BY ANDI OSAWOTA
IN the pursuit of economic prosperity and national development, privatisation has often been viewed as a double-edged sword in Nigeria. While the intention behind selling state-owned enterprises (SOEs) was to improve efficiency and attract foreign investment, the aftermath of these policies frequently revealed gaps in governance and unsatisfactory results.
The acquisition of state-owned assets by private companies, while boosting economic activity in certain sectors, has also led to the closure of several vital industries, the loss of employment, and the depletion of Nigeria’s industrial base.
A prominent example of this scenario was the privatisation of the Delta Steel Company (DSC) and other major government-owned corporations in the steel and manufacturing sectors.
These industries, once the backbone of Nigeria’s industrial aspirations, were sold to private investors with the hope that revitalisation and modernisation would occur.
However, the disappointing performance of these privatised entities soon became evident. The privatisation model, which was supposed to create new opportunities and strengthen the Nigerian economy, often led to the opposite result.
It is high time we examine the reacquisition of DSC and other strategic industries, their subsequent revitalisation, and the challenges faced by Nigeria in regaining control of these vital sectors.
This way we can understand the complexities of privatisation, the reasons behind the failed revitalisation attempts, and the lessons that can be drawn for the future of Nigeria’s industrialisation.
The Privatisation of the Delta Steel Company (DSC) and the Fate of Nigeria’s Steel Industry
Nigeria’s steel industry, once envisioned as a critical component of the country’s industrialisation and economic development, began with immense promise. The government embarked on large-scale investments in steel production to reduce dependency on imports, create jobs, and stimulate the local economy.
One of the most significant investments in the sector was the construction of the Delta Steel Company (DSC), located in Aladja, Delta State. The DSC, commissioned in the 1980s, was intended to be a central player in the Nigerian government’s industrialisation strategy. The plant was equipped with advanced machinery to produce steel billets, a critical component in the production of construction materials and other industrial goods.
However, despite the high expectations, DSC struggled with inefficiency, lack of technical expertise, mismanagement, and corruption. The lack of consistency in government policy, poor maintenance of equipment, and inadequate investment in workforce training prevented DSC from reaching its full potential.
By the early 2000s, it became clear that the government could not sustain the enormous financial burden of maintaining and managing the steel plants. As a result, the Nigerian government initiated a privatisation drive to sell off state-owned industries, including DSC, in an attempt to revive them and bring them in line with global market standards.
The idea was that private ownership and competition would inject much-needed efficiency and innovation into the system. The DSC was eventually sold to a consortium of private investors, led by a company called Global Infrastructure Nigeria Limited (GINL), in 2005. The sale was part of a broader effort to privatise Nigeria’s steel industry, which also included other key players such as the Ajaokuta Steel Company and the Nigerian Iron Ore Mining Company. However, the privatisation did not go as planned.
The Challenges of Privatisation and the Decline of DSC
After the sale of DSC, the new private owners failed to significantly improve the company’s operations. Although the government’s objective of privatisation was to inject new capital, enhance efficiency, and modernise the steel sector, the reality was far different.
The new private investors struggled to make the necessary investments to revitalise the company. Instead of improving the plant’s operations, the consortium became embroiled in disputes over ownership, management, and the future direction of the company.
The lack of a clear business strategy, combined with poor infrastructure and outdated machinery, led to a steep decline in production levels. DSC’s capacity remained largely underutilised, and the plant could no longer produce the amount of steel required to meet local demand. The situation was made more distraught by the inability of the new owners to meet their financial obligations, which led to a collapse in the company’s operations.
The promises of revitalisation through privatisation had been shattered, and DSC remained a shadow of its former self, with its once-vibrant production lines now silent. Despite the intentions behind privatisation, it became evident that Nigeria’s industrial sector was not experiencing the transformation it was meant to. The failure of DSC underscored the broader challenges of privatisation in a developing economy.
Instead of fostering growth and improving productivity, the privatisation of DSC and other steel companies resulted in a decline in local production, a rise in unemployment, and a sharp decrease in Nigeria’s industrial capacity.
The Reacquisition of DSC and Other Strategic Assets
Faced with the evident failure of privatisation and the stagnation of critical industries such as steel production, the Nigerian government made the decision to reacquire several of the previously privatised parastatals.
The case of the DSC was particularly significant, as the steel industry had long been seen as a pillar of the country’s economic development.
In 2011, the Nigerian government, recognising the strategic importance of steel production, moved to regain control of DSC. The government’s decision to reacquire DSC was influenced by several factors, including the failure of the private investors to revive the company, the broader collapse of the steel industry, and the necessity to ensure that critical industries remain under national control for long-term development.
The reacquisition process, however, was not without its challenges. Legal and financial disputes arose between the Nigerian government and the private investors, who had acquired the company under dubious circumstances.
Furthermore, the state of the plant’s infrastructure, which had deteriorated significantly under private ownership, made the task of revitalisation a daunting one.
The Challenges of Revitalising DSC
Revitalising DSC after its reacquisition was a monumental task for the Nigerian government. The plant had fallen into disrepair over the years, with much of the equipment outdated or damaged. In addition, the workforce had diminished in size and expertise, further complicating the process of revitalisation.
One of the first challenges was addressing the financial constraints of the government. With an already strained national budget and competing demands for resources, the government had to carefully allocate funds for the refurbishment and modernisation of DSC.
Securing the necessary capital for such a large-scale revitalisation project was no easy feat, particularly given the global economic conditions and the reliance on oil revenues to fund government operations.
Another significant challenge in the revitalisation process was the need for technical expertise. The modern steel industry requires specialised knowledge and advanced technology, both of which were lacking in the Nigerian workforce.
The government had to invest in training programmes and partnerships with foreign companies to bring in the technical know-how necessary for the steel plant’s operation.
Moreover, the broader industrial policy framework of Nigeria needed to be overhauled in order to create a conducive environment for industrial growth.
Privatisation had demonstrated that the government’s role in strategic sectors such as steel production could not be entirely replaced by the private sector. Instead, a hybrid model involving both public and private participation was required to ensure that vital industries like steel could thrive.
The revitalisation of DSC also had to contend with broader economic issues. Nigeria’s dependence on oil exports made the country vulnerable to fluctuations in global commodity prices.
When oil prices fell, as they frequently did, the government found it increasingly difficult to sustain the financing for industrial projects like the revitalisation of DSC.
Moving Towards a Sustainable Industrial Strategy
The revitalisation of DSC and other key industries in Nigeria must be part of a broader strategy to reinvigorate the country’s industrial sector. The lessons learned from the failures of privatisation and the challenges of reacquisition suggest that Nigeria must adopt a more sustainable, integrated approach to industrial development.
This approach should involve:
Public-Private Partnerships (PPPs), Investment in Infrastructure, Diversification Away from Oil Dependence, and Long-Term Policy Consistency. The reacquisition and revitalisation of DSC, along with other previously privatised industries, represent a crucial chapter in Nigeria’s industrial journey.
While the challenges of privatisation were evident, the failure of the private sector to effectively manage state-owned assets has prompted the government to reconsider its approach to industrial development.
The revitalisation of DSC is not just about restoring an industrial plant; it is about restoring Nigeria’s industrial future and creating the conditions for sustainable economic growth.
As Nigeria moves forward, the lessons learned from the privatisation and reacquisition of strategic industries like DSC should guide the country’s future industrial policies.
By embracing a more integrated approach that combines government involvement with private sector innovation, Nigeria can overcome its past challenges and chart a new course for economic development.
Chief Dr Andi Osawota is a lawyer and politician based in Warri.
