Minerals offer Nigeria new income as oil falters
As crude oil output declines, the mining of minerals may offer Nigeria a way to earn revenue to fund its budget, with the rising spate of activities in the sector recording the most growth in five years.
The production of mineral products in Nigeria rose to 89.48 million tonnes in 2021, the highest in five years, according to data from the National Bureau of Statistics (NBS) on the back of government policies to harness the sector.
Aggregate production of mineral products in 2021 grew by 39.19 percent from 64.3 million tonnes recorded in 2020 to 89.48 million tonnes in 2021, indicating an improvement in production.’
Minerals like limestone, granite, and laterite were the three biggest resources mined in 2021, the report stated.
This modest success validates the President Muhammadu Buhari-led government policies of encouraging public-private partnership, revamping abandoned projects, organising artisanal miners into cooperatives and encouraging financing from lenders to the industry driven by Olamilekan Adegbite, minister of mines and steel development.
Artisanal miners often endanger themselves and wreak havoc on the environment of host communities due to their crude method of mining. Therefore, the ministry began organising them into cooperatives.
Thus began efforts to formalise their operation that would enable them to deploy modern tools of mining to ensure more revenue generation and job creation.
At a recent conference, the minister said in countries endowed with strategic mineral deposits, the mining sector contributes substantially to foreign exchange earnings
“Direct foreign investment in the mining sector creates a massive inflow of foreign exchange for the exploration and development of minerals with a positive impact on infrastructure and employment,” he said.
Nigeria is yet to extract the benefits from a thriving mineral sector. Insecurity challenges posed by criminal gangs and the activities of illegal foreign miners still pose significant problems.
According to a PwC Nigeria review, availability of reliable geological data, access to funding, regulatory requirements aimed at increasing government’s ‘take’, a shortage of skilled labour, preponderance of artisanal mining activities, weak infrastructure, pervasive corruption, environmental degradation an and increased stakeholder expectations are common features of mining in Nigeria.
“But there are enormous opportunities and potentials for companies who are focused and willing to be part of the new developments in the sector,” the analysts said.
According to the minister, a key constraint in the accelerated development of solid minerals is the undeveloped financing mechanisms for the mining sector.
“Nigeria’s banking system has limited exposure to mining, which probably is due to the lack of sufficient understanding of the sector,” he said.
For many lenders averse to risk, the mining sector presents more risks they can handle. Others who got burnt lending to energy sector have become more cautious.
However, Nigeria’s dire economic situation, marked by declining revenue from crude oil, is creating the perfect opportunity to diversify earnings.
Since May, Angola has produced more crude oil than Nigeria having failed to meet its OPEC production quota. Crude theft is worsening in the Niger Delta and investors are fleeing the region on account of insecurity and poor government policies.
OPEC’s monthly report for August showed that Nigeria’s oil production declined by 74,000 barrels per day (bpd) to 1.08 million bpd in July from 1.26 million in June, based on direct communication.
Angola’s oil production rose to 1.18 million bpd in July, up from 1.17 million bpd in June, based on direct communication.
But Nigeria has over 44 mineral deposits occurring in commercial quantities in over 500 locations across the country, according to Adegbite. Analysts say to get the most value from them, exploitation must be transformed beyond the small-scale operations across the country.
According to NBS data, on state profile analysis, Ogun state recorded the highest production in 2021 with 32 million tons, followed by Kogi with 18.4 million tons and Cross-River with 11.64 million tons. However, the least mineral production was recorded in Borno with 231 tons.