Diversifying Nigeria’s economy through solid minerals

Nigeria is endowed with vast reserves of solid minerals, including, but not limited to, precious and base minerals, industrial minerals, energy minerals and metals.  The country was a major exporter of tin, columbite and coal in the 1960s to early 1970s. However, activities in this sector began to nosedive by the mid-1970s due to a number of political and economic factors, especially the significant focus on crude oil production as a major source of foreign exchange for the country.

The mining of minerals in Nigeria accounts for only 0.3% of the GDP, due to the influence of vast oil resources. The domestic mining industry is underdeveloped, leading to Nigeria having to import minerals that it could produce domestically, such as salt or iron ore.

The quest for the diversification of the Nigerian economy towards activating other sources of revenue has become necessary, given the constant increase in population and the country’s vast human and natural resources and against the backdrop of the decline in oil revenue which is currently trending. One key sector which offers great potential in achieving diversification is the solid minerals sector.

Consequently, the government has affirmed its commitment to the exploration and development of solid minerals and metals by approving N30billion financial intervention, and prioritized for exploitation of seven strategic minerals of vital importance to the economy, i.e., coal, bitumen, iron ore, barites, gold and lead/zinc which are available in ample qualities to sustain mining activities in Nigeria. Also, the Federal Executive Council (FEC) in the year 2016 approved new roadmap for the growth and development of the mining sector and renamed the Federal Ministry of Solid Minerals to Federal Ministry of Mines and Steel Development (MMSD).

The distinguishing factor in the new roadmap, which builds on the old roadmap that was approved by the FEC in 2012, was its determination to set up an independent regulatory agency, which is to be constituted by members of the Inspectorate, Environmental Compliance and the Artisans and Small Scale units of the ministry as part of the regulatory agency to satisfy the demand of investors and stakeholders who have been insisting that the ministry which has been serving as facilitator should also not be the one that regulate them. This necessitated the current Bill before the National Assembly seeking to establish the Nigerian Mining Commission.

The strategy under the ERGP 2017- 2020 is to create an enabling environment to enhance private investment, targeting energy minerals, iron/steel and gold/ gemstones. Thus, the specific key activities assigned to the MMSD to achieve this strategy are (a) Expand electro-magnetic and gravity exploration to complete resource mapping and (b) Increase access to information by improving the archiving of geo-data, harmonizing their format, and promoting their dissemination. To achieve this, the Honorable Minister and Honorable Minister of State of the MMSD set up a 17-man committee, to develop a roadmap for the sustainable development of the mining and metal sector in Nigeria.

To demonstrate government’s commitment to the diversification plan, the Ministry of Mines and Steel Development (MMSD) issued a revised sector growth and development roadmap, with the objective of addressing the key challenges identified in the sector and outlining strategies for rapid development and utilization of key minerals and metals.  One of the targets of the roadmap is the growth of the sectors’ total contribution (direct and indirect) to Nigeria’s GDP to about 10% by 2026.

On application by Nigerian government to the World Bank in 2017, a cumulative fund was approved to enhance the mining sector’s contribution to the economy by strengthening key government institutions, improving information infrastructure and knowledge, and fostering domestic investment in the sector in the sum of USD150 million which is equivalent to N46 billion spread from 2017 to 2023. Thus, the Federal Government of Nigeria (FGN) received the sum of USD10 million and USD20 million in 2017 and 2018 respectively. It is expected that the FGN will receive the sum of USD20 million in this current fiscal year making it cumulative USD50 million (N15 billion) within the last three years leaving the balance of N39 billion to be shared between 2020 through 2023.

Notwithstanding the above intervention funds by the federal government through the World Bank and other sources, the sector generates funds internally through registration and certification of mining companies and other investors within the sector and also receives its allocation through the annual budget of the FGN. Although the details of funds allocation to capital expenditure of the sector in the budget document show that there was decrease in the total capital expenditure with 4.79 % in 2018 and 16.99 % in 2019. Rather than increasing the financial strength in capital expenditure of the sector, a lot of frivolous, inappropriate and unclear items were included in the 2019 budget as pointed out by the Centre for Social Justice (CSJ) Abuja in its analysis of the 2019 Executive Appropriation Bill which is currently before the National Assembly.

Today the sector has one of the lowest outputs in the Nigerian economy. The mining sector’s contribution to GDP has steadily declined from 5.6 percent in 1980 to about 0.33 percent by 2015, which is significantly lower than other mineral rich countries in the region. In comparison, the mining sector’s contribution to GDP in neighboring states is 6.16 percent in Ghana, eight percent in Mali, 20 percent in Guinea, three percent in Niger, 20 percent in Senegal, and 24 percent in Mauritania.

With the minute annual allocation to capital expenditure of the sector which continues to decrease almost every year as exemplified above and almost nothing on ground to show for the various intervention funds sank into the sector between 2017 and now, it may be difficult if not impossible for the country to achieve the milestones contained in the roadmap and develop the sector to the level of contributing up to 10% to the country’s GDP.

The Civil Society Organisations, the media and relevant stakeholders should work closely with the Ministry of Mines and Steel Development and other relevant ministries to ensure that FGN achieves its intention of diversifying the economy of the country through the sector. Also, the carryovers or outstanding items in the immediate and the short term of the action items contained in the 2016 policy roadmap for the sector should be merged with the medium term to enable the government achieve its goal of diversification through the sector.

In conclusion, FGN should create avenues and enabling environments within the sector that will encourage public private partnership to attract both local and foreign investors into the sector.