Nigeria’s solid minerals, A diversification route missing in economic development plan
April 12, 2022580 views0 comments
BY ONOME AMUGE
The global push to switch from fossil fuel towards the adoption of renewable energy systems in industrial production has in recent times increased the demand for solid mineral resources in the global market.
Rapid deployment of clean energy technologies and related innovations has consequently inflated prices of solid minerals, with mineral-rich countries serving as top destinations for explorers, miners and international investors.
According to the Nigerian Geological Survey Agency (NGSA), Nigeria possesses a vast deposit of over 44 solid minerals and precious metals including, bitumen, coal, columbite, copper, gold, iron-ore, lead, limestone, lignite, sapphire, tin, zinc, among others, across the various regions of the country with a commercial value estimated to be worth trillions of dollars.
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Despite the immense potential of the solid minerals and mining sector to become one of the major drivers of the country’s diversification agenda towards economic developments, industry analysts described the sector as a “cash cow in dejection” as reports show that the sector is largely untapped and lacks significant investments, with the total revenue generated estimated at N624.45 billion in 13 years, while contribution to overall gross domestic product (GDP) stands at around 0.33 percent, an abysmal figure compared to other mineral-rich countries in Africa.
A recent report released by the Nigeria Extractive Industries Transparency Initiative (NEITI), disclosed that Nigeria’s export dropped from N124 billion to N17.53 billion between 2019 and 2020.
It noted further that royalty receipts from Enugu, Nasarawa, Plateau, Zamfara and other states renowned for their large and high value mineral deposits, was materially low due to illegal and unlicensed mining activities, tax evasions, poor attitude of small scale miners towards filing their monthly production returns, and continual smuggling of minerals out of the country.
The audit report, which analysed the sector’s performance in 2020, revealed that Nigeria possesses huge deposits of barite, an industrial mineral found in commercial quantities in Adamawa, Benue, Ebonyi and Cross River, Nasarawa, Plateau, and Taraba States. However, it was observed that local companies still imported the mineral.
“147 barite titles have been issued but production level during the year under review did not reflect this,” the report added.
NEITI also disclosed that 38 different minerals were produced in 2020, with granite, limestone, sand and laterite having a combined contribution of 90 percent of total production volume and 87 percent of total royalty receipts.
The consequence, it stated, is that barite, coal, tin and other precious minerals, such as gold, generated very low returns in comparison.
Bringing to fore the low level of activities in the solid minerals sector, the report disclosed that out of the 850 companies in operation during the year, only 102 settled the materiality threshold of N3 million for the audit as well as 90 percent of total royalty payments.
NEITI expressed concern that there was weak monitoring of mining activities across the country due to insufficient manpower at the states’ mine offices, poor deployment of technology and security challenges.
It also attributed the poor results of the sector to China’s dominant position, noting that the Asian powerhouse is the sole destination for Nigeria’s solid minerals resources.
According to the report, China accounted for 80 percent of total volume and about 85 percent of total value of solid minerals Nigeria exported, while over 2000 solid mineral companies operating in the country currently owe the federal government statutory yearly service fees for respective mineral titles amounting to N2.76 billion.
NEITI faulted Nigeria’s over-reliance on China for its mineral export, pointing out that the country’s export line is at risk in the event of disruptions in business relations between both countries and natural occurrences such as the COVID-19 pandemic which distorted industrial operations, leading to a plunge in demand for Nigeria’s solid minerals.
To foster better investments and generate significant revenue from the sector, NEITI advised the federal government to moderate its dependency on China for its mineral exports by developing robust business relationships with other countries that are likely to patronise its solid minerals.
It also encouraged the government to promote industrialisation and other policies that will facilitate participation of local industries to exploit the minerals.
Speaking on why Nigeria struggles to maximise its valuable mining commodities, Olamilekan Adegbite, the minister of mines and steel development, explained that the country’s banking system has limited exposure and understanding of the mining sector, leading to little participation of stakeholders in the financing community.
Adegbite explained further that factors such as insufficient geo-data and geological knowledge, low value-addition capacity, drawbacks in implementing and enforcing the existing mining law and regulations, were among some of the challenges the ministry has been working to address.
On the way forward, he said the ministry will through the solid mineral development fund, partner with banks, private sector investors, and multilateral partners to facilitate private sector investment and develop long term mining sector development bonds to finance the mining sector.
The minister also stated that Nigeria was working with other countries to strengthen regulation and prevent illegal exportation of precious metals, particularly gold, adding that the country must add value to its resources before exporting them to ensure more significant revenue generation.
In his assessment of the country’s mining sector, Oluwaseun Olatunji, chairman, mining and solid minerals group, Lagos Chambers of Commerce and Industry (LCCI), bemoaned that 80 percent of operators in the country’s mining sector involve small-scale or artisanal mining companies, which limits production scale.
Olatunji emphasised the need for the government to create a reliable database, provide adequate financial interventions, and increase the production and value addition capacities of existing operators in the solid minerals sector, describing it as a low hanging fruit with promising returns when the available resources and markets are considered.
The LCCI chairman also stated that the current surge in global metal prices underpinned by the new energy markets, global uncertainties, as well as the lingering war in Ukraine, has created a more buoyant market for solid minerals, an opportunity Nigeria must maximise to foster economic development.
On his part, Michael Olawale-Cole, the LCCI president, noted that the existing fiscal framework for investors in the mining sector is not favourable enough for stakeholders as it does not consider the peculiar nature of the sector, particularly, its long gestation period.
Olawale-Cole advised the federal government to revisit the entire fiscal framework for the taxation of mining operations, and also establish a robust fiscal framework, to attract mining majors and foreign investors.
The LCCI president lamented the incessant insecurity challenge that has continued to hinder production and investment in the sector. He emphasised the need for the Nigerian government to urgently address insecurity across mineral-rich and mining communities in the northern region and other mining communities.