Fayemi: Indigenisation Policy of 1970s Destroyed Nigeria’s Mining Industry

0

INTERVIEW 

Why has Nigeria allowed its once vibrant  mining industry to collapse and what is the government doing to revive this potentially huge revenue earner. The Minister of Mines and Steel Development, Dr. Kayode Fayemi provided answers to these questions and more on ARISE News Night. The extended chat was monitored by Senator Iroegbu. Excerpts: 

Is it fair to say that oil has done little good for Nigeria?

I don’t think it’s completely true to say that oil has done little good for Nigeria. Oil has done some significantly good for Nigeria but oil has also affected our multiple fold of revenue generation.

…Not to interrupt but much of the revenue has been squandered by various military and civilian regimes because the oil was used as a basis for massive borrowing in the 70s, which itself was also squandered, leaving ordinary Nigerians with a declining standard of living?

To that extent I will say it’s correct. Oil has not always been a source for good but that is also the challenge we must confront … you can’t continue to explain away the challenges of the past. It is how we get out of this poverty trap for all. That is where most of the revenue generation for all the natural resources is coming from for now. But much more importantly, is that even when we develop mining to its fullest potentials, the true wealth of Nigeria is the human capital, not even generation from the mineral resources.

We still will talk about the mineral resources but what lessons has Nigeria learnt and what can we conclude about the future prospects for the country, given the tantalizing prospects, which oil offered for breaking out of the poverty and fueling industrial development seems to be diminishing by the day?

Clearly, I think the first lesson that Nigeria has learnt from the neglect of its mineral resources is that private sector works and market must be leveraged. We started facing this problem; the minute nationalisation came into the mining sector. Of course, there are varieties of positive reasons why Nigeria embarked on the indigenisation decree of 1972, but it has had a very deflectory effect on the mineral sector. At a time in this country, power was only generated by tin mining companies in Jos that you mentioned. The railway connecting Enugu to Port Harcourt was largely to service the coal industry and these sorts of things that were fettered. But Nigeria is still like a green-field as far as mining concerned. That is why opportunities are legion if we focus our energy on geological prospectivities, on organising the informal sector in mining, on putting enough access to finance in the hands of those embarking in the sector. And generally, ensuring that business environment is conducive.

There have been a lot of talks in the past about diversifying away from oil. Basically, a fall in the oil price is what became the wakeup call for the areas the country has neglected for a long time such as agriculture, mining industry and are now getting the attention of the government?

Correct. I think it’s a fair to say that President Muhammadu Buhari has always been passionate about agriculture and mining. It is not a later day fad for him. He has always believed in these sectors, having worked in the oil sector himself as a minister that we needed to broaden these sectors…

…I mean the fall in the oil sector…?

Yes, that has always been the trigger, when oil falls, what sector offers him an opportunity for substitution? Mineral resources. Look at what we have done with cement. The limestone has helped us to produce the largest cement industry in Africa to the extent we are now a net exporter of cement. It’s the same limestone we have always had and yet we are importing almost 80 percent of the product…

Well you said last year that before the end of the first quarter of 2017, you would have clear direction as whether the government is taking over the mining sector and running it yourself or not. What have you decided now what is the current situation?

The roadmap is out and endorsed by the Federal Executive Council (FEC), and thrust of the roadmap is that government is going to be the enabler. We are not going to be an operator. We are going to provide the conducive environment for players to come into the industry and we will support them with a variety of incentives, backed with predictable legal and regulatory environment, access to finance, access to tools for the small scale players, and a very clearly defined licensing regime. Those are the things I believe we should do, while we let the players in the private sector drive the industry.

What is the current yield financially that you are getting from the mining and solid mineral sector. What is the current share of the GDP per year?

Well, the current share of the GDP (Gross Domestic Product) is still at least very low. It is at 0.34 percent of GDP but what is interesting about that is that if you look at the National Bureau of Statistics (NBS) last two quarter reports, its only mining and agriculture that has grown in this period of recession. So the clear direction is on the upswing.

So what is the potential growth that you envisage from that as we shift away from dependence on oil as our main source fund?

The whole of the emphasis at our disposal and all the fact that we have is that by the year 2025, that is 15 years from now, which is enough time for mineral resources to develop; we should be hitting 70 percent of GDP and that’s quite a chunk. We used to be at 5 percent. That period you referred to, used to be at 5 percent of the GDP up till the early 1970s when oil and gas took over. I believe we could return to that if we provide the entire regulatory and legal environment to support the sector.

Mining as you noted is of course, long term and some Nigerians have questioned whether that is urgent remedy Nigeria needs to mitigate its cash crunch?

Well, if you look at our Economic Recovery and Growth Plan, we have said that the trigger for inclusive growth is ensuring that once we guarantee macroeconomic stability; aligning our trade policy with our monetary policy, with our fiscal policy. Two, is to increase expenditure in infrastructure, transportation infrastructure, road infrastructure, attain sufficiency in energy and power sector. Those for us are the immediate triggers but those triggers will not become possible if we don’t guarantee a sustainable industrialisation. That’s where mining comes in, that’s where Ajaokuta plants comes in, that’s where all the elements that makes mining thrives in other countries becomes relevant. It may not be the short term remedy that will be required but it’s one of the longer terms sustainable remedy is that we will build an industrial society.

Obviously to do all these things you need a lot of money. You have set for yourself ambitious targets. You talked about the percentage. I heard that the government plans to increase mining contribution to GDP up to 30 percent by 2020. I mean obviously, you are the Minister and can give us the accurate figures. Some have said all of that is unrealistic given that even the money that was meant to come from the World Bank to help develop the mining sector is now apparently being shifted towards plugging the huge budget deficit?

That is not correct. Actually, the World Bank announced on Friday that $150million is still being approved by its board for the mining sector.

…But that’s a pittance?

Yes that’s a pittance but we are not seeking perfection. We are seeking progress. We won’t get to perfection but let us at least begin the journey of a thousand years.

So what are you going to do with that roadmap?

One, two we are going to start a process of strengthening the cooperatives in the small scale sector. 80 percent of the miners in Nigeria are small scale. They are artisanal. We are not going to get rid of them by simply saying they are illegal. We are going to do something by organising them so that they have safer mining practices, access to finance and tools rather than using shovels and diggers.

…Hold on first because on the second part we are still going to talk about the illegal mining. But beyond that what else are going to do with that fund?

Beyond the illegal mining, we are going to use it (the grant) to improve the geological prospectivity. Mining is about research, it’s about data. If you don’t have information on what you have that is bankable, nobody is going to come into your country? So we are spending a lot of that money to improve the quality of the data we have, on mineral resources we have in Nigeria.

That’s a very good thing to spend your money on. I think a lot of people will agree with that. But you know Minister; you are not really diversifying properly. Are you? Because with Nigeria shifting from dependency on oil, which is one commodity to mineral resources, which is another set commodity, you are still stuck in commodity rot and therefore, subject to the vagaries of fluctuations of the commodity market, which is what has forced you to attempt to diversify away from oil in the first place?

Yes and no. Ultimately, we are not going to ignore the resources that God has endowed us with. However, I said something earlier that ultimately, it is the human capital in Nigeria that will take us out of this poverty trap. That is why if you look at the Economic Growth and Recovery Plan, we are investing on people.

…we are talking about industrialisation?

Yes. We are looking at industrialisation particularly of the small and medium scale. In fact, in the mining sector one of the core priorities is beneficiation and processing, and discouraging people from taking raw minerals out of Nigeria so that we put it to use here. Take bitumen, we import 80 percent of bitumen in this country. This country is the 3rd largest reserve of bitumen in the world. So it’s incongruous for us to have something and still be importing it into our country. So we need to get people who can set up processing plants here in order to produce asphalt that is in so much demand in fixing our roads.

So you are saying we need to get…?

We are doing that now, in fact that’s one of the priorities issue that we have in our roadmap. And before the end of this year, we are rolling out a major programme on bitumen development in the country.

In 2016, you said that informal mining is conducted at level as high as 80 percent of activity. Some will say higher, and you needed to bring these illegal miners you mentioned into a legalised framework that will make real start-up miners and ensure that they pay taxes and royalties. Where are you now with that?

We are making significant progress with that. We are working with Miners Association of Nigeria. They represent the small scale minerals, artisanal mining and the states. We want to ensure that we build partnership because there have been some tensions between the federal governmnent and states over mining. And one of the ways we are going bring them in is to ensure that they retain the registration of miners within their jurisdiction and then we support the process with some finance and some equipment that the miners can use. Also on our part, we will provide them some tenement areas that they can legally mine from and then get small scale licenses for their operations. That is ongoing now.

The problem of course has been week enforcement against the illegal miners. How have you tightened the enforcement?

In enforcement, we approach this through carrot-and-stick. carrot is what I have just told you and in enforcement, we have what we called the Mines Surveillance Task Force which comprise of all our security agencies, Ministry of Interior, Civil Defence, the Police as we revived that is the Mines Police that used to be very active in the 60s, the military as well as the various components of the security agencies. What we have also decided to do is to limit some areas as special mining zones that government can take charge of and look for serious mining mega players to operate on. That way we can have a broader outlook on this and all the security agencies I am talking about have set up units in the states level that are specifically designated as Mines Unit and they are working together collaborating with our own mines officers . I am on tour of the mining jurisdictions across the country now and this is beginning to create a much more serious impression. The important thing is the enforcement as you said, if you do not enforce… our mining laws is one of the most progressive in the world but enforcement is still a problem.

Now the illegal miners have said publicly that if the government ends corruption they will start paying taxes. Are they correct to the extent that all of this is tied to good governance and by dramatic reduction in corruption that is the only way to make it efficient?

Clearly there is a challenge, I can’t here and tell you that we are realizing all that we ought to realise from mining even as low based as our mining sector has become in the country. There is a lot of underreporting that is still taking place; underreporting royalties, underreporting fees, underreporting of taxes and we do have a duty in wearing another hat, I am the chair of NEITI. And I know from my involvement at the level of NEITI that a lot of what we should be realizing from the sector we are not. So one of the things we have done as a government is to decide that we are going to do a back review of all taxes, fees and royalties in the sector and the National Economic Council (NEC) chaired by the Vice President has endorsed this, all the governors has endorsed this and the President has said, go ahead with this so that we can get appropriate sense of what is actually should be coming into mining.

That is a very good point. Now the other thing is that the small scale miners as well as the illegal miners have said that they don’t want you to bring in foreign investors. They actually got their own union and they said that you should leave mining to just Nigerians. Is that a challenge or something like an additional pain for you?

I really don’t think it’s within the law. If we are going to grow this country, Nigeria operates within a global environment. We cannot pretend as if we are in isolation and go into some form of hybrid economic nationalism that will not produce the results. So if we need to sell our products to the outside world, we will necessarily open our market to the outside world. What is important is to attach them particularly because of their technical expertise in mining, to our own local operators and grow the skills of the local operators in a manner that they can take over the industry in the shortest possible time. Outside of that I don’t think it’s a realistic objective for any miner to say “leave it to us”. It’s clearly not possible and if you look at our Economic Recovery and Growth Plan, we made it very clearly that we are going to leverage the market and we won’t define that market as a local market.

So you want to bring in the big players…?

Yes. Obviously.

…the likes of Glencoe, Anglo-America, Rio de Tinto, etc.?

Absolutely. I was in a mining gala in Cape Town, talking to these guys recently.

So what bait are you offering them? Are they nibbling, biting or ignoring that bait?

The bait we are offering them is that they will get as good a regime in Nigeria if not better than what is obtained in mining organisations where they have been operating like Ghana, South Africa, Mali, etc. And that is…one, you will have a tax-free holiday from the time you set up and the next three years after setting up in Nigeria. You can own you company 100 percent if you want to. You can have a lease of up to 30 years, if that inclined and we will let you bring in your mining equipment to Nigeria duty free. These are things that can compete with Australia and other countries.

But one of the big complains have been the ease of doing business in Nigeria. Will these foreign investors find it easy to operate in today’s Nigeria with all the difficulties in the communities like the players in the oil sector had to face. Not to mention red tape bureaucracy, lack of infrastructure, lack of power and all of that?

You see, if we allow ourselves to be dissuaded by all of these we can as well just sit back. But these are what we are already tackling that; at least those operating in my sector. Let me give you an example, if you are coming to work in my sector and you want to come to Nigeria to have visa on arrival, you have no problem.

When you are talking to these businesses, are these the concerns they have?

These are the concerns they have and I assured them that Nigeria has since moved on. These are challenges that we have but we are tackling them and that we are going to provide the infrastructure. Power is a major infrastructure for mining and many of them are setting up their own independent power projects in Nigeria. Yes it adds to the cost but ultimately we let it off by the gains that they make.

Mining have a very debilitating effect on the environment. If you go to Jos, you can still see the scars from the days of mining on the land, much of that area still hasn’t recovered but left the people with an impoverished lifestyle. How much is an environmental protection being emphasised as you attract foreign investment because there are simply no way anybody can benefit from this country’s mineral potentials without disturbing the ground?

Absolutely! You just hit the question on a very good note. One, we have a Mining Compliant Directorate within the ministry. It’s a major provision and in the Mining and Mineral Resources Act. So we do not take it lightly and we work collaboratively with the Ministry of Environment and the Ministry of Health. In fact, you cannot have a title in Nigeria without providing the environmental impact plan.

And what about compensation to these people where the mining actually takes place because these communities are usually left with one of the most difficult environmental legacies?

For the very first time, we learnt from the experience in the Niger Delta and we have placed host communities front and centre in the Mining and Minerals Act in Nigeria. So we ensure that you have to take them into consideration in what you are doing. We also have different programme at the level of government on reclamation of abandoned mines. In fact, that’s another thing we will be spending some of the money that I spoke about earlier on particularly in the Jos area, in the Abakiliki area where we also have a lot of abandoned lead-zinc mines and in the sheath belt. The whole belts of Nigeria where a lot of illegal activities are happening and we are working with groups….to also train the artisanal miners on some safe mining practices.

So the Minister, your final word. What is the future of solid minerals in Nigeria?

The future is significant progress. It may not be perfection but it is also not about an immediate quick-win. Mining does not lend itself to quick-win but we are plugging the leakages, we are working with the miners, we are working with the industrial union in the sector and we are determined to ensure that it becomes a significant aspect of the Nigerian economy.