• Ramping up N33bn electricity debt on a cost centre calls for a drastic change in Ajaokuta Steel’s business model
Ajaokuta Steel Company Ltd (ASCL) was conceived to embed heavy manufacturing to drive Nigeria’s real sector. But it is, at best, turning a mirage, despite the brave efforts to revive the plant by the last administration, as well as the Tinubu Presidency.
Clearly, here is why: ramping up a N33 billion electricity debt, over numberless years, yet producing virtually nothing! The situation was so bad that the Transmission Company of Nigeria (TCN) just yanked ASCL from the national greed!
What did the plant do with all that electricity, when it had been near-comatose all this while? Why did the Nigerian Bulk Electricity Trading Plc (NBET) — or whichever preceding agency that sold the national electricity pool — continue to indulge ASCL with more credit when the plant was not servicing its debt, until it became well-neigh a bad debt at a cumulative N33 billion?
What is even the integrity of this bill? Is ASCL adequately metered, so that there was no padding of the bill?
But beyond debt owed to NBET, the N33 billion also included N2.22 billion owed to “service providers”, aside from the bulk of N30.85 billion to NBET. Pray, how do you provide service to a comatose company and be sure you would be paid?
Read Also: Tinubu explains reasons for cabinet size
Perhaps there were other under-the-table motivations beyond naked business? Or were all of these “deals” struck with the belief that the Federal Government would always foot ASCL’s bills, simply because it was a government company?
The interaction between Shuaibu Audu, the Minister of Steel Development, and Sumaila Abdul-Akaba, the managing director of ASCL, was even more intriguing, from the minister’s own account: “Part of what the MD of Ajaokuta told me is that most of the money is in interest payments.” That supposes ASCL might be heavy on routine loans. But whoever would give money to a struggling business, if they were not convinced some Father Christmas would bale it out?
From a conceived profit — in any case, revenue — centre, ASCL has turned a sickly cost centre. Yet, it is ill-advised to cut the loss and move on. Too much resource had been sunk into this strategic plant for it to be abandoned — even if it had become a sick metaphor for official neglect and decay, collusion and corruption: a corruption fired by systemic conspiracy.
All that must stop. But it won’t if we don’t radically change the plant’s business model. The path to that redemption is running ASCL as an efficient venture. It should float or sink by what it generates, not by what it sucks from the federal purse. But sinking is out of the question — which is why the government must get the company’s management right. It’s just too strategic to fail.
We must applaud the current multi-ministry efforts to return Ajaokuta to producing light steel, to realise the current administration’s ambitious infrastructure dreams; and to enhance the production of military hardware. Still, the minister’s comment that since one arm of the government is doing the revival, another arm should not make “things very difficult for us” would appear manifestly wrong — especially if “difficult” refers to NBET’s right to collect debts Ajaokuta owes.
Indeed, the contrary should be the stress: ASCL should pay its debt. NBET must collect its due. Those hard basics, not mushy sentiments, should undergird the relationship between the two. That is the first step to tweaking Ajaokuta’s business model; and putting in place a more business-like corporate temper.
Of course, the Federal Government should explore a reasonable payment plan — flexible enough and mutually beneficial to both — after a forensic audit that establishes the actual amount owed.
That’s a logical way to recalibrate the plant and transform Ajaokuta from the cost centre of the past four decades, to the profit centre and industrial trigger it was conceived to be — and it must be.
