Vultures of steel: Ajaokuta where corruption is the system

Theophilus Abbah

If corruption was an issue of the presence of individual ‘rotten apples’ in the state, it would suffice to arrest such individuals to cleanse the system. That it is not so proves the story of the steel plant of Ajaokuta, Nigeria, where corruption has been the system for decades. With a new legislature and an impending cabinet, what next for Ajaokuta?

Several government changes, commissions of inquiry, senate committees, even arrests, have not been able to stop the bleeding of the tormented Ajaokuta steel manufacturing plant in Kogi State, Nigeria, the second largest in Africa and twelfth largest in the world, for the past four decades.
A new change is on the books now, but will this time be different?
When abundant resources of steel were discovered in the region in the early eighties of the last century, the new steel plant at Ajaokuta was seen as a promising project, meant to generate close to a million jobs and propel Nigeria finally into industrialised manufacturing. But most of the ten thousand shiny new houses built for prospective mine workers and their families at the time are now abandoned and overgrown with weeds, connected by ghost paths where armed robbers hide. No less than four mining projects turned- plunder-exercises by old and new captors in the past thirty-six years have enriched individual politicians, their bankers and other wealth managers, who managed to lay their claws on the project.
It delivered some steel once, during the first six months of its operations in 1983, and never since.

An aerial view of Ajaokuta Steel factory

The revivals that weren’t

When asked when Ajaokuta would start to produce steel again, the immediate past government minister of transportation, Rotimi Amaechi, responded sagely that the roads in the area should be done up first, because if not, how were you going to transport it to customers? He was right: the roads in Ajaokuta, constructed in the 1980s, are now in a bad state. But remarkably, it was the first time anybody ever asked this question. As if it had never really been a plan to get any actual steel from the mine at the time of any of the other revivals.
Today, expired asphalt disintegrates from the base of the expressway to Ajaokuta, exposing the white sharp-edged stones underneath. The houses around the mining compound have lost windows, doors and corrugated roofing sheets. Behind a large faded gate one can still see the gigantic but now rusty machines, dilapidated factory buildings and abandoned tractors meant for the ambitious steel complex that was meant to change the economic story of Nigeria no less than four times. Wives and children of idling mine workers are hawking fried yam, plantain, corn, bean cakes and fast foods for passing travellers.
The Ajaokuta steel plant was first almost completed in 1983. Russian Tyazhpromexport (TPE) had delivered the machines and heavy equipment; Germany’s Julius Berger had fixed the complex network of rail lines from the port to Ajaokuta, while the French had carried out the civil work, including road construction, housing estates, and other foundations for physical structures. The total investment according to a World Bank estimate was over US$ 7 billion.
But since all the contracts had included large slices for the ruling National Party of Nigeria (NPN), the money was finished then. “Ajaokuta was a drainpipe for the NPN government. Through Ajaokuta, money was being funnelled from the system into the party,” says Chief Paul Unongo (74), then Minister of Steel Development. “I was forty. I wanted the project to work. We produced steel for six months. But I was made to resign (through political pressure, TA) because I stood in the way of those who wanted to move money from Ajaokuta for selfish purposes.”

One of the machines in the factory

I was made to resign because I stood in the way

A later communication from the US Embassy on Ajaokuta’s history, captured by Wikileaks, confirms: “According to the GON [Government of Nigeria] and Embassy contacts, since 1979 (the) Ajaokuta Steel Complex has been used as a mechanism to grant contracts to contractors performing substandard work at overinflated prices while providing senior GON [Government of Nigeria] officials with large kickbacks. The GON estimates it has spent at least US$ 5 billion on what was to be Africa’s largest steel production facility, while World Bank estimates put the cost at about US$ 7 billion (not adjusted for inflation). That (…) administration may have thought the project feasible, (…) but within a few months senior GON officials were already siphoning off millions in kickbacks from real and false contracts for the complex’s construction.”
The corruption surrounding the Ajaokuta construction had been so blatant that it contributed to the collapse of Johnson Mathey Bank of London in 1983. According to another Wikileaks cable, Johnson Mathey had acted as “a conduit to transfer hard currency for some party members in Nigeria. A few leading officials and politicians had amassed large amounts of money. They sought to transfer the money out of the country (…) by issuing import licenses (for fictitious items).” The collapse of Johnson Mathey, which had conducted much unsavoury business with many unsavoury clients globally (1), would inaugurate an era of stronger banking controls in the UK.
Abacha’s banker
Sadly no such controls were established in Nigeria. Even though, in January 1984, the Nigerian military assumed power amid promises to end corruption, then kept the Ajaokuta project at arm’s length for close to a decade, the looting started again when General Sani Abacha came to power in 1993. Abacha’s plundered billions, kept in Swiss banks for years, and estimated at US$ 22 billion in total, are legendary.

Less known is the fact that of this money, around US$ 2,5 billion came from Ajaokuta

Abacha and his family -notably his son, Mohammed, about whom more later- saw the opportunity in 1995 when Russian TPE came knocking for an outstanding payment for heavy machinery for Ajaokuta of US$ 2,5 billion. A company set up by the family, Mecosta Securities Inc., in league with Atiku Bagudu then hatched a plan to buy up that debt so that instead of owing the Russians, the Nigerian state would now owe him -and the Abacha family.
The offshore company located in British Virgin Island approached the Russians and told them that the Nigerian state was likely not going to be good on its money, but that the company could repay them -at least partly, he added, because to repay the full amount would be impossible. It worked: the Russians, already frustrated with the delay in payment, gave the company a very good deal. The debt would be written off if Mecosta could ensure payment of at least a fifth of its value: US$ 500 million. Using two off-shore companies, they channelled the amount of US$ 500 million to TPE; then proceeded to recover the full US$ 2,5 billion from Nigeria itself. This was the easiest part, since Abacha, for the state, then simply made the money available to the banker.
The full extent of Abacha’s plunder would come to light during an international investigation in 2000 led by the then British Deputy High Commissioner to Nigeria, (who was involved since some of the looted money had been hidden in the United Kingdom or British Virgin Isles.) When interrogated by lawyers for the British, General Abacha’s son Mohammed Abacha admitted to the thefts and gave colourful descriptions of how the family and their banker looted the Nigerian treasury and Central bank, taking money in “bags, cartons and trucks.” He also described how Bagudu helped to lodge the moneys in offshore accounts.

The late Head of State, General Sani Abacha

Taking money in bags, cartons and trucks

Asked about Ajaokuta, Mohammed Abacha stated that the Nigerian government had requested him to return US $100 million of the originally looted US$ 2,5 billion. He added that he “didn’t see any reason for that” but that he after he “was threatened by the then (authorities)…. agreed with Mr Bagudu that, well, we should pay something (that $100 million) just to get these people off our back.” Up to now, Mohammed and the rest of the Abacha family, instead of showing contrition, appear annoyed by the zeal with which they have been “persecuted.” Their supporters point out that, while others who had also taken state’s money were left unbothered, Mohammed Abacha was only jailed for three years after the inquiry.

Over the last 20 years, ever since civilian rule returned to Nigeria in 1999, only US$ 3,3 billion out of the unknown billions of dollars stashed away by the Abacha family has been recovered. None of it has been reinvested in the Ajaokuta project.

Relatives and friends

With a constant refrain of ‘government has no business in business,’ President Olusegun Obasanjo came to power as head of a new civilian government in 1999 with a privatisation agenda that would once again drain lifeblood from Ajaokuta. Soon after his ascendance to power, the new president started to appoint friends and relatives at the head of former state enterprises in such a blatant way that, as Malam Nasir el-Rufai, a former Director-General of the Bureau of Public Enterprises, would state in an interview with Sahara Reporters in 2011, four years after Obasanjo had left the presidency: “The president and I were always quarrelling over issues of privatisation. Each time I told him we have a process … that they should advise their friends to be the highest bidder.”
One of the projects privatised by Obasanjo concerned Ajaokuta. In 2003, the steel mine was sold to Solgas Energy Limited, a company incorporated on paper in the USA and introduced to Nigeria by Seun Oyefeso, an accountant friend of Obasanjo’s son, Gbenga. Remarkably, at the beginning of the concession process, Solgas did not even bid for Ajaokuta, but somehow the process involving five other bidders (Voest Alpine Industrial Services of Australia; Osaka Steels Nigeria Ltd; Darueli Offline of Italy; Denus Nigeria Plc and Kobe Steel of Japan) was stopped. Instead, Solgas was brought in.
The concession of Ajaokuta to Solgas took place in spite of a critical report from the House of Representatives committee that had discovered that Solgas did not have the technical and financial capacity to revive the project and had advised against the concession. The report was ignored by the Obasanjo government. A United States Embassy memo on Solgas, issued on 17 December 2003 and leaked by Wikileaks, commented that “SOLGAS, a small U.S. energy service provider, has never managed or operated a steel factory. (..) In a private meeting (…) SOLGAS’s Nigeria-based Vice Chairman Oluwaseun “Seun” Oyefeso said the only reason SOLGAS was in Nigeria was to enter the electricity and gas markets, and to make “money, money, money.”
Money was, however, not forthcoming. Oyefeso was indeed unable to attract either local or international loans for the Solgas Ajaokuta project and the agreement with Solgas was terminated by the Obasanjo government in 2004. However, Obasanjo then immediately signed a new Ajaokuta agreement with the Nigerian branch of the Indian company Global Infrastructure, Global Infrastructure (Nig) Ltd (GINL), which was promoted by the very same two men who had brought in Solgas: presidential son Gbenga Obasanjo and his loyal sidekick and Seun Oyefeso. Like Solgas, GINL was also registered off shore on the Isle of Man.

Large funds borrowed from Nigerian banks were not repaid

A presidential panel would, in 2007, scathingly compare the GINL deal to the Solgas deal, and state that there had been no knowledge of the company “to warrant the qualification to rehabilitate complete, commission and operate Ajaokuta Steel Project” in the first place. But, by then, President Obasanjo had already used his presidential fiat to oblige his Minister of Steel to handover Ajaokuta to GINL in a new ten-year agreement.
Gbenga Obasanjo would still boast in a 2006 interview that he was “proud to associate with the success of the Ajaokuta Steel Complex. (…)” and that “they have started making steel and prices of steel have come down in Nigeria….” But it was not true. GINL was another disaster. According to the 2007 presidential panel, company management “withheld any foreign investment into the mine,” had “merely depended largely on funds borrowed from Nigerian banks, which were not repaid” and could not even find where the money from the banks had gone: “the Panel is at a loss as to where this volume of money has been invested,” it said, “as GINL has not been able to produce convincing records of injection of such funds.”

Cannibalising and vandalising

The panel further discovered that GINL could not even produce any bank reconciliation statement over the three years since it took over Ajaokuta; that the mandatory payment of one percent of turnover as concession fee to the government was never paid and that facilities at the company had been ‘cannibalised.” “GINL is constantly and systematically cannibalising, vandalising and moving valuable equipment and Spare parts/Consumables out of (the Ajaokuta Steel project),” it said, and also that “(…) GINL has not imported replacement parts in three years; it (is) using broken-down equipment as spare parts shops – just to keep producing at the detriment of the entire system” while “security (…) has completely broken down and from time to time thieves break in (…) and cart away valuable equipment,” with the Management “not interested in prosecuting offenders.”
The panel also reported, even then, that buildings “such as the Metallurgical Training Centre” had already been “overtaken by bushes exposing the buildings and equipment to bush fire.” It also reported that there had in fact been a fire, in 2006, and that GINL management had pocketed the insurance pay out of close to US$ 1 million instead of passing it to the government, which was funding the Ajaokuta structures and equipment. It came as no surprise that the panel at the end of its report recommended that the concession agreement between GINL and Nigeria on Ajaokuta should be terminated. The mine would again lay still in its broken state for another three years.

None of the privatised steel mines had fared well

A senate committee investigating Obasanjo’s privatisation deals would find in 2011 that none of the steel mines privatised by this president – besides Ajaokuta, also the Delta Steel Company, Oshogbo Steel Company Limited, Jos Steel Rolling Mills and Katsina Steel Rolling Mills – had fared well. The committee reported a loss, for example, of over US$ 100 million in the case of Delta Steel; said that Jos Steel had never engaged in any ‘meaningful commercial activities;’ and added that Oshogbo and Katsina, though not embroiled in controversies, had operated far below expectations.

The fourth wave

A new opportunity to feast on Ajaokuta arose when, after president Yar’Adua’s death in 2010, the new government under President Goodluck Jonathan appointed Mohammed Adoke, one of the legal advisers to GINL, as the country’s Attorney-General. Adoke, whose profile on Wikipedia proudly says he has handled a case “between Global Steel Holdings (the parent company of GINL) and the Bureau of Public Enterprises Investment,” promptly proceeded to favour GINL in a ‘breach of contract’ case the company had filed against the Nigerian government. GINL now wanted US$ 525 million in damages from the Nigerian state.
Instead of defending Nigeria’s interests, Adoke offered, on behalf of the state, an out-of-court settlement with his own GINL clients whereby that company would obtain a new management contract as well as a reduced ‘damages’ payment of US$ 250 million. Flabbergasted, stakeholders in the iron and steel industry in Nigeria opposed this move. The director of Nigeria’s Bureau of Public Enterprises (BPE), Sanusi Mohammed, said that Adoke’s settlement with GINL was “null and void” since the only agency in Nigeria entitled to conduct privatisation contracts was the BPE, and that the BPE had not participated in the matter at all.
Sanusi Mohammed also reiterated the awful record of GINL, saying that it “ransacked and destroyed virtually every facility they operated.” This included, besides the Ajaokuta Steel Company, also the National Iron Ore Company at Itakpe and the railway track and locomotives running from Itakpe to Ajaokuta and Warri, Mohammed said.

Even some typos in the new agreement were identical

As a consequence of the outrage, then Minister of Steel Muhammed Sada rejected the Adoke settlement. The promised ‘compensation’ to GINL was not carried out and Sada’s ministry recommended that GINL’s arbitration case be pursued to a final conclusion.
Enter a new Minister of Solid Minerals in 2015: Dr Kayode Fayemi. For unknown reasons Fayemi turned out to be really partial to the rejected Adoke settlement with GINL. He revived it by presenting a new settlement deal that, opponents noted, was verbatim the same as the earlier deal made by erstwhile attorney general and GINL lawyer Bello Adoke. The opponents pointed out that even some typos were identical: for example, in both, fine clay was written ae fire clay, complete as compete, indicted as indicated and even as event.
Minister Fayemi defended himself by saying that he had negotiated a higher annual concession fee from three to four percent of the turnover to be paid to the government by GINL. This was being economical with the truth, though, since the 2013 draft agreement had already negotiated and obtained the four percent rate.

The minister said it would be handled differently this time

In his bid to continue with GINL in the management of Ajaokuta, Minister Fayemi said that the mine should be handled by a private business and that no more money from the state should be poured into it. According to him, Nigeria had already spent US$ 8 billion on it, which had been more than enough. He said privatisation would be handled differently this time, assuring parliament that “we are not going to repeat the mistake of the Obasanjo administration.” He also promised a “technical audit” and a thorough assessment of “as to who really has the technical capacity, the financial wherewithal and the track record to really bring Ajaokuta back to life.”
However, Fayemi’s simultaneous insistence that management should once again be handed to GINL, the company that had ‘cannibalised’ Ajaokuta, caused many in Nigeria to doubt such promises. Stakeholders in the sector, including the African Iron and Steel Association (AISA) and BPE’s Sanusi Mohamed, maintain that only proper governance by an accountable government authority can avoid new drainage from the mine. They still support the view of the ad hoc senate committee that had recommended in 2011 that both the Ajaokuta and Delta Steels privatisations should be undone.

A new voice

Fayemi is no longer a minister now, but the plan to once again privatise Ajaokuta through GINL still exist. An increasingly strong protest against this, however, comes from a new voice on the block: former senate candidate and barrister Natasha Akpoti, who leads the Ajaokuta/Itakpe Revival Movement in Kogi State. When Akpoti addressed a public hearing in parliament last year, she pleaded strongly for the government to revive Ajaokuta and openly accused some of those who have been pushing for a new privatisation deal with GINL of ‘covert interests’ in the company. She named the Governor of Kogi state, Yahaya Bello, as being in ‘partnership’ with GINL and added that former steel minister Fayemi as well as former Minister of Finance, Kemi Adeosun, also had personal interests in the new deal.

Natasha Akpoti: in the struggle for the revival of Ajaokuta

All individuals named by her denied such a connection and in turn accused her of working for a ‘competing Indian group’ interested in taking over the company. But she is not resting her case any time soon. “Ajaokuta means a lot to Nigeria’s economic development,” she said in an interview. “The Federal Government should take over Ajaokuta and make it work.”
Her project is finding support from Chief Unongo, who still remains optimistic about the business prospects of the company with its 24,000 hectares of land that dovetail into the bank of River Niger. After all, he says, the machinery is still there, as well as two power plants and the internal standard gauge rail track of approximately 68 kilometres. Also, out of the initially built 10 000 housing units, a third are still inhabited by workers who are ready to get going again. “I wrote a 1,000-page handover note (at the time)” says Unongo. “We nearly completed Ajaokuta. It’s painful that corruption has stalled it. But we can do it.”
One time Ajaokuta engineer Anthony Madagua still believes in Ajaokuta too: “If the US$ 2,5 billion stolen in the name of Ajaokuta (by Abacha and Bagudu, ed.) was returned to the project, it would go a long way in reviving it. Even with US$1,4 billion, which would produce 1,3 million tons of liquid steel per year, it should be on stream.”
Speaker of the House of Representatives, Yakubu Dogara, agreed during the public hearing where Natasha Akpoti spoke that “Government does not need liquid cash to complete the plant and put it to work. All Government needs (to do this) is leadership.”
So far, ever since the eighties, the Ajaokuta steel plant has still not produced any steel.

Who got rich from Ajaokuta?

1.  The cost of the looting by the NPN government of the initial investment in the late seventies and early eighties has never been estimated. If ‘commissions’ on the first contracts are calculated at a conservative ten percent, it would have been at least US$ 700 million.
2. The Abacha family got US$ 2.5 billion from Ajaokuta. This was supposed to have been paid out to the Russian machine supplier TPE, so no direct theft from Ajaokuta itself. However, after the money not being paid to TPE it should have been reinvested in Ajaokuta, which it wasn’t.
3. It is again difficult to estimate what the cost of the ‘cannibalising’ of Ajaokuta by GINL has been. But if the estimate of a local engineer that the present value of Ajaokuta machinery is US$ 5 billion, and former minister Fayemi estimating that the government invested US$ 8 billion in it over the years, GINL can be said to have cost the steel plant US$ 3 billion
4. If GINL is allocated a damages payment of US$ 250 million, this should be added to their bill
5. And then there are the workers, who have been idle, but whose salaries have been paid. The salaries were not high so they never got rich, but the total wage bill is calculated to have cost Nigeria US$ 10,4 million per year since the early eighties.

NOTE (1) see https://www.latimes.com/archives/la-xpm-1985-09-22-fi-18317-story.html

Also published on the following websites: https://www.investigativecollective.com/kleptocrats-the-associates.html and https://www.dailytrust.com.ng/vultures-of-steel-ajaokuta-where-corruption-is-the-system.html.