Opening up Nigeria’s Vast Mineral Resources

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For much too long, Nigeria has carried on as though its survival hinges exclusively on its famed huge reserves of oil that little is now known of its equally formidable reserves of other commercially viable mineral resources including precious stones, industrial metals and minerals. Remarkably, such items as tin ore, iron ore, columbite, coal and lead-zinc, which were vital to the “pre-oil era” economy of the early 1960s and early 1970s have been relegated to the economic doldrums.

That is about to change; and not just literally, but philosophically as well. For “Change” is the battle cry of President Muhammadu Buhari’s economy-fixing administration, which is deep in the process of diversifying Nigeria’s notoriously oil-fixated economy.

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The exploitation of the considerable deposits of an array of solid minerals the country once built its economy on, is one of the ways in which the administration hopes to achieve this noble objective using the new, energised Ministry of Mines and Steel Development under the leadership of Dr Kayode Fayemi.

Solid minerals, like oil, are in the extractive industry and subject to the same international dynamics that affect the fortunes of oil, but they will provide alternative revenue source for government, when oil’s fortunes plummet as it did a couple of years ago. This is the argument of Vice President Yemi Osinbajo, Nigeria’s Economic Management team leader. According to the Vice President, the mining sector is a priority of the present administration and a crucial part of its economic growth and diversification agenda. “The President has seized every opportunity over the last two years to highlight the diversification vision and the central role of the mining sector in it,” Osinbajo says.

And it could not be any different from the viewpoint of Minister Fayemi who says that in recognition of the pivotal role of the mining sector in his administration’s diversification strategy, President Buhari has charged the Ministry of Mines and Steel Development to put the mining sector back on the growth trajectory in the shortest term. The minister reveals that the goal is to raise mining’s overall direct contribution to GDP from about 0.34 percent in 2015 to over 5 percent in the next 25 years. He notes that attaining this goal is in line with government’s vision of developing a well-diversified economy and reducing the over-reliance on crude oil through agriculture and mining.

Bringing everyone to the table
To ensure the Ministry of Mines and Steel Development delivers on the President’s mandate, it undertook intensive sectoral situational analysis to develop a roadmap for the growth and development of the mining industry. This is because developing a framework for a sensitive sector such as solid minerals requires the active participation of key stakeholders. In developing the roadmap, the Ministry of Mines and steel consulted with a broad spectrum of stakeholders. Respected veterans of the industry helped to develop the framework which received significant inputs from public and private organisations including the Economic Management Team, National Economic Summit, Governors’ Forum and the National Economic Council. A national consultative forum was held to secure additional memoranda and synthesize inputs from all stakeholders, which were fully integrated into the final document.

The Mining Sector Roadmap
The blueprint for the revival of the sector aptly tagged Roadmap for the Growth and Development of the Nigerian Mining Sector was approved by the Federal Executive Council on August 31, 2016. The roadmap has provided a strategic framework for Nigeria to build an inclusive and sustainable mining industry designed to serve a targeted domestic and export market for ores and minerals. It is anchored on globally acceptable mining practices that are environmentally and economically sustainable, hence it has domesticated the provisions of the African Mining Vision (AVM) adopted in February 2009 during the African Union summit. Under the framework, the sector is also positioned to create jobs and fast-track industrialisation. The ultimate goal is to position Nigeria as a contender for foreign direct investment in the mining sector.

Part of the measures to ensure effective implementation of the roadmap and its reform initiatives is the creation of a dedicated team known as the Mining Implementation Strategy Team (MIST). MIST is a multi-stakeholder team established to drive the reforms.

Leveraging the Mining Sector
The roadmap has been endorsed by local and international organisations including the African Development Bank (AfDB) which is ready to provide funding and technical assistance for solid minerals development in Nigeria. The World Bank is also ready to extend $150million for technical assistance for the restructuring and operationalisation of Mining Investment Fund, which will make finance available to artisanal and small mining operators through development finance, microfinance and leasing institutions. The Fund is expected to bring back on stream previously abandoned proven mining projects like tin ore, iron ore, coal, gold, lead-zinc. Other organizations that have endorsed and lent support to the development of the sector include:

• The Department for International Development (DFID) which is financing some of the costs for advisory and technical teams;

• Ford Foundation, which is taking care of the ministry’s strategic communication, environmental and social justice activities as well as some of the costs for the ministry’s advisory and technical teams;

• Medecin San Frontieres (MSF) which is to undertake a pilot clean-up in artisanal mining communities affected by lead poisoning from gold processing;

• Open Society Initiative for West Africa (OSIWA) which is reviewing the legal and regulatory obstacles in the sector, supporting women in mining and improving gender inclusiveness in the sector as well as carrying out advocacy to end child labour in mining activities;

• The United Nations Industrial Development Organisation (UNIDO) which is assisting the country to develop the Minamata Initial Assessment and a National Action Plan on Mercury use in artisanal and small scale gold mining;

• The United Nations Development Programme (UNDP) which is assessing the implementation of the African Mining vision and the framework for revenue collection with a view to addressing leakages;

• Nigeria has secured $150 million funding from the World Bank for the Mineral Sector Support for Economic Diversification (MSSED) or MinDiver programme, a critical component of which is to provide technical assistance for the restructuring and operationalization of the Solid Minerals Development Fund. This would make finance available to artisanal mining operators through micro-finance and leasing institutions. The fund will also help bring back on stream previously abandoned proven mining projects like tin ore, iron ore, coal, gold and lead-zinc.

With the support the Ministry of Mines and Steel Development is receiving from both President Buhari and development partners, it is poised to restore Nigeria’s lost glory in mining. However, actualising the vision of the Buhari administration for the mining sector requires improved funding. To this end, the Minister, Dr Fayemi says the ministry is seeking to establish a $600million investment fund for the mining sector in partnership with the Nigerian Stock Exchange (NSE) and the Nigeria Sovereign Investment Fund. This is part of a strategy to attract $7billion investment into the sector in the next 10 years.

Quick wins
The renewed attention on solid minerals is already yielding results. Since the Buhari administration came into office, the reforms initiated by the Ministry of Mines and Steel Development has increased revenue accruing to government. The ministry requested and secured N30billion (about $100million) to help provide cheap loans and grants to industry participants as well as for direct investing in foundational infrastructure. It paid off. Within 13 months, the ministry tripled internally generated revenue from N700million in 2015 to N2billion through strengthening and strict enforcement of mining rules and regulations. The 2016 fourth quarter report of the National Bureau of Statistics (NBS) shows that the contribution of mining to the gross domestic product (GDP) grew by 7.1 percent up from a contribution of 6.23% in the preceding quarter.

To modernise the sector, the ministry is digitizing revenue collection and auditing which had been paper-based and collecting and updating tax and royalty assessment. Before now, the ministry relied on figures supplied by private companies which were often under-stated.

The ministry is developing a Mineral Management Information System (MMSD) for automating processes and procedures and linking the MMSD departments and agencies together as well as with other key ministries, departments and agencies. The ministry is also in the final process of operationalising a web-based Nigerian Mineral Decision Support System (DSS). When operational, the DSS will allow the MMSD, in conjunction with other government stakeholders, to undertake regionally based resource corridor analysis. Such analysis will support government in identifying opportunities for value chain and local content development, as well as infrastructure development in those regions.

The ministry has improved engagements with state governments just as some of them have adapted the mining sector roadmap. This ministry is collaborating with them on formalising and managing artisanal miners. The security agencies are not left out. The ministry has secured their help in stamping out illegal mining and smuggling activities in the country.

Strengthening institutional capacity
Efforts are being intensified by the ministry to strengthen intuitional capacity in the sector. Successive governments took steps to entrench the reforms into legal instruments by developing and enacting the following: Nigerian Minerals and Mining Act 2007, the National Minerals and Metals Policy 2008, Nigerian Minerals and Mining Regulations 2011, establishment of the Mining Cadastre Office (MCO) for mineral rights management, establishment of the Nigerian Institute of Mining and Geosciences (NIMG), establishment of control departments for Mines Environmental Compliance (MEC) and Artisanal and Small Scale Mining (ASM) among other initiatives.

The Mining Act and the supporting body of regulation were designed to give competitive legal and regulatory framework for the sector. To build on the progress so far recorded in this area. The ministry is pursuing a focused strategic agenda which is encapsulated in the roadmap. This is to encourage the creation of value-chain in mineral development and processing. The ministry is working with other Ministries, Departments and Agencies (MDAs), the private sector and the legislative arm of government to facilitate investment in a range of enablers including bulk handling terminals, railroad and rolling stock capacity, technical and engineering capacity, regulatory reform, and expansion of access to finance to drive the transformation of the sector.

The framework will focus on the following six key dimensions:

• Clear Minerals & Steel Focus: This emphasizes the need to ensure that industrial and energy minerals strategy prioritizes domestic utilization of assets, including getting the steel sector to provide a solid backbone for the manufacturing and industrial economy.

• Institutions and Governance: This entails rebuilding the organizational and functional capabilities of the supervising Ministry, and ensuring that the regulatory framework is enforced. That means, for example, reviving and using the Mining Police to protect mine sites and the reserves. The ministry is also working with defence and other security agencies to curb the actions of illegal mining.

• Stakeholder Engagement: This entails improving the engagement of states, particularly around financial participation, revenue sharing, and recognizing the oversight of the federal government. The ministry is also working hard to ensure that all parties recognize their social responsibilities to avoid issues similar to the oil sector.

• Industry participants: This involves working to attract a diverse portfolio of participants from artisanal miners to junior explorers to mining majors, into the industry. The goal is to build a sector that is competitive and which supports the investment objectives of a broad section of the investing community.

• Geosciences data and information: This entails improving the collection and dissemination of geosciences data which is a critical enabler of success. Nigeria needs to know what it has and in what grades and quantities to plan more effectively. This is particularly important to investors.

• Access to Finance: The Ministry of Mines and Steel has commenced a systematic effort to build knowledge and confidence among Nigerian financial institutions to support mining projects. In addition, the Ministry is repositioning the Nigerian Solid Minerals Investment Fund towards fulfilling its mandate. The fund is structured as a private sector-oriented investment outfit to provide financing to private sector-led projects in the mining sector.

• Enabling environment: Finally, Nigeria has resolved to create the appropriate environment to support enterprise. That will require building technical and managerial skills, and capabilities locally to ensure the steady supply of talent required by the sector in the future, as well as investing in infrastructure, gender equity, and improved access to finance.

The Mining Investment Strategy Team (MIST) in the Ministry, which is a team drawn from a mix of the Ministry and outside talent is working round the clock to ensure that it stays focused on execution and achieving results without detracting from the core regulatory role of government. The Ministry of Mines and Steel Development will be providing quarterly updates on the successes and challenges, with an initial focus on getting domestic industrial demand on track again.

The ongoing reforms in the mining sector are already yielding results. Today, Nigeria is a net exporter of cement following the development of value-chain in limestone processing which has saved $10billion in foreign exchange with $2billion saved in only 2014 alone. Dangote Group earned about $600million from cement in 2016. With the right policy now in place, limestone processing has created millions of jobs. Before now, there was a huge gap in cement production and demand. However, since government policy encouraged local production, Nigeria is gradually becoming a hub for solid mineral processing. There are eight cement companies operating in Nigeria with healthy margins; suggesting that there is room for more growth even as the present administration is rapidly scaling up infrastructure development across the country. The projected demand has created opportunities for investors willing to stake their bet on the Nigerian solid minerals sector.

Missed opportunities in mines and steel
Nigeria today sits on proven reserves of at least 44 solid minerals which include iron ore, limestone, gold, gypsum, bitumen of which it has the second largest deposit in the world; talc with over 40 million metric tonnes and coal with over 1trillion metric tonnes among other mineral assets. Unfortunately, these resources have not been put to use to earn foreign exchange for the country. Despite the fact these resources present unique opportunities that would not only provide desperately needed resources for government, but also empower Nigerians, successive governments neglected the sector.

The consequence is that the country expends huge resources importing goods that could be produced locally with its negative impact on the foreign exchange. For example, Nigeria imports about $3.3billion worth of processed steel and associated derivatives. Despite the country’s relatively robust iron ore reserves, only 18 of the 30 steel rolling mills are operational, producing 2.8million metric tonnes per annum while using 100 percent scrap metal. According to some estimates, $3.3billion spent importing steel products has the potential to grow to a $15billion market size with increased industrialisation that would be driven by domestic resources. With a projected increase in steel in the next 10 years, driven by the industrialisation, this presents opportunities for local and international investors to get into the sector.

Interestingly, the present administration is making renewed efforts to revive the multi-billion dollar Ajaokuta Steel Company after more than two decades of abandonment and neglect. Fayemi believes that following the interest shown by President Buhari in developing the industry, the steel sector is beginning to show signs of growth.

Wooing investors
With the priority accorded to the mining sector by the present administration, there is no doubt that Nigeria is now the destination for mining investment. Fayemi says that this is the time for investors to come into the industry to reap abundant returns. To support new entrants and more investors, the Federal Government is working to ensure the implementation of a three-year tax holiday for new investors in the mining sector.

Besides, government is creating an enabling environment targeting large-scale investors to institutionalize world-class production standards in the country’s solid minerals sector. The present administration’s Ease of Doing Business Reform Agenda which kicked off in 2016 with the creation of the Presidential Enabling Business Environment Council (PEBEC) which is chaired by Vice President Osinbajo is geared towards ensuring that Nigeria is a better place to do business. Since the launch of PEBEC, Nigeria has successfully completed a 60-day national action plan that reformed and simplified bureaucratic procedures. Today, the country not only has a functional Visa-on-Arrival process, but also the immigration regulations have been updated. What is more, a 48-hour Visa processing time for businesses and tourism at Nigeria missions abroad has been rolled out and is currently being implemented. “We are incredibly excited about what it portends for business and the economy in general including existing and intending businesses and players in the mining sector,” Osinbajo says.

Looking ahead
From all indications, the Ministry of Mines and Steel under the leadership of Dr Fayemi is leaving nothing to chance in its efforts to achieve the vision of President Buhari’s administration for the mining sector. With the support of his able Minister of State, Alhaji Abubakar Bawa Bwari and the formidable team in the ministry, Fayemi is effectively driving a public sector-enabled and private sector-led mineral sector transformation in Nigeria.

Dr Fayemi is quite aware that the mining sector is expected to become one of the frontiers of sustainable growth in the Nigerian economy and is determined to continue delivering on the broad mandates of the Ministry of Mines and Steel Development.

The minister says that in the years ahead, the ministry would strive to consolidate the gains already made by improving the visibility of Nigeria within the African mining community as well as ensure that the country remains relevant on issues relating to its interest in the sector. “We will continue to work to make our mining sector more competitive in the global mining space, and relevant to our domestic needs and strategic sovereign goals,” Fayemi says.

By Osaze Omoragbon


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October 2017