Nigeria’s Ajaokuta steel revival hobbled by power, raw material gaps

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Read History Go to My Account Log Out Enhanced by Google Economy Nigeria’s Ajaokuta steel revival hobbled by power, raw material gaps …Experts demand integrated steel policy to unlock private investment, cut $4 billion import dependence Nigeria’s effort to revive the Ajaokuta

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Nigeria’s effort to revive the Ajaokuta Steel Plant faces a potential 300-megawatt power gap, shortages of raw materials and inadequate transport infrastructure, raising questions about the country’s ability to establish a viable domestic steel industry.

The ministry of steel development estimates that Nigeria spends about $4 billion annually on steel imports.

Industry experts say reducing dependence on foreign supplies will require more than restarting existing plants; it will require an integrated steel policy that coordinates power supply, mining, transport, processing and private investment.

The stakeholders said successive efforts to revive Ajaokuta had not adequately addressed the supply chains and infrastructure needed to sustain production.

Abdullahi Kihausa, director of metals and mineral strategy at African Industries Group, told BusinessDay that Nigeria’s failure to establish a viable steel industry stemmed from its inability to treat steelmaking as an integrated value chain.

“For the past 47 years, the government has been trying to establish a successful steel industry, but without success because of certain gaps.

“The government has not treated the steel value chain as an integrated system,” Kihausa told BusinessDay.

“The steel value chain covers everything from iron ore and other raw materials to processing, power, logistics, finished products and the market. If you neglect raw materials and focus only on processing, as we have done with Ajaokuta, you will not get anywhere.

“We talk repeatedly about Ajaokuta without paying enough attention to the raw materials needed to sustain production. Similarly, you cannot operate Ajaokuta without adequate power. You also need logistics to transport raw materials to the plant.”

Kihausa said Ajaokuta requires about 400 megawatts of electricity, compared with a stated captive generation capacity of 100 megawatts, implying a potential shortfall of 300 megawatts.

The plant’s official company overview lists a thermal power facility comprising two 55-megawatt generators, giving a combined installed capacity of 110 megawatts. The 100-megawatt figure cited in the discussion should therefore be distinguished from the listed installed capacity and confirmed as the relevant operating capacity before publication.

Kihausa said the government needed to secure reliable electricity and involve private-sector companies with the technical capacity to address the plant’s challenges.

“Can the national grid provide the remaining power? It cannot adequately do so at the moment,” he said.

“You cannot run Ajaokuta with budgetary allocations alone. The best approach is to identify competent private-sector companies with the necessary technical expertise, sign agreements with them and support them in addressing some of these challenges.

“That is why we need a steel policy. Once a policy is in place, the government can clearly define its responsibilities and those of the private sector.”

He said an integrated approach was necessary because steel production depends on the availability of iron ore, other mineral inputs, electricity and transport links. Without these, investment in the plant alone would not guarantee sustained production.

Kihausa said Nigeria had not adequately developed the mining and transport arrangements required to supply the plant with raw materials.

“We are talking about raw materials, including iron ore. Iron ore is the only one for which we have established mines, while mines for other materials, such as limestone, dolomite and bauxite, have not been adequately established,” he said.

“We have also not established how these materials will be transported from the mines to the plant. So, how can production take place under these conditions?”

He called for a national steel policy and the establishment of a Steel Competitiveness Council to coordinate government agencies and private investors, set production targets and monitor implementation.

The proposed council, he said, should assign responsibilities and establish measurable milestones for investors and public institutions.

“When responsibilities are assigned to a private company, clear targets and timelines should be established. For instance, there should be specific deliverables after six months and one year,” Kihausa said.

“The government must also fulfil its own obligations. It cannot expect a private company to deliver results while failing to meet its own commitments.”

He said the policy should cover raw material supplies, power, financing, technical capacity and market access.

“If the government continues to treat Ajaokuta as an isolated project, nothing will change,” he said.

The ministry’s estimate of a $4 billion annual steel import bill highlights the potential market for domestic producers. However, local manufacturers must be able to compete on price, quality and supply reliability to capture a larger share of demand.

Steel is used in construction, manufacturing, transport equipment and machinery. Dependence on imported products exposes these sectors to foreign-exchange pressures and international supply-chain costs.

Ajaokuta was designed with an initial production capacity of 1.3 million tonnes annually, with provisions for expansion to 2.6 million and 5.2 million tonnes. Its prolonged delay has limited its contribution to domestic steel production and the industries that depend on steel.

Private investment is central to the latest efforts to expand the sector. Among the announced commitments is more than $1.3 billion for the rehabilitation and modernisation of the former Delta Steel Company, now known as Premium Steel and Mines Limited. Another investment agreement involving Stellar Steel Company Limited concerns a planned steel facility in Ogun State.

These commitments are at different stages of development and should not be treated as funds already spent or production capacity already commissioned.

In August 2026, the Federal Ministry of Steel Development announced that Premium Steel and Mines Limited had committed more than $1.3 billion to plant rehabilitation, modernisation and raw material development. The company aims to restore commercial operations within 18 to 24 months, subject to a sustainable supply of iron ore.

The project targets annual production of one million tonnes of liquid steel. The government also expects it to generate about 5,000 direct jobs and more than 20,000 indirect jobs, while supporting rail and maritime freight.

The agreement with the National Iron Ore Mining Company seeks to address raw material supply constraints. However, the project’s success will depend on the availability of iron ore, supporting infrastructure and commercially viable operations.

In October 2025, the government announced an investment agreement with Stellar Steel Company Limited, backed by Chinese parent groups, for a planned facility in Ogun State. The project was presented as a phased development intended to expand local production and reduce dependence on imported steel.

Kihausa said investors should be selected on the basis of technical capacity and their ability to meet agreed targets. He urged the government to establish performance indicators and ensure that public agencies fulfil their infrastructure commitments.

Beyond power and raw materials, he said local producers needed a policy framework that would help them compete with imported steel.

“If the government does not protect local producers, companies that manufacture steel in Nigeria will struggle to compete with imported products,” he said.

“If locally produced steel cannot compete in the market because imports are allowed without adequate safeguards, domestic production will not be sustainable.”

He called for a framework that combines private investment with financing, technical support and safeguards for local producers. Such measures, however, would need to balance the development of domestic capacity with competition, product quality and the costs faced by industries that use steel.

Isinmidun Loto, sole administrator of the National Iron Ore Mining Company, said the government could support the industry through infrastructure, incentives and measures to encourage local consumption of Nigerian-made steel.

“Government support does not necessarily mean giving companies money directly. It can involve providing essential infrastructure for steel production, including railways, electricity and other facilities needed to transport raw materials and finished products,” Loto said.

He also advocated better access to mineral-resource information and digital tracking systems to monitor the movement of materials through the supply chain.

“With digital tracking, it is possible to know when a product leaves a facility and when it arrives at its destination. These are some of the issues we need to consider,” he said.

Maureen Tiamiyu, executive director of Solar Nigachem, said Nigeria could use its natural gas resources and direct-reduction technology to support iron production, pointing to the former Delta Steel operation as an example.

“Regarding the Delta Steel Plant, the natural gas that we flare can be used in the direct-reduction process to produce iron. The system was working effectively, so its eventual failure raises serious questions,” she said.

Tiamiyu also called for investment in technologies capable of processing mineral deposits containing impurities and urged the government to create policies that attract investors with the technical capacity to develop the sector.

“I believe we should move away from relying solely on government-owned businesses and instead create the right policies and programmes to attract competent investors, including foreign direct investors, who have the technical capacity and discipline to develop the sector,” she said.

Recycling also supplies raw materials to some Nigerian steelmakers, but experts said scrap metal alone would not meet all future demand. Expanding primary steel production would require reliable supplies of iron ore and other inputs.

The revival of Ajaokuta therefore depends on more than rehabilitating the plant. It requires a coordinated policy that secures electricity, develops mineral supplies, improves transport links and gives private investors clear responsibilities and measurable targets.

Without these measures, Nigeria risks continuing to spend billions of dollars on imported steel while its domestic production capacity remains underused.