The Federal Government of Nigeria is set to settle a long-term business dispute with Global Steel with a sum of $496 million. Global Steel is a foreign investor group with an interest in steel production.
Between 1999 and 2007, the Nigerian government under former President Olusegun Obasanjo gave complete dominance over the Nigerian steel space to Global Steel Group.
Global Steel Group was to develop the Ajaokuta Steel Mill and make it operational.
Ajaokuta Steel Mill which is located in Kogi State was conceived to start as the pillar of Nigeria’s industrialisation. Built by Russia between 1979 and the mid-1990s, the steel mill never reached the production stage.
When Late President Umar Musa Yaradua took over from President Obasanjo in 2007, the contract was terminated contrary to legal advice offered by the Federal Ministry of Justice which cited termination cost in form of damages.
The Federal Ministry of Justice had advised the government to wait for 55 days which would have allowed the contract to expire lawfully with a claim cost of $26 million in favour of the Federal Government.
According to Ummar Gwandu, the spokesperson for the Minister of Justice, Abubakar Malami; ” This would have given Nigeria a right to over $26m as liquidated damages under cl.12 of the Ajaokuta Share Purchase Agreement. Because the company appeared unable to pay the first tranche for the Ajaokuta shares before the first anniversary of the agreement (25 May 2008)”.
In response to the termination by the federal government, Global Steel Group took the Nigerian Government to the International Court of Arbitration in Paris with claim damage of $10-14 billion.
The federal government however agreed to settle the case out of court with a claim damage of $496 million after engaging PwC Nigeria to do a comprehensive review of the contract.
If honoured, this settlement could rescue Ajaokuta Steel Mill from the long dispute that has bedevilled it and save Nigeria from paying billions of dollars in damages.