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Government Revokes Steel Concessions to India's GIHL

Nigeria Today
3rd April'08

The federal government yesterday revoked the concessions for its biggest steel plant and iron ore mine to India's Global Infrastructure Holdings Ltd (GIHL), citing "noncompliance." GIHL had won a 10-year concession for the 1.3 million tonne-a-year Ajaokuta Steel Co and Nigerian Iron Ore Mining Co in 2005, after it acquired control of Delta Steel Co in 2004. The deals under former President Olusegun Obasanjo were meant to revamp Nigeria's moribund steel sector, but they were so widely criticized that the new administration of President Umaru Yar'Adua set up a panel in October to probe the transactions. The panel's report, which was adopted by the government on Tuesday, noted that the deals "were largely skewed in favor of the concessionaire to the detriment of the Federal Government of Nigeria," a statement from the president's office said.

GIHL officials were not immediately available for comment. The panel said GIHL breached the agreements by failing to submit a workable business plan within a specified timeframe, did not pay the concession fees and cannibalized plants and equipment, which it shipped abroad. "Instead of investing external funds on the completion of both projects as expected, GIHL embarked on massive borrowing from local commercial banks, pledging the assets of Delta Steel Co as collateral," the statement said. The panel said GIHL owes Nigerian banks $192 million. "President Yar'Adua has ordered the criminal prosecution of indicated officials ... and promoters of GIHL for asset stripping," the statement said. Nigerian newspapers have named one of Obasanjo's sons, Gbenga, as the main promoter of the Indian company. The concession for the Ajaokuta plant was first given to Solgas Energy Ltd, but Nigeria terminated the $3.6 billion deal after some weeks, saying the UK-registered company had failed to come up with the cash within the stipulated time.

The revocation of the concession deals came after the House of Representatives called on the government to cancel the sale of 81 percent of the 960,000 tonne-a-year Delta Steel to GIHL for $30 million. The Delta deal was challenged by local firm BUA, which had offered $31 million for the plant and was initially named preferred bidder at a public auction in the capital Abuja. The deal was revoked weeks later by the Bureau for Public Enterprises and the mill handed over to GIHL, which was not part of the bidding process. Yar'Adua, who took power after a flawed election last year pledging zero tolerance for corruption, had in July cancelled the fire sale of two key oil refineries by Obasanjo to a major financier of the ruling party. Privatizations were one of the main planks of Obasanjo's liberal reforms, but the former leader was accused of selling some of the key assets to his cronies, charges which he denied.

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