Restructuring the solid minerals sector for optimal performance under PMB, by Jide Ayobolu

1553, Jide Ayobolu

One of the cardinal programmes of the President Muhammadu Buhari (PMB) led administration is the systematic diversification of the economy away from the sole dependence on oil, which has been the trend for so many years now.

Successive governments have talked about the diversification of the economy, but they obviously lack the political will and game plan to implement any concrete plan of action in this regard.

The PMB led government is bent on diversifying the economy, more so, that oil price in the global market is seriously dwindling and the revenue accruable to the government is daily nose-diving.

The president himself in many of his speeches clearly identified solid minerals and agriculture as areas where the country can leverage on and benefit maximally.

It is for this reason that the president chose two dynamic ministers for the very crucial sector. Indeed, solid minerals development is one sector that has been virtually neglected and could, if properly managed, bail out the country from its present economic strait jacket.

In fact, it is on record that the Nigerian Extractive Industries and Transparency Initiative (NEITI) in her report noted that “there are about 40 different kinds of solid minerals and precious metals buried in Nigerian soil waiting to be exploited.

Furthermore, the report read interalia that over “40 million tonnes of talc deposits have been identified in Niger, Osun, Kogi, Ogun and Kaduna States. There are huge deposits of coal ranging from bituminous to lignite in the Anambra Basin of South-Eastern Nigeria.

There are lead-zinc ores within the Asaba Area of Niger Delta, while tin, niobium, and lead, are to be found around Oyo and Igbeti, with as much as over a billion tonnes of gypsum spread around Sokoto, Niger, Ondo and Ekiti States.

Limestone deposits occur in Cross River, Ogun, Benue, Gombe, Ebonyi, Sokoto, Edo and Kogi States; magnesite in Adamawa and Kebbi States; coal in Enugu, Imo, Kogi, Delta, Plateau, Anambra, Abia, Benue, Edo, Ondo, Bauchi, Adamawa and Kwara States; wolframite in Kano, Kaduna, Bauchi and Niger states; silver is found only in Kano, with kyanite in Kaduna and Niger states; manganese only in the Northern states of Kebbi, Katsina and Zamfara with diatomite found only in Yobe State, while ilmenite-rutile is only in Bauchi, Plateau and Kaduna states; Fluorite only in Taraba State with gold in Niger, Kebbi, Kaduna, Kogi, Kwara and Zamfara and a little in Osun.

Nasarawa State in the North has been appropriately tagged as Nigeria’s home of Solid Minerals with clay, columbite, ilmenite, mica, barytes, pyrite, galena, limestone, sodium chloride, ephalerite, silica sand, granites, tantalite, mica, sphalerite, talc, gemstone (tourmaline, aquamarine and sapphire), halcopyrite, topaz, cassiterite, columbite, tantalite, emerald, heliodor, amethyst, quartz, coking coal, marble, and iron ore.

Bauchi is another richly endowed state in the North with metal ores, non-metallic ores and gemstones. Other untapped mineral resources in Bauchi include kaolin,talc ,tin, quartz, iron ore, gypsum, zircon, calcite, tantalite, chalcoprite, mica, copper ore, limestone, tourmaline, beryl, garnet, columbite, muscovite, aquamarine, topaz, marble, bismuth, wolfromite and others.

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In corroborating the position of the NEITI, the President of Miners’ Empowerment Association of Nigeria, said that “Nigeria loses a whopping N8trillion ($50 billion) annually in unexploited gold alone”.

It is important to note that, mining is not new to Nigeria. As a nation, mining of our resources began in 1902 in key mining towns such as Jos and Enugu. From these early operations led by the then British Colonial government, we went on to a more private sector focused model, and then moved to companies controlled by government such as the National Steel Company and the National Coal Corporation.

The policy shift created too much uncertainty which occasioned many private investors leaving Nigeria and the sector suffering sharply as a result.
The government at the time unfortunately did not do a good job of running mining companies, and as a result, the sector’s progress grounded to a halt.

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Needless to say, little attention paid to the sector over the years compounded by, in some cases, poor policy judgements of previous administrations are some of the factors that have stunted the sector’s growth.

Nigeria’s solid minerals sector makes up about 0.34% of gross domestic product (GDP). That means that based on current official exchange rates, the mining sector contributes N400billion in value to the economy. While that is a significant role, it is smaller than its true potential as the vast majority of our mining assets have yet to be exploited.

In fact, what has been happening is the sector has more or less been operating sharply below capacity, with many mining operations manned by small scale artisanal miners, as opposed to the large scale players.

The PMB led government has identified some challenges that are confronting the solid minerals sector, amongst these are,

(1)Limited Infrastructure: This is a key issue; the absence of appropriate infrastructure e.g. water, railroads and port handling facilities for base and bulk minerals makes it difficult for Nigeria to export iron ore for example. We need to improve energy, transport and market links to mines.

(2)Insufficient Geological Data: While we have some geosciences data, we are still heavily reliant on work done 30 to 50 years ago to estimate our reserve potential. We need to provide more detailed, investment grade data to support investors. Mining licenses issued by the Cadastre Office should be able to serve as collateral for loans, if supported by reliable information on the quality and grade of deposits.

(3)Limited Cooperative Federalism: Absence of incentives for states to become involved in mining is a key constraint i.e. royalties and taxes not directly accessible to states; need to review this arrangement. States have also not taken full advantage by setting up mining joint ventures, limiting their capacity to generate IGR.

(4)Low Productivity: Nigeria’s mining techniques and processes need to be upgraded in order to reduce mine site waste, and boost productivity of output. Ditto some of our older steel plants. Even in a labour intensive mining sector, it is important that miners have access to the most efficient supporting technology.

(5)Illegal Artisanal Mining and Community Challenges: Much of Nigeria’s mining is conducted informally at levels as high as 80% of activity in some regions of the country, not necessarily of Naira earnings. We need to bring these miners into a legalized framework, making them real start-up miners and ensuring they pay government the right set of taxes and royalties. I want to be clear: there will no longer be a free lunch, as the Mining Act will be firmly enforced.

(6)Weak Institutional Capacity: The Ministry has undergone significant changes since 2007 but still remains constrained with respect to enforcing existing laws and policies, supervising mines, and leading the provision of geo-sciences data. The Ministry will therefore need to add more technical staff and also upgrade the skill set of the Mining Inspectorate staff as well as other staff in the Ministry and its agencies.

(7)Insufficient Funding: Funding has been a challenge partially because the sector had not been a focus area for both government and financial institutions. Thus, a number of projects have drawn funding from offshore sources, while others have sought capital from a few Nigerian banks. We have commenced constructive engagement with the Central Bank of Nigeria (CBN) and with commercial lenders to help them create the teams to sharpen commercial options for Nigerian miners.

(8)Weak Ease of Doing Business and Perception Issues: Nigeria still remains a challenging place to do business based on data from the World Bank’s survey over the past decade; while we have improved, that has had a negative impact on mining. Mining specific data such as the Fraser Institute survey puts Nigeria nesr the bottom of investor friendly destinations, even if that is more perception than reality, it shapes investor decision making process.

The plan of the PMB led government is to achieve the following result through the instrumentality of the solid minerals development in the country, namely,

(1)Jobs Creation – We want to build a sector that is a jobs and growth machine, capable of working alongside other sectors to create a range of career options for our citizens.

(2)Revenue Generation – We want to build a sector that blocks all forms of leakages in the revenue accruals with a view to ensuring prompt and comprehensive collection of revenues.

(3)Industrialization – We want to build an industry that will support Nigeria’s industrialization, expansion of low cost coal generated power, earn foreign exchange and generate tax revenues for government at all levels.

(4)Sustainability – We want to build an industry that is sustainable, and will balance profit maximization with sustained economic options.

(5)Transparency – We want to build a transparent industry that broadcasts what it pays to government and other partners.
(6)Environmental Justice – We want to build an industry that values environmental equity and fairness for any and all.

(7)Cooperation – We also want to build an industry that integrates states, communities and existing artisanal miners where possible into the mining ecosystem.

It has even been rightly observed that the solid minerals sector is grossly under-developed leading to a situation where we import minerals that we could produce domestically such as Barites, salt and iron ore.

Compare this with South Africa where in 2009, mining directly accounted for about 9 per cent of GDP, one-third of the total capitalization of the Johannesburg Stock Exchange (JSE) and employed 500,000 people, or with the US where mining provides about 670,000 direct jobs.

In Australia, about 320,000 direct jobs are attributable to the mining sector. In Canada, mining provides employment for about 200,000 people. In South Africa, mining contributes another half a million indirect jobs in addition to direct jobs, focused on only a handful of minerals!

Nigeria has huge reserves of 34 solid minerals and virtually no jobs! Globally the mining industry has enjoyed strong economic growth for the past decade.

Demand for solid mineral resources from rapidly growing nations like China and India is on the rise, while Canada supplied minerals with a total estimated value of $45.3 billion in 2008. Today, mining accounts for 3.5 per cent of Canada’s GDP.

Nigeria is losing huge amounts of foreign exchange that it could have earned considering the tremendous growth in the demand for minerals in the global market. Nigeria has proven reserves of 34 solid minerals in commercial quantities.

Unlike the oil enclaves we have identified so far, these minerals are widely spread across 450 locations in most of the 36 states of the federation and FCT. No state or region will be left behind when we exploit our mining potentials.

The political will to drive the mining sector has indeed been established but it has to be sustained. Implementation was considered as key as it has not been one of our strengths but thankfully it has been provided for within the framework of the Roadmap by the creation of the Mining Implementation Strategy Team (MIST).

The Mining institutions need to be strengthened and given wholehearted support to create an enabling environment for investment and funding. Also, the law on mining and mining activities should be amended to enable states and local governments to be able to directly involve in mining matters; the point must be made that, they have to satisfy all laws on environmental impact assessment, there is no doubt whatsoever that under the present political dispensation, solid minerals development will occur its place of pride in the country’s economy and play a major role in the nation’s economic emancipation.

Jide Ayobolu, a social commentator based in Lagos writes this piece

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