300 Entities Collapse, 86.7% Earn Below N3m as Nigeria’s Solid Minerals Sector Struggles

300 Entities Collapse, 86.7% Earn Below N3m as Nigeria’s Solid Minerals Sector Struggles

Emmanuel Addeh in Abuja

At least 300 business entities failed to produce any mineral resources, while 86.7 per cent of the operators in the solid minerals sector fell below the N3 million royalties payment threshold in 12 months, a development that underlines the almost comatose state of the sector in the country.

A newly-launched report by the Nigeria Extractive Industries Transparency Initiative (NEITI), disclosed that out of the 1,241 registered companies operating in the sector, only 914, representing 75 per cent paid royalties while 300, that is 25 per cent had no production and therefore paid no royalty payments.

Besides, out of the 914 companies that paid royalties, only 121, representing 13.24 per cent met the materiality threshold, a disappointing number compared to the volume of companies operating in the sector.

For context, the Raw Materials Research and Development Council (RMRDC) has listed 44 mineral types ready for exploitation, including bitumen, marble, gypsum, lithium, silver, granite, gold, gemstones, bentonite, iron ore, talc, among others.

 In Australia, for instance, the mining industry’s contribution to the Gross Domestic Product (GDP) of the country increased between 2019 and 2020 by 4.9 per cent to $202 billion. It’s the country’s largest industry with 10.4 per cent share of the economy.

Also in South Africa, the mining industry contributes about 22 per cent to the country’s GDP and employs over 760,000 people and constituted 41 per cent of Ghana’s exports.

Although Nigeria’s mining roadmap unveiled in 2016 targeted raising its contribution to GDP to 3 per cent, or $27 billion by 2025, the NEITI’s latest report which covers the entire 2021 showed that the country is far from meeting that target.

In all, the audit revealed that the solid minerals sector contributed less than 1 per cent to the national GDP in the period under consideration, and accounted for just 2.62 per cent of total revenue and 0.24 per cent  of total exports.

Despite exploration licenses increasing significantly by 324 licenses, that is 62.79 per cent , from 516 in 2020 to 840 in 2021, indicating a sustained interest in mineral exploration and production, the NEITI document showed that the surface has barely been scratched in the sector.

“There was an 85 per cent increase in the number of Artisanal and Small Scale (ASM) operators, from 1,273 in 2020 to 2,336 in 2021 across the six geo-political zones of the country.

“However, there are no commensurate data (i.e. production, royalty, export, etc.) to support this increase in operators. This implies that the sector has great potential yet to be harnessed,” the Ogbonnaya Orji-led organisation said.

The report added that the major challenge in revenue distribution from the solid minerals sector was due to the absence of a sector-specific fiscal regime, since it’s difficult to link the taxes to specific activities within the sector.

For the period under review, NEITI noted that the seven strategic minerals in the sector only contributed a total of N1.42 billion in royalty payments, with limestone being the dominant contributor at N1.03 billion.

“However, the significant disparity in royalty contributions between limestone and the other minerals highlights the under-performance of the latter,” NEITI added.

Nineteen states in Nigeria, including Zamfara and Enugu, contributed less than 1 per cent each to the total royalty receipts from the solid minerals sector, despite having significant commercial quantities of strategic minerals like gold and coal.

In addition, NEITI stated that it discovered a variance of 38.1 million tons between solid minerals export data reported by customs and the ministry, blaming it on lack of collaboration between the service and the superintending ministry.

“This implies that some companies are exporting without obtaining relevant permit from the ministry and payment of royalties on the minerals exported,” it stated.

Although 67 out of 121 companies covered in the audit, executed agreements with their host communities as required by the law, NEITI stated that there was no monitoring of the agreements which were not publicly accessible, contrary to Nigeria’s commitment to open government.

It observed that only 39 out of 121 companies made the mandatory social payments as contained in the signed agreements with their host communities while 10 companies made only non-mandatory social payments/expenditures.

NEITI recommended that there should be increased monitoring, and surveillance of the operators, which can be achieved through increased funding to the ministry, adoption of a risk-based approach to monitoring and focusing resources on high-risk areas or operators with a history of poor compliance.

 In addition, it called for the deployment of appropriate technology to support monitoring and enforcement activities and a whistle blower mechanism to encourage individuals with knowledge of illegal mining or environmental violation, to report such activities confidentially. The government should prioritise and provide continued support to companies engaged in Page | 88

It recommended the establishment of a Special Purpose Vehicle (SPV) dedicated to derisking the solid minerals sector value chain and to attract investments that drive revenue generation.

“The federal government through the ministry, must urgently review the solid minerals roadmap to align it with current market realities and implement sustainable strategies for boosting revenue from other strategic minerals, reducing reliance on a single mineral like limestone.

“To unlock the potential of coal, gold, bitumen, lead/zinc, iron ore and barites, in the various states with commercial quantities, revitalise the Nigerian Coal Corporation through a Public-Private Partnership (PPP). This collaboration between the government and private investors will attract investments and drive development in the coal sector.

“Likewise, for gold, there is the need to establish a national gold company under a PPP model to drive primarily exploration, exploitation, and gold beneficiation in the sector, ”the report stated.

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