However, the country has very little government participation and robust policy guidelines around mining activities and this is slowing the growth of the sector.
Yet the outlook is not all bad, deputy head of markets for EY in West Africa, says Ashish Bakhshi.
Bakhshi highlights that there are seven priority commodities in Nigeria, namely bitumen, iron ore, coal, barites, limestone, lead-zinc and gold, which are in demand and recognised by the Nigerian government.
Among these seven, coal and iron ore are the most mined by metric ton and, therefore, attracts the most investment.
“In 2015, coal mined in Nigeria totalled 144.88 billion metric tonnes, while metal ore mined totaled around 22 638.96 million metric tonnes,” he illustrates.
“Coal is largely exploited in Nigeria due to its use in the steel and cement industries and as a fuel for extraction of iron from iron ore and for cement production. Other commodities aside the seven priority areas have low volume of investment activities,” he explains.
Policy and investment matters
Bakhshi notes that multiple foreign countries have declared interest in the Nigerian mining sector including Australia, South Africa, Brazil, Thailand, United Arab Emirates (Dubai) and Canada.
He points out that within the gold mining sector for example, six international companies recently received licenses to explore and mine. A growing number of private and public mining companies have also made additional inquiries into obtaining mining licences from the government.
“Nigerian banks and private equity investors have started to explore the market, an important financing signal to international lenders and development partners such as multilateral institutions that have made offers to support the Federal Government of Nigeria's (FGN) commitment to accelerating growth in the mining sector,” he comments.
PwC Nigeria’s mining sector leader and head consulting, Cyril Azobu, who is speaking at this year’s Nigeria Mining Week in October, has largely seen a continued implementation of the policies and mechanisms put in place by the sector’s policy makers with positive results gradually being seen.
“To the credit of the Ministry of Mines and Steel Development, there has been a commendable policy consistency following the resignation of the erstwhile minister Dr Kayode Fayemi. This is unprecedented because policy summersaults have largely been the bane of the sector in the past,” explains Azobu.
In addition Azobu mentions that the Ministry has also made some progress in strengthening the mechanism for gathering, disseminating and archiving critical geological data required by investors and policy makers with the launch of the centralised eGIS Web portal and supporting ICT infrastructure that offers real time information on the mining sector, as well as electronic submission of licenses, permits, certificates etc.
He notes that in the regulatory space, approval was given in January 2018, for 10 policy and project related initiatives including establishme
nt of the National Council on Mining & Mineral Resources Development.
“Also, we saw the introduction of a bill to create a new regulator for the sector: Nigerian Mining & Minerals Commission,” he adds.
Azobu comments that the current administration has also taken decisive measures to reactivate the State Mineral Resources and Environmental Management Committee (MIREMCO) in all the States of the Federation including FCT. The committee is now vibrant in up to 26 states.
“We understand that the Ministry has gone on to provide the sum of Five million Naira each, as mobilisation grants as well as Hilux pick-up. In addition, operations of the Special Mines Surveillance Task force (SMSTF) has been improved with vehicles procured to ease their operations. The Miners Association of Ni
geria has also benefited from this support.”
Notably too, there has been an improvement in the operational capacity of the Mining Cadaster office for faster processing of mining titles and the establishment of over 30 mineral buying centers and improved collaboration with the customs service for policing of mineral exports.
Not without challenges
Azobu points out that the challenges in the sector have not changed. Challenges exist around funding and the attraction of new investments, the security situation around mining sites, the preponderance of artisanal and illegal mining operations, the attendant environmental pollution and the general deficit in infrastruc
ture in the country.
In addition Bakhshi notes that the Nigerian domestic mining industry is highly underdeveloped. The impact of this under-development is seen in lost tax
revenue to the government, lost foreign currency exchange, lower job opportunities to work seekers, and lack of infrastructural amenities associated with a developed mining industry.
He highlights that other problems within the mining sector of Nigeria include:
- Limited geoscience data and information: Most of the available geological/ geoscience data in Nigeria are outdated. This affects the credibility of the resource information, and has impacted the bankability of mining projects.
- Infrastructure development: A major challenge to the development of the sector is the infrastructural imbalance within Nigeria, particularly inadequate electricity supply and access roads to sites of mineral deposits.
- Security: A number of communal and religious conflicts occur intermittently in the country, which affect the mining of these commodities.
- Illegal mining and community challenges: There are pockets of illegal mining activities in some of the regions, with attendant risks and community challenges.
- Project funding: Due to the long period of inactivity and the slow implementation of the Federal Government’s reform agenda in the sector, multinational corporations have been reluctant to fund major mining projects in the country.
- Lack of robust fiscal framework: The existing fiscal framework for investors in the mining sector is not friendly enough and does not consider the peculiar nature of the sector, particularly, its long gestation period.
On the bright side
“Following the initiatives of the Buhari-led Federal Government in declaring mining one of the two key growth sectors to drive diversification and the fight against illegal mining, we envisage that in the next five to 10 years we expect that the Nigerian mining sector would further develop with the entrants of new com
panies, a surge in revenue growth rate in the industry, a decrease in illegal mining activities and an increased participation of the host communities in promoting harmonious relationship with the mining companies,” notes Bakhshi.
Azobu states that his vision for the sector is one that is profitable to all stakeholders and in which the Nigerian people are able to enjoy the maximum benefits possible from these natural endowments.
“We believe that a lot of strides have been made to reposition the sector for more investment especially as government expects to earn more from solid minerals in line with her diversification agenda. With high expectations and willingness amongst key stakeholders to collaborate in driving this growth, there is no better time to invest in unlocking the mining potential of Nigeria than now,” concludes Azubo.“I am quite optimistic that if we maintain the momentum and make the right choices, the solid minerals sector can contribute up to 3% of GDP by 2025 as predicted in the current roadmap, up from a current contribution of just about 0.5%. This is even more important given the rebound in crude oil and gas prices which could impact the mining renaissance,” he comments.Source