Promoting Investment in Mining Sector


The federal ministry of mining and steel development has embarked on aggressive drive towards attracting foreign investors into the nation’s untapped mining resources, writes Peter Uzoho

When President Muhammadu Buhari assumed office in 2015, his administration wasted no time in recognising the need to diversify Nigeria’s fragile economy away from oil. This was to ensure that revenue from non-oil sector improves.

It was also to cushion the effect of oil price slump, as Nigeria largely depended on the proceeds of crude oil to her economy.

One of the sectors considered and given priority to achieve that was the mining and steel sector. To hit the ground running, the President assembled his best brains to run the mining and steel ministry. After his re-election in 2019, he appointed Mr. Olamilekan Adegbite, as the Minister of Mines and Steel Development.

Immediately after his appointment, Adegbite, went all out to get all the information he needed about Nigeria’s mining sector- available mining resources, potential, national mining/steel assets, annual revenue and spends in the sector, the risks, as well as policies and projects on ground to develop the sector.

Based on the facts gathered through his visits to the mining sites, the nation’s steel manufacturing plants and studying of policy documents, he decided to embrace his predecessors’ policies to ensure that the sector is developed to the benefit of Nigeria and Nigerians.

According to Adegbite, Nigeria has over 44 mining resources, which if exploited, could dwarf what the country gets from crude oil.
He said the Gross Domestic Product (GDP) of the country’s mining sector has improved from 0.03 per cent as at 2015 to 0.05 per cent currently. He gave the sector’s contribution to national revenue as N4 billion in 2017, N3.7 billion in 2018, saying, the 2019 revenue from the sector would be over N5 billion.

The minister added that Nigeria has a lot to benefit from the mining and steel sector if all the potential could be harnessed, and if the government’s downstream policy as well as the Ajaokuta Steel company could be prioritised.
He stressed that there was need for Nigeria to embrace formal, as against informal mining practices to grow the sector and the economy.

Attracting Investment

However, with the federal government’s crave to have foreign investors participate in the nation’s mining sector, this has necessitated the identification of seven strategic minerals by the ministry which it is currently promoting to attract foreign investment and boost national economy.

According to Adegbite, the government is also gathering data through one of its projects aimed at ascertaining the locations and depths of the minerals in the country, which will help to remove the risks in the sector for foreign investors to come in.

During his interactive session with journalists in Lagos recently, Adegbite, who listed the seven strategic minerals as coal, bitumen, limestone, iron ore, lithium, gold and lead, described them as the minerals of the future.

He advised that Nigeria should focus on them to attract investment in the mining sector and grow the nation’s economy.
He said the seven strategic minerals were selected through a project called National Integrated Mineral Exploration Project (NIMEP).
He noted that for so long, Nigeria has been engaged in informal form of mining dominated by artisanal miners with little contribution to the economy, stressing that there is need to formalised mining in the country.

Adegbite said: “We need formal mining in Nigeria. You need to bring the right investors in to come and do mining in Nigeria, and that is what we are trying to do. You have such investors in the UK, South Africa, Australia, Taiwan, etc. Essentially, miners all over the world gather at these different fora in these countries.

“This is where we go to, to sell Nigeria’s potential to them- telling them that Nigeria has this, Nigeria has that. So, a lot of effort has been going on.
“At this point, I must acknowledge the efforts of my predecessors in office, who have been going out there to showcase what Nigeria has.

“We have got to the point that almost everybody in the mining industry all over the world is aware that Nigeria has minerals.
“But the foreign investors are shy of the risks involved. They want to be sure that when they come into Nigeria, it will be profitable for them, and of course, they can make their money quickly”.

He further said: “So what are we doing to de-risk the sector? Nigerian government is investing in exploration. Prior to my coming to office, President Muhammadu Buhari released a sum of money from the Natural Resource Fund to the ministry. We call it intervention fund.
“The sum of N30 billion was released to the ministry, this was in 2019-2018. Out of this, almost half, about N15 billion has been committed to a project we call National Integrated Mineral Exploration Project (NIMEP).

“This is an exploration project where seven strategic minerals have been selected for the country. These are coal, bitumen, limestone, iron one, lithium, gold and lead. These minerals are the seven strategic minerals that were identified at that time that we needed to promote for the investors to come in.

“Now, these seven strategic minerals are being explored where they occur. What are we trying to do with this NIMEP project? It is to establish data such that we present this data to the investors, telling them areas we have got the minerals and the depth, and reasonably, we can tell them the quantum. Basically, this is what the NIMEP project is doing, and it is a good investment”.

The minister, however, disclosed that the final results of the data would be out by the end of first quarter of this year, adding that with the data, Nigeria stands better chance to convince prospective investors to come and invest in the nation’s mining sector.

According to him, “we need to do just a little more work to get to the bankable stage, in essence, de-risking the sector. We are telling them and reassuring them that this mineral exists at this location at this depth and at this extent.

“So this will reassure the investors to come into Nigeria. I must say at this point that the seven strategic minerals are being reviewed, because they are so called minerals of the future.”

Reviving Ajaokuta Steel Company

On reviving Ajaokuta Steel Company in Kogi State, Adegbite said the federal government had entered into a partnership with the Russian Government which would see the Russians, the original builders, coming back to complete the project. He said the project was between 95 to 98 per cent complete and that it would take just a little push to get it working.

He pointed out that over $6 billion had been spent on the project since its inception, adding that the plant would be a game changer for Nigeria if it came on stream
Adegbite explained that the Russian government would nominate a contractor that would handle the project, while a build, operate and transfer (BOT) model would be adopted. This means that the company would operate the facility after building for a certain number of years to recoup its investment, before handing it over to Nigeria.

He also disclosed that the project would be funded by the African Export-Import Bank (Afreximbank) and the Russia Export Centre.

According to him, Afreximbank is coughing out $1 billion while Russia Export Centre is bringing $460 million for the project.

“So, we agreed with the Russian government. Hopefully by the end of this month, the MoU will be signed. It was agreed between President Muhammadu Buhari and President Putin that we would complete Ajaokuta on a government-to-government basis.

“The funding will come from Afreximbank and the Russian Export Centre. Jointly, they will fund the resuscitation of Ajaokuta and the payback will come from Ajaokuta itself. Once Ajaokuta starts operation, the experts that will come from Russia will run it; of course, the terms will be agreed,” the minister explained.
According to him, “we are looking at two and half years for Nigeria to begin to produce steel and this is a game changer for Nigeria. It will save us a lot in foreign exchange. Working at full operation, Ajaokuta will employ 10,000 engineers.

“Afreximbank is bringing $1 billion to the table and the Russian Export Centre is bringing $460 million. It is a debt, not equity; and it is coming at the rate of five per cent.

“But it is not so much a debt to Nigeria because Mr. President has told us that he doesn’t want Nigeria’s money involved in it. The business case built around Ajaokuta is such that it will pay back by itself. So, we are not going to use taxpayers’ money to pay that debt.”
While lamenting that the country spends billions of dollars importing steel, he stressed that with Ajaokuta functioning, it would be able to meet domestic demand.

He added that the steel company would be very useful for Nigeria’s industrialisation, pointing out that it could even be manufacturing ammunition for the military.
Adegbite further explained, “If Ajaokuta were to produce, the facility in Ajaokuta is so outstanding, we can even begin to make ammunition for the military, we can begin to make car parks for vehicles, engine blocks, everything is there. So, there is a lot of potential, ones you produce steel you can now transform it to anything.

“Of course, it is creating a lot of employment which is the mandate the president has given us –create a lot of employment, generate revenue for Nigeria, and of course, begin to take millions of youths who are roaming the street off the streets.
“Ajaokuta has a lot of benefit downstream as well. There are a lot of foundries that will benefit from Ajaokuta, our industries will benefit.

“There are so many things that will come from Ajaokuta. And like I said, Ajaokuta itself is mining because you have to mine the iron ore, which is the major ingredient for steel production.”

Downstream Policy

The minister also explained that the government’s Downstream Policy was aimed at ensuring that value was added to the mining resources before they were exported.
This, he further explained, was ensure beneficiation of the mining proceeds and to avoid repeating the losses being recorded in the nation’s petroleum industry in mining.

He said: “There is a new policy we call ‘the downstream policy’. In the past, most of the minerals mined in Nigeria were exported in the raw form. We are now saying there must be beneficiation. “That is, you must add value before you export them. Of course, there is a lot of job opportunity in this as well. And of course, we will not be getting peanuts.

“When we export crude oil for instance, we don’t get as much as we should get. If we refine the crude oil and we export PMS or AGO or Aviation fuel and all that, we get more. So, we are avoiding that pitfall in mining.
“We are making sure that we add value, that is beneficiation. We add value to whatever we are doing whether it is steel, it is melted and all that.

“We are giving licenses to at least two gold refining companies. One is based in Ogun State, the other one is in Abuja. So instead of just taking the raw gold abroad, we refine them locally. “Government has also created a situation where the CBN can buy gold from us and keep some of their reserves in gold. They have agreed to keep about 10 per cent of our gold reserves. So, we can go to the CBN to buy gold.

“So these are measures to encourage mining in Nigeria. Like I said, the revenue will come but most importantly, at this point in Nigeria, we need to create employment for our people, because the idle hands are ones causing the problem in the country.”

Supporting Artisanal Miners

Also speaking about the effort of the government’s to support artisanal miners, Adegbite stated that the sum of N5 billion had been made available to them as soft loans and free mining equipment.

The minister who said this was to improve their capacity and productivity, added that they were also being trained on the latest techniques in mining.
He said: “Since President Muhammadu Buhari came into power, he has put a lot of money into mining. There was a presidential intervention of about N30 billion, which is being used very well. “There is also the World Bank support in mining which is about $150 million. But there is this fund that is created. We have N2.5 billion which we have put with the Bank of Industry.

“Bank of Industry has also backed that up with another N2.5 billion, making it N5 billion fund, that is for artisanal miners. It is to help them, it is so easy to access because we have tried the method in the past and then there was a problem.

“Everybody thinks this is part of the national cake, they want to access the money and then go away with that, that is not what we want. We want to use this money. We are given out this money at about 3.5 per cent interest rate maximum. So it is actually something that is very inexpensive to get.”