Nigeria's $3.2 billion aluminium smelter faces another setback

Nigeria's aspiration for a domestically-produced aluminium industry seems increasingly distant as the $3.2 billion Aluminium Smelter Company of Nigeria (ALSCON) in Ikot Abasi, Akwa Ibom State, once again fails to meet its long-awaited revival deadline.

The recent setback has sparked renewed criticism of the project, prompting many Nigerians to question its feasibility and potential economic advantages. Critics highlight the escalating costs, recurrent delays, and perceived lack of transparency as indicators of mismanagement and inadequate planning.

ALSCON was established with the explicit aim of harnessing Nigeria's vast gas reserves and curbing gas flaring, redirecting this resource to power the smelter plant through a gas-to-power framework. Originally commissioned in 1999, the smelter has lain dormant since 2007. Despite initial hopes of resuming operations by 2020, subsequent delays pushed the target to 2023. However, it now appears doubtful that even this revised timeline will be met.

Project delayed

Over the course of more than two decades, the project has been hampered by persistent delays, funding deficiencies, and contractual disagreements. The most recent setback saw the missed deadline of the last quarter of 2023.

Nigeria's Vice President, Kashim Shettima, had assured stakeholders during a meeting with the management of Russian Aluminium Company – UC Rusal, a key partner in the project, that the plant would commence operations by the last quarter of 2023. This pledge was made on the side lines of the Russia-Africa Summit held in St. Petersburg the previous year.

During the same gathering, Gabriel Aduda, Permanent Secretary of the Political and Economic Affairs Office within the Office of the Secretary to the Government of the Federal Republic of Nigeria, informed BusinessDay that agreements had been formalized with Rusal (UC Rusal) to rejuvenate the plant.

 “We are left with refining the financial obligation with UC to revive the project,” he said. “The plant should be ready in the last quarter of the year (2023).”

Reason for the shutdown

ALSCON, the Aluminum Smelter Company of Nigeria, commenced operations on October 15, 1997. However, its production came to a halt on June 6, 1999. This cessation was primarily due to the withdrawal of Reynolds, the technical partner, owing to irreconcilable differences between Ferrostaal and Reynolds.

Additionally, factors such as inadequate working capital, insufficient gas supply, and the absence of dredging of the Imo River hindered the importation of raw materials and exportation of aluminium ingots, the finished product.

The conflict arose from the privatization efforts of ALSCON. In 2004, BFIGroup, a consortium of Nigerian and American interests, emerged victorious in the bidding process. Despite this, the Bureau of Public Enterprises (BPE) invalidated BFIGroup’s bid, sparking a prolonged legal battle. Finally, in a landmark ruling in 2012, the Supreme Court affirmed BFIGroup as the rightful bidder for ALSCON, thereby mandating the transfer of the company to the consortium.

“The privatisation process for ALSCON was poorly done. A lot of privatised government entities have underperformed. There must be repercussions for poor decisions taken by Government officials, which affect the economy and our people. True and genuine investors will not come to Nigeria with non-transparent processes. That will continue to leave us with people without the capacity to run our assets aground. It’s a pitiful situation,” added Eze Odiri, a public sector consultant.