Nigeria in 2016 Special Edition
Dr. Kayode Fayemi, the Honourable Minister of Solid Minerals, outlines the ministry’s agenda in tune with the current administration’s promise to build a more diversified economy for Nigeria.
It is no news that Nigeria has tremendous mining endowments. The country has at least 44 known mineral assets that include precious minerals, base metals, bulk minerals and rare earth minerals. Specifically, our most promising mineral assets include gold, iron ore, baryte, bitumen, lead, zinc, tin and coal.
Available data of our reserves understates what the Almighty God has blessed our country with in many cases. We
have barely updated some of the geosciences data collected 50 years ago or earlier. So, we are cautiously optimistic that our mining endowments actually exceed what is currently stated. That said, based on current data, Nigeria’s solid minerals sector makes up about 0.34 perfect of gross domestic product (GDP). Though insignificant, it is my conviction that it is smaller than its true potential as the vast majority of our mining assets are yet to be exploited. In fact, what has been happening is that the sector has more or less been operating sharply below capacity, with many mining operations being manned by small scale artisanal miners as opposed to the large scale players.
Mining is not new to Nigeria. As a nation, mining of our resources began in 1902 in key mining towns such as Jos and Enugu. From these early operations, led by the then British Colonial government, we went on to a more private sector focused model, and then moved to companies controlled by government such as the Nigerian Mining Corporation, National Steel Company and the National Coal Corporation until 1999. Today, following extensive reforms started in 1999, which essentially crystallized around the Nigerian Minerals and Mining Act of 2007, Nigeria is once again on the path to providing a transparent and workable regulatory and policy environment for private sector-led mining. And companies have started responding to all the efforts made by my predecessors. Today we have companies such as Tongyi Allied Mining, Dangote Group, Segilola Gold, Kogi Iron Mines, Multiverse Resources, Australian Mines Ltd and so on, blazing the trail in the mining sector. We certainly look forward to welcoming more companies into the sector.
External and Internal Challenges
Even at that, challenges persist. Today, the Nigerian mining industry faces two sets of challenges: external and internal. The global mining market is in turmoil as key sources of demand that supported prices over the past two decades have declined. There is a continuous global decline in prices of mining products which has put mines and mining houses under tremendous pressure. We see this reflected in the sharp declines in the share prices of Glencore, BHP-Biliton, Anglo American and Rio Tinto, for example. Naturally, as a result of falling metal and asset prices, many of the top mining houses are pulling back from investment planning, shutting down mines and optimizing current operations.
For Nigeria, it creates a challenge to attract the large houses in the current time frame but therein also lies a great opportunity. We have therefore adjusted our go-to market strategy to reflect a need to jump start market growth using a mix of domestic mining houses, junior mining companies and large global miners. The good news for Nigeria is that we have tremendous domestic demand for industrial minerals and metals – in the construction industry for example, so we will be focusing on working with other key MDAs to ensure that demand is met by Nigerian miners and processors.
Our internal challenges are of a different nature, and not a supply-demand balance issue. Internally, we need more of the support structure that will enable industry growth. At present, there are eight key internal challenges we face. They include: Limited Infrastructure, insufficient geological data, limited cooperative federalism, low productivity, illegal artisanal mining and community challenges, weak institutional capacity, insufficient funding and a general weakness in the ease of doing business and perception issues.
The President’s Agenda and Promise
Beyond the challenges, the key question is: what do we want to achieve in the Solid Minerals sector? The President has often said that he wants the sector to be a key source of economic growth and diversified revenue base for Nigeria. In fact, Mr. President has stated clearly that our goal is to build a more diversified economy in which oil remains important, but its share of the overall portfolio of revenue sources declines as the whole pie grows bigger. The recently approved Medium Term Expenditure Framework (MTEF) and the Fiscal Strategy Paper (FSP) emphasizes the place of solid minerals in the economic growth strategy of the country.
Based on that presidential promise to build a more diversified economy, our task as a ministry is to remove all obstacles to such growth. From working with the National Assembly to receiving the right budgetary provisions to ensuring expansion in bulk handling terminals at multiple river and ocean ports, our role is to ensure that things work as intended. 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 a clear understanding of how to handle poisonous material such as lead has had incredibly devastating consequences.
Given where we are and the early stages of the industry in Nigeria, we believe it is important that we set the right tone and create a structure for long term success. Our immediate priority now is to accelerate investor confidence in the mining markets and get the sector growing and jobs created. To do that within, we will be taking the following actions:
Revenue Generation: Upgrading of 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 as well as the establishment of Mines Police.
Formalising Artisanal and Small Scale Miners: Strengthening the institutional support to artisanal and small-scale miners for integrating them into the formal economy.
Finalise Privatisation Exercise: Based on the recent update provided by the Bureau of Public Enterprises to the Ministry, embark on an audit of privatised assets with a view to reactivating moribund but potentially viable companies.
Geosciences: Review and conclude all open contracts for collecting geosciences data, for projects that have been contracted and the collection flights flown, finalize payments and make these and other data available to investors.
Capacity Building: We will invest in capacity building for the technical and operational staff in the Ministry and organise the Ministry for optimal delivery of the goals outlined.
Non-State Actor Engagement: 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.
Regulation: We will work with stakeholders to review existing licenses and bring them up to date where there are issues; our goal is to get licensees who are sitting on the fence to have sufficient confidence to start investing real capital. That said, starting March 1, 2016, we will start enforcing the “use it or lose it” doctrine enshrined in the Nigerian Minerals and Mining Act, 2007. The period from today to 1st March 2016 should be considered an amnesty period to allow regularization of papers.
Formation of Investment and Business Support Team: There will be some low hanging fruits e.g. providing 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 get 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 e.g. coal for cement kilns. That import substitution push will be a quick to medium term win. The team will also start working closely with foreign investors who need guidance to launch operations in Nigeria.
Whatever we do, we are mindful of the fact that this is a journey, not a destination and in order to reverse the neglect in the sector, all stakeholders must embrace quick wins whilst aiming for the long term view.
Published in the Business Eye’s print version, Jan 2016 edition.