| FG laments huge investments
on steel sector
By LUCKY NWANKWERE, Abuja
Monday, September 13, 2004
The Federal Government’s decision to open up the power
and steel sector was informed by the fact that it had spent
over $10 billion (about N1.34 trillion) in the steel sub-sector
alone without any meaningful returns on investment.
Minister of Power and Steel, Mr Liyel Imoke who disclosed
this weekend in Abuja, said government had spent about N114
billion on the revitalisation of the power sector in its first
tenure with an additional commitment of over N40 billion in
the current budget.
He said apart from the well known government’s incompetence
to successfully handle such projects, the country lacked the
necessary infrastructure which could jumpstart the steel sub-sector.
Even with the huge investment, he said it would be difficult
for the country to produce steel in the rolling plants, including
the Ajaokuta Steel Complex, if it insists on getting back
the over $10 billion sunk into the different projects, adding
that this informed why government was looking at the concessionairing
options with reputable firms in the industry.
"We just cannot produce steel competitively in this country,
if you first take the $10 billion investment that has gone
into the sector. If you want to produce steel competitively
you may have to underwrite that investment. What we are trying
to do over the last years, we are now addressing sensibly
and practicably by saying that you don’t really have
to sell everything especially in the steel sector.
"So, why don’t you look at the option of concessonairing,
so that that investment remains yours? You don’t ask
investor to pay you $2-$3 billion because he won’t pay
you. If he pays you, then he can’t produce. You can
see what is happening to Delta Steel where the highest offer
we are getting is $20 million for a facility that is valued
conservatively at over $12 billion," he stated.
On the power sub-sector, Imoke explained that it is so capital
intensive that the about N114 billion already spent by government
could be said to be below what would be required by the National
Electric Power Authority (NEPA) to improve tremendously on
power generation and supply in the country.
He also explained the position of government on the controversy
surrounding the sale of the Aluminium Smelter Company to the
BFI Group and the subsequent revocation of the contract, stating
that government discovered that the conglomerate had a different
motive for bidding for ALSCON.
He said government found out that the firm that won the bid,
BFI Group, was not interest in the production of steel but
in other matters, stating that the firm also failed to meet
the requirement that it should pay 10 per cent of the bid
offer as down payment within a specific period.
The minister also spoke on the recent revocation of the 10-year
contract signed with SOLGAS to manage the Ajaokuta Steel Complex,
stating that though the government gave the firm the opportunity
to make the plant work it was discovered that SOLGAS looked
the capacity and ability to pull the financial muscle to achieve
success.
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