18 June 2015, Abuja – Partner and Mining Sector Leader at PricewaterhouseCoopers Nigeria, Mr. Cyril Azobu, has stressed the need for the President Muhammadu Buhari-led government to prioritise the development of the solid minerals sector to shore up revenue, which has been driven down by the fall in global crude oil prices.
According to Azobu, who believes the reduction in oil prices is not expected to reverse at least in the short run, one key sector that offers great potential in diversifying the Nigerian economy towards improving other sources of revenue is the solid minerals sector.
Noting that the previous administration had targeted a five per cent contribution to the Gross Domestic Product by the sector in 2015 and 10 per cent in 2020, he said the contribution of the sector to the GDP averaged about 0.46 per cent despite concerted efforts on their part to meet these targets.
“One of the major challenges experienced by miners in raising funds is the ability to establish worthy collateral for the intending financiers.
“While the previous government achieved 100 per cent aerial geo-physical survey of the country, the data does not provide reliable details of the estimated quantity of solid minerals existing across different geological zones.”
He said a more detailed geoscience data gathering was needed to provide reliable information on solid mineral deposits in the country and assign value to mining licences which could then be used as collateral for loans to fund activities in the sector.
“This will also spur cash injection into the sector, as investors will be more confident to inject funds with the comfort of licences being valid collateral.”
Azobu said both local and foreign entrants into the mining sector had been discouraged by security issues in the north central, north-east and north-west regions, which were estimated to have some of the country’s major mineral deposits.
He therefore urged the government to sustain the recent gains in the fight against terror to restore peace and security in those areas.
The Federal Government needs to take a holistic view regarding infrastructure development and mining, and execute in synergy, he said.
It is estimated that about 80 per cent to 85 per cent of current mining activities in Nigeria is via artisanal and small scale mining which is not captured in GDP calculations, Azobu said.
“Not only is artisanal mining crude and extremely dangerous, the sales channel is also largely unofficial and embedded with smuggling and distribution cartels leading to loss of revenue to government and degradation of the environment.
“There is an urgent need to formalise the artisanal and small scale mining sector by formulating policies aimed at integrating the informal artisanal miners into the mainstream, provide them with training and the right equipment and enlighten them on safe mining practices.”
He said the government should urgently establish mineral buying centres and lapidaries across the relevant zones in the country to encourage the artisanal miners to sell minerals in-country, with production monitored for taxes and royalty collection.
The PwC partner further said the government should encourage each state to invest in domiciled solid mineral(s) with revenues accruing entirely to the state, and taxes and royalties accruing to the Federal Government.
Stating that the development of the solid minerals sector is hampered by lack of adequate funding to cater for the different life cycles of a typical mining operation, Azobu suggested the establishment of a solid mineral development bank to provide investor-friendly loans, specifically designed to cater for the various stages of the mining life cycle.
“The new administration needs to re-establish the milestones for the sector’s road map and take necessary action to ensure achievement of the set goals. The current road map appears to have been treated as a theoretical exercise by either not setting realistic targets or not working to achieve them,” he said.