On record, by a marginal growth of 0.55 percent in gross domestic product (“GDP”) in the second quarter of 2017 (driven primarily by improved performance of agriculture, manufacturing and trade sectors of the economy coupled with the gradual rise in global commodity prices and relative stability in domestic crude-oil production), Nigeria crept out of its worst recession in more than two decades; which had been precipitated largely by persistent falls in international oil prices.
Recognizing the precarious nature of an oil-dependent economy, emphasis has thus continued to be laid on diversification through development of the non-oil sector, as a sure way for the country to stay on a steady recovery path in the short term; stabilize the economy in the medium term; and build a formidable economic bulwark against external shocks (such as oil price volatility) in the long term.
This article takes a critical look at solid minerals as a viable alternative resource to Nigeria’s crude oil and presents an overview of the policies and strategies of the Government for harnessing the potentials in non-oil natural resources, as well as the dynamics of the mining landscape in Nigeria
Sector Review
In spite of the abundant and diverse solid mineral deposits in Nigeria (about 44 different types of non-oil mineral resources including gold, copper, iron-ore, limestone, bitumen, lignite, coal, lead/zinc, gypsum, kaolin, sapphire, granite, laterite, sand, and clay) abound across the 36 States of the country and the Federal Capital Territory, Abuja), contribution of the solid mineral sector to overall GDP remains abysmally low and lags behind the figures for major African peers such as Guinea, Botswana, Democratic Republic of Congo (DRC), Ghana, Cote D’Ivoire and South Africa.
The annual Nigeria Extractive Industries Transparency Initiative (“NEITI”) Solid Minerals Audit Report put total revenue from the sector in 2013 at N33.86 billion, and in 2014 at N55.82 billion accounting for just 0.11 percent of GDP. In 2015, a marginal growth was recorded in solid minerals mining with accrued revenue hitting N69.2 billion and amounting to 0.33 percent contribution to GDP. However, figures published by the National Bureau of Statistics (“NBS”) showed that the minerals and mining sector contributed 0.55 percent to Nigeria’s GDP in 2016 while the corresponding figures were 40 percent, 25 percent and 18 percent respectively for Botswana, DRC and South Africa for the same period. Currently, solid minerals sector contributes averagely about 0.5 percent to GDP, accounts for about 0.3 percent of national employment and 0.02 percent of exports. This contribution is a reversal of historically higher percentages of up to 5 percent in the 1960s–70s, when the economy was largely sustained by agriculture and exploration of solid minerals.
Legal and Regulatory Framework
The Constitution of the Federal Republic of Nigeria, 1999 (as amended) vests total ownership and control of all minerals, mineral oils and natural gas in, under or upon any land, territorial waters and the Exclusive Economic Zone of Nigeria in the Federal Government (“FG”). Consequently, the main governing legislation, Nigerian Minerals and Mining Act, 2007 (“the Act”) follows this constitutional position. The FG exercises its absolute ownership and control by granting Exploration and Mining Licenses, Leases or Permits to applicants through the Mining Cadastre Office under the supervision of the Ministry of Mines and Steel Development (“the Ministry”). Other subsidiary legislation made pursuant to the Act and governing the minerals and mining sector include Nigerian Minerals and Mining Regulations (2011); National Minerals and Metals Policy (2008); and the Guidelines for Mineral Title Applications.
The regulatory, supervisory and institutional authorities in the Nigerian mineral and mining sector include the Ministry (led by the Honourable Minister); Mining Cadastre Office (“MCO”); Mines Inspectorate; Mines Environmental Compliance; Artisanal and Small Scale Mining Department; Metallurgical Inspectorate and Raw Materials Development; Steel and Non-ferrous Metals Department; Nigerian Geological Survey Agency; Nigerian Institute of Mining and Geosciences; Nigerian Metallurgical Development Centre; National Steel Raw Materials Exploration Agency; Council of Mining Engineers and Geoscientists; and the State Governors, who grant Right of Occupancy over lands that are mining areas.
Government Policy and Growth Prospects
The solid mineral sector holds true as a game changer and growth driver for the Nigerian economy. The current goal of the Government to raise non-oil revenue through diversification would be better achieved by building a competitive mining value chain capable of contributing to wealth creation through employment generation and domestic industrialization. As envisioned by the FG, the minerals and mining sector could rake in more than US$25 billion by 2025 and contribute up to 3 percent of GDP. There have been a number of policies drawn by the Government towards the realization of these lofty goals.
In December 2016, the FG launched a “Roadmap for the Growth and Development of the Nigerian Mining Industry”, which introduces institutional and regulatory reforms, sets clearly defined targets and provides for incentives as well as strategies for public-private-partnership for orderly development of the Nigerian mining sector, with a view to increasing its contribution to the GDP from the US$2 billion in 2016 to about US$27 billion by 2025.
Prior to this, a few interventions towards addressing the funding gap in the sector were made. In the last quarter of 2016, a US$30 billion intervention fund was approved from the country’s Natural Resources Development Fund (NRDF) and released for the facilitation of exploration activities and formalisation of artisanal miners. Plans have also reached advanced stages for the sourcing of capital from the capital market for the financing of solid minerals development in the country. The Ministry in conjunction with the Nigeria Sovereign Investment Authority (NSIA – operator of the country’s Sovereign Wealth Fund), recently negotiated the floating of a US$ 600 million mining fund with the Nigerian Stock Exchange.
The FG also recently announced the commencement of a policy that pays to State Governments 13% derivation from minerals mining revenue (similar to what currently obtains in the oil sector). This policy is geared towards encouraging States’ cooperation through financial participation and revenue sharing while a $US150 million World Bank’s assistance was also recently secured by the Government, for its Mineral Sector Support for Economic Diversification (“MSSED” or “MinDiver”) program. According to the Ministry, the World Bank support is a critical component that will provide technical assistance for the restructuring and operationalisation of the Mining Investment Fund (MIF), which would make finance available to artisanal and small scale operators through developmental finance, micro-finance, and leasing institutions.
Furthermore, the FG recently initiated a framework for partnering with State Governments, investors and host communities for the exploration and exploitation of bitumen. Focus is being placed on granting licences to investors with proven track records and demonstrable work-plan, financial strength and technical capacity to build processing plants. As recently hinted by the Minister, expression of interest by prospective investors in Nigeria’s bitumen reserves will soon commence. In a similar vein, negotiations have been reopened with foreign investors (consortia of some Chinese and Russian companies) on the privatisation of Ajaokuta Steel Rolling Mills.
In April 2017, the FG launched its Economic Recovery and Growth Plan (“ERGP”) which hinges the strategies for recovery on the diversification of the nation’s economic base from oil to the non-oil sector and targets a 7 percent economic growth by year 2020 with a more aggressive growth rate of 8.54 percent for the solid minerals sector for the same period. As part of efforts to diversify the economy, Government is planning a $7 billion investment in mining and steel for the next 10 years with a projected phenomenal increase in the sector’s contribution to GDP. There are ongoing plans to develop the extractive industries generally with range of incentives both for local miners and foreign investors.
Also, Government is pushing for legislation that will continue to guarantee 100% foreign ownership of mining projects in Nigeria, to attract foreign direct investments (FDI). There is also plan for the creation of a new super regulatory agency independent of the Ministry, which will merge and take over the roles of existing regulatory units, to facilitate transparency and certainty in the regulatory and taxation regimes. The Ministry is also looking to establish a Council of Mining and Mineral Resources, which will meet quarterly to promote collaboration between the FG and State Governments in improving the mining landscape. Currently, the over 40 minerals (industrial and energy) found in the country, as identified by the Ministry, are still largely untapped. These developments show that the sector is poised for a phenomenal growth.
Achieving Set Targets for the Solid Minerals Sector
There are high prospects of growth for the solid minerals sector. However, critical challenges trail the actualization of the vision of the Government for the sector. The 2016 Roadmap must be faithfully implemented by the Government and the development partners in order to fully address the inherent crises within the sector’s three key and broad areas namely, geosciences data and regulatory regime; stakeholder engagement; and institutional reforms.
To be continued …
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