Following a remark by Vice President Namadi Sambo that most of the government-privatised companies have failed to operate properly, the Senate has set up an ad-hoc committee to investigate the entire privatisation and

commercialisation activities of the Bureau of Public Enterprises (BPE) from 1999 to date. That means they will examine all the federal government assets that have been sold to the public in the last 12 years. Before the Senate begin their inquisition, it is important for them to understand the implication of what they are trying to do because the nation could end up with court cases that may render their exercise counter-productive. To underscore what I am trying to say, members of the ad-hoc committee may well avail themselves of the never-ending story of Ajaokuta which I will just summarise.

Established in 1979 by the General Olusegun Obasanjo administration, the Ajaokuta Steel Rolling Mill was designed to be completed in three phases but despite the cumulative investment, running into billions of dollars, the TPE of Russia, the contractors that built the plant, eventually abandoned what has now become the biggest "white elephant" project in the world. To complement this monument to waste is Delta Steel Plant, situated at Aladja in Delta State, a relatively smaller project which was completed and inaugurated in February 1982 but which by 1994, had also been abandoned.

Every administration has made efforts to revive these projects but after several hundreds of millions of Dollars would have been wasted, the story of sleaze continued while the value of these companies depreciated. The situation was not different when the late President Umaru Musa Yar'Adua came to power, except for the fact that there were allegations of impropriety against the deal which culminated in the upgrade of the concession agreement to an outright sale a few days before the expiration of the President Obasanjo administration on May 29, 2007.

From the media to the National Assembly, there was a public outcry that the sale of Ajaokuta Steel Company and Delta Steel Company as well as the concessioning of the National Iron Ore Manufacturing Company, all to Global Infrastructure, was not in the national interest. Speaking at a public function in Abuja, former Defence Minister, Lt. General T.Y. Danjuma (rtd), alleged that the promoter of the company to which the entire steel industry had been handed was working as an agent of some corrupt Nigerian leaders. He also alleged that the company had started to cannibalise the entire steel mills and stealing valuable equipment and machinery and shipping them out of the country. He urged Yar’Adua to probe the transaction that led to a situation in which three national assets were handed to one foreign entity. Coming on the heels of Danjuma’s allegation was a petition titled "Ajaokuta Company Scam: A challenge to your administration" written by one Mr. Akajiaku Chibueze, a freelance journalist. The petition was sent to the president.

The complainant had alleged that on August 13, 2004, Global Infrastructure Holdings Limited (GIHL) signed a concession agreement with the Federal Government of Nigeria to rehabilitate, commission and manage the Ajaokuta Steel Plant for ten years. However, according to the petitioner, a week to the expiration of the Obasanjo government in May 2007, the BPE tinkered with the concession agreement and sold 60 percent of the plant's shares to GIHL. He alleged further that rather than take concrete steps to rehabilitate the facility, GIHL began to systematically cannibalize the plants, loot the equipment and take same to Delta Steel Company where it had acquired 80 percent shares under controversial circumstances that were already well documented.

Apart from directing the then Minister of Mines and Steel Development, Mr Sarafa Isola, to carry out an administrative review of the entire steel projects, President Yar’Adua forwarded the petition of Chibueze to then acting Chairman of the Economic and Financial Crimes Commission (EFCC), Mr. Ibrahim Lamorde whose subsequent investigation not only confirmed most of the allegations, but also revealed high level criminality on the part of GIHL management with some officials of the BPE being complicit.
In his conclusion, Lamorde affirmed that due process was not followed in the concessions/sales of ASCL, DSCL and NIOMCO to Global group of companies (GINL, GIHL and GSHL). In his words, “the processes that brought these companies on board were not transparent and pose deleterious effect to the survival and progress of the Nigerian Steel Industry. In view of this, it is our considered opinion that there is the need for the government to revisit the concession/sale agreements in the steel sector with a view to putting things in order."

Meanwhile, the administrative panel of inquiry inaugurated by the ministry had also concluded its job with findings that were even more damning. The panel, for instance, observed that the company adopted an unwholesome accounting practice by running ASCL and NIOMCO and Delta Steel Company as one financial unit, differentiating them only with a new invention called 'Memorandum of Records,' which was in contravention of the Concession Agreement. With regard to funds to be injected into the project by GIHL, the panel held that there was no evidence of capital importation and therefore no payment for the shares of ASCL had been made, stating that "even the assumed investment of $200m is a ruse.”

The panel, which said it sought confirmation about any injection of funds by GIHL from the Central Bank stated that the company had embarked on massive borrowing from the local commercial banks to the tune of $192 million while pledging assets of Delta Steel Company as collateral. “The panel is at a loss as to where this volume of money has been invested as GIHL has not been able to produce convincing records of injection of such funds into the three companies. The panel is strongly suspecting capital flight. The general impression is that GIHL has been diminishing the values of both ASCL and NIOMCO to buoy up their fortunes."

For Ajaokuta Steel Company, the panel concluded that the Share Sales Purchase Agreement was technically not in force as the BPE confirmed that the transfer of shares to GIHL had not been done as “the non-completion of the transfer of shares process had vitiated clause 8-1 which stipulated that the execution of the SSPA automatically terminates the Concession Agreement.”

The foregoing findings therefore shaped the decision taken by the Federal Executive Council on April 1, 2008 to terminate the agreement that "was largely skewed in favour of the Concessionaire (GIHL) to the detriment of the government" and that "it is not economically and strategically advisable to place three major industries in the hands of one foreign entity with questionable background."
The Ajaokuta story, quite naturally, did not end with the termination of the contract because like almost all other sales by BPE, the contract papers were probably drafted by the buyers which made it very convenient for GHIL to institute legal actions abroad against the Federal Government, claiming hundreds of millions of Dollars in damages. With this, Chief Mike Aondoakaa, then Attorney General of the Federation and Justice Minister, began to shuttle between the United Kingdom and United Arab Emirate for meetings to explore arbitration with foreign businessmen who ordinarily should be facing criminal prosecution in Nigeria.

Yet, for all his efforts and after several millions of Dollars in legal fees, the GIHL would late in 2009 make a new presentation to government on “a complex solution to get Ajaokuta operating again” with an estimated requirement in excess of $950 Million which even the company admitted would not be profitable for the federal government!

For instance, going by the breakdown of the figure proposed by GHIL, $280 million would be spent on mechanical repairs, including hydraulics; $200 million on Control systems; $170 million on electrical cabling; $85 million on mining; $50 million on logistics and rail; $25 million on housing; $70 million on engineering; $25 million on spare parts and another $25 million on civil works. The company concluded, rather ironically, that “based on the above capital requirements and the projected marketing conditions, the enterprise value of Ajaokuta is negative (-$520 million).”

The new proposal sought cooperation between GIHL and the federal government which would involve “substantial tax concessions and infrastructure development” and eventually culminate in reviving the Ajaokuta Steel Company over a period of between five to six years. It was brought to the attention of the president shortly before his last trip to Saudi Arabia in November 2009 from which he did not return to office until he died. As of today, it is difficult to ascertain where the government of Nigeria actually stands with regard to the ownership of our steel industry that has become, for all practical purposes, a bottomless pit from where corrupt government officials, their foreign collaborators and smart lawyers feed fat to the detriment of the nation. Yet the whole edifice on which there is continuous investment of scarce resources (with lawyers making a kill) is fast becoming a scrap.

Now, Ajaokuta is just one of the several sordid tales that will be brought to the attention of the Senate committee in the course of their assignment. But when you look at it, what they are actually investigating is a failure of BPE, the agency charged with privatising government assets which has not lived up to its responsibility. And since a solution should not be worse than the problem which inspired it, the Senate will do well to consider possible legal issues as they advance in their investigation and to ask whether the end will truly justify the means. They may just be about opening a can of worms; I hope they can also handle the fallout.
• This piece was first published in THISDAY on 28th July, 2011