RMRDC: Seek to revitalize the steel sector for economic growth


Focusing on the federal government’s determination to diversify into a knowledge-based economy, the Commodities Research and Development Council (RMRDC) encourages synergy among stakeholders towards achieving a sustainable economy through the steel industry. Reports by BINTA SHAMA.

Steel is a high strength, formable, versatile and inexpensive material used worldwide for a variety of purposes. It is used in the production of automobiles, the construction of buildings and infrastructure, household appliances, the manufacture of metal products, agricultural and military equipment, the construction of energy, railway and road facilities. It is a non-combustible material that is resistant to termites, mold and mildew. It is also environmentally friendly when waste is properly managed.

World steel production

Globally, steel is recognized as an ingredient for actualizing the aspiration for sustainable industrial and economic development of national economies. The negative aspect of the economic dependence on the import of raw materials and finished steel products by any country cannot be overstated. This has enabled countries endowed with raw materials for steel production to facilitate and promote the development of the iron and steel sectors. This led to a significant increase in the production of iron and steel around the world. World steel production has increased dramatically, from 28 million metric tons (Mt) at the start of the 20th century to 781 million Mt at the end of the century. During the 20th century, crude steel production increased significantly to 1.6 billion Mt per year. Moreover, during this period, steel consumption increased at an average annual rate of 3.3% of world steel production.

According to the World Steel Association, in February this year alone, global steel production reached 142.7 million Mt. While at the individual country level, China produced the highest volume of steel. high estimated at 996.3 million Mt in 2019. India, with production of 111.2 million Mt in the same year. Japan, the third largest producer, produced 99.3 million tonnes of steel while the United States, the fourth largest producer, produced 87.9 million tonnes of steel, among other things. With the opening of world trade after the disruptions of COVID-19, Africa in February 2022 produced 1.3 million tonnes, mainly by Egypt, South Africa and Libya. Nigeria was left out.

Steel production in Nigeria

Nigeria is endowed with all the major raw materials required for the production of iron and steel. These include 3 billion tons of iron ore, 3 billion tons of coal, over 700 million tons of limestone and 187 billion SCF of natural gas. Planning for the Nigerian steel sector began in 1958. However, after about 50 years, the country has yet to establish a stable steel sector despite the huge investment of over $7 billion already in steel development . Exploration began in the Itakpe iron ore deposits in 1963. Between 1961 and 1965, several foreign companies that came to assess the Nigerian steel sector reported that steel production was not feasible due to the lack of domestic market, high cost of technology, infrastructure development, lack of manpower, poor quality iron ore deposits in Nigeria and other international political considerations.

However, in 1967 Russian experts came to Nigeria to conduct feasibility studies for the establishment of a steel plant in Nigeria. During the period 1960-1970, the Federal Government directly coordinated the iron and steel sector in Nigeria and there are instances of policy inconsistency. During the second National Development Plan (1970 – 1974), the government established the National Steel Development Authority (NSDA) which was charged with the responsibilities of iron and steel development in Nigeria. Under the coordination of Russian experts, the NSDA conducted various geological studies which led to the discovery of commercial quantities of iron ore in Nigeria and during the implementation of the Third National Development Plan (1975 – 1980), the government signed various agreements for the construction of two integrated steelworks and three rolling mills. In 1979, the government issued Decree No. 60 of September 18, 1979, which dissociated the NSDA and created Ajaokuta Steel Company, Delta Steel Company, Jos Steel Rolling Company, Kastina Steel Rolling Company, Oshogbo Steel Rolling Company, National Iron Ore Mining Company, National Iron and Steel Raw Materials Exploration Agency, National Metallurgical Development Center and Metallurgical Training Institute. While the three rolling mills and the DSC were completed on schedule, the ASC was not completed after more than 40 years of intermittent construction work. Until today, Ajaokuta Steel Company (ASC) has failed to take off while Delta Steel Company (DSC) and rolling mills in Oshogbo, Jos and Kastina are producing at very low utilization rates.

Adding value

These developments have led to fluctuations in the value added of production and capacity utilization in the base metals, iron and steel sector of the economy. According to the statistics available in the Annual Reports of the Manufacturers Association of Nigeria from 2016 to 2020, the Manufacturing Value of Output (PMV) in the sector group of Base Metals, Iron & Steel and Metal Products was 240.623 billion naira in 2016, 408.347 billion naira in 2017 and 503.9 billion naira in 2018. The corresponding values ​​for 2019 and 2020 were 483.424 billion and 324.480 billion naira respectively. The corresponding values ​​for local raw material sourcing were 59.7% for 2016, 68.77% for 2017, 60% for 2018, 59.15% for 2019 and 65.5% for 2020. for commodities in times of currency difficulties. In addition, the closure of land borders has an increasing impact on the use of local raw materials. However, the increase in capacity utilization from 59.15% in 2019 to 65.6% in 2020 can be attributed to the opening of global economies to trade after months of lockdown. A number of studies have indicated that the Nigerian steel sector is supported by the recycling of scrap metal obtained mainly from municipal solid waste. In many rolling mills, 100% of the scrap is recycled for the production of iron bars used for civil construction. Recycling scrap results in the generation of less than 7% and 7-15% slag for iron and carbon, respectively.

Overreliance on imported billets

The sector is also heavily dependent on imported billets. However, due to the high cost of importing billets, many steel companies cannot operate. Nigeria imported $1.18 billion worth of steel materials in 2020 according to the United Nations COMTRADE International Trade Database. According to the statistics available from the National Bureau of Statistics, Nigeria imported iron, steel and metals worth N837.76 billion on the 3rd and 4th of 2021. According to the statistics, the country imported basic metals, iron and steel products with 600 mm in width, rolled, painted and coated, varnished and plasticized within the period of 6 months. The total value of base metals imported during the two quarters was N748.529 billion while that of iron and steel was N88.232 billion.

Sector challenges

Clearly, the Nigerian steel industry faced many operational challenges. The privatization that was carried out in 2004-2005 failed to revive the sector. The two integrated steel companies are unable to produce billets for the 20 steel rolling mills that include private sector establishments in the country. Following the privatization exercise, the DSC started its activities in December 2005 after approximately 10 years of inactivity. Although, during the Third National Development Plan (1975 – 1980), thousands of Nigerians were trained in the country, as well as in India, Russia, Germany, UK, Japan, etc. Unfortunately, when the public steel sectors collapsed, staff were left in limbo for a long time, leading to the accumulation of huge pension liabilities.

These huge pension liabilities forced the steel companies to attract fewer bonuses during the privatization exercise. Similarly, the location of most steel projects has made their operations costly. Iron was mined at NIOMCO, Itakpe in the north central part of Nigeria. It was sent to DSC in the south for the production of billets, a distance of 327 km by rail. Billets produced from DSC were sent to the three inland rolling mills, one in South West Nigeria (Oshogbo), another in North Central (Jos) and the third in North West (Kastina), all these places are far from Aladja from where the billets were produced. Another challenge is funding/operational cost. After successful construction of DSC, NIOMCO folded, DSC followed and due to lack of billets the other three government-owned rolling mills also folded.


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