Coal miners in Enugu State
The decades of neglect of the mining sector appears to be nearing an end, due to the nation’s dwindling revenue as analysts welcome government’s newfound interest in the sector and proffer way forward for the sector, writes Olaseni Durojaiye
After decades of neglect of the nation’s solid minerals sector, leaving it largely to private and unlicensed operators to prey on, the nation’s current economic challenges appear to be forcing government and analysts to look in the direction of the sector in a bid to shore up the nation’s revenue profile and reduce mass unemployment.
This is even as observers contended that if accorded appropriate attention, the sector was capable of out-performing the oil sector in terms of revenue and employment generation. Those who subscribed to this argument based their take on two major factors: one, the sector boasts of multiple products compared with the oil sector, which is mono-product. Two, most of the solid minerals resources available in the country are export-driven.
Findings revealed that the country has over 40 solid minerals in commercial and exportable quantities. Of the over 40 minerals, THISDAY gathered that coal, tin, lead, and columbite are among the ones that were mined in large scale in the country. Others like gold, talc, iron ore, gypsum, rock salt, bitumen, gemstone, coal, zinc and kaolin among others remain largely untapped
Observers held that this partly explains why the sector has, over the years, under-performed in terms of contribution to the nation’s revenue base and Gross Domestic Product (GDP) even as legal framework is believed to constitute impediment in the way of optimally harnessing the vast resources in the sector.
The sector’s under-performance becomes more glaring when its contribution to the country’s GDP was put at 0.55 per cent, compared with that of other African countries with less quantity and numbers of products as Nigeria. Records show that the sector contributes 40 per cent of Botswana’s GDP, in South Africa it is 18 per cent while it is 25 per cent in Democratic Republic of Congo (DRC).
Huge Potential in the Sector
Though the sector presently contributes about one per cent of the country’s GDP, observers described it as an untapped gold mine and pointed to countries like South Africa and Sierra Leone as proofs of what can be benefitted from the sector adding that Nigeria’s endowments in the sector are “ in commercial and exportable quantity, yet largely untapped.”
Two of the analysts who spoke to THISDAY, Executive Director of Corporate Finance, BGL Securities, Femi Ademola and Lagos-based economist with a foremost economy advocacy group, Rotimi Oyelere, agreed that the sector holds enormous potential.
According to Ademola, “I agree that the solid mineral sector has huge potential, not surety because it is yet to be exploited. The solid mineral sector has quite a number of products and there are no alternatives to them yet. Besides that the oil sector is a single product sector it has alternatives; there are alternative sources of energy, shale oil and the likes.
“However, it has huge potential to attract foreign investor because a lot of products in the sector are export-driven and this is what. Foreign investors want to be able to hedge their risk, with prospects of foreign exchange earnings from exports in the sector they can hedge their risks.
“This is good news for Nigeria if you look at the example of Sierra Leone and South Africa among many others. Many foreign companies are investing in South Africa’s platinum and the country is reaping good benefits, same thing with Sierra Leone. None of the countries have as many solid mineral minerals as Nigeria has and in diverse states too; so it is an untapped goldmine and this is one of the best time to invest in the sector,” Ademola stated.
Corroborating Ademola, Oyelere noted that, “Nigeria has about 40 solid mineral endowments in commercial and exportable quantity, so it follows to conclude that it has huge revenue potentials. Apart from that it can also help with job creation,” he stated.
Government’s New Resolve
At different fora the Minister of Solid Minerals Resources, Dr. Kayode Fayemi, continued to harp on the money-spinning potential of the sector as well as its capacity to significantly impact employment generation in the country.
Speaking at the third edition of the Chief John Agboola Odeyemi Annual Lecture at the Obafemi Awolowo University (OAU) Ile-Ife, Fayemi noted that the country’s mining sector had the potential to contribute N5 trillion (about $25.3 billion) annually and significantly impact the prospects of creating thousands of job opportunities.
He stated that Nigeria was blessed with various natural endowments scattered in every states of the federation. “Ironically, these natural endowments contribute less than one per cent of the country’s Gross Domestic Product (GDP),” he however pointed out.
At another forum, Fayemi reportedly stated that the immediate plan of the current administration was to fast track investment drive in the sector. According to him “Our immediate priority is to accelerate investor confidence in the mining markets, and get the sector growing and creating jobs. To do that in the context of the overall emerging strategy, we will be taking the following action to finalise market and technical diagnostics.
“We shall finalise privatisation exercise based on the recent update provided by the Bureau of Public Enterprise and an audit of privatised assets would be undertaken,” he added.
While analysts, who spoke to THISDAY agreed that the potential in the sector is vast and capable of turning around the country’s fortune, particularly foreign exchange earnings, they agreed that there was plenty of work to be done if the country must reap the benefits inherent in the sector.
Challenge of Legal and Regulatory Framework
THISDAY checks revealed that the sector is governed by the Mineral and Mining Act of 2007. An overview of the act showed that it “vests control of all properties and minerals in Nigeria in the state and prohibits unauthorised exploration or exploitation of minerals.”
According to the act, “All lands in which minerals have been found in commercial quantities shall from commencement of the act be acquired by the Federal Government in accordance with the Land Use Act. Property in minerals resources shall pass from the government to the person by whom the mineral resources are lawfully won, upon their recovery in accordance with the provisions of the act.”
Incidentally, Ademola and Oyelere both harped on the importance of legal framework if the country must optimally explore the sector.
“Political will is required to fully harness the potential in the sector. Government must put plenty of hard work and investment as well as regulatory framework in the sector as was done with the oil sector. There is need for some other regulatory agency besides the ministry as is the case with the oil sector. This is what will attract foreign investors to the sector. Foreign investors like to hedge their risks, since almost all the products in the sector are export driven, foreign investors can hedge against that,” Ademola argued.
Aligning with Ademola, Oyelere noted that retaining mining in the exclusive list is a cog in the wheel. While canvassing for its listing in the concurrent list, Oyelere insisted that this became necessary because the federal government lacks the capacity to monitor all the solid mineral resources scattered in every state of the federation. He added that listing in the concurrent list will allow states harness the various products for the development of the states.
“Mining is on the exclusive list which means it can only be managed by the Federal Government. That is an anomaly; the way to go is to take it out of exclusive list and put it into concurrent list. This will help the different states to harness products it is endowed with for the developmental purposes. If that is done, states will be able to harness its resources in the sector we would see simultaneous development and growth in the economy of all the states. The way things are will not foster that,” he concluded.
THISDAY findings also indicated that while observers welcome the ministry’s acknowledgement of what need to be done and plan of action, they are nevertheless waiting with bathed breath to see if the ministry will match word with action and demonstrate the political will to follow through on its promises, particularly with regards to the collaboration with states to optimally harness the sector’s potential for the overall good of the country.