A Review of the Nigerian Energy Industry

Nigeria’s mining sector still awaits World Bank’s N12bn grant

Oscarline Onwuemenyi

24 August, 2011, Sweetcrude, Abuja – There appears to be a little disquiet in Nigerian solid minerals industry over the delay in the approval of about $80 million (over N12 billion) from the World Bank funding for the sustained development of the industry. Thus, many a stakeholder has been forced to wait with bated breath the much-awaited injection of funds that is aimed to support efforts by the government to effectively position the industry as a hugely viable investment haven for major mining corporations in the world.

The Federal Government had sought an additional $80 million credit from the World Bank to enable the implementation of additional work necessary to trigger the full development of the mining sector in the country. This is in addition to the $120 million concessionary credit it received in 2004 from the global lender as part of a Development Credit Agreement towards funding the Sustainable Management of Mineral Resources Project (SMMRP) implemented by the Ministry of Mines and Steel Development.

The Senior Mining Specialist of the World Bank, Ms. Ekaterina N. Mikhaylova, who visited with the Minister of Mines and Steel, Arc. Musa Mohammed Sada, last week in Abuja, gave further assurances of the Bank’s commitment to assisting in the nation’s quest to become one of the choice mining destinations across the globe.

In her first ever interview in December last year with our correspondent upon resumption as the Task Team Leader (TTL) for the Project Monitoring Unit (PMU) of the Bank in Abuja, Ms. Mikhaylova said all efforts were on top gear to ensure the approval of the sum to sustain the growth in the country’s solid mineral sector.

Then, she said the World Bank had given indication that it is set to approve an additional $80 million credit for the nation’s solid mineral’s sector, which was expected to come earlier in the year.

According to Mikhaylova, “This project has been on the right track over the last five years, and we only hope to move faster from this point and create the necessary environment for sustainable growth in the industry. The Bank is in the process of approving the Federal Government of Nigeria’s demand for an additional $80 million for the continuous improvement of systems and mechanisms for the solid minerals industry, and at this stage we are confident that all the right boxes will be ticked towards making this feasible by the first quarter of 2011.”

Mikhaylova pointed out that investment in “efficient geology and information survey systems would put Nigeria on the global map as a serious mining destination, and would encourage investors to put money for the growth of the industry.” She added that, “The Project belongs to the Nigerian government and its people. The World Bank is just here to give financial support and technical guidance to the achievement of a sustainable mining system for the economic and social growth of the country and its citizens.”

Also speaking to Sweetcrude, the Lead Mining Specialist of the World and former Task Team Leader of the Project, Mr. Craig Andrews, noted that the country has the potential “to stand shoulder to shoulder with many mining countries in the world in mining giving the amount of work done to reform the sector and make it attractive to investors both locally and internationally.”

He added that, “The Project has been involved in so many aspects of the Nigerian mining industry including training, capacity building, infrastructure development and equipping relevant institutions and providing technical assistance to government in the formulation of policy for the sector. The Project has also invested heavily in the establishment of the Geophysical Airbourne surveys and the Geo-chemical mapping systems, as well as the development of dimension stones and gemstones subsector of the industry, among others.”

At a recent Stakeholders’ Workshop on World Bank funding of the Nigerian Mining Project, in Abuja, the Minister of Mines and Steel, Arc. Musa Mohammed Sada, explained that the initial concessionary credit was required to jumpstart the development process for the country’s solid minerals industry. He noted that the World Bank’s Sustainable Management of Mineral Resources Project (SMMRP) is very crucial towards the development of the Mining industry to enable it make a meaningful contribution to Nigeria’s socio-economic development through diversification from the oil and gas Sector.

According to Sada, the on-going reform programme in Nigeria’s Minerals and Metals Sector are driven through with financing from the Federal Government of Nigeria and the World Bank assisted grant of USD120 million. “Through the World Bank project institutional frame works such as Nigeria’s Minerals and Mining Act of 2007 was put in place to bring mining industries in the country to be in line with global best practices. The National Institute of Mining and Geosciences in Jos, Plateau State was established and being run through the World Bank assisted project. This is to supply the needed expertise to the industry,” he added.

The Minister pointed out that through the World Bank support for the development of the Solid Minerals Sector, grants are given to the Artisanal and Small Scale Miners to facilitate their operations and address some mining communities’ social needs.

He said, “The government over the years has recognized the imperative to diversify our economy away from oil and gas; the mining sector was, therefore, identified as critical to the achievement of this goal. The Project is in direct response to government’s emphasis on the development of non-oil sources of revenue, with mining and agriculture remarked as sectors with the greatest potentials. Government had sought to diversify the economic base of the nation, give it some balance and ensure less susceptibility to the vagaries and dynamics of international oil price mechanism.”

Sada said there was also the need to increase output of industrial minerals such as gypsum and barite, which would serve as input factors for local production, thereby reducing achieving import substitution and conserving foreign exchange. According to him, given the enormous and wide range of mineral endowment found in nearly every community across the country, government had realized the potential of the mining sector in helping fast-track wealth creation, employment generation and poverty reduction, especially in the rural areas.

Sada explained that the objective of the Sustainable Management of Mineral Resources Project (SMMRP) is to increase the government’s long-term institutional and technical capacity to manage Nigeria’s mineral resources in a sustainable way. “It is also to establish a basis for poverty reduction and rural economic renewal in selected areas of the country via the development of non-farm income generating opportunities through small-scale and artisanal mining and to diversify away from oil sources of income,” he explained.

He noted that prior to the commencement of the SMMRP in 2005, “the mining sector was in a deplorable state of collapse owing to nearly four decades of neglect occasioned by the discovery of oil in commercial quantities and the Indigenization Act of the 1970s which was a disincentive to foreign mining companies and investors.”

Sada added that the decline in tin prices in the 1980s, as well as the harsh economic conditions that became prevalent during the periods of Austerity Measures and Structural Adjustment Programme (SAP) brought mining activity in the country to its lowest ebb. “This resulted in over 95 percent of mining in Nigeria being undertaken at artisanal and small scale levels. Artisanal and small-scale mining (ASM) is largely driven by poverty, hunger and struggle for survival in a very difficult and challenging sector,” he said.

Meanwhile, the Minister has pointed out that the Project has reported satisfactory performance ratings in its financial management and procurement functions, and was on course towards meeting the development objectives. He stated that, “The SMMRP has surpassed some of targets set in the original performance indicators, which were revised upwards during the Mid-term Review and Quality Assurance Group (QAG) Review conducted by the World Bank in April and May, 2008.”

He regretted that the Nigerian banking industry “lacks awareness of the importance of the mining sector to the national, hence the little or negligible investment by the banks. This does not augur well for both sectors. There is no better time for banks in the country to look in the direction of the mining sector given the enormous growth and development recored, which is exemplified by the increase in the number of investors both locally and internationally coming in to play a part in the Nigerian mining industry.”

The SMMRP Project Coordinator, Mr. Linus Adie has stressed that the World Bank is ready to assist Nigeria in the development of the solid minerals sector adding that neither the Ministry of Mines and Steel Development nor the SMMRP can achieve the enviable target alone.

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