The grey powder will be a combination of metal powder from years of wear of tumblers and keys inside the lock, plus graphite powder which is the preferred lock lubricant. Avoid WD40 as it eventually makes everything sticky and attracts crud build up. Always use a dry lube.

If it is worn out there's not a lot you can do apart from replace the barrel. However, I would have a go at cleaning it first.

Difficult to do with removing the barrel, but it can done by flushing with brake cleaner or electrical contact cleaner, then allowing to dry and puffing in graphite powder. You can buy the powder from a lock smith and sometimes on eBay.

Also try turning the key with some sideways pressure, which sometimes helps. Have you tried a different key? Sometimes it can be the key at fault. Also lube the pin the goes into the yokes to lock the steering.

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