Is it Feasible to Produce Iron Ore in Nigeria via Local Foundry for Spare Parts? A Cost-Benefit and Net Present Value Analysis

Richardson Kojo Edeme, Victor Victor Osemenam


In the wake of Nigeria’s desire to diversify and the move to revive iron ore deposit, various options are considered on how best to produce iron ore at the least cost possible. This study evaluates plausible source of spare parts for earth moving equipment and establishment of local foundry to forge spare parts utilized for iron ore production. The benefit-cost and net discounted present value analysis were employed and findings shows that both sources are not profitable to the entity’s operation as it increases running expenses, amid a 16 percent inflation rate, an unfavorable global market exchange rate of $1 to N359.201 and a non-profitable global market price of $62.59 (N22, 482) within projection of 5 years which is very critical to the revival of the nation’s iron ore deposit. The policy suggestion from the findings is that new price higher than the current global market price be set in order to absorb current cost accruable to the entity at 16 percent inflationary rate and a global market exchange rate.

Full Text:



Adebimpe, R.A and Akande, J.M. (2011), “Engineering economy analysis on the production of ore in Nigeria”. Journal of Scientific Research, 3 (1), 14-20, .doi: 10.4236/gm:2011.11002

Ahmed, M. (2016). “How Nigeria lost iron ore firm to Indians over $525m Penalty”. Independent Newspapers Limited, Retrieved from nigeria-lost-iron-firm-to-indians-over-$525m-penalty/.

Awe, A.A and Ajayi, S.O. (2009) “Diversification of Nigerian revenue base for economic development: The contribution of the non-oil Sector”. Pakistan Journal of Social Sciences, 6 (3) (2009); 138-143, doi: pjssci..138.143

Baligidad, S.M., Krishnamurthy, N., Narenda, N and Srinivasan, N. (2014), “Sand casting: conventional and rapid prototyping manufacturing approaches”, International Journal of Research in Engineering & Technology, 3 (11), 12-23

Bruno, M. and Sachs. J. (1982),”Energy and resource allocation: A dynamic model of the Dutch Disease”. Review of Economic Studies, 49 (5), 845-859, doi: 10.2307/2297191.

Corden, W.M and Neary, J.P. (1982), “Booming sector and de-industrialization in a small open economy”, Economic Journal, 92 (2), 825-848, doi: 10.2307/2232670

Daniel, F. (2016). “FG renegotiates concession deal with Indian Coy, takes over Ajaokuta. Information Nigeria”, Retrieved from

Engineering Export Info Bulletin. (2015); “Country profile on Nigeria”, Engineering Export Promotion Council, 8 (1), 1-13

Hlavová., A (2015), “The impact of mineral resources on economic growth”. International, Journal of Arts & Commerce, 4 (6), 12-18; .doi: (17).06

Ismail, K. (2010). “Structural manifestation of the Dutch disease: the case of oil exporting countries”. IMF Working Paper. doi: 10.5089/9781455200627.001.

IAS, 37. (2005) “Provisions, contingent liabilities and contingent assets”, International Accounting Standard

Jegede, M. (2016) “Ajaokuta steel/NIOMCO and modified concession”, Retrieved from concession/158736.html

Maduaka, A.C. (2014) “Contributions of solid mineral sectors to Nigeria's economic development”. Eastern Mediterranean University, Cyprus

McBride, E. (2008) “China's resource hunger”. The Economist; 35

Nasir, I. (2013) Constraint of a multibillion naira project, Retrieved from project/12268.html.

National Bureau of Statistics (NBS). (2016) “Nigerian Gross Domestic Product Report”, National Bureau of Statistics

Nwosu, J.I and Nwankwoala, H.O (2012). Influence of some economic parameters on cut-off grade and ore reserve determination at Itakpe iron ore deposit, North Central Nigeria”, International Research Journal of Geology & Mining, 2(4), 82-87

Olade, M.A. “General features of a precambrian iron ore deposit and its environment at Itakpe Ridge, Okene, Nigeria”, Institution of Mining and Metallurgy, Transactions, 87, (1978); 1-9

Olalekan, Afees and Ayodele, “An empirical analysis of the contribution of mining sector to economic development in Nigeria”, Khazar Journal of Humanities & Social Sciences, 19(1) (2016).

Osadi, E and Okpako, E.O. “Cost management strategy: A tool for improving efficiency in business performance”. International Journal of Economic Development Research & Investment, 1(2) (2010); 2-3

Saadat, “The impact of mineral resources on economic growth of Pakistan”, Journal of Resource Development & Management, 20 (2) (2016); 10-19

Su. F., Guoxue W. and Ran T. “China and natural resource curse in developing countries: empirical evidence from a cross-country study. Institute of World Economics and Politics”, Chinese Academy of Social Science, 24(1) (2016); 18-40, doi: 10.1111/cwe.12142.

Shakti, N. “Performance analysis of heavy earthmoving machineries in open cast coal mines”, National Institute of Technology, Rourkela, (2015).

Zweig, D and Bi, J., “China's global hunt for energy”, China Council on Foreign Affairs, 84 (5) (2005); doi: 10.2307/20031703.



  • There are currently no refbacks.

This journal is indexed by:


ISSN: 2621-5918

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.