A Review of the Nigerian Energy Industry

Towards harnessing Nigeria’s vast solid mineral potentials

Chima Ugwuanyi

25 November 2012, Sweetcrude, Abuja – Statistics show that Nigeria is endowed with more than 33 commercially viable solid minerals which could be exploited, while more than 40 million tonnes of talc deposits have been identified in Niger, Osun, Kogi, Ogun and Kaduna states.

The records also reveals more than one billion tonnes of gypsum deposits spread across the 36 states of the country, while more than three billion tonnes of iron ore deposits have been identified in Kogi, Niger, Enugu State and the FCT. In addition to this, an estimated 10 million tonnes of lead/zinc veins are found in eight states, with proven reserves of five million tonnes located in the east-central area of the country.

The data also reveal that more than 7.5 million tonnes of baryte deposits are found in Taraba and Bauchi states, while over 700 million tonnes of bentonite reserves are located in many states of the federation, ready for exploitation.

The occurrence of bitumen deposits in Nigeria is estimated to be in the region of 42 billion tonnes; almost twice the quantity of the crude petroleum reserves of the country.

In spite of this, the National Bureau of Statistics insists that the solid minerals sector contributes less than 1 per cent to Nigeria’s Gross Domestic Product (GDP), as against its erstwhile 10 per cent contribution prior to crude oil exploration.

Experts, however, attribute the slow development of the solid minerals sector to a number of man-made and natural factors. Mr Sani Shehu, the National President of the Miners Association of Nigeria (MAN), stresses that inconsistent government policies on mining, as well as frequent leadership changes in line ministries and agencies are part of the factors inhibiting the development of the solid minerals sector.

He also identified paucity of fund as a major impediment to the growth of the mining sector. “Funding capacity is a major challenge confronting the miners; the 10-million-dollar World Bank grant is far inadequate for the small-scale miners.

“It only triggered their interest to mine in groups as cooperative societies; lack of funds is what forced many small-scale miners to engage in illegal mining activities.

“The lead poison incident in Zamfara is a case in question here. We have a large number of illegal miners and a significant part of the mining activities is carried out by them,” he says.

Shehu explains that mining is a capital-intensive project which requires long-term investments before its potentials could be fully realised. He notes that India, which is less endowed with solid minerals than Nigeria, currently earns 75 billion U.S. dollars (about N11.3 trillion) annually from solid minerals.

“It took South Africa more than 15 years of steady investment to get there and the country now earns over 30 billion dollars (about N4.5 trillion) annually from the sub-sector,” he adds.

He advocates the establishment of a solid minerals development bank, to finance activities within the sector, by giving loans to millions of active players within the industry.

While lauding the Federal Government for the N120 million loan given to artisanal and small- scale miners, Shehu urges the government to revive the railway system “because effective rail services would greatly boost mining activities in the country.

“With an effective rail system, minerals can easily be transported to the ports for export, while industrial minerals for our local industries could also be transported with ease.

“On the whole, if the railway is used to transport minerals, the cost of transportation will reduce significantly, while the prices of minerals at the international market will consequently come down,” he says.

To enhance the development of the solid minerals sector, Shehu calls on the Federal Government to fast-track the establishment of the Minerals Development Fund, as enshrined in the Nigerian Minerals and Mining Act of 2007. He believes that the Fund, when fully operational, will function as a pool of resources, which will draw funds from the World Bank and other international financial organisations.

“The Fund, when finally established, should be used to provide critical infrastructure for various mines such as access roads and water, which are also essential to mining activities,” he says.

Shehu expatiates that the provision of such amenities would inevitably attract foreign investors and partners into the industry, while aiding the work of small-scale miners.

He appeals to the government to provide additional security for mining sites across Nigeria, in view of the current security challenges facing the country, saying that many of the mining sites have been closed for security reasons.

“Many artisanal miners have left the mining sites due to insecurity at the sites; they have gone to take up menial jobs and this is not healthy for the mining sector,” he says.

Shehu underscores the need for the government to tackle the current security challenges facing the country decisively, arguing that prospective foreign investors now prefer to do business in other African countries with striking comparative advantages-such as good security.

Sharing similar sentiments, Mr Musa Sada, the Minister of Mines and Steel Development, stresses that inadequate skilled manpower, illegal mining activities and unreliable power supply are some of the factors slowing down the growth of the mining sector.

“The ministry is being hampered by lack of mine sites, lack of special-purpose surveillance vehicles for field work and revenue collection duties. “The sector is also faced by leakages in revenue collection and lingering arbitration in Ajaokuta Steel Plant and National Iron Ore Mining Company Ltd in Itakpe,” he says.

The minister, nonetheless, notes that some foreign investors are now showing interest in investing in the solid minerals sector due to the new mining regulations and enabling environment created by the Federal Government.

Sada says that the sector, which employs more than 350,000 Nigerians, now generates more foreign exchange for the country. He insists that the mining sector has the potential of generating more employment opportunities, saying: “Everything we use has strong mineral connection: the cars, houses, cell phones and computers rely on the use of minerals.”

Sada emphasises that the Nigerian Minerals and Mining Act, 2007 guarantees security of tenure to investors, while facilitating the creation of an autonomous office that administers mineral titles. He expresses the hope that the Metallurgical Bill, when passed into law, would be useful in regulating the activities in the metal sub-sector.

The minister says that the bill aims at providing tax holidays of three to five years, deferred royalty payments and 100 per cent foreign ownership of enterprises. Other provisions of the bill include free repatriation of capitals, profits, dividends and exemption from customs duties on imported machinery, plant and equipment for mining.

Prof. Peter Onwualu, the Director-General of the Raw Materials Research and Development Council (RMRDC), stresses the need for a well- defined policy for the mineral sector. He says that the policy should address the mining leases with regard to tenure, size and geological boundaries. Onwualu says that the processing of high value minerals should be pursued vigorously, while foreign equity investments or joint ventures in mining should be encouraged.

Stakeholders, however, believe that efforts to revamp the sector have started yielding positive results as most state governments are now showing interest in harnessing their solid mineral potential.

Alhaji Ali Abdullahi, the Bauchi State Coordinator RMRDC, notes that going by the feats it has so far recorded; Bauchi State will soon become Nigeria’s most economically viable state, given its abundant mineral resources.

He insists that the state government only has to expedite action in the exploitation of the various mineral resources that abound in more than 20 local government areas of the state to achieve the feat.

He says that the state is blessed with assorted minerals such as kaolin, tantalite, gem stones, tin and columbite.

“Bauchi State will be very rich if it can exploit its abundant solid minerals; if that is done, the state will forget about waiting for allocations from the Federation Account, as proceeds from gems stones alone can sustain the state’s economy.

“There are several mining sites in Bauchi State, particularly in Toro Ningi, Alkaleri and, may be, Ganjuwa Warji Local Government Areas. When you go to Alkaleri and Gwana areas, many miners are mining lead zinc. Lead zinc is a metallic mineral; actually, you can have silver, lead, zinc from this mineral. It is used in battery- making and so many other products,” he said.

Abdullahi, nonetheless, advises the Bauchi State Government to make funding arrangements for small-scale entrepreneurs so as to encourage them to participate in solid minerals development programmes. He says the government can also encourage potential entrepreneurs to develop the solid minerals sector by providing the needed equipment to operators at subsidised rates.

Industry watchers say that the Federal Government’s efforts to revamp the solid minerals sector are quite commendable. They, however, insist that the government must promote greater private-sector participation in ongoing solid minerals development programmes so as to make the initiatives more purposeful and sustainable.

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  • All we have heard from Nigerian government operatives over the years is lip service to development of the solid minerals sector and that is because government earns cheap funds from hydrocarbon exploration.

  • treasuredominic

    It will do Nigeria a whole lot of good if we revamp our solid mineral sector, and I pray our government will be serious and cirmspect about it. I’ve always asked my self if God will forgive Nigerian powers that be for the enormous amount of money wasting away at Ajaokuta Steel Plant and National Iron Ore Mining Company Ltd in Itakpe which is due to the government’s negligence, sabotage and apartheid all because of the ‘huge-money black gold’. This company has the potential of helping the country generate income, and even jobwise. May God open the right mind of our leaders. May God bless our ‘Niger Area country’ according to his reaches in glory.

  • Ahammadu Dako

    Entrepreneurship must be encouraged to boost the economy.
    There are no provisions to fund Start Ups in Nigeria.
    The commercial Banks require a collateral equivalent to the value of funds required.
    The Bank of Industry and International Finance Corporation require a minimum of 30% Project completion (Acquisition of 10000000% Mineral deposit and a great Business Plan, with all the required Government Permits and Licenses does not matter.) And the NEXIM Bank needs a 150% Collateral. Tell me my brother, how does one who is not a thief get these?
    International Investors shy away from such Non-government Projects in Nigeria; they have the fear of Fraudster (419) and Boko Haram to quote.
    I have a Quarry License for the production of Pearl Granite (Exotic and sought after worldwide) Tiles, Slabs and Blocks. The Project can add about $20m USD annually to the Nigerian economy and prevent Foreign Exchange drain through the importation of lower quality Tiles. It will provide employment. I have had this project set for funding for 3 years now.
    Provide Start-Up funding for Projects verifiable as genuine and capable of adding value to the economy as practiced in most developed and Developing Economies.