• Friday, September 29, 2023
businessday logo


Why Nigeria needs to diversify economy through solid minerals development

Measuring the regions by data

The lack of diversification of the economy over the years has put the nation’s economy in a perilous state and has consequently left it at the mercy of international oil prices.

The need to effectively and efficiently exploit solid mineral resources as a means of generating huge revenue for Nigeria cannot be overemphasized as the oil and gas sector which Nigeria has so much depended upon since its discovery in the 19th century has been faced with so many hiccups over time, ranging from the deliberate sabotage of the crucial sector through vandalism by militants, to the inconsistent prices of crude oil in the international market coupled with the discovery of alternative sources of generating power and energy thereby further reducing the demand for crude oil.

All these factors have consequently led to a reduction in the level of revenue generated and further reduced Nigeria’s foreign exchange earnings, thus putting the nation’s economy in jeopardy. Due to the fragile nature of Nigeria’s economy, there has been a persistent call for the Nigerian government to look towards the diversification of its economy especially from the angle of solid minerals development.

According to a report by the National Extractive Industries Transparency Initiative in 2019, only 79.96bn was earned from the extraction of solid minerals. The report further revealed that out of the total export figure of 24.275 trillion, solid minerals only accounted for 124.23 billion, which implies a 0.51 percentage of Nigeria’s total export.

Also, in the same year, the solid mineral sector only contributed 0.26 percent to the total GDP whereas the oil and gas sector accounted for about 10 percent. This shows the failure of the various interventions and policies made to resuscitate the sector. In the year 2021, the mining sector as a whole contributed a total of 7 percent to Nigeria’s GDP but less than 1 percent of it can be attributed to solid minerals activities.

Presently, the solid minerals sector contributes 0.6 percent to the GDP of Nigeria while the government plans to increase it to only 5 percent in 2025. Meanwhile, over 90 percent of the activities of the mining industry are dominated by artisanal operators, thereby accounting for the low output level in the industry. From 1992 till date, there has been a continuous decline in solid minerals contributions to the industrial sector as its value has kept on fluctuating between 0.3 percent and 0.4 percent.

The collapse of major steel-producing industries all over the country has further aggravated the issue of low solid minerals development as the story of solid minerals development cannot be complete without making reference to the Ajaokuta Steel Mill. The Ajaokuta is the largest steel mill in Nigeria, and the coke oven and by-products plants are larger than all the refineries in Nigeria combined.

Despite the fact that 40 of the 43 plants at the facility had been completed, the Ajaokuta Steel Mill that had reached 98 percent completion as far back as 1994 has not produced a single sheet of steel after more than three decades.

In the year 2019, the immediate past minister of mines and steel, Abubakar Bwari, declared that Nigeria lacks the technical capacity and competence to kick off operational activities at the Ajaokuta steel industry. The present administration is also making efforts to concession the Ajaokuta Steel to foreign expatriates, however, it is worthy of note that efforts by successive administrations in Nigeria to concession the industry to foreigners yielded no positive results.

Read also: Airlines to cancel, delay, divert flights during Christmas over harmattan

For instance, in June 2003, former President Olusegun Obasanjo conceded Ajaokuta Steel to Messrs SOLGAS Energy of USA for a 10-year tenure. However, in August 2004 the agreement was terminated on the ground of non-performance. Between 2004 and 2005, the Obasanjo administration, again, granted another concession to Global Infrastructure Nigeria Limited (GINL) an Indian-owned company for the operation of Ajaokuta Steel and the Nigeria Iron Ore Mining Company (NIOMCO) at Itakpe in Kogi State without also yielding any meaningful result.

In a bid to promote economic diversification through industrial value chain, the Economic Recovery and Growth Plan (ERGP) was designed in the year by the present administration led by Mohammadu Buhari. The ERGP provides a detailed plan on how the Nigerian government intends to achieve a diversified and sustained economic growth.

In the year 2017, the Ministry of Budget and National Planning revealed that one major interesting component of the ERGP is the plan of the government to rehabilitate and modify the solid mineral sub-sector especially through the revitalization of the abandoned mines and steel industries with more focus on the Ajaokuta thereby restoring the lost glory of the solid mineral sub-sector. In order to achieve this, the Nigerian government in the year 2018 revealed its plans to put up a rail line from Itakpe-Ajaokuta to Warri Port and to also ensure the dredging of the River Niger. Coupled with this was the rehabilitation of the Baro Port while works were also ongoing to ensure the functionality of the Lokoja and Warri Ports.

However, in the year 2021, Rotimi Amaechi, the minister of transportation made another revelation that suggested that despite the trillions of naira that have been allocated to ensure the completion of these projects; they would eventually turn out to be another story of white-elephant projects in Nigeria.

In an interview carried out by “Ships and Ports”, an online website for information pertaining to the maritime industry, he said:

“Nigeria does not produce anything so what are we transporting; I had this conversation with my friend about the viability of the river ports and I felt it was a waste of time.”

If revitalized, the mining industry in Nigeria has the capacity to become a major producer of industrial machinery, auto-electrical spare parts, shipbuilding, railways, and carriages thereby offsetting the quest for diversification in Nigeria. Firstly, it would help create jobs in the private sector whose presence is needed to absorb young and growing working-age populations into the workforce.

Also, it would help put in place the non-oil economy that will be needed many

years down the road when oil revenues start to dwindle. Without any iota of doubt, there is a strong synergy between industrialization and solid minerals development. This is because solid minerals provide vital input to the manufacturing of any equipment or machinery. It is, therefore, no gainsaying that nothing can be forged or manufactured without solid minerals.

However, the level of industrial development in Nigeria has been low over time thereby accounting for low input and output linkage between these two sectors.

If the Nigerian solid minerals sector is well organized, it has the capability of competing favourably with the oil and gas sector in terms of revenue generation as the exportation of solid minerals will not only lead to increased foreign exchange earnings but also lead to a reduction in the money expended on solid minerals importation from other countries thereby leading to a more favourable balance of payment.

The need to develop the Nigerian solid mineral sector is exigent especially considering the fact that the crude oil which the country so much depends upon has exposed the fragile nature of the nation’s economy each time there is a fall in global oil prices thereby making it unreliable for the sustainable development of the nation’s economy.

As it stands now most states are currently struggling to pay their workers, ironically some of these states are sitting on hundreds of billions of naira worth of solid mineral deposits. All the states of the federation are endowed with one solid mineral or the other, thereby implying that the industry has a high potential to succeed in the country.

This lends credence to the fact that it may not be a misplaced priority, after all, to pursue the development of the sector vigorously, given the widespread availability of solid minerals.