The Nigerian steel industry is a major sector of the raw material industry that has continued to face hiatus despite its potential for growth and expansion. Steel is the most common metal on Earth, and most of its uses are in construction, energy, packaging, appliances, and transportation. Steel is a fundamental resource most often used in construction and is relatively cheap to produce.
Nigeria’s discovery of steel in Kwara State in the 1950s opened opportunities for the government at the time to begin home production of steel and iron rods. Later in 1959, the Nigerian government signed an agreement with Technopromexport, a Soviet group, for the construction of a steel manufacturing plant in Ajaokuta, Kogi State, designed to produce 1.3million tonnes (MT) of liquid steel per annum with capacity to expand to 2.6MT and 5.2MT in three phases. Further development in the industry happened in 1982 with the commissioning of the Alajda Steel Complex (now privately owned), with a capacity of 1.0MT per annum and utilized a more complex electric arc furnace steel-making technology. Both companies have however faced functional setbacks due to various factors including poor corporate governance.
The steel industry is essential to the industrial growth and development of any nation. According to stakeholders in the industry, over 95% of the current steel production in Nigeria is from scrap metal, making the country currently focused on developing the upstream mining sector. Over the years, successive governments have made efforts to revive the steel company, unfortunately, such efforts have not produced significant strides.
According to Proshare, the ministry of steel and development in Nigeria states that its target is to increase the contribution of the total mining sector to 10-15% by 2025 from 0.1% in 2019. The major investment case for the steel sector is the abundance of the raw materials for steel production which include: iron ore, limestone, clays/silica sand. The Nigeria mining industry also allows for 100% foreign ownership. The country also has a huge potential for growth in steel demand. According to the World Steel Association, steel use per capita for finished steel products stood at 8kg in 2017, significantly below the world average of 214.5kg.
Nigeria’s steel industry is one of its biggest, making up about 20% of the country’s industrial manufacturing production. Nigeria is the fifth largest producer of crude steel globally. Yet, Nigeria imports steel value is on the rise. According to Shuaibu Audu, the Minister of Steel Development, Nigeria imports steel valued at $4 billion dollars every year. This announcement was made in February while he was on a familiarisation tour of the National Metallurgical Development Centre (NMDC) in Jos. He mentioned that 70% of Nigeria’s steel is imported and added that President Bola Tinubu is committed to reversing this trend.
The former Chief Executive Officer of the National Steel Raw Materials Exploration Agency, Dr Umar Albarka Hassan in 2022 called on investors to take advantage of the huge investment opportunities in the Nigerian iron and steel sector by engaging in primary liquid steel production using primary raw materials like Iron ore and related minerals. He made this call during the 23rd Annual African Mining Breakfast Breakout session at the 2022 PDAC event in Canada which was held from 13th to 15th of June 2022. Dr Hassan revealed that Nigeria’s primary steel production from iron ore is currently at zero level as there are no active players in the public and private sector now. He, however, noted that a 500,000 tonne per annum DRI plant is currently being constructed in the country. Dr Hassan even stressed that the country is blessed with abundant steel raw materials, such as iron ore, manganese, bauxite, limestone, clay, silica sand, etc., to play in the main league. He added that these minerals are scattered in locations across the country with proven reserves and estimates. He also decried the proliferation of plants who manufacture steel products from scrap metals, often resulting in low quality finished products.
Nigeria currently has 74 established steel plants and fabricators in the country, with only 40 of them actively operational. These plants, with a combined installed capacity of 11.14 million tonnes per annum, only manage a meagre output of 2.2 million tonnes of steel products yearly, leaving room for an annual import of 7.1 million tonnes to meet up with local demand.
According to the former DG, Nigeria is a viable destination for investment due to its huge steel consumption of almost 10 million tonnes per annum, more than 70% of which is imported. Other investment drivers include the population of 200 million people, massive construction, and urbanisation projects ongoing across the country, attractive investment incentives, such as zero import duty on equipment and 3-5 years tax holiday, and the government’s desire to diversify the nation’s economy and focus on sectors like mining and metals.
The top steel manufacturers in the Nigerian industry include:
1. Pacioli Investments Limited
2. Makarios Ltd
3. Brossette Nigeria Limited
4. Alinco Steel & Metal Construction Co
5. Aulsteel Investment
6. Universal Furniture Ltd
7. Decra
8. Berliac Engineering Company Limited
9. Sparkwest Steel Industries Nigeria Limited
10. Nigeria Gas & Steel Ltd
11. Imperial Aluminium Limited
According to a statement issued by presidential spokesperson, Ajuri Ngelale in January, the Minister of Defence and the Minister of Steel Development had visited Hefei and Guangzhou regions of China to hold business talks with the Chairman of Luan Steel Holding Group, Mr Wang Jianbing; the Chief Executive Officer of the Company, Mr Xiao Weizhan, and other senior executives of the Luan Steel Holding Group. The Minister informed president Bola Ahmed Tinubu of their discussions with a Chinese company, Luan Steel Holding Group, to build a new steel plant in Nigeria, as well as to commence the production of military hardware in Ajaokuta Steel Plant. The Chinese company is expected to invest billions of dollars in Nigeria to build the new steel plant. This news comes at a time when the steel industry continues to grow at a slow rate.
Like Nigeria, Zimbabwe has partnered with China’s Tsingshan Holding Group to construct an iron and steel plant with $1 billion. This put it on its way to become Africa’s largest steel industry. This serves as a reminder to use the right tactics and make changes to draw in more investors. The steel industry is expected to grow more in the coming years, but its long-term potential for growth is currently limited by its high energy costs, high cost of labour, and environmental issues.
One of the major problems affecting the steel industry is lack of skilled labour and low wages. Due to company’s dependence on unskilled labour as it affects the growth of the industry. Skilled labour encourages individuals to conduct research into efficient working practices. This might not apply to all staff but will help in company practices. The importance of investing in the education and training of workers to keep up with the advancements in technology improves working conditions and practices in the industry.
The Nigerian steel company has enormous potentials given its capacity to become a major producer of industrial machinery, auto-electrical spare-parts, shipbuilding, railways, and carriages. At a time when the Federal Government is exploring alternative ways of diversifying foreign exchange earnings away from oil, the project is also a veritable source of foreign exchange earnings. Self-sufficiency in steel production would also mean conserving the much-needed foreign exchange expended in the importation of steel. With increasing levels of unemployment, the steel company also has the capacity to employ many of the nation’s labour force both directly and indirectly.
