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OPINION: COORDINATED APPROACH TO THE DEVELOPMENT OF THE SOLID MINERAL SECTOR


Olamilekan Adegbite

The Minister of Mines and Steel Development, Mr Olamilekan Adegbite, says the Federal Government will soon ban the importation of barite to help the country save foreign exchange for other useful purposes. Adegbite, who said this when he featured as a special guest on the News Agency of Nigeria (NAN) programme: Forum, noted that about $300million was spent annually to import barite from Morocco. Barite is a mineral consisting of barium sulphate, typically occurring as colourless prismatic crystals or thin white flakes used in the oil industry and also part of the drilling mud mixture.

The minister said a consultant had been engaged by the ministry to work out modalities for sourcing barite locally and also end its importation into the country. “Nigeria has been spending millions of dollars every year on barite. We import barite from Morocco, about 300 million dollars’ worth annually, and this is something we have in Nigeria. “We have barite all over the country (in Nasarawa, Cross River States); so, why can’t we produce our barite. There are standards required by the industry and we have it. “Now, as at today, the proven deposit that we have is over a million ounces but we believe that the prospect could be over 200 million ounces. “We have a Canadian company in Nigeria that is working out something in Osun; they already have at least one million ounces of proven deposit. “The plan is to start processing and exporting gold by the end of the year but, because of COVID-19, it might be in the first quarter of next year,” Adegbite said.

An established and well managed solid minerals sub-sector will accelerate economic, social and political growth of Nigeria by the provision of gainful employment and a rise in national income earnings far exceeding the petroleum sector. In addition, solid minerals will provide local raw materials for industries and bring vital infrastructure and wealth to rural areas. Solid minerals have the capacity to provide the all-important launching pad for the development of other sectors of the economy as well as give sense and meaning to the oneness of the Nigerian state as minerals are located in all states of the Federation. This will douse the agitation for resource control. It is therefore vital that the nation explores this latent potential, which has slumbered over the years.

Solid minerals contributed immensely to the economic development of Nigeria in the pre-independence years. During this period, Nigeria was known for the production of coal as an energy source for electricity, railways and also for export. Tin, Columbite, Lead and Zinc were exported. Nigeria was the largest producer of Columbite at one point. The earnings from solid minerals were used to develop roads, education, hospitals and in fact develop the petroleum industry.

The decline of the solid minerals industry started with the discovery of oil to the extent that Nigeria became a mono-product economy and vulnerable to international oil politics. The domineering role of oil did not allow past governments to attend to global challenges that evolved in the development of solid minerals.

The neglect of the minerals industry led to disorder in the minefield with a strong presence of illegal miners whose activities are characterized by inefficient mining, illegal trading of highly priced minerals, severe ecological degradation, the spread of diseases and huge loss of revenue to the government through smuggling.

Furthermore, the sales channel is largely unofficial and embedded with smuggling and distribution cartels leading to:
• Loss of revenue from taxes
• Loss of revenue from royalties
• Exposure of miners to uncontrolled risks
• Uncontrolled and non-systematic evacuation, resulting in environmental degradation, erosion and excessive pollution, amongst other negative effects.
There is an urgent need to formalize the artisanal and small scale mining by formulating policies aimed at achieving the following:
• Integration of informal artisanal miners into the formal mining sector
• Training and equipment supply
• Funding • Possible absorption by bigger companies
• Enlightenment on safe mining practices • Provision of equipment

The development of the solid minerals sector is hampered by the lack of adequate funding to cater for the different stages of the life cycle of a typical mining operation. Before returns can be generated from a mining operation, the activities need to go through the 5 stages of exploration – development – mining – processing – marketing, a cycle which takes between 2 to 10 years or more. Most mines in Nigeria are typically green fields (in the exploratory phase), thus not necessarily attractive for funding by the traditional commercial banks. Establishment of a solid mineral development bank will provide investor-friendly loans, specifically designed to cater for the various stages of the mining life cycle. These will have interest rates and repayment terms specifically designed around the mining life cycle, making funding more accessible to miners, and repayment terms more reflective of the realities in the mining industry. Furthermore, the government can provide special incentives for solid mineral development banks, or commercial banks having special packages for the solid mineral sector.

The absence of solid mineral buying centres and lapidaries has enabled the flourishing of illegal sale cartels out of the country, with resultant loss of solid minerals revenue from taxes and royalties. As a matter of urgency, the government should establish various mineral buying centres and lapidaries across the relevant zones in the country. This will encourage the artisanal miners to sell minerals in-country, and production can be monitored for taxes and royalty collection.

Nigeria is enriched with over forty (40) types of minerals including marble, gypsum, lithium, silver, granite, gold, gemstones, bentonite, iron ore and talc. The mining and solid mineral sector of the extractive industry in Nigeria have always been a viable greenfield and is now getting the attention it deserves, having been earmarked as a key source of economic development and diversification of the revenue streams of the country.

It is, however, incontrovertible that the sector is under-performing and plagued with issues ranging from inadequate infrastructure to illegal artesian mining and community challenges. These issues stifle potential by deterring potential investors whose resources are essential to the revitalisation of the sector. The sector is being regulated by the following laws, namely,
Minerals and Mining Act No. 20 of 2007 (the MMA): The Act is the principal legislation that regulates the Nigerian mining sector. The Act vests the control, regulation and ownership of all mineral resources in the Federal Government of Nigeria (FGN).

The National Minerals and Metals Policy1
Nigerian Minerals and Mining Regulations 2011 (the ‘Regulations’)2: The Federal Ministry of Mines and Steel Development (the ‘Ministry’) recently issued new mining regulations titled the Nigerian Minerals and Mining Regulations 2011 (the ‘Regulations’) which is intended to establish a more coordinated and accountable solid minerals sector in the country and to stamp out the discretionary grant of mineral titles. The Regulations were issued to set out the rules, procedures and processes for the acquisition of mineral titles, and to give effect to the Minerals and Mining Act No. 20 of 2007 (the MMA).

Company and Allied Matters Act (“CAMA”) Cap 20, Laws of the Federation of Nigeria (LFN) (2004) (“CAMA”): This is the law that regulates company formation and operation in Nigeria, no foreign company may carry on business in Nigeria unless it incorporates a local subsidiary in the country. The MMA also states that no person shall be qualified for the grant of any mining title unless the person is a body corporate duly incorporated under CAMA amongst others.

Recalled that, the Federal Government has launched a report designed to enhance the contribution of the solid minerals sector to Nigeria’s revenue and Gross Domestic Product, GDP.

Speaking at the launch of the report, Improving Transparency and Governance in Nigeria’s Mining Sector, Executive Secretary of the Nigeria Extractive Industries Transparency Initiative, NEITI, Mr. Waziri Adio, said the sector, despite not being tapped to its fullest, had the potential to grow Nigeria’s economy, create jobs and address a number of social issues.

According to him, NEITI, in launching this report, is seeing how it can bring on board what needs to be done and how it should be done, adding that it wanted to go beyond audits and do things that would impact lives of the citizenry. He said: “There is no doubt that Nigeria has a lot of potential in the solid minerals sector, but having potential is not enough.

Potentials by itself would not translate to improved revenue for improved fortunes for the country and its people. “Our country needs other streams of income, but we are not doing that. This sector is one that has all the potential to generate more revenue for our country, create more jobs for our people, to even expand our industrial base. Rather than continue to talk about the problems all the time, we want to do something that would build on ongoing reforms in the sector. “The Ministry Of Mines and Steel Development, MMSD, is doing enormous work to reposition the sector. To align with that, we want to see how we can bring certain perspectives, not just on the potential and problems, which we all know, but what needs to be done and how.”

The report presented by its Editorial Consultant and Professor of Geology, University of Ibadan, Mr. Gbenga Okunlola, disclosed that in comparison with other countries with similar potential, Nigeria’s mining sector was still largely underdeveloped. The NEITI report stated that until recently when there had been a slight improvement, the mining sector’s contribution to the GDP had not been more than 0.5 per cent, a reversal from the historically higher percentages of about 4-5 per cent in the 1960s and 1970s.

The report noted that the misfortune of the solid minerals sector started with the Indigenization Decree of 1972, which saw a massive withdrawal of foreign investments in the mining industry from the country, leaving the bulk of private-sector mining operations in the hands of small-scale local miners.

According to the report, these factors were largely responsible for production decline in the sector, particularly in the metallic minerals sub-sector, starting in the late 1970s. The NEITI report noted that today, the mining industry has the potential to sharply contribute to the country’s GDP, but was currently under-performing, responsible for 0.33 per cent of employment in Nigeria, 0.02 per cent of the country’s exports and 0.3 per cent of the country’s GDP. The report, however, called for policy consistency in the sector, stating that this would help boost Nigeria’s score in the global Policy Perception Index, thereby, removing the barriers to investments in the sector.

It argued that mining policies should also guarantee predictability and consistency of applications of rules, noting that any sudden change of rules might cause a 10-year lull in foreign investments inflow into the industry, as investors take that number of years to observe an economy and assess its rules before investing.

To this end, to improve transparency and governance issues in the mining industry, the NEITI report advocated the sustenance of a robust regulatory framework, revamp of the institution and technical structure; ensuring a more conducive finance and business environment; plugging of loopholes between production and revenue; communities and stakeholders participation among others.

It would be recalled that the Nigeria Extractive Industry Transparency Initiative, NEITI, has said Nigeria earned N69.2 billion from the solid minerals sector in 2015, an increase of 24 per cent on the N55.8 billion earned from the sector in 2014.

NEITI, in a statement on its latest independent audit report of the solid minerals sector released weekend, also disclosed that the value of solid minerals exports from Nigeria in 2015 stood at $9.733 million, which was 1.45 per cent of non-oil exports. It noted that lead and zinc dominated Nigeria’s solid minerals export with 79 per cent valued at $7.7 million, while 175 ounces of gold valued at $122,000 were exported during the period.

The NEITI report showed that the solid minerals sector contributed 0.12 per cent to Nigeria’s Gross Domestic Product (GDP) in 2015, a marginal increase of 0.01 per cent on the 0.11 per cent contribution of the sector to GDP in 2014. The report noted that the total production of solid minerals in the country stood at 39.27 million tons, representing a reduction of 17 per cent from 47.1 million tons produced in 2014.

NEITI attributed the drop in production in 2015 to insecurity in parts of the country and the more stringent approval process for explosives used in mining. However, the NEITI report noted that while mineral production reduced, government revenues went up in the same year. It said, “This increase in revenue was due to the growth in taxes collected from the sector and review of royalty rates paid by companies which came into effect within the year under review.” NEITI said its previous solid minerals audit reports had recommended an upward review of Nigeria’s royalty rates to align with prevailing industry and present-day realities.

The NEITI report also highlighted the specific contributions by companies and states to the sector revenue growth and development. According to the report, cement manufacturing companies were the major revenue contributors to the sector, accounting for over 60 per cent, while construction companies and real mining companies contribute about 31 per cent and 8 per cent respectively. “For instance, three states- Ogun, Kogi and Cross River and the FCT accounted for about 70 per cent of the production volumes in 2015. However, Ogun state topped the table with 36 per cent,” the report noted. The report further noted that a total of 4,305 mineral titles were valid in 2015, adding that of this figure, 204 were mining leases, 657 were for small scale mining, 1,865 were for quarrying licenses while exploration licenses accounted for the remaining 1579. It also noted that 1,220 of the 4,305 mining titles were issued in 2015 alone.

Commenting on the report, Executive Secretary of NEITI, Mr. Waziri Adio, said, “This report shows evidence that the contribution of the solid minerals sector to government revenues and macro-economic indicators is beginning to improve, even if marginally. “The sector could contribute more to revenues, job and wealth creation, exports, imports substitution, industrial development and overall national growth. “But there is a sign of progress already. What we need to do is to build on, deepen and sustain this early promise to ensure that the country returns to being a major mining destination and maximizes the abundant opportunities offered by the sector. “Faithful and sustained implementation of the roadmap developed by the Ministry of Mines and Steel Development and the recommendations in this report will be necessary.”

There is no doubt that the solid mineral development sector is a very important one that can make a huge contribution to the growth and development of the country and which the present administration has identified and invested heavily in, for the benefit of the generality of the populace.

*** Written by Jide Ayobolu.





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