Nigeria sees emerging vision to resuscitate mining sector

Oscarline Onwuemenyi
28 February 2016, Sweetcrude, Abuja – Mining in Nigeria has a long history, beginning in the early 20th century in key mining towns of Jos in present-day Plateau State, and Enugu in Enugu State, with operations being directed by officials of the British Colonial Government.

Miners

Miners

From that period to a more private-sector focused era, regarded as the Golden Era of mining in Nigeria, and then to the establishment of the National Steel Company and the National Coal Corporation, which gradually moved operations back to government control.

Many mining historians in Nigeria believe that the shift to government-owned companies created too much uncertainty in the sector, which led to many large-scale private operators to depart from the country and the sector suffering sharply as a result. Unfortunately, the government of the time did not do a good job of running the mining companies and as a result brought progress in the sector to a grinding halt. Needless to say, little attention paid to the sector over the years compounded by poor government policy judgements, and, many have argued, the discovery and exploitation of oil, have stunted the sector’s growth.

Little wonder, then, that with the turbulence being witnessed in the oil and gas sector leading to declining revenues over the years, the Federal government is, once again, looking for ways to reposition the solid minerals sector and turn it into a job creator and a viable foreign currency earner for the economy.

Indeed, following the reforms that began in 1999 and crystallised around the Nigerian Minerals and Mining Act of 2007, it is believed the country is once again on the path to providing a transparent and workable regulatory and policy environment for private sector-led mining. And private companies have started responding to all the efforts made by past administrations, with companies like Tongyi Allied Mining, Dangote Group, Segilola Gold, Kogi Iron Mines, Multiverse Resources, and Australian Mines Limited, among others, blazing the trail in the mining sector.

But still a lot more needs to be done to resurrect a moribund sector, which used to be the pride and glory of the country. Despite modest gains recorded over the past few years in mining in Nigeria, the sector is still bedevilled by the legions of challenges, including limited or sub-standard infrastructure, insufficient funding, limited cooperative federalism, weak institutional capacity, poor ease of doing business and perception issues, low productivity, insufficient geological data, illegal and artisanal mining, as well as community and environmental challenges.

The current Minister of Solid Minerals Development, Dr. Kayode Fayemi, sees it as his duty to bring about a sharp turn in the craft of the sector, reverse the stagnation and, finally, put the sector on a safe, sustainable and profitable trajectory.

Fayemi has described his strategy as one of targeting “low hanging fruits” that would spell quick wins – immediate and medium term benefits to the solid minerals sector, and, ultimately, create a safe, sustainable and profitable mining sector in Nigeria.

Speaking recently at a briefing in Abuja, the Minister expressed dismay that the sector, despite its immense potentials, was operating at below capacity and with sub-standard mining techniques and processes that must be upgraded in order to reduce incidence of mining site waste, and boost productivity and output. He said, “In all my years in politics and the professions, not many issues have had a sobering effect on me as what I have seen for myself and learnt since I resumed this assignment (as minister). For example, it is a collective shame for us that such a massive project as the Ajaokuta Steel Plant can be allowed to remain moribund in spite of our sovereign resources that have been invested and its immense potentials.”

According to him, “It is no news that Nigeria has tremendous mining endowments. Today we have at least 44 known mineral assets that include precious minerals, base metals, bulk minerals and what are known as rare earth minerals. More specifically, our more promising mineral assets include gold, iron ore, barite, lead, zinc, tin and coal.”

He added, however, that based on current data, Nigeria’s solid minerals sector makes up about 0.34 percent of gross domestic product (GDP). “That means that based on current official rates, the mining sector contributes N400 billion in value to the economy. While that is a significant role, it is smaller than its true potential as the vast majority of our mining assets have yet to be exploited.

“In fact, what has been happening is the sector has more or less been operating sharply below capacity, with many mining operations manned by small scale artisanal miners as opposed to large scale players.”

He pointed out that the trajectory of the country’s extractive industry has not been without controversy, adding that, “We are all witnesses to the challenges in the oil industry over the past few decades. More recently, we have seen significant challenges in the gold, lead and zinc mines of Zamfara where illegal mining without clear understanding of how to handle poisonous material such as lead has had an incredibly devastating consequences.”

Emerging Federal Mining Strategy

Fayemi noted that the Ministry has developed a framework strategy to drive growth in the mining and minerals sector. “Our strategic aspiration is to build a sustainable, globally competitive mining sector, and related supporting sectors that will prudently use the finite resources available to improve the quality of life of Nigerians.

“We will focus on supporting and growing Nigeria’s position in mineral assets with commercially prove reserves. Our assets will then be used to serve two key markets: a domestic industrialisation market that is more beneficiation focused; and an export market that is more focused initially in the export of ores and raw materials.

“The mix of investors that will target Nigeria will reflect that preference of serving both the domestic and export markets. We anticipate that as we expand our geosciences database and insights, we will also expand what minerals we compete in,” he added.

The Minister further noted that Nigeria will focus on “going to the market as a quality and cost leader, rather than a scale based operation, pending further understanding of our reserves position. Be that as it may, we are interested in building a profitable solid minerals industry, not the largest in the world, hence we will always make shrewd decisions with our partners, communities and other stakeholders.

“For example, we will rather be the most competitive gold producer in the world and serve only a fraction of supply, than be the biggest producer and have equity investors generating losses.”

Fayemi noted that given the where to play and how to win choices, the role government would be to invest in activities and levers that reduce cost of doing business, and improve Nigeria’s perception as a high quality mining destination. He pointed out that over the next few months, the ministry would conduct additional analysis to refine its strategies and the policy regimes that would emerge to support and accelerate the execution of the strategy.

According to him, “Given where we are and the early stages of the mining industry in Nigeria, we believe it is important that we set the right tone and create a structure for long term success. Therefore, our core philosophical beliefs that will guide our decisions include enhance job creation through the mining sector, revenue generation, industrialisation, sustainability, transparency, environmentally safe operations and cooperation.

“It is our belief that if we deliver on this vision, then we can build a mining sector that Nigerians can be proud of 30 years or more from now. This sector should deliver double digit impacts on households. To improve our likelihood of building such an outcome, the Ministry has sought to extensively understand the entire operations in the sector. Therefore, we continue to review lessons from some of the best mining industries to what lessons we can draw from their experiences, balancing some of our own objectives.”

The road to achieving a leaner, more efficient and more focused mining and minerals sector, Fayemi contended, will start with exploiting some “low hanging fruits” that will accelerate investor confidence in the mining markets, and get the sector growing and jobs created. He said the government was ready to offer “support to miners who are close to production but facing one or two administrative issues. We are setting up a new investment team that will help such companies over the line and into production mode. We will also engage rapidly with key Nigerian companies that are today importing raw materials that can be supplied domestically, for example, coal for cement kilns. That import substitution push will be a quick medium-term win. The team will also start working closely with foreign investors who need guidance to launch operations in Nigeria,” he added.

The Minister added that in the coming weeks, the ministry would launch a series of targeted sessions with investors, communities and other parties to continue that have begun since the new administration came to office. “Our focus would be on ensuring that we are listening and acting as well in the best interest of committed partners. As much as possible, these sessions will be used to refine our thinking as well as solve problems,” he stated.

He noted, “We are working on creating one consistent view of Nigeria’s mining industry, drawing on a range of internal and external data and creating market and technical diagnostics that will help inform our strategy as well as investor decisions. There is also need to upgrade the Mining Cadastre Office and the Mines Inspectorate Directorate; automation, efficient review of overlapping and inactive titles, guaranteeing the integrity of mining licenses, external audit of revenue receipts in the past years would be undertaken, including the establishment of Mines Police.”

He added that, “We will encourage and work in partnership with non-state actors especially Community Development Associations and civil society organisations to promote participation and inclusion, and ensure community development and safer, environmentally sustainable mining practices.”

Furthermore, Fayemi noted, the ministry will work to strengthen the institutional support to artisanal and small-scale miners for integrating them into the formal sector. He added that based on the recent update provided by the Bureau for Public Entreprises to the Ministry, an audit of privatised assets will be undertaken with a view to streamlining mining assets in the country for effective privatisation in the sector.

“We shall review and conclude all open contracts for collecting geosciences data; for projects that have been contracted and the collection flights flown, finalise payments and make these and other data available to investors,” he added.

He said that the continued presence of drawbacks in the mining sector will hold back market development. “Therefore, we must resolve these set of issues as they impact how we choose to compete in the market. While external markets create opportunities we can exploit, improving ease of doing business or reducing transport costs and enhancing ease of assessing funding for projects will enable us to attack market opportunities as a lower cost competitor for example. Indeed, the global mining party is ours to attend, but we must dress appropriately and come with a competitive edge. My team and I will be spending more time on building collaborative links with key institutions and agencies to enable us build a cost competitive mining industry for Nigeria.”

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