Investment | Nigeria Talking With Ansteel of China Over $4.5 Billion Project

LAGOS, Nigeria, Capital Markets in Africa: Nigeria is in talks with companies including Ansteel Group Corporation of China to revive its $4.5 billion Ajaokuta steel complex, according to solid minerals development minister Kayode Fayemi.

While construction of Ajaokuta started over three decades ago along the Niger River in central Nigeria with a planned production of 5 million metric tons annually, it was never completed. President Muhammadu Buhari wants to revive the factory project to diversify Africa’s largest economy which relies on oil, Fayemi said.

“We are in discussion with Ansteel,” Fayemi said in an interview on Monday in the capital, Abuja. “We are also talking to Tyazhpromexport of Russia, that was originally involved in the project.”

Ansteel, one of China’s biggest steel producers, didn’t respond to an e-mail sent on Monday seeking confirmation of talks. Nigeria is also talking to India’s Mumbai-based Global Steel Holdings Ltd. and a Ukrainian company that the minister didn’t name.

Contracting Economy 
Nigeria’s economy shrank by 0.4 percent in the first quarter, the first contraction in a decade, according to the National Bureau of Statistics. It has been battered by falling prices and output of oil, from which government derives about two thirds of revenue.

Buhari, who took power a year ago, promised to diversify the economy with a focus on agriculture, services and industry. He has increased borrowing to 2.2 trillion naira, or 2.14 percent of gross domestic product, to plug the gap in the 2016 budget.

Nigeria’s two billion metric tons of iron ore reserves are the world’s 12th largest. The country plans to increase the contribution of solid minerals to GDP to as much as 7 percent over the next decade, from less than 1 percent in 2015, with deposits of iron ore, gold, barite, bitumen, lead, zinc, tin, coal and limestone, Fayemi said.

Tiny Budget 
Nigeria plans to substitute steel and other industrial imports with domestic production, and export some of its output. It currently imports about $3.3 billion worth of processed steel annually, according to Fayemi.

The minerals ministry operates on a “tiny budget,” making it difficult to fund gathering of data that investors need to make decisions on entry, Fayemi said.
A mining investment fund is being set up to support exploration activities, he said, without giving details on size and management, and the government is
looking for companies to help with geological surveys. 

The bulk of the ministry’s capital expenditure of 7.3 billion naira in 2016 “is going to our geological agency to gather data,” Fayemi said.

Source: Bloomberg Business News