Ajaokuta steel coy: Stop the wastage

The Attorney General of the Federation and Minister of Justice, Malam Abubakar Malami, recently eulogised the government for resolving an international dispute involving Ajaokuta Steel Company in Kogi State by paying $496 million instead of $5.2 billion in fine for the termination of concession agreement with an Indian firm, Global Steel Holdings, owners of Global […]

The Attorney General of the Federation and Minister of Justice, Malam Abubakar Malami, recently eulogised the government for resolving an international dispute involving Ajaokuta Steel Company in Kogi State by paying $496 million instead of $5.2 billion in fine for the termination of concession agreement with an Indian firm, Global Steel Holdings, owners of Global Infrastructure Nigeria Limited. The contract was terminated in 2008.

The minister stated that the long-running dispute was resolved on August 19, through the arbitration process involving the International Chamber of Commerce Alternative Dispute Resolution (ADR) mechanism, which saw the debt payment reduced to less than 10 per cent of the judgment debt.

He said: “By this settlement, the Buhari administration has rescued the Nigerian steel, iron ore and rail industries from a variety of interminable and complex disputes with Global Steel Holdings and Global Infrastructure Nigeria Limited (GINL), as well as taxpayers and treasury from the significant damages that would have ensued.”

Also, the Minister of Mines and Steel Development, Olamileke Adegbite, commenting on the resolution of the dispute, advised that, “Future arrangements – sale or concessions – must be carried out with the interest of the nation at heart and in compliance with the law…. If we fail, our steel would produce more litigation than steel.” It would be the second time that the country would lose money in controversial circumstances in the name of Ajaokuta Steel Company. Part of the ‘Abacha monies’ being repatriated from abroad included a $350 million ‘debt-buy-back’ deal during the regime of the late General Sani Abacha.  

The current litigation was a product of dubious concession agreement signed under the administration of ex-President Olusegun Obasanjo, in a blind rush to privatise Ajaokuta Steel Complex without carrying out due diligence on the companies involved. A report of a panel set up by the late Umaru Musa Yar’Adua’s administration to probe the activities of GINL at Ajaokuta contains details of how Nigeria was shortchanged by the so-called concessionaires who stripped off Ajaokuta of its assets, instead of producing steel for Nigerian and international markets.

The investigative report submitted to government in December 2007 says, in part: “The basic purpose of the ASCL Agreement is to rehabilitate, complete, commission and operate the Ajaokuta Steel Project with a view to producing Liquid Steel within 12 months, increase the production capacity, maintain the existing facilities of the township for the employees, complete the balance of the civil engineering works necessary for the completion of the project and to submit within five (5) months of the date execution of this agreement an initial project business plan to the ministry.  From all indications, the basic purpose of the agreement has been defeated as none of those stipulations has been satisfactorily carried out.  The agreement requires GIHL to pay a concession fee of 1% of turnover annually.  The panel could not establish the annual turnover of the company due to lack of records.  There is no evidence that GIHL has paid any concession fee to date.”

The investigative report says further: “There are several other breaches of the covenants of the agreements such as cannibalisation and vandalisation of plants and equipment, dangerous engineering practices bordering on lack of maintenance, exporting premium scraps imported for the project by FGN etc., resulting in huge financial losses to the FGN.  These breaches make it imperative to determine these agreements for ASCL and NIOMCO. In respect of importation of funds to be injected into the project by GIHL, there is no evidence of capital importation and therefore no payment for the Shares of ASCL has been made.  Even the assumed investment of US$200 million is a ruse.”

Reading through the 55-page report, which provides graphic details of how the country was being ripped-off through Ajaokuta Steel, gives the feeling of Nigeria being crushed under iron and steel. The Yar’Adua administration had to terminate that contract. It is disheartening, therefore, that Nigeria’s Ministry of Justice failed to defend the country against the wolves, causing GINL to secure a judgment of $5.2 billion against Nigeria.

Unfortunately, Nigerian legal luminaries were part of the GINL legal team that secured the judgment against the country.  While an end to the legal dispute is good, we are horrified that it  came at a huge cost without a single kilogramme of steel being produced. 

We call on government to find a lasting solution to the problem of ASCL, just as we urge it to take a critical look at all contractual agreements signed with foreign companies operating under Private Public Partnership (PPP) to ensure bad contracts are legally revoked to avoid the replay of the pathetic situation in Ajaokuta.