Extractive Industry Key to Wealth Creation and Employment Generation

Kasim Sumaina writes that the mineral and metal sector holds the key for economic diversification in Nigeria

The mining services industry is a vital source of economic activity and jobs in Nigeria, and a major contributor to national income and wealth creation. Technical and business innovation is continually needed to maintain the industry’s international competitiveness and to ensure that mining is conducted in an environmentally sustainable manner that is aligned with society’s expectations.

The value of all aspects of mining in Nigeria is encapsulated in the mining value chain, extending from exploration and discovery through mining and processing to waste disposal. Along the chain there are critical areas of industrial activity wherein improved efficiencies can markedly increase the value of Nigeria’s mineral resources, and aid in the discovery of new resources, thus creating enormous opportunities for wealth creation culminating in economic growth.

It is heartwarming that President Muhammadu Buhari had continuously reiterated the commitment of his administration to the diversification of the revenue base of our country. Expectedly, attention has shifted towards non oil export such as solid minerals and agriculture as remediating strategy for bringing back our ailing economy.

It is worthy to note that a sustainable and well governed mining sector has the capacity to: Garner resources for national development; Create capacity for downstream value addition via establishment of resource based processing industries; Create capacity up stream value addition through development of resource supply/inputs for the sector goods, consumables, technology, and general services; Create potential for job creation and entrepreneurship through the development of artisanal and small scale mining.

According to the Minister of Mines and Steel Development, Dr. Kayode Fayemi, while speaking recently at the just concluded 2nd Nigeria Mining Week conference and exhibition, revealed that the country’s mining sector has made remarkable improvements in both hard risk and perceived risk factors as it’s now considered to have a better risk profile than Russia, China, India and several others in the mining jurisdiction.

Fayemi said, “I am frequently approached by many young Nigerians who want to know of opportunities in the industry. I unreservedly commend the Gems and Jewellery segment of our industry to such budding entrepreneurs to explore – you wouldn’t find a more extensive value chain with relatively lower risk profile and entry points. In yesteryears, the mining sector was seen as the exclusive preserve of expatriate illegal miners, or “old school” players. Today, we are pleased that our reform efforts have brought about stronger participation and shared responsibility across board – especially with the more youthful demographic. Many young people have worked with us on our journey to build a more vibrant mining sector, serving on statutory committees and in advisory roles. Their energy, optimism and vision have blended well with the wisdom, experience and carefulness of our older veterans and produced the results we are now seeing in the industry. It is now clear that the new face of mining in Nigeria is the young men and women taking positions in various segments of the industry.

“Permit me to quickly give a rundown of possible areas of opportunities in our mining sector in the course of this session – it is vast indeed.

“I, however, hope to start a conversation that will hopefully lead to more robust engagements between serious prospects and officials of our ministry, as well as other interested stakeholders – in order to provide the necessary guidance for those interested in participating in the industry.

“We must however remember that government remains committed to its role of stimulating the deepening of the industry as facilitators, not necessarily as active players. Prospective investors are therefore encouraged to similarly engage current investors and other stakeholders that are better positioned to speak to the business opportunities.

“Private sector players are better positioned to leverage the ‘truly Nigerian’ creative spirit, in spotting emerging opportunities while we as government do as much as possible to help them succeed, knowing that the outcome of their success will help address key government priorities such as creating jobs and increasing revenue.

“Government renewed commitment to environmental justice requires safety experts for necessary environmental impact assessment; considering mining is a dangerous endeavour, doctors and paramedics are needed in mines to respond to emergencies; even the welfare of different cadres of mining workers require such services as catering and hospitality, especially on very large mines.

“The proposed growth strategy to unlock our full potential to achieve wealth creation and employment generation, to rebuild the sector and unlock its full potential, the ministry is pursuing a focused strategic agenda.”
He further said, “I recently gave an assessment of what I found and our plans to rebuild the sector. That plan was recently articulated in a roadmap that will guide how we grow the industry over the next two decades.

“The roadmap which was approved by the Federal Executive Council, August last year has the following highlights: Aspiration: our aspiration is to build a world class minerals and mining ecosystem designed to serve a targeted domestic and export market for minerals and ores.

“Where to play: we will achieve this by focusing on Nigeria’s minerals, mining and related processing industry over a three phase period: Phase 1: Nigeria will seek to rebuild market confidence in its minerals and mining sector and win over domestic users of industrial minerals that are currently imported. During this phase, Nigeria will also seek to expand use of its energy minerals. This phase will likely last about 2-3 years.

“Phase 2: Nigeria will focus on expanding our domestic ore and mineral asset processing industry. This phase will last about 50 to 10 years. Phase 3: Nigeria should seek to return to global one and mineral markets at a market competitive price point. We expect this to coincide with the next commodity upswing.”

He explained that strategy without the appropriate set of enablers will remain just a plan. “Working alongside the private sector, other MDAs and in partnership with the legislative branch, we will facilitate investment in a range of enablers including bulk handling terminals, railroad and rolling stock capacity, technical and engineering capacity, regulatory reform, reorganisation of the ministry itself, and expansion of access to financing to drive sector transformation.”

He noted that, rebuilding Nigeria’s mining sector is a function of success on seven key dimensions. “These are: Clear minerals and Steel focus: we need to ensure that our industrial and energy minerals strategy prioritises domestic utilisation of our assets, including getting our steel sector to provide a solid backbone for the manufacturing and industrial economy.”

Speaking further, the minister said that the ministry had recorded a major breakthrough in funding and in providing access to capital and financing to artisanal and small scale miners.

“Already, we achieved a 300 per cent increase in revenue (royalties and fees) between 2015 and 2016, and as at July of this year, the sector had already surpassed the entire revenue of N2 billion generated for the whole of 2016,” he said.

Fayemi identified the signing of a ‘Modified Concession Agreement’ between the Federal Government and Global Infrastructure Nigeria Limited, which resolved the protracted litigations surrounding the ownership of Ajaokuta and NIOMCO, as one of the major achievements of the ministry.

“The implication of the signing is that ownership of Ajaokuta Steel Company Limited has now reverted to the Federal Government of Nigeria, and we can now proceed to engage a new core investor with the financial and technical capacity to run the steel complex. The operationalisation of ASC will provide the needed inputs to support the infrastructure requirements of the country and lead to import substitution, and save the country about 3.3 billion dollars annually spent on the importation of steel products.

“To stem the illegal trading of minerals, the ministry has registered over 30 Mineral Buying Centres, and enacted the Revenue and Reporting Compliance Agreement with the Nigeria Customs Service, which has improved the policing of mineral exports.

“With the successful hosting of the inaugural edition of the NCMMRD, we have covered a major milestone in the implementation of the roadmap for the sector, and at the same time set in motion a chain of positive outcomes. As we look to the future, we remain focused on working with stakeholders to deliver on all other provisions of the roadmap,” he added.

He stated further that, the ministry was working assiduously to resolve once and for all the Ajaokuta situation. “Just last year, we signed a modified concession agreement with Global Infrastructure Limited of India.”
On institutions and governance, he said “we are rebuilding the organisational and functional capabilities of the supervising ministry, and ensure the regulatory frame work is enforced.

“The capacity of our officers is being enhanced through a variety of incentives. Oversees training, local capacity building, intensive engagements with industry, improved mobility, enhanced security for field officers – cooperation with ONSA, DSS, police and civil defence corps. Moreover my ministry has entered into cooperation with National Civil Defence Corps to promote mines field security, also the Inspector General of Police has approved the revival of these mines police to protect mine sites and our reserves.”

On stakeholder engagement, he said “we need to improve the engagement of states with the minerals and mining sector, particularly around financial participation, revenue sharing and recognising the oversight of the federal government. The roadmap already dwells on this and states are being taken into consideration – ranging from the establishment of the council on mining and mineral resources development to the extension of derivation principle of 13 per cent to mineral resources extraction at the state level.

“In line with this initiative a few weeks ago, I commenced a nationwide your of mining sites and meeting stakeholders in Kaduna, Lagos and Ogun States. The essence is to ensure that all parties recognise their social responsibilities so we avoid issues similar to the oil sector.”

On industry participants, he said “we are working to attract a diverse portfolio of participants from artisanal miners to junior explorers to mining majors into the industry. Our goal is to build a sector that is competitive and supportive of our overall job creation aspirations for Nigerians.”

To this end, the minister said, “we have concretise our efforts toward organisation of artisanal miners into cooperatives nationwide. Also the prototype mineral buying centres in Zamfara, Benue, Ebonyi and Sokoto had been handed over to state as mineral support centres.

“While at the same time, encouraging the establishment of privately owned mineral buying centres. Last year, my ministry also organised a special purpose vehicle workshop to sensitise the states on how to effectively partake in the management of their resource wealth.”

On geosciences data and information, he said “we are improving our collection and dissemination of geosciences data is also a critical enabler of success. Nigeria needs to know what it has and in what grades and quantities in order to plan more effectively. The Nigerian Geological Survey Agency is presently being repositioned to unearth the mineral endowment of the country. Additionally, a significant chunk of our 30 billion Naira intervention fund is going to exploration activities and I am sure that many of you have seen the advertisement.”

On access to finance, he said “we have commenced a systematic effort to build knowledge and confidence among Nigerian financial institutions to support mining projects. In addition, we intend to establish the Nigerian solid minerals investment fund, structured as a private sector oriented investment outfit to provide financing to private sector – led projects in the mining sector. The federal government recently approved about 30 billion Naira from the natural resources fund to promote exploration for new minerals and improve the regulatory frameworks in the ministry. The ministry through the federal government is also negotiating a 150 million US dollars from the World Bank to commence the mini diver project aimed at further resuscitating the ailing sector. Today, the Bank’s board is meeting in Washington to consider the concessional loan.”

On enabling environment, he said “Finally, we must also create the appropriate environment to support enterprise. That will require building technical and managerial skills, capabilities locally to ensure the supply of steady talent required by the sector in the future, as well as investing in infrastructure gender equity, and improved access to finance.

“In order to ensure that the above initiatives are properly executed, late last year I inaugurated the Mining Implementation Strategy Team (MIST) in the ministry to oversee the work required to deliver success. The team which is led by the president of this great society, Professor Gbenga Okunola is drawn from a mix of the ministry and outside talent to ensure we stay focused on execution and results without distracting from the core regulatory role of government. We will be providing quarterly updates on our successes and challenges, with an initial focus on getting domestic industrial demand on track again.

“Should Nigeria successfully implement the proposed recommendations, growth is expected to return to the sector in the form of new exploration activity, operations and production from active mining, functional (and expanded) processing and refining capacity, and higher Value-addition in exports. Already we are seeing the green shoots of growth if we go by the evidence coming out of the NBS.

“The net outcome will be the creation of thousands of direct jobs and potentially hundreds of thousands of indirect jobs. We anticipate contribution to mining GDP to exceed $25 billion by 2026 as industries are better able to use the output of the sector, substituting for imports.

“Analysis conducted by major stakeholders in the solid minerals sector, the Association of Metal Exporters of Nigeria, also indicates that we can generate at least five trillion Naira annually from mining and exporting of vast solid mineral deposits.”