Revocation of the Ajaokuta Steel Concession

The Federal Executive Council (FEC) recently revoked, on account of non-compliance, the concession agreements between the Federal Government and Global Infrastructure (Nigeria) Limited (GIHL) in respect of the Ajaokuta Steel Company Limited (ASCL) and the National Iron Ore Mining Company, (NIOMCO) Itakpe, Kogi State.
The FEC after considering the report of the Administrative Panel of Inquiry established by the Yar’Adua Administration to review the concession agreements and determine the extent of compliance by both parties, the council agreed with its finding that the agreements “were largely skewed in favour of the concessionaire to the detriment of the Federal Government of Nigeria”.
The council also agreed with the panel’s conclusion that any benefits that might have accrued to the government and people of Nigeria from the implementation of the agreements have been thwarted by breaches and “unwholesome” practices by GIHL.
The panel indicted GIHL for breaches of the concessionary agreements including failure to submit a workable business plan within the specified timeframe, non-payment of concessionary fees as well as the cannibalisation and exportation of plants and equipment.
In deciding to revoke the agreements, government also noted that the purported Share Sales Purchase Agreement (SSPA) between it and GIHL in respect of ASCL is technically not in force because the transfer of shares to the purchase was never effected.
The summary of statutory obligations outstanding against GIHL was put at N350 million. The panel also discovered that instead of investing external funds on the completion of both projects as expected, GIHL embarked on massive borrowing from local commercial banks, pledging the assets of the Delta Steel Company as collateral.
The panel reported that GIHL currently owes the banks about $192 million. “The general impression is that GIHL has been diminishing the values of ASCL and NIOMCO to buoy up their fortunes,” the panel concluded.
After reviewing the Economic and Financial Crimes Commission’s (EFCC) interim report on the concessioning/sale of ASCL, NIOMCO and the Delta Steel Company, President Yar’Adua ordered the criminal prosecution of indicted officials of the Federal Government and promoters of GIHL for asset stripping.
We believe the action of government in this regard is commendable. GIHL was expected to rehabilitate, complete, commission, operate and produce liquid steel within one year. GIHL was also expected to increase the production capacity of the project; maintain the existing facilities of the township for the employees; complete the balance of civil engineering works; submit a business plan to the Ministries of Steel within six months and; to pay one percent fee of its annual turnover to government. None of these was accomplished.
First it was SOLGAS which promised to inject $3.6 billion into the company to refit and run it. The $3.6 billion the company said it would inject into the steel company never came.
The government stated then that the concession of Ajaokuta to SOLGAS was done in the over all interest of the country. But for the 13 months it managed Ajaokuta, SOLGAS did everything but never worked in the interest of the country.
While Nigerians were yet to over come the trauma of the SOLGAS misadventure, former President Olusegun Obasanjo, again over stepped due process to appoint GIHL to run the company.
GIHL was, in fact, a sub-concessionaire to SOLGAS by virtue of a sub-concessionaire agreement they both entered into. This prompted SOLGAS to allege that the Ministry of Mines and Steel acting under instructions of Obasanjo worked Mr. Pramod Mittal, of GIHL to terminate the sub-concessionaire agreement it had so that the latter could be appointed to run Ajaokuta in the interest of Obasanjo, his son Dr. Gbenga Obasanjo.
The Senate under Chief Adolphus Wabara, did smell a rat in the transaction and quickly called on the EFCC to probe the deal. The Senate position was that the concession agreement with GIHL violated the principle of transparency and due process, which the government was mouthing then.
The Global Transparency Initiative, GTI, also raised a voice against the concession agreement. In its petition to the Senate and House of Representatives, GTI raised several issues surrounding the deal as bordering on corruption.
However, the exit of Senator Wabara as President of the Senate soon consigned all such petitions to the trash can as Chief Ken Nnamani-led Senate and Bello Masari-led House of Representatives failed to institute any probe into the concession agreement.
Indeed, the rot in the concession agreement has exposed the executive lawlessness and impropriety of the Obasanjo administration. It is obvious that the administration personified governance at the expense of the country.
The concession agreements signed with both SOLGAS and GIHL were faulted on procedural error, lack of transparency and due process. It is gladdening therefore to note that the government has decided to prosecute all government officials that facilitated the deal over a rip off of the country.
As has been said severally, the major problem of ASCL is nothing but corruption and for justice to be seen to have been done in this regard, the government must approach this assignment with open mind with no intentions of shielding anyone involved in the ugly transaction.
The Yar’Adua’s efforts in cleansing the augean stable in the steel sector is a welcome development and nothing should be spared to rid it of all corrupt tendencies for the sector to have a new lease of life.