Thread by @seunfakze

The problem with AJAOKUTA: backtracking from an objective report in 1986. A Thread. (Part 1 of Thread) @MistateeT @AareAgo @PremiumTimesng @ogundamisi @rosanwo @omojuwa @fmmsdngr @kfayemi @eggheader @seunonigbinde @nedunaija @DOlusegun @ayourb @AsoRock

As at the time of construction, or even in 1986 when an independent review was made, the cost process of AJAOKUTA construction was the highest in the world owing to inflated costs and other unforeseen externalities.
#Ajaokuta

As at 1986, Practically all projects under implementation in subsaharan Africa, with the exception of the #Ajaokuta Plant, have been either abandoned or frozen.

Similarly, with the exception of SICARTA in Mexico and ACOMINAS, COSIGUA, and some minor projects in Brazil, all steel projects in Latin America have been either frozen or cancelled. #Ajaokuta

In contrast, countries of Asia (China, South Korea,Taiwan) displayed dynamism, have enjoyed healthy project financing, and have installed capacities at low costs, emerging generally strong in steel technology. Today, POSCO turnsover $68bn annually #ajaokuta

The commonest cause of delays and cancellation is shortage of funds. The extensive infrastructure normally required to support steelmaking projects in developing countries contribute significantly to total costs, and few countries can make the investment without securing loans

The external debt carried by developing countries is such that creditors have been reluctant to provide additional loans, especially as most developing countries have experienced serious difficulties servicing their debt. #ajaokuta

Worse, Nigeria has experienced turbulent economic, social and political periods that has not only led to the stoppage of projects but weighed heavily on foreign investments or capital importation into projects like #ajaokuta

Funding and infrastructure aren't the only concerns regarding #ajaokuta. Steel development demands a high level of skills, technical and organizational capacity, and systemic sophistication (supply of capital goods and technical services).

These are components that are available (partially or wholly) in most of the Asian nations, whereas they must be imported by African countries and paid for in foreign currency. Lack of financing, therefore, is a sign of more fundamental problems. #ajaokuta

Because of the large, diverse, and specialized nature of steelmaking equipment, investment in just the technology, especially for integrated plants, is in Billions of Dollars. #ajaokuta

The costs are still rising so time overruns are very expensive, and the increase in costs from delays sometimes makes project completion practically impossible. #ajaokuta
In Nigeria, we made costly mistakes that led to the delay of this project: from concept to implementing

Considering then that a combination of internal incompetence, economic and political foolishness and externalities altogether derailed the completion of plans for steel production over 4 decades now, it's not far fetched to think of the collective cost this poses on our economy

It is cheap intellectualism and half patriotism to wake up suddenly with conceited nationalism and declare - without fact, without much reason or sensible debate - that Nigeria can complete #ajaokuta or that it's status is nearly complete (98%)

The multifaceted integrated phases of steel production, the longstanding infrastructure deficiencies, economic competitiveness of the plants, the rising cost of materials as well as importantly the lack of seasoned human capital makes nationalizing #ajaokuta a challenge

A long gestation is inextricably linked with inflation costs. The bigger the project, the higher the costs of delay, manifesting in contractual escalation costs, and prolonged paybacks with attendant interest payments on borrowed money. #ajaokuta

Public exasperation with the steel projects in Nigeria has been largely caused by the long time that it has taken the plants to materialize as well as the huge sums of money invested. So far over $8billion - according to Hon Min @kfayemi - reportedly of sunk costs!! #ajaokuta

The repercussions on the economy of completing #Ajaokuta is tricky and perhaps debilitating that an investigation of the causes of long gestation and the cost implied is essential to determine the viability and economic worthiness of such "nationalistic cause". #Ajaokuta

It will be criminal by the House of Representatives or any Nigerian individual or entity to continually insist on a nationalization of the #ajaokuta project if it fails to take into cognizance the cause of stagnation, the cost of settlements, and our capacity to undertake such

It IS foolish to embark on this without knowing how long such would take or if we have the CAPACITY to. Projects like the creation of steel plants are a process: a series of interconnecting actions -- past, present, and future -- not "phased" or discrete periods of development.

one of the key problems of the cost is building on a "greenfield" location -- virgin lands in developing countries, which incurs 75% more spending than an industrialized site and 35% more than a site with some infrastructure according to UNIDO document of 1983.

Tam-West, then minister of steel devt in May 1986 agreed "it would have made more sense to have given priority to..iron ore mining..than to the construction of the steel mills. Mining at Itakpe should logically have started five years before the Ajaokuta works were commissioned"

Tam-West also remarked that it was "important to synchronize the development of the mine with the completion of the Ajaokuta blast furnace."
But we didn't when planning started. In fact, NIOMCO planning and approval happened after #ajaokuta had commenced.

The associated problems can be grouped not only by phase but by focus:
- Finance, including shortage of foreign exchange, high indebtedness, complete or almost total importation of capital goods, technology, and engineering services. #ajaokuta

- Planning and management resulting from inexperience, low levels of technological and organizational skills, and lack of precedents.
- Political control, bureaucratic interference, and shifting government policies. #ajaokuta