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Uche Igwe

October 23rd, 2024

Nigeria can unleash a mineral boom if it gets the governance right

0 comments | 8 shares

Estimated reading time: 4 minutes

Uche Igwe

October 23rd, 2024

Nigeria can unleash a mineral boom if it gets the governance right

0 comments | 8 shares

Estimated reading time: 4 minutes

Without strong policy and planning Nigeria will not be able to reap the benefits of its vast mineral wealth, writes Uche Igwe.

Nigeria has huge deposits of the minerals needed for the energy transition. This includes lithium, which the country is poised to become a hub of production following recent discoveries. The mineral is used in the manufacture of batteries for electric vehicles, smartphones, and power systems. In 2015, an Australian firm discovered an extraordinary volume of high-grade nickel deposits in parts of Kaduna, Kogi, and Plateau.

Significant deposits of copper also exist in many states across Nigeria. In 2022, Nigeria exported about £26.6 million worth of raw copper, making it the world’s 23rd largest exporter. There are also commercial-level amounts of distinctive gemstones like emerald, tourmaline, topaz, spessartite, and zircon. The country reportedly has an estimated 600,000 tonnes of gold reserves worth £34.4 billion, five million metric tonnes of nickel, and one of Africa’s highest reserves of cobalt. But to reap the full economic benefits of these resources, Nigeria needs to avoid repeating the failures of the past.

Oil became a distraction

The sudden discovery of oil and the leap in oil wealth in the early sixties became a distraction that led to the neglect of the mining sector. Then came the civil war and the indigenisation policy that led foreign mining companies to sell their shares to Nigerian owners. Many of these companies could not survive the new ownership regime and had to hurriedly leave the country. The sector was then taken over by predominantly new players who had neither the resources nor the technical capacity to carry on the business professionally.

These new entities had to resort to makeshift approaches, often with crude implements, which led to the spread of illegal and artisanal mining. The revenue from crude oil diverted attention from the mining sector and led to substantial neglect as the country slowly became a mono-product economy dependent on oil exports.

Legislation exists but needs to be updated

The Nigerian mining sector is governed by the Minerals and Mining Act 2007, supported by the National Minerals and Metals Policy of 2008 and the Nigerian Minerals and Mining Regulations from 2011. Before the passage of these laws, the sector was largely unregulated. However, the laws are now obsolete and not in line with current realities in the mining industry and are fraught with ambiguities.

The law put mining resources under the federal government’s exclusive control, which is in line with the constitution. However, it does not align with the Land Use Act, which places land administration under the state and local government areas. There is, therefore, a conflict between the three tiers of government, and other tiers of government are often reluctant to fulfil their side of the implementation.

Available data still needs to be improved

Mineral exploration is capital-intensive. Therefore, there is a need for robust data on Nigeria’s mineral resources, especially critical minerals to elicit investor interest. A lack of this data is a significant obstacle to investment. Even when the data is available, it is often not very reliable.

There are projects aimed at improving the quality and quantity of mining data in Nigeria. The World Bank recently granted a credit facility for geo-data acquisition to support the mineral sector’s economic diversification. But generating bid data remains a key challenge as these interventions are not enough.

Progress has been made on data availability and accessibility through the work of the Nigerian Geographical Survey Agency to improve access to scientific data and de-risk the mining sector. Recently, the Nigerian government launched the Nigerian Mineral Resources Decision Support System, which is designed as comprehensive software for investors seeking credible information. It aims to empower stakeholders to make informed investment decisions by simply clicking a button. Changes are afoot, but more still needs to be done.

In addition, incentives were created to attract investment into the mining sector through capital allowance, exemption of customs duties on mining equipment, permission to retain foreign exchange, free transferability, and tax relief period, among others. Companies with mineral titles are granted a three year tax relief period commencing from the date the company begins operation with a likelihood of extension. The solid minerals development fund was established to develop financing instruments to catalyse private sector-led investments in the mining sector.

Reform is needed

The country is said to be losing $9 billion annually to illegal mining. Foreign criminals have been implicated in the trade of Nigerian minerals, but so far not enough has been done to stem the tide.

Nigeria’s Minister Dele Alake insists that influential Nigerians are involved in illegal mining. The Nigerian military chief once revealed that some highly placed political actors and compromised security officials are frustrating efforts to apprehend illicit miners. These criminal and unpatriotic actors must be named and shamed lest they continue to frustrate well-intended reform efforts.

Nigeria requires 70 billion naira to fund solid mineral exploration activities across the country. To attract such funds, the government must take steps that will boost investor confidence. For instance, the Nigerian Mining Act 2007 needs to be urgently amended to reflect international trends and align with the Africa Mining Vision. It must contain specific provisions that will enhance private sector participation and value added mining activities. It should target to mainstream community interests and environmental sustainability.

The sector needs a regulatory commission. This will separate policy making functions from regulatory functions, reduce discretionary powers of the Minister of State, improve process transparency and curb arbitrariness. A flexible royalty and taxation structure that is fair and equitable to stakeholders is also necessary. The government needs to provide special funding vehicles that will make resources available to vulnerable groups like women. If the government fails to take these steps it will repeat the missed opportunities that were lost during the country’s oil boom.


Photo credit: Pexels

About the author

Uche Igwe

Uche Igwe

Dr Uche Igwe is a Senior Political Economy Analyst and Visiting Fellow at the LSE Firoz Lalji Institute for Africa. He may be reached at: u.igwe@lse.ac.uk

Posted In: Economics | Policy

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