Mining fits the vision of Nigeria’s current government on many levels. It has the potential to open up new revenue streams, create jobs and help underpin industrial expansion. With 44 minerals spread across Nigeria’s 36 states accounting for just 0.3 percent of GDP, the recent renewed attention to the sector represents a welcome break from Nigeria’s oil and gas fixation.
Unlike the capital intensive hydro-carbon sector, mining has the capacity to absorb labour and support the diffusion of transferable skills to local technicians. Mining’s propensity to upgrade technical skills can become a game-changer if it helps to reorient the economy towards manufacturing for local and export markets.
To unlock this potential, four key steps are needed. First, in the bid to turn solid minerals into fulcrums of Nigeria’s industrialization push, the new solid minerals minister, Kayode Fayemi, and his team should tweak existing regulations governing the sector to make it more attractive to investors. In the medium term, they should push smaller, manageable legislative changes, rather than an all-encompassing Bill. The travails of the Petroleum Industry Bill are instructive here. In the longer term, they should redouble efforts at framing an overarching fiscal and regulatory regime that balances stakeholder interests with overhauling and modernising the sector.
This sounds intuitive. Yet, striking the right balance may not be so straight-forward in Nigeria’s specific circumstance. A history of resource-based conflicts, especially in the onshore oil producing communities, will surely give pause to mining interests who will need to operate on land. The taxation and royalty package must therefore nod to investors’ concerns to present terms that can draw in funds and expertise. Global best practices on community benefit, environmental licensing and others also need to be prioritized so that big mining can obtain a social licence early on, in a clear departure from the Nigerian oil industry’s missteps. A move away from the pervasive centralization in Nigeria’s extractive industries is also overdue. States should be allowed to partner with credible foreign prospectors to develop mineral assets.
Second, as Nigeria bids to relaunch its mining, the country should orchestrate targeted outreach to investors at the February 2016 African Mining Indaba in Cape Town, South Africa. As the one-stop destination for mining nations keen to draw attention to their investment-friendly policies, the event is a must-attend. It needs to be energetically leveraged to make Nigeria’s case in the midst of a sharp commodity downturn. Nigeria’s previous appearances there have been inconsequential, with neither the focus nor calibrated messaging that can sway investors.
Third, the sector also offers potential opportunities for Nigeria to shore up its leadership credentials on the continent. A robust re-engagement with recent African mining governance initiatives formed without Nigeria’s active participation can help here. As an adviser to the African Union on both the African Mining Vision and the Africa Mineral Geoscience Initiative, this author has observed at close quarters pan-African efforts to promote mutual learning, capacity building, and spread best practices among leading mining countries. Minister Fayemi must bend the arc of history by mobilizing his aides to re-engage with such processes. Doing so will also allow Nigeria to benefit more systematically from technical capacities within agencies managing these initiatives. These include the African Development Bank, United Nations Development Programme, and the UN Economic Commission for Africa. It will also afford the minister and his team the opportunity to understand from counterparts challenges faced and possible lessons for Nigeria. Regrettably, some of Fayemi’s predecessors have not prioritized important mining forums such as the Conference of Ministers Responsible for Mineral Resources Development.
Fourth, and most crucially, mining exclusively for export will exacerbate the drawbacks inherent in Nigeria’s resource-dependence. A focus on local value-addition is therefore essential. Many African countries have pursued value-addition assuming that mineral endowment in itself confers comparative advantage. Rather than doing all the necessary heavy lifting, those countries try to legislate mineral processing into reality. Nigeria will do well to define a vision of its mineral sector development anchored in an industrial policy-type engagement among its mining investors, regulators and broader stakeholders. Economically meaningful mineral value-addition can occur if Nigeria’s government enters into a dynamic process of mutual learning and support with the private sector, pushing regulations that are sensible and based on consultation. This will bolster the industry’s ability to support linkages and mineral processing schemes.
By allowing the sector to experiment to find out winning formulae, regulators can create a virtuous cycle in which successful value-addition helps attract further investments for expanded job creation. Discipline will be needed to manage a regime of creative destruction. What works should get scaled up and faltering, economically sub-optimal schemes need jettisoning. This needs to be complemented with constant analysis and re-evaluation of where Nigeria’s mining and allied sectors are most competitive in regional and global value chains. The solid minerals ministry should enlist the help of think-tanks and other knowledge networks to lead this research and development function. If visionary leadership is provided, mineral assets can become a competitive advantage that underpins Nigeria’s future manufacturing prowess.
Crucially, every mineral value-addition scheme (or “beneficiation”, as this is increasingly referred to across the continent) has failed unless where conceived in terms of efficient manufacturing that can compete in a global market place. This is an important lesson that we must never lose focus of. Encouragingly for Nigeria, it has the advantage of a ready internal market large enough to sustain a major mining-led industrialization programme. If done efficiently, this ambition won’t be easily frustrated by China and other systemic mineral consumers who use their overwhelming scale to squeeze the margins for smaller African manufacturers. Yet, disciplined planning and execution will be required for Nigeria to turn such schemes into a winning formula.
In tandem with market competitiveness, social equity and shared value approaches must be prioritized. Our own Good Governance Africa (GGA) office in Nigeria is positioned to provide unbiased advice to government in many areas of mineral sector governance.
Our organization possesses expertise on international best practice and continues to hone Nigeria-specific nous in important areas. These include sustainability and community participation; developing local content; corporate social investment; mining environmental licensing and ecosystem preservation; and framing exploration and mining rights allocation systems to deliver for communities and future generations.
Ola Bello
Dr. Bello earned a first class degree from Obafemi Awolowo University and holds an MPhil and a doctorate in International Relations from Cambridge. He is the director of the Lagos office of Good Governance Africa (GGA).
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
