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Nigerian mining revival in the works

Nigerian mining revival in the works

After decades of neglect, Nigeria’s mining and minerals sector is showing signs of recovery as the authorities seek to diversify the economy away from its dependence on oil. Linus Unah reports

As Rachid Benmessaoud, World Bank Country Director for Nigeria, remarked in 2017, “Nigeria has a favourable geological potential that, if adequately assessed, well exploited and sustainably managed, could support broader economic growth through the mineral sector.”

The Nigerian authorities have been focusing their attention on under-exploited industries as part of a drive to diversify the economy away from oil, and mining is one of them. The nation’s reserves of tin, gold, coal, iron ore, lead and barite represent potentially vast revenue sources, but the industry has been held back by insufficient geo-data, weak infrastructure, and limited enforcement of regulations, which has discouraged investors and left critical mining projects on ice.

The mining sector contributed only about 0.15% to Nigeria’s GDP in 2015, a far cry from the 4-5% it contributed in the 1960s and 1970s. Mining, where it has taken place, has often been carried out by illegal artisanal miners working in unsafe conditions.

After Nigeria slumped into recession in 2016 amid a nosedive in global oil prices, attempts to promote diversification became more pronounced. Key to this effort was the revision and approval of a roadmap to advance the development of deposits of more than four dozen types of different minerals.

The Roadmap for the Growth and Development of the Nigerian Mining Industry has a major goal: to grow the mining industry’s contribution to GDP to over 10% by 2026.

“There is no doubt that Nigeria has a lot of potential in the solid minerals sector, but having potential is not enough,” Waziri Adio of the Nigeria Extractive Industries Transparency Initiative said at a report launch in February.

“Rather than continue to talk about the problems all the time, we want to do something that would build on ongoing reforms in the sector.”

Wooing investors

To change the narrative, the government roadmap included a N30bn (£83m) intervention to fund exploration and research projects and improve regulatory oversight for the growth of the industry. To woo investors, the government offers a number of incentives.

Last November, Nigeria’s minister for mining and steel development, Abubakar Bawa Bwari, told Reuters that the government had awarded a contract to 10 exploration and consulting companies focusing on gold, zinc, iron ore and rare earth metals. He had earlier said that eight companies would receive a contract worth $41.5m.

Bwari said he had offered mining companies a three- to five-year tax holiday, duty and tax-free importation of equipment, full ownership of their businesses and the ability to take profits out of Nigeria.

In April 2017, the World Bank agreed to lend $150m to help Nigeria develop measures for formalising, regulating and inventorying artisanal and small-scale mining, and to facilitate the flow of mineral transactions and access to finance, technology and equipment.

Investors are taking note. In June this year, Hudson Mining, a subsidiary of Globelink China Investment Group, said it hopes to invest $30m in processing mainly tin and columbine in the central Nigerian city of Jos. The firm said it will invest an initial $3m and later scale it up to $30m at the first phase of the project.

Canadian mineral exploration firm Thor Explorations is working to develop the Segilola Gold Project, located 120km northeast of Nigeria’s commercial hub of Lagos. Last year Thor, which has operations in Senegal and Burkina Faso, secured $78m in funding from the Africa Finance Corporation to help it carry out construction of the project which is expected to begin this year and last for up to 18 months. The project comprises an open pit mine and a new 650,000 tonne yearly gold ore processing plant. The project is expected to produce 80,000 ounces of gold per year with an initial mine life of five years.

Australian mining company Symbol Mining also has operations in Nigeria and holds 60% of the 500sq km Imperial Joint Venture in Nigeria’s Upper Benue Trough and another 60% in the 7sq km Tawny Joint Venture. Both ventures are thought to contain significant deposits of lead and high-grade zinc. Last year, Symbol Mining began construction of a $225,000 density separation processing plant at its high-grade zinc and lead Macy Project in the Benue Trough.

According to the Nigerian Mining Cadastral Office, the government has awarded 2,502 current exploration licences, 2,597 quarry leases, and 1,522 small-scale mining leases. It says it is working to make the process of obtaining mineral licences faster and easier by creating an online portal to facilitate applications for mineral titles and payments.

Production increases


Given the breadth and scope of activity, Nigeria’s mining and minerals sector finally seems to be reviving after several decades of neglect.

In 2018, production in the sector reached 59m tonnes, up 22% from 46m tonnes in the previous year, according to the National Bureau of Statistics. Yet current productivity from the Nigerian mining sector is still insufficient to meet local demands, particularly for industrial minerals, according to the World Bank, and much more can be done to encourage activity.

Analysts are urging the government to invest in geological surveys to provide accurate information and data on the country’s mineral deposits.

Exploration and production are held back by the country’s immense infrastructure deficits, which include thousands of kilometres of unpaved and unreliable roads. A 2013 report found that less than a third of the nation’s roads were paved in bitumen.

The mining sector is also not immune from the country’s ongoing security challenges. Widespread insecurity in remote mining regions caused by bandits and Islamist-linked militants are significant concerns.

In April, Nigeria suspended mining in the restive northwestern state of Zamfara amid concerns that illegal miners were connected to a surge in banditry.

Investors are looking to government to ensure security around mining sites and key transit routes before they consider risking their capital.

The government has announced new initiatives to tackle illegal mining, including establishing mining cooperatives to encourage artisanal miners to bid for legal licenses, but explaining the benefits of legitimate commerce remains a challenge. Yet the prize could be significant.

“There are clear efforts on the part of government to make the sector more attractive for investment by putting in place clear regulatory policies and operationalising hitherto existing ones,” wrote Cyril Azobu, a partner and mining leader at PwC Nigeria, in a recent appraisal of developments in the sector. “The times are right too as there is a remarkable shift in thinking among policy makers towards other sources of revenue for government.” 

 

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