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Nigeria’s scrap metal industry booms

At the busy Nkpor-Abakpa scrap market in Enugu state, southeastern Nigeria, 33-year-old Samson Ugochukwu stands in front of his shop.

He watches as tons of metal and aluminium scrap materials are loaded onto heavy duty trucks destined for Lagos, the commercial capital.

There, they will be recycled and processed into finished products. Behind his shop in the market is a parking yard where collected scraps are stockpiled, ready for transportation.

The scrap industry in Nigeria is fast becoming a booming venture with traders taking in thousands of naira monthly. Nigeria’s national steel consumption, estimated at 6.8m metric tons annually, is met almost entirely by recycling metal scraps.

The business has grown following the Central Bank’s 2015 ban on using foreign exchange to import steel – along with a list of other items – in a bid to kickstart non-oil sectors in Nigeria’s hydrocarbon dependent economy. But so far the domestic iron ore mining and smelting remain largely untapped, while export of scrap metal is prohibited.

Scrap traders are filling the supply gap, at a profit. For one ton of metal traders can make between 35,000 naira ($111) and N40,000 naira ($126), while a ton of aluminum sells for around N130,000 naira ($412).

“This business provides for me and my family,” says Mr Ugochukwu, who graduated from university five years ago but, like many qualified young Nigerians, found it hard to find a job.

“When I finished school I moved from one office to the other in search of job, but no luck, until my friend, who was in this business, introduced me to join in. I have no regrets.”

His story is not unique. Thousands of others who struggled to enter the formal economy have found a steady source of income in the scrap industry. Today, most of them are no longer looking for white collar jobs.

“The industry has helped in reducing unemployment rate in the country,” says Evaristus Anaekwe Nnamdi, the founder and president of Foraminifera Market Research.

Nigeria’s unemployment rate rose from 13.3 percent in the second quarter of 2016 to 13.9 percent in the third according to the National Bureau of Statistics (NBS). Youth unemployment is particularly high at 24 percent, up from 21.5 percent.

“I make more profit than those who work in a bank,” says 54-year-old Samuel Nwankwo, who has been in the business for more than 25 years. “I feed my family and train my children, who are in school, through this business. I trained myself in the university with this business.”

There is some social stigma associated with the scrap business, he says, but traders focus instead on the profits.

“It is true that we look dirty, people call us scavengers when we move around to search for metals and aluminum at refuse dump sites. But that’s not the point, the point is the money we make everyday,” he asserts.

The government, meanwhile, is still holding out hope that it can kickstart domestic steel production. According to the minister of solid minerals and steel development, Kayode Fayemi, Nigeria is seeking investment of some $2bn to revive the Ajaokuta steel mill project. Begun in 1979 and intended to have an installed capacity of 5m tons a year, it has never been operational.

Steel production is unlikely to displace the scrap industry anytime soon. Some 3bn tons of iron ore deposits around the country have yet to be explored.

Indian and Chinese investors tend to be ones backing metals recycling businesses. “Indians are known the world over for anything that has to do with scrap, metals and automobiles and recyclable materials. They are generally good with recycling,” Mr Nnamdi, the market researcher, says.

Critics claim government policy towards the industry, including levies, is crippling potential. “[These businesses] need a conducive environment to thrive and attract more investors in the country,” says Stan Ude, an expert who has been working in the scrap industry for over 20 years.

And, as with many industries in Nigeria, lack of infrastructure is a binding constraint. “We don’t have many factories for the processing of these materials into finished products,” Mr Uchenna Amadi, the chairman of scrap dealers association, tells This is Africa.

“The transportation system for these materials is poor and government agencies are threatening us with too many levies,” he adds.

Despite its challenges, Mr Ugochukwu and many others have found a steady business with room to grow. “I want to start my own company one day with my own workers. I know that day will come,” he says.

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