Posted on October 16, 2018
The Nigerian government’s 2018 revenue will not be enough to finance its N9.12 trillion budget. Hence, it has been putting different measures in place to address the deficit, including borrowing and selling of assets. Governor of the Central Bank of Nigeria (CBN) Godwin Emefiele says assets sale will continue.
“I am aware, as a member of the National Council on Privatisation, that more are coming and I believe in due course that the Bureau of Public Enterprise (BPE) will make this available to us. I am aware of the situation of Ajaokuta Steel Company of Nigeria. It is also on the cart, first for a total review of the process of privatisation and payment, so that our aluminium sector can eventually come alive,” Emefiele told the Nigerian delegation at the end of the International Monetary Fund (IMF)/World Bank Group meetings in Bali, Indonesia.
Ajaokuta Steel Mill was incorporated in 1979 but has never produced steel. Referred to as the “bedrock of Nigeria’s industrialization”, the project which was started by the Soviet Union under a cooperation agreement with Nigeria, reached 98 percent completion by 1994, with 40 of the 43 plants at the facility completed. Mismanagement and failed attempts at privatisation has seen the mill remain non-operational. But now, the government wants to try again.
President Shehu Shagari visits Ajaokuta Steel Company Ltd. on February 25, 1980.
The steel which has gulped about $80 billion since inception, needs another $652 million for it to be ready for production, money the government does not have.
Nigeria’s House of Representatives had disagreed with the Minister of State for Solid Minerals Development Abubakar Bwari in June, with the lawmakers in favour of the government completing the project and running it as a state-owned enterprise. But Bwari explained that “with concession, the government will not put more money, but will appoint a reputable transaction adviser to move forward. Right now, the government does not have the funds. It is important that we hand it over to those who have the resources.
“The government is even borrowing to run services. That is to tell you that there is no money.”
Who wants to buy?
Ajaokuta Steel Mill in another country will get investors lining up to make a bid, but Nigeria is not the best place to do business. Investors learn from history and the challenges currently being faced by companies operating in the country. Bi-Courtney Aviation Services Ltd. (BASL) still has a running legal battle with the Federal Airports Authority of Nigeria (FAAN) over a concession agreement for the Murtala Muhammed Airport Terminal 2 signed in 2003, with the Chairman, Resort Group, the parent company of BASL, Dr. Wale Babalakin, saying recently that “If Nigeria wants to encourage private sector participation in the infrastructural development of the country, it must abide by international regulations; government and its agencies must respect and abide by concession agreements”.
Thus, fears about the government respecting concession agreements might make it difficult to find a concessionaire for Ajaokuta Steel Company. More so, some foreign-owned companies are currently not finding things easy in the country. telecommunications giant MTN is still discussing with the central bank on an $8.1 billion the Bank said it illegally took out of the country. There is another $2 billion claim in back taxes by the attorney general’s office.
Also, there other dependencies that an investor/concessionaire will consider which might make the status quo difficult to change. Financial planner Kalu Aja highlighted these in his 19 June 2018 article for local business newspaper Business Day.