Nigerian Government GetsReduced Claim over Ajaokuta Steel Contract

Nigerian Government has settled a long-standing contractual dispute over the Ajaokuta Steel Industry with Indian Global Steel, represented by the international firm of King and Spalding, reducing it from USD 5.258 billion to USD 496 million. The settlement agreement was finalized at mediation proceedings under the International Chamber of Commerce’s Alternative Dispute Resolution framework led by Mr Phillip Howell-Richardson, coming into effect on 19 August 2022.Seeds of the disputes can be traced to five contracts entered into by the 1999 -2007 administration that gave complete dominance over the Nigerian steel space to one company group, the Global Steel group. Global Steel, which is linked to Mittal family, had between 2004-7 acquired rights to Nigeria’s entire state steel industry via five major concessions and share purchase contracts. The deal also included access to Nigeria’s iron ore reserves and the central railway network.However, in 2008 a new administration proceeded to terminate these contracts. Global Steel took the Nigerian Government to the International Chamber of Commerce, International Court of Arbitration Paris, commencing arbitration in 2008. Although the Federal Government negotiated a settlement in May 2013, the previous administration failed to implement its settlement agreement. In May 2020, Global threatened a resumption of the arbitration and announced an anticipated claim in damages of over USD 10-14 billion against the Nigerian State in respect of the affected 5 contracts. Ajaokuta Steel, located in Ajaokuta in Kogi State of Nigeria, was built on a 24,000 hectares site based on BF BOF Route. A feasibility study for the production of steel was first awarded to the British, and later undertaken by the Soviet Union under a cooperation agreement with Nigeria. In 1967, Soviet experts recommended prospecting for iron ore in Nigeria, as the known deposits were of poor quality for steelmaking. In 1973, iron ore of the required quality was discovered in Itakpe, Ajabanoko and Oshokoshoko. The Ajaokuta Steel Company Limited was incorporated in 1979, and the steel mill reached 98% completion in 1994, with 40 of the 43 plants at the facility having been built. To supply the Ajaokuta Steel Mill with raw materials and connect it with the world market, a contract was awarded in 1987 for the construction of Nigeria's first standard gauge railway, from the iron mines at Itakpe to the steel mill at Ajaokuta and continuing to the Atlantic Ocean at Warri.However, both projects have been mismanaged. The Ajaokuta Steel Mill was still unfinished four decades after construction began. After several failed attempts at privatization, the Nigerian government took back control in 2016. The Ajaokuta Steel Mill still had not produced a single sheet of steel by December 2017. The light mills were finally put into operation in 2018 for small-scale fabrication and the production of iron rods. However, three-quarters of the plant have been abandoned, including the large-scale equipment and the internal railway.Installed capacity – 1.3 Million Tonnes per Annum Coke Batteries - 0.88 Million Tonnes per AnnumSinter Plant - 2.6 Million Tonnes per AnnumBlast Furnace - 1.3 Million Tonnes per AnnumTwo Basic Oxygen Furnaces – 1.3 Million Tonnes per Annum Three continuous bloom casters of four strands eachBillet Mill – 0.795 Million Tonnes per AnnumWire Rod Mill – 0.13 Million Tonnes per Annum Light Section Mill – 0.4 Million Tonnes per AnnumMedium Section and Structural Mills – 0.56 Million Tonnes per Annum