Minister of Solid Minerals Development, Dr. Kayode Fayemi, in this exclusive interview with Chineme Okafor, posited that the mining sector roadmap will pivot Nigeria from a mineral-rich nation to a mineral-mining and processing country. He also revealed that by 2025, the sector could be adding up to $27 billion to Nigeria’s GDP. Excerpts:
You’ve been in office for 10 months now sir, what have you seen and what do you want to do with what you’ve seen?
When I was asked to superintend over the affairs of this ministry, I had two mandates from the president as part of his overall diversification agenda. One was job creation and the second was revenue generation, but they are in my view outcomes of certain steps that ought to be taken in order to make that happen.
We considered that this is a sector that has being largely comatose for a considerable period and we needed to recalibrate the entire sector and identify what the gaps were before articulating an agenda for that diversification.
Now, in 10 months of being here, I have a clear sense of what the challenges are and I have also proposed a number of ways to tackle these challenges and that has been encapsulated in the roadmap for the growth and stability of the mining sector that was approved on August 31 by the federal executive council.
What is the focus of this roadmap?
Summarily, it focuses on four things. First is geological prospectivity: mining is about searching, if you don’t search, you won’t find, and it is when you search that an independently verifiable evidence of what you find becomes attractive to the average investors out there.
So, we have captured that and then looked at where the gaps are in terms of the geological information available in the sector and we believe that it is inadequate, it is not of investment grade and not as precise as what you will find in the oil and gas sector for example.
With an OML in the oil sector, you can get almost to the letter how many barrels you will be pumping from a field and in how many number of years you will do that, with that you can go to a financial institution to get funds for investment. We need to get our mining information to that level.
We have a geological survey agency that is statutorily empowered to gather the data but we cannot really say it has the level of what we want and one of the ways we have decided to go about this is to promote collaboration with other geological survey agencies and we have being talking to the Australians, Chinese and British in this regard.
We are also partnering with private exploration companies with a view to deriving from whatever results of such exploration activities, a mutually beneficial arrangement.
Are these all about the roadmap, are there other aspects?
The second area tackled by the roadmap is the legal and regulatory environment. We are now talking about an agency that encapsulates all of our regulatory institutions: the Mining Cadastral Office, Mines Inspectorate Directorate, and Mines Environmental Compliance Unit under one roof but at an arm’s length relationship with the ministry, similar to what you have in NERC or NCC, but also with the capacity to generate its own resources and undertake compliance and enforcement in a much more dedicated and committed manner.
This will necessarily lead to a tweaking of the law and also the structure, operations and funding arrangement of the agencies being collapsed and reworked. That is what the roadmap implementation strategic team is working on with a view to producing a bill that can go to the Federal Executive Council and the National Assembly.
The third area is the relationship between states and the federal government. I have often said that if we are to succeed in mining operations in Nigeria, we cannot hold on rigidly to the principles of exclusivity that is enshrined in our constitution.
But not holding on rigidly to it does not mean flouting it but working out an arrangement that is beneficial to all the critical stakeholders, which include the host community, governments and investors who need predictability of investment in this regards.
What we have done was to decide how best States can become critical players and the first is that the 13 per cent derivative in oil and gas does not really specifically say oil and gas but also for all mineral resources and that is being implemented now.
Another is the principle of consent that is required by law. Right now consent is given by the host community and we have run into series of conflicts especially when minerals straddle through two communities and each gives consents to two different investors and creating unnecessary legal wrangling. So, we have introduced a new step which is revalidation of consents by the States because in any case land belongs to the State governments in trust for the communities and there is nothing that says the State should not determine the rightful consent giver and by that it frees us from the troubles around license award.
We have looked at our approach to license. There is nothing in the law that prohibits States from owning licenses. Mineral rights are exclusive to the federal government but if a State establishes a special purpose vehicle that applies for license, it has as much right to do so like any other private company and we will treat it that way.
In principle, we cannot give a State license as a legal entity but we can give to a company in which a State has an interest. The issue for us is how best to advance the relationship between the States and the federal government.
The final principle enshrined in the roadmap is the management of artisanal miners and the role of the federal and State government in that. We feel we should devolve a lot of responsibilities concerning artisanal miners to the States because they are operating largely at the State level and so the registration and enumeration of who is an informal miner should be handled at that level whilst support can come from us by way of organising them into cooperatives, capacity building and supporting with technology and tools, as well as access to finance.
That is the best way for us to measure much more accurately the contributions of mining to job creation and GDP because a lot of that is lost in the underground economy that we run in the sector.
But have you considered that mining is capital intensive?
Yes, it is hugely capital intensive and if we are going to make a significant headway in the manner that the president has often spoken about, we need to put a lot more weight on access to finance by serious players in the sector and we have gone about this in a multipronged manner.
The first is that for the first time, the president is granting us access to benefit from the Natural Resource Fund which is 1.6 per cent of the Federation Account, similar to Ecological Fund, UBEC Fund and it is there primarily for the use of agriculture, mining and water resources.
I don’t know how much is there now but it is automatically deducted and it is not small money. Depending on what we approach the federal executive council to release to us from there based on our work, we have decided that it should go for exploration because that is the most capital intensive part of mining.
We are also in discussion with the Nigerian Sovereign Investment Authority to put together a mining investment fund. About $500 million, and it is looking good even though we are in discussion and have not finalised yet. They are getting a lot of interest from private capital, equity funds venture capital and I believe this will complement whatever will come from the Natural Resource Fund.
Outside of that, we are also talking with the World Bank to support actual transaction activities – those who are already in exploration and just about to move into production but don’t have enough funds, and this will be like a support fund for such activity across the sector.
We believe because we are starting from below zero, the major miners will come in once they see that things are beginning to be discovered, they will begin to refocus their interest on Nigeria.
Which comes first in all of these plans?
The roadmap proposed a three-pronged approach to that. The first is that we play locally in developing our processing and beneficiation opportunity so that we limit raw exportation of our minerals. Right now, a lot of minerals are not just taken out illegally but they are taken out raw, and so we lose the revenue potentials that naturally accompanies these minerals when you process.
We have all seen how Nigeria has turned around from being a net importer of cement to a net exporter. That is our vision, we want that more of our minerals should be processed locally and we want to encourage those who are processing by limiting importation exclusively to them. It is not an exclusively import substitution but we want to make it difficult for people import.
Our coal to energy relationship with the ministry of power follows that same local beneficiation approach, same as Ajaokuta which we want to work. And once we are able to make significant progress in this local space, we believe we would have developed the capacity to produce export grades and return to the market when the market is up from its downtime.
The courting of the majors will then come in after this because they will not come until we get to a certain level, and it is no use pursuing them now – that is why we are not after going for the Rio Tinto, Glencore, Anglo-American and others. We want to get Nigeria ready for playing at that level when we have tackled the demands that exist locally and improve the quality of our minerals.
All of these clearly necessitate some structural reforms, this ministry needs to top up its game, we need to pay a lot of attention to the institutional reform we have in plan to wake up the sector.
How do you expect to run this roadmap for it to meet its short, medium and long term goals?
We have an 18-month period for the short term goals in which we are supposed to do the geological prospectivity that I talked about, get the laboratory functional so that we can test the minerals locally because we cannot test minerals in Nigeria now. We are working with SGS to take over our laboratory in Kaduna so that it will be ISO standard complaint.
We also want to have our partnerships done within this period, and the implementation of the regulatory agency reform and reorganisation of the artisanal miners.
The industrial side of this is what we expect will happen in three to five years of the medium term and then the long term which is 10 years is when there are interests from the majors once things pick up. By that time we would have moved from being mineral rich to a mining nation.
I must say that this is not a quick win sector, I know people are anxious but I am hopeful they will see the steps we are taking to get to where we want to be, however, there are some kinds of low hanging fruits.
What are these low hanging fruits, will they stimulate the recessed economy?
Absolutely; one low hanging fruit that we have is our belief that this sector in terms of its revenue generation capacity is under assessed, and I am backed up on this by information from NEITI where I also chair.
The audit we have done for the solid minerals sector shows that mining even in its low ebb can earn more than it does now and one of the things that we have done now is to find a mechanism for revenue generation beyond the ministry and we may have to farm out once we get the support of the States.
We will farm out to people the bulk of the dredging activities that go untaxed in Lagos and Bayelsa for instance, as well as quarry operations that are undervalued. These are immediate wins we believe will contribute significantly to revenue generation in the short run.
We also see another quick win in illegal mining which is why we entered into partnership with the ministry of defence and other security agencies because there are activities we don’t want to turn a blind eye to, there are conscious criminal miners that are mining and exporting out of the country – the full weight of the law has to be brought on them, that necessitated the joint relationship on mines surveillance with the security agencies to curtail these practices.
The NEITI in its recent report thinks the Mining Cadastral Office is not up to its responsibilities, are you aware of this, what actions have you taken?
Those who know me will tell you that all the cases that have been brought against the Mining Cadastral Office either as allegations or petitions to my notice have been swiftly dealt with.
Yes, there may be people in that office who may have been involved in illicit activities and once this is brought to our notice, we take decisive action but overall, the bulk of people there are dedicated and can do better when we provide then with the right tools. Part of what we want to do is to increase our level of monitoring there so that standards are set.
Coal to power is a touchy subject globally but I understand you are favourably disposed to giving coal mining license to people who will build power plants, is this true?
This position is simple. We have not talked about it but the president just signed our agreement to the COP during our last trip to the United States. There are all sorts of position on coal and one of such is that it is not pro-climate change and so countries should not be involved with it.
I consider myself to be environment friendly and sensitive to these issues, but I have always said that when you are faced with an existential threat, your immediate approach is to deal with that threat. Lack of energy is an existential threat to Nigeria. If you have a country of 180 million struggling to generate 5000 megawatts, it is abysmally low and it is evident that coal is a cheaper form of power generation, and even more is that Nigeria has one of the sweetest low sulphur coal that is akin to clean coal.
There is clean coal technology too. We have had discussions and African Development Bank has made it clear they are ready to support us. We have gas in abundance but you know our challenges with it, and this is forcing people in my sector to convert to coal – Dangote has converted Obajana from gas to coal, same as Ashaka which has built a coal plant because it is cheaper for them to run.
We are reviewing the transactions on coal mines in the country because the people who bought them almost a decade ago have done nothing. The BPE has given me a list of coal mines that are still vacate and up for sale but we don’t just want to sell. We are primarily interested in those who are ready to set up power plants nearer to the coal deposits and a joint team is being established to review this. When we have people who are ready to put up plants in any of these places we have coal, we will work with them.
What are you going to do with Ajaokuta, is it still a huge challenge?
We have just managed to resolve the legal issues around Ajaokuta when we signed the modified concession agreement in August, which was presided by the Vice President.
Where we are at in that is an audit process which is to reconcile the positions of both parties precisely in relations to the NEOMCO Itape iron ore mines, and we have advisers from our side and consultants from Global Infrastructure working to resolve all these issues to come up with an agreed arbitral position which apportions responsibilities to both sides.
Once we resolve that, it becomes a condition precedent that will trigger the release of Ajaokuta to be put to the best use, and when you asked what I am going to do with it, I will tell you that government has decided that we have spent enough on Ajaokuta but we still want the benefits of Ajaokuta. How best to get these benefits, either from commercialisation, outright privatisation, PPP concession or any other aspect to asset sales, and at that stage we then involve critical players like the ICRC, BPE and hire a transaction adviser and then the NCP’s approval of whatever we decide on.
I can however say that we have had unsolicited interests from both private investors and state owned enterprises from countries like China, Ukraine, Russia and Belarus but when we get to that point it will be open and whoever is able to give us indubitable track record of steel production and money in the bank will be considered.
You projected in the roadmap that this sector will contribute $27 billion to Nigeria’s GDP by 2025, how confident are you on this?
One cannot e 100 per cent confident but if you put the right policy and there is policy consistency and not summersaults, there is no reason why we cannot achieve it as long as we maintain the approach we have proposed. I believe we can reach that objective because we believe Nigeria is immensely mineral rich and the transition between being a mineral rich to a mining country will produce that projection.