Africa’s most populous nation, Nigeria, is on the cusp of a $1 billion (N1.6trillion) iron ore to steel project.

If everything goes according to plans, the project will be  a major breakthrough for the country, which relies heavily  on steel importation.

The project, planned to be sited in Kogi State, is being promoted by Chart and Capstone Integrated Limited of Nigeria and Sinomach-He of China.

Currently, Nigeria imports $4 billion worth of steel every year, according to the the Minister of Steel Development, Shuaibu Audu. At least 70 percent of steel used in the country is imported, due to low in-country production. This is despite having large deposit of iron ore, a major raw material for steelmaking.

To reduce the fiscal strain this is having on the economy, the government wants to boost local production of steel through transformation and revitalization of the industry.

”Right now we import about four billion dollars worth of steel, which is over 70 per cent worth of steel in Nigeria.

”Mr President wants us to reverse this trend; he wants to ensure that most of the steel consumed in Nigeria is produced locally to reduce the pressure on foreign exchange.

”The president is determined to turn around the fortunes of Nigeria and this is why he is taking tough decisions.

”For the first time since independence, a steel ministry is created. It shows the president’s seriousness and determination to put the steel industry and industrialisation of Nigeria on the front burner,” said Audu during a familiarisation tour of the National Metallurgical Development Centre (NMDC) in Jos, Plateau State sometime in February.

The Minister of Solid Minerals Development, Dr. Oladele Alake has hailed the $1 billion proposed project, describing it as breakthrough in the Federal Government’s campaign to make local value addition the model of development in the solid minerals sector.

Addressing the promoters on the sidelines of the recently concluded China-Africa Cooperation Summit in Beijing, China, Alake pledged the cooperation of the Federal Government with the promoters to ensure the delivery of the project in the quickest possible time.

Nigeria recently reversed the trend of  mining companies exporting raw minerals   without  local value addition. Under a new policy, applicants for licences to mine are mandated to disclose plans for processing the raw minerals as part of the conditions for approval.

“The trade balance between Nigeria and China is over one billion dollars in favour of China because the minerals imported from Nigeria are essentially in raw forms. Once Nigeria starts to export finished or semi-finished value-added mineral products to China and other trading  partners, our balance of trade will be more favourable, and our foreign exchange earnings will improve. With aggressive local value addition and the revenue from it, the prospects of reducing our debt burden in the nearest future is possible,” the minister was quoted as saying in a statement.

Presenting the Memorandum of Understanding (MoU) signed by both parties to the Minister, Chief Executive Officer of Chart and Capstone Integrated Limited, Abel Edijala, explained that the model is that the iron ore site will feed the steel manufacturing plant and grow to service the needs of the Nigerian economy for industrialisation.

To cope with the flunctuations in the macro-economic system and meet targets, he stated that the project would require tax waivers for the importation of equipment and tax holidays during the take-off period.

Sinomach-He is a  state-owned company established in 1958 to meet the needs of the Chinese economy. It has over 15,000 staff including 2000 engineers on its payroll.

The company engages in mining, iron making, steel rolling, steelmaking, the construction of infrastructures, and handles 80 per cent of the steel needs of the Chinese economy.

“In mining, we have the technology on how to excavate the ores from the earth. We can evaluate the iron ore potential of any site and tell you what the feasibility of mineral extraction is on a site. Secondly, we have the equipment needed, including excavators and drilling machines for mining iron ore. For transportation of iron ore from site to the factory, my group produces the trucks,” said  Sinomach-He’s Vice Manager, Hou Encai.

Under  the MOU, Sinomach-He will be the master contractor and deploy its expertise in the engineering, procurement, installation, commissioning, and training of the project.

The oil and gas industry is one of the main demand drivers   of steel in Nigeria. Virtually everything in the industry requires steel, but Nigeria lacks  an efficient steel sector, which has resulted in capital flight.

Under the Nigerian Oil and Gas Industry Content Development (NOGICD) Act, all steel products for project development must be procured in-country. But implementing this has been challenging because of inefficient steel industry in the country.

“There’s another example about our pragmatism: If you read the law, it says: all steel products must be procured in country. That’s what the law says 100 per cent. So now if I want to implement the law like a Bible, I’ll probably ask all of them to go and build a steel plant first before you start producing hydrocarbon. But we know that’s not possible. We say, okay, what else can you do for us? You get on with your project but there are other activities you can do that are not as gigantic as building a steel plant. Is there is there any other way to do it?”, a former Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Engr. Simbi Wabote, told an industry media outfit in an interview early 2023.

Nigeria has about 30 steel manufacturers, with combined production capacity of  just 2.2 million tons per annum, with scraps and billets imported mainly from China. Experts believe that revival of the state-owned  Ajaokuta Steel Complex, as the flagship of the steelmaking industry, will reduce the country’s dependence on imported steel products and save foreign exchange.

However, between 2016 and early 2022, the Federal Government pumped N21.3 billion into the moribund Ajaokuta Steel Complex with nothing to show for it. The Ministry of Steel Development has again asked for $2 billion  to revive the steel company.

While the country waits in anticipation for the take off of the proposed $1 billion iron ore to steel project, bringing Ajaokuta to life  followed by   revival of the Delta Steel Complex, the moribund steel rolling mills across the country and building of more plants are expected to add to meeting national and regional demand as well as reducing importation.