December 03, 2008

Nigeria terminates concession of GIHL

Reuters reported that Nigerian government has revoked the concessions for its biggest steel plant and iron ore mine to India's Global Infrastructure Holdings Ltd citing noncompliance.

Nigerian government said it is rescinding a 10 year concession granted to Global Infrastructure Holdings to run the Ajaokuta Steel Company and the National Iron Ore Mining Company. A statement said the president had ordered criminal prosecution of officials and promoters of GIHL for asset stripping.

Global Infrastructure Holdings had won a 10 year concession for the 1.3 million tonne a year Ajaokuta Steel Co and Nigerian Iron Ore Mining Co in 2005, after it acquired control of Delta Steel Co in 2004. The deals under Mr Olusegun Obasanjo former president Of Nigeria were meant to revamp Nigeria's moribund steel sector, but they were so widely criticized that the new administration of Mr Umaru Yar'Adua president set up a panel in October to probe the transactions.

A statement from the president's office said that the panel's report, which was adopted by the government noted that the deals were largely skewed in favor of the concessionaire to the detriment of the Federal Government of Nigeria.

The panel said Global Infrastructure Holdings has breached the agreements by failing to submit a workable business plan within a specified timeframe, did not pay the concession fees and cannibalized plants and equipment, which it shipped abroad. It added that "Instead of investing external funds on the completion of both projects as expected, GIHL embarked on massive borrowing from local commercial banks, pledging the assets of Delta Steel Co as collateral.”