Restarting Nigeria’s dormant mining industry

From industrial metals to precious stones, columbite to tantalite and limestone to zinc, Nigeria is full of untapped mining resources. Dele Alake, Minister of Solid Minerals Development, declared on April 29 that the country is endowed with minerals worth a conservative $750 billion.

However, Nigeria has largely failed to generate significant revenues from its vast natural resources – the extractive industry generates less than 1% of Nigeria’s GDP.

Underinvestment

Historically, this sector has struggled with low levels of investment. Despite the deposit’s potential, Alake lamented on May 8 that Nigeria’s exploration budget ranks 12th in Africa according to S&P Global Ratings, with only $2.5 million invested compared to Côte d’Ivoire’s $147 million and Côte d’Ivoire’s $133 million Democratic Republic of the Congo.

Many intriguing projects never progress beyond the exploratory or feasibility phases due to difficulties in obtaining funding for the design, development and production of the project.

Lack of reliable geological data, lack of enforceable regulations, lack of community safety and weak human capital are all to blame for the lack of interest. However, Nigeria’s economic diversification has become more urgent due to the unpredictable nature of oil prices.

The Progressive Miners Empowerment Association (PMEA) says mining has the potential to fill this gap by directly employing 2 million Nigerians. The President of the Nigerian Senate, Godswill Akpabio, says that if managed effectively, the sector can increase foreign exchange earnings and contribute to social inclusion and empowerment.

“We cannot ignore the significant opportunities in this sector. “Mining should be a central component of our foreign exchange earnings and a driver of social development and empowerment,” he said.

Government plans

In response, President Bola Tinubu’s government says it is getting down to business. It is planning tax breaks and regulations that would allow international companies to repatriate profits, a major source of friction under the previous presidency of Muhammadu Buhari.

The government also plans to commit $70 billion ($46 million) to exploration and has created a state-owned solid minerals corporation offering a 75% stake to investors to spur further investment. In May, Alake said legislative processes were underway in the National Assembly through the House of Representatives Committee on Solid Minerals Development to establish the Solid Minerals Corporation of Nigeria.

“We are working with consultants to ensure a smooth emergence of a corporation that will be driven by the private sector. We are looking at a corporation structured with 50% of the capital going to the private sector; 25% for citizens; and 25% to the federal government. Our vision is to erect sustainable private sector-led structures for corporations that will drive efficiency, survive the current administration and ultimately insulate it from future government interference,” Alake said.

Ministry spokesman Segun Tomori says the government plans to offer tax breaks on mining equipment imports, streamline the process of obtaining operating licenses and allow full repatriation of earnings. Given the size of the country’s potential resources, it is clear that if the right environmental conditions are provided, private-sector interest could be strong.

Gary Nagle, chief executive of Swiss multinational mining and trading company Glencore, told the minister on April 29 that it would be willing to invest in Nigeria provided the government maintained a stable economic environment. In March, Nigeria and the United States agreed to form a mining development working group to unlock investment.

“Let’s figure out a way where we can share everything you have with our team, and then we can work with companies to see what solution makes sense for the United States,” said Amos Hochstein, senior adviser to the U.S. president for energy and infrastructure.

“Then we will check what the infrastructure needs are to unlock and make these investments more attractive,” he said, pointing to the importance of clean energy in powering industry.

More data required

Consulting firm PwC Nigeria says another major obstacle to the industry’s development is the lack of available data on mineral resources. Public dissemination of comprehensive and accurate data on revenue generation, expenditure and other key statistics is required. In addition to supporting good governance, this will enable stakeholders and civil society organizations to effectively monitor and evaluate projects.

The government responded by creating the Nigeria Mineral Resources Decision Support System information website where investors can view details of infrastructure and mineral resources. Previously, potential foreign investors had to fly to Nigeria to obtain the information they needed.

“The importance of data for investors cannot be overstated. With accurate data, investors will be able to forecast the commercial value of mineral deposits and make informed investment decisions. We have signed a Memorandum of Understanding with the German company GeoScan GmbH and are making strenuous efforts to collaborate with globally renowned science and data-driven agencies to be able to generate the required big geographic data that will attract international big players,” Minister Alake assured.

He said that in cooperation with the World Bank, aeromagnetic surveys were conducted across the country, which provided a superficial analysis of the spread of minerals and deposits, stressing that more detailed studies were being carried out.

Community involvement

A key part of restarting the industry will be ensuring local communities have a sustainable stake in the industry. The oil industry’s failure to achieve this over many decades has resulted in political unrest, oil theft and militant activity.

Supporters say the creation of a National Permanent Mineral Areas Development Commission, modeled on the Niger Delta Development Commission, could help encourage sustainable practices, ensure equitable distribution of benefits and stimulate socio-economic development in mining communities.

Alake said the revised guidelines on community development agreements make it mandatory to obtain the consent of host communities before applying for mining concessions. Revocation of inactive licenses and the inclusion of value enhancement plans are now federal government policy. In April, the federal government revoked 924 inactive licenses covering exploration, mining, small-scale mining and quarrying under a new “use it or lose it” approach.

The costs of past inadequate engagement with local communities are evident in the growing illegal mining industry. Extensive illegal mining operations increase environmental degradation and endanger the lives of artisanal miners who operate without adequate safety regulations or ecological safeguards.

President Bola Tinubu attributed the escalation of violence in the north of the country to illegal mining. Illegal mining of gold, diamonds and other resources has been linked to Islamist terrorist organizations and organized crime. The cost of illegal mining of all types is estimated at $9 billion per year.

To address this issue and promote the development of a fair and safe mining sector, the government recently hired 2,200 mining marshals. The government detained dozens of people in connection with illegal mining activities in April and May, in what the mining industry described as “a coercive element of the administration’s carrot-and-stick method to combat illegal mining that undermines safety in the sector.”

The minister said that the persuasive element is that artisanal miners form cooperatives to legalize their activities. Alake pointed to the formation of 152 new cooperatives between September and April as evidence that artisanal miners are prepared to meet the government halfway in implementing its ambitious reforms.