Alok Gupta is the Group Managing Director, African Industries Group. In this interview, he discusses the challenges of exporting steel from Nigeria and a variety of issues affecting the steel industry in Nigeria.
Excerpt.
By Franklin Alli
How long have you been operating in Nigeria and how much you have invested in the economy?
African Industries Group has been in the country for 46years, since 1971; From a humble beginning in 1971 as a small unit in Nigeria, we have diversified into as a manufacturing conglomerate producing and dealing in wide varying items like steel and steel products, power generation, glass, chemicals and industrial Raw materials, light engineering goods, plywood and other building and construction materials.
Our 15 manufacturing plants located in Lagos, Port Harcourt, Abuja, Agbara and Ogijo in Ogun state provides direct employment to 8,000 persons and over 100,000 in indirect employment. So far, we have invested $1.1 billion in Nigeria and plan to invest more in upcoming projects. We produce over 1 million tonnes of steel a year making our group the largest steel producers in the country.
How do you try to balance the issue of not having enough scrap locally, and you are now talking of export? Which of the market have you been able to reach out to?
We have been able to produce enough to meet the local market and that is why we are now exporting steel. In fact, there is no need of importing finished iron rods into this country; there is no basis for that. As at the moment, the number of manufacturing plants in steel in this country, if they go into full production, including us, we are not yet doing 100 per cent capacity. We are still doing below 70 percent operational capacity, so by the time we have up to 100 per cent capacity we will have excess.
So the problem is not about meeting up demand but being able to operate at optimum level which we are not doing due to so many reasons. But that does not stop our export because the export driven part of it is a different segment entirely.
This is an era where one of the major constraints of Nigerian businesses today is forex scarcity and if you can meet up to international standard, you can sell your product beyond your shores and earn forex for the nation.
Back to your question on where we are exporting to, we are exporting to Ghana, Ivory Coast, Morocco and Egypt. So, for us, that is the breaking news, that for the first time in Nigeria, we are now exporting steel, finished steel, made-in-Nigeria steel from Nigeria to other countries.
That is just the news and it has been on for a while. At this very critical time in the country, where people are talking of foreign exchange for importation, they are calling this country import oriented nation, we want to change the wheel, now we are exporting our finished products having meet up international standards and are accepted globally.
You have been into export for a while, as you mentioned, can you give us an idea how much your activities is saving this country in terms of forex?
The exporting we are doing is saving the nation over $650 million yearly. In the past, many people have been importing steel into this country; nobody talks about that because imported steel cannot compete with our own. We are in the same standard so you don’t need to waste your money importing steel
We have been exporting non-steel products to regional markets for many years. However, our steel products had to compete with big produces from Ukraine, Russia, China and other developed countries.
However, our constant effort in marketing backed by international certification and satisfied products sampling by user made it acceptable in these market. Recent adjustment of naira has made our product more competitive to the extent that a significant amount of our production is in now destined for export.
We are exporting between 150,000 – 200,000 metric tons of steel on annual basis to start with. Our export of steel during the first nine months of this year has increased over three fold by weight and value compared to the full last year 2016.
To put numbers on it, in year 2017 for the first three quarters, our steel export are almost $13.5million compared to $4.1million in 2016 and we are expecting an additional $12 million of steel exports in the final quarter of this year. Overall we expect over $25 million in the current year 2017. We are proud to achieve this milestone due to combined effort of our team and enabling environment created by domestic industrial policies.
What are the challenges in steel export?
There are many challenges both on logistics and fiscal policy issues. Sea freight between Lagos and other West African countries is almost double of what it cost to bring the steel product from Ukraine or China. For example, sea freight from Ukraine to Ghana is $35-40 per metric tonne while from Lagos to Ghana cost $65 per metric tonne, i.e. almost 50 percent more.
We appeal to shipping companies operating in Nigeria to remove this abnormality and make a level playing field for us, if we really want Nigeria to emerge as global player in steel sector. We need our colleague, partner and workforce among port authorities and customs to ease the bottleneck associated with smooth flow of export cargoes through port, reduce the various charges to acceptable level so as to make Nigerian goods compatible in global market. On fiscal front, we want government to look at provision of current export incentives and make it attractive to induce us for more export. Current export incentive for fully Nigeria manufactured goods are enough to cover the cost incurred due to infrastructural deficiency like high transport cost to port, dollar denominated high natural gas price, abolition of various taxes and levies on export cargoes and export expansion grant.
Nigeria has abundant raw materials for steel production, what’s the level of your local content?
We became pioneer in scrap to steel industry in the country with single motto of waste to wealth creation. We combined steel scrap, littered across the country with abundant local natural gas for liquid steel production to make steel iron bars. Since then we are working on content innovation and implementation of later environment friendly technologies in steel making and also diversified the product line to steel billets, steel angles, channels, flat bar, pipe and iron wire rod, nails, wire fencing and other structural steel items.
Steel production is electricity consuming, how are you addressing the challenges?
We are trying our best to address these challenges. To cover electric infrastructural deficit we started in-house production of natural gas based power generation. Today we are producing over 115 megawatts of electricity for our consumption as well as sale of surplus to various electricity DISCOs in the country.
Finally, made in Nigerian products are usually perceived inferior, how were you able to break into the foreign market?
Our products are certified for best quality by Standards Organisation of Nigeria, SON, and many international renowned agencies ; we got International Organisation for Standardisation, ISO 9001, ISO 14001and ISO 18001 certification by RINA Italy and certification from CARES, UK. We are the only company in sub-Saharan Africa to get this CARES certification. This speaks of our commitment to provide best quality products in the market.