A 42-Year Gap Between Capacity and Output
Nigeria's steel deficit tells a stark story. The country demands roughly 10 million metric tonnes of steel annually but produces just 1.2 million metric tonnes — and nearly all of that comes from recycled scrap, not primary steelmaking. At the centre of this gap sits the Ajaokuta Steel Company in Kogi State, a plant built in 1984 with an installed capacity of 1.3 million metric tonnes per annum. For over four decades, legal disputes, failed concessions, and policy reversals have kept the facility largely idle, turning what was meant to be the backbone of Nigerian industrialisation into a symbol of unrealised potential. The federal government has now advanced negotiations with a preferred Chinese investor — selected from nearly 10 firms evaluated — to inject approximately $2 billion into rehabilitating and expanding the complex. According to Joseph Tegbe, Director-General of the Nigeria-China Strategic Partnership, the chosen firm already deployed about 20 engineers to Nigeria at its own expense for a two-week technical assessment. Their conclusion: while much of the equipment is outdated, the core infrastructure remains viable, and a steel rolling mill could begin operations within six months of commencement.
The proposed deal is structured as a production-sharing arrangement, not an asset sale. Nigeria retains full ownership of Ajaokuta. Under a sliding-scale model still being negotiated, the Chinese partner would initially take 60 to 70 percent of output to recoup its $2 billion investment. Over a five- to ten-year period, that share would decline to zero, transferring full production control back to Nigeria. Financing would be raised by the Chinese side, subject to approval from China's National Development and Reform Commission, meaning no direct federal funding is required. The government is also working to integrate the iron ore supply chain — particularly deposits at Itakpe with 34 to 44 percent purity — directly with the Ajaokuta complex. Tegbe dismissed concerns about ore quality, noting that Chinese plants operate with iron ore purity as low as 14 percent, making Nigeria's deposits competitive with beneficiation. Supporting infrastructure is also on the table: rail links from Warri Port through Itakpe to Ajaokuta, road upgrades, and dredging at Warri Port to accommodate larger vessels.
Rebalancing a $23 Billion Trade Relationship
The Ajaokuta revival sits within a broader push to correct a massive trade imbalance between Nigeria and China. Current bilateral trade stands at approximately $23 billion, making China Nigeria's largest trading partner. However, the split is heavily lopsided: Nigerian exports to China account for just $2 billion, while imports from China exceed $20 billion — a ratio of roughly 1:10. The government's target is to grow total trade volume to $40 billion within five years while ensuring at least $15 billion flows as exports from Nigeria. Tegbe emphasised that this is not simply about increasing non-oil shipments but about building value-added export capacity across steel, agriculture, and logistics. Scaling Ajaokuta's output from 1.3 million to a target of 10 million metric tonnes annually would be a centrepiece of that strategy, potentially generating billions in steel exports while reducing the country's dependence on imported steel products.
If final approvals are secured by mid-2026, Tegbe projected that rolling mill operations could resume by December 2026 or January 2027. A critical component of the agreement involves technology transfer: hundreds of Nigerian engineers would be sent to China for specialised training in steel production, with candidates selected based on relevant technical backgrounds to avoid past mismatches in skills programmes. The knowledge transfer clause reflects lessons learned from decades of failed industrial partnerships where Nigeria was left unable to maintain the assets it built. With steel demand at 10 million metric tonnes and local output stuck at 1.2 million, the arithmetic is clear — Nigeria's industrial ambitions depend on closing that 8.8-million-tonne gap, and Ajaokuta, after 42 years of dormancy, is being positioned as the vehicle to do it.