is very conversant with the hard facts especially as she is coming from the background of the oil industry herself. She realises that it is no longer tenable to rely on crude oil export to run the Nigerian economy against the backdrop of the vagaries of the world oil market as she pointed out recently: "we are all aware about what is happening to the price of crude almost on a weekly basis. It is dropping fast. At the same time the quantity of production is dropping in the same manner.
As matter of fact, my former company, Shell is now losing 45, 000 barrels per day and that is Shell alone." But the failure in the sector so far does not suggest that her predecessors in office were ignorant of the facts or did not have the will to attempt to put the mines and steel in the driving seat of the economy. They will claim rightly or wrongly that they were hindered by several factors most of all the neglect of the sector by government and its inconsistent policies.
Allison Maduekwe certainly believes that these are not insurmountable problems and has indicated her determination to trudge ahead with the sector and restore it to its pride of place.
According to her, "over the next few months, I expect that this ministry will actually, if we do what we need to do right, become the mainstay and main fulcrum for Nigeria's economy in the years to come. And so, we really have to look at the area of mines and steel development to become the mainstay and in fact, the resuscitating factor for the Nigerian economy as we go forward. I have no doubt that if we put the right levers in place and we put the right framework and strategic objectives, we will be able to do that in the shortest possible time."
She has taken her redeployment from the Ministry of Transport to Mines and Steel Development as a personal challenge and has pledged to resuscitate the sector in such a way that within the next 18 months or so, a viable alternative would have been created for crude oil. But she has her work cut out in view of the gargantuan problems besetting the sector particularly the steel sector which boasts of white elephant mills that appear to have defiled all remedies in the last decades.
Government realized that steel was one of the most important tools that drive the technological growth of any nation and as far back as the 70s promulgated decrees to prepare the necessary ground for its take off in Nigeria. This was followed by the establishment of Ajaokuta Steel Company Limited (ASCL), Delta Steel Company, Aladja and inland Rolling Mills in Jos, Katsina and Oshogbo, Aluminium Smelter Company (ALSCON) and many other industry-related projects.
In spite of these huge investments, the steel sector is at it teething stage as it appears to have suffered neglect and adverse fiscal policies leading to low capacity utilization, huge indebtedness, equipment pillage, industrial unrest, abandoned structures, among others. Attempt had been made to put the situation right through the active involvement of the private sector in the belief that the steel mills would be better administered if they were sold to private entrepreneurs but this has been fraught with disasters of all kinds.
For instance, the sale of Delta Steel Company was so messy that the House of Representatives deemed it necessary to recommend the reversal of the sale to Global Infrastructure Nigeria Limited, citing the company's non observance of due process and failure to make appreciable improvements in terms of physical investments.
The lawmakers wanted the ownership to be reverted to BUA International Nigeria Limited which was said to have won the initial bid. In the same vein, the House recommended the cancellation of the concession of the National Iron Ore Mining Company and requested the major contractors Messrs Koch Nigeria Limited to undertake a technical audit of the company while it threatened to cause the cancellation of the sale and concession deal of ASCL with Indian-owned Global Infrastructures Nigeria Limited (GINL) and invite the Russians back to the company to complete it and hand it over for possible commissioning by 2010.
The House had argued that GINL depended largely on the stock of spare parts they inherited and made no efforts at investment in that area. It also observed that where production had been going on, GINL has failed to pay taxes, VAT, Insurance cover for plant machinery, vehicles or staff cover. Even where taxes were deducted from Nigerian staff salaries and wages, such taxes and even pension contributions had never been remitted to appropriate authorities.
Same went for other deductions from staff salaries for contributions to their various welfares and cooperative societies. The House thus concluded that "these are no signs of a serious investor."
This pretty sums up the lot of the Nigerian steel sector which has virtually consumed in its mismanagement, the abundant investment opportunities and potential for rapid technological growth that ordinarily come with sound planning and execution of steel policies. That is not to say that the much vaunted Nigerian factor is at play because steel headache is not limited to Nigeria alone.
The United States of America in the last few years has battled to keep its shaky steel industry afloat fending off problems arising from defective policies and external competition but its difference with Nigeria's situation is that the U.S. is serious enough with the sector to ensure that everything is done to protect it knowing how important its domestically produced steel is to its industry and overall national defence objectives.
In fact, a US steel industry 2007 analysis on "importance of domestically-produced steel to overall national defence objectives and economic and military security" indicated that the U.S. steel industry, consisting of all carbon and alloy steel producers and specialty metal producers, employs more than 160,000 highly skilled workers who produce over $60 billion of high quality steel and high-technology specialty alloy products annually.
The industry includesstate-of-the-art, large and small electric arc furnace producers or "mini mills" that make steelfrom recycled scrap, and highly efficient large "integrated" steel producers who make steel fromvirgin materials and recycled steel. The protection the U.S. government accords the steel industry has preserved the opportunities enjoyed by local investors in steel and related industries.
These are the kind of opportunities opened to a country like Nigeria that is richly endowed with natural resources such as iron ore, limestone, dolomite, coal and refractory clay that are vital to the development of iron and steel and allied industries. But these wil remain untapped if the enabling environment remains elusive and government continues to pay lip service to the development of the sector. Herein lays the task of Mrs.
Allison Maduekwe. Unless she is able to tailor government attention and policies towards the realization of the original iron and steel objectives, her tenure would simply pass unnoticed just like her predecessors.
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