Pramod Mittal, the younger brother of billionaire Lakshmi Mittal, has received a massive bailout from the Nigerian government after his company settled a contract dispute over a steel plant that has been a drain on the country’s resources for decades.
The Nigerian government agreed to pay Pramod’s company, Global Steel Holdings Ltd. (GSH), almost $500 million last year to end a legal battle over the Ajaokuta steel mill, a Soviet-era project that has cost the state more than $7 billion in public investment without producing any metal.
The settlement, which represents about 1.5% of Nigeria’s foreign reserves, has sparked controversy and criticism, as some see it as a reward for Pramod’s mismanagement and corruption. The deal also raises questions about the viability and desirability of reviving the Ajaokuta plant, which has been described as a “white elephant” and a “black hole” by experts and analysts.
Pramod, whose career in the steel industry has been less successful than his brother’s, has a history of failed ventures and unpaid debts in several countries, including Bosnia, Bulgaria, Libya, Zimbabwe and the Philippines. He is currently facing bankruptcy proceedings in the UK and criminal charges in Bosnia for allegedly heading an organised crime group.
Pramod entered the Ajaokuta picture in 2004, when then President Olusegun Obasanjo awarded GSH a series of contracts, including an arrangement to manage and later buy the steel mill. However, his successor, Umaru Yar’Adua, cancelled the contracts in 2008, after a panel found that GSH had invested little in the plant and had been “systematically cannibalising, vandalising and moving valuable equipment” out of the factory.
GSH and its Nigerian unit initiated arbitration proceedings against the government and later entered mediation, which produced last year’s settlement. Pramod had suggested using the money to pay down some of his creditors, but as of October 4, the main creditor, Moorgate Industries Ltd., had not received any of the funds, according to court documents.
The settlement was reached under the administration of former President Muhammadu Buhari, who said it “rescued the steel industry from interminable and complex disputes as well as saving the taxpayer from humongous damages.” However, some critics have questioned the rationale and legality of the deal, as well as the role of the attorney general, Abubakar Malami, who modified the terms of previous agreements that would have seen GSH relinquish the plant for free.
The new president, Bola Tinubu, who took office in May, has pledged to get the Ajaokuta steel mill up and running, despite the doubts and challenges that surround the project. The government says the plant has the potential to create half a million jobs and boost the country’s industrialisation. However, some experts have argued that the plant is obsolete, inefficient and environmentally harmful and that Nigeria should focus on other sectors of the economy.
The Ajaokuta saga is often cited as an example of the corruption, poor governance and incompetence that plague Nigeria, Africa’s most populous nation and largest oil producer. The country is facing multiple crises, including insecurity, poverty, inflation and unemployment. However, some analysts and activists say there is still hope for change and reform if the government and the people can work together to address the root causes of the problems and demand accountability and transparency from those in power.
Source: Bloomberg
