• Wednesday, July 17, 2024
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Existing fiscal frameworks in Nigeria’s mining sector not attractive for investment – KPMG

Existing fiscal frameworks in Nigeria’s mining sector not attractive for investment – KPMG

The existing fiscal frameworks, including tax policies in Nigeria’s mining sector, are not attractive enough to drive needed investments and they do not consider the peculiar nature of the sector, a new report says.

According to the report by KPMG, a professional services company, successive federal governments have attempted to revamp the sector with minimal successes recorded.

The report — the fourth in the series – recalls that, in 1999, a new national focus and strategy on mining evolved and it culminated in the enactment of the Nigerian Minerals and Mining Act (the Act or NMMA) in 2007, amongst other policy efforts.

“However, these efforts only led to a stunted growth in the sector; with the sector’s contributions to the nation’s Gross Domestic Product (GDP) remaining at less than 1% as of 2023,” it stated.

To demonstrate the government’s commitment to enhancing the sector’s contribution to GDP and facilitating the diversification of the economy, the erstwhile Ministry of Mines and Steel Development issued a revised sector growth and development roadmap (Roadmap for the Growth and Development of the Nigerian Mining Industry – the “Roadmap”) in 2016, the report said.

It noted that one of the roadmap’s targets is the growth of the sector’s total contribution to Nigeria’s GDP to about 10% by 2026. Under this target, the government launched an N30 billion intervention fund to open up the sector to multinational companies. The fund was to be used to promote exploration and research.

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“Despite these significant efforts, only little traction was achieved across the mining value chain, as the sector only contributed 0.77% to the GDP in 2023 according to the National Bureau of Statistics (NBS),” the report said.

The report categorised the country’s mining sector according to the key activities in the sector viz-a -viz exploration and mining (upstream), processing and beneficiation (mid-stream), and marketing and stream subsectors where active.

“Historically, only the upstream and down consider the peculiar nature of the sector, particularly, its long gestation period. In addition, incentives for miners appear to be scattered in pieces of different and independent fiscal legislation, which urgently calls for harmonization, to provide clarity to operators as to which should prevail (e.g., incentives in the NMMA and Companies Income Tax Act, CITA). Typically, fiscal incentives should be codified into the relevant corporate tax law to avoid overlaps and/or inconsistencies,” KPMG said in the report.

The KPMG stressed that the FGN needs to revisit the entire fiscal framework for the taxation of mining operations, to align with global best practices and attract mining majors and foreign investors.

“Apart from the harmonisation of the fiscal incentives, the revision of the NMMA is long overdue, as some of the provisions may no longer be in tandem with current realities. Hence, the an urgent need for an update to ensure the provisions align with global best practices and address the current realities of the mining ecosystem in the country,” the report said.

It further noted that despite Nigeria’s being endowed with over 44 different minerals occurring in over 500 locations across the 36 states of the federation and the Federal Capital Territory (FCT), the FGN has designated seven strategic minerals for focused development, due to the commerciality of the estimated deposits and their capacity to accelerate overall economic development through industrial linkages.

The priority minerals are Coal, Bitumen, Limestone, Iron Ore, Barites, Gold and Lead/Zinc.