After years of abandonment, the Federal Government’s plan to revamp the Ajaokuta Steel Company may still the brickwall, if the conflict between Russia and Ukraine persists.
The Centre for the Promotion of Private Enterprises (CPPE) which made the projection in Lagos, noted that the crisis may cause a major setback to an agreement between the Russian government and President Muhammadu Buhari, following the torrent of sanctions against Russia.
Its Chief Executive Officer, Dr Muda Yusuf, said bilateral discussions between the Federal Government and the Russian government on the resuscitation of Ajaokuta Steel Plant by the Russians, which had progressed significantly before the pandemic disruption would also affect trade.
The Minister of Mines and Steel Development, Mr. Olamilekan Adegbite, had informed that the Ajaokuta project, which Nigerians have been told has attained 98 percent completion, was making a business case which has been accepted.
Adegbite stressed that essentially the project on the collaboration with Ajaokuta is the “build, operate and transfer model. President Buhari and President Vladimir Putin, sat together at a bilateral and agreed on a government to government cooperation to resuscitate Ajaokuta because the Russians built Ajoakuta when they were the Soviet Union in collaboration with the Ukrainians. That is why “we have gone back to them, the whole essence is for them to come here, access the plant and access the job to be done that is what we call a technical audit.”
He disclosed that the Russian export centre, which is a Russian sort of Nexim bank, would provide $450million for the project and Afrexim bank will provide $1billion, which is a total of $1.45billion.
Adegbite noted further that the whole essence is that the Russian technical experts will come, do the audit which will lead to them giving an exact figure of how much it will cost to resuscitate Ajaokuta and the National Iron Ore Mining Company (NIOMCO), “the two are tied together and once this is done, there will be negotiations and at the end of the day, a sum will be agreed and the contract formed and that is the basis that we will proceed.”
Yusuf noted that since Nigeria also imports substantial amount of wheat, it would also suffer some disruptions and impact on prices, as Ukraine and Russia are major producers of wheat. “Ukraine and Russia account for about 30% of the global wheat export. Wheat is a major raw material for the production of flour which is used for bread and some other confectionaries.”
He noted that the current development is going to disrupt the supply of wheat in the global market.
“There is therefore a risk of a hike in the cost of wheat which will affect the price of flour and a knock-on effect on the price of bread and other confectioneries.”
He emphasised that generally, global trade will also be affected as Russia is also a major player in the global economy, where there are major investments owned by Russians across the world. There are financial transactions involving the Russian investors. There are issues of trade especially in the area of iron and steel for which both Ukraine and Russia are reputed. The iron and steel market are also going to be affected by this, we are therefore likely to see a spike in prices of iron and steel products globally.
There are also risks of cyber-attacks because Russia has very strong competencies in the cyberspace and if the situation degenerates, we may see the deployment of cyber-attacks as part of the process of this war. There is also the frightening rhetoric by the Russian President of the possibility of deploying nuclear weapons. That again will further create more uncertainties and more disruptions in the global economy.
Reeling out other implications of the crisis on Nigeria economy, the CEO said the conflict will cause the escalation of energy prices (diesel, aviation fuel, kerosene and gas), mounting petrol import and subsidy bill and the aggravation of petrol smuggling, fiscal operations of government, impact on federation account and others.
Credit: The Sun