Rebooting Nigeria’s dormant mining industry

Nigeria's mineral wealth could be substantial – but the industry has long suffered from underinvestment and chaotic regulation. Minister Dale Alake hopes to change that, writes Olumide Adesina.


Image : Kola Sulaimon/AFP

From industrial metals to precious stones, columbite to tantalite and limestone to zinc, Nigeria is replete with untapped mining resources. Dele Alake, the country’s minister of solid minerals development, stated on 29 April that it is endowed with minerals valued at a conservative $750bn.

But Nigeria has largely failed to generate significant income from its vast natural resources – less than 1% of Nigeria’s GDP is contributed by its mining industry.


Historically, the sector has faced low investment. Despite its potential, Alake lamented on 8 May that Nigeria’s exploration budget is ranked 12th in Africa by S&P Global Ratings, with just $2.5m invested, compared to Côte d’Ivoire’s $147m.

Many intriguing projects never make it past the exploratory or feasibility stage due to the difficulty of obtaining funds for project design and development.

The lack of reliable geological data, a lack of enforceable regulations, community insecurity, and weak human capital, are all to blame for the lack of interest. However, Nigeria’s economic diversification has become more urgent, due to the unpredictable nature of oil prices.

The Progressive Miners Empowerment Association (PMEA) argues that mining can fill the gap by directly employing 2m Nigerians. Nigeria’s senate president, Godswill Akpabio, says that with effective management, the sector could drive foreign exchange earnings and contribute to social inclusion and empowerment.

“We cannot underestimate the significant opportunities in this sector. Mining should be a central part of our foreign exchange earnings and a driving force for social development and empowerment,” he stated.

Government plans

In response, the government of President Bola Tinubu says it is stepping up to the plate. It is planning tax breaks and regulations that will allow multinational firms to repatriate profits – a major source of friction under the previous presidency of Muhammadu Buhari.

The government also plans to allocate N70bn ($46m) for exploration and has set up a state-owned solid minerals corporation offering investors and the public a 75% stake in a bid to spur further investment. In May Alake said that processes for enacting legislation for the establishment of the Nigerian Solid Minerals Corporation are underway in the National Assembly, through the House Committee on Solid Minerals Development.

“We are working with consultants to ensure the smooth emergence of a corporation which will be private sector driven. We are looking at a corporation with a structure that has 50% equity for the private sector; 25% for members of the public; and 25% for the federal government. Our vision is to erect private-sector-led enduring structures for the corporation that will foster efficiency, outlive the present administration, and consequently wean it from future government interference,” said Alake.

Segun Tomori, a spokesman for the ministry, says the government plans to offer tax breaks on mining equipment imports and streamline the process of acquiring operational licences and enable the complete repatriation of earnings. Given the size of the country’s potential resources, it is clear that there could be major private sector interest if the environment is right.

Gary Nagle, chief executive of the Swiss multinational mining and trading company Glencore, told the minister on 29 April that it would be prepared to invest in Nigeria, provided the government maintained a stable economic environment. In March, Nigeria and the United States agreed to form a working group on mining development to unlock investments.

“Let’s figure out a way between us where we can share whatever you have with our team, and then we can work with companies to see what makes sense for the United States to do,” said Amos Hochstein, senior advisor to the US president on energy and infrastructure.

“We will then look at what the infrastructural needs are to unlock and make those investments more attractive,” he said, pointing to the importance of clean energy to power the industry.

More data required

Consultancy PwC Nigeria says another major block to the industry’s development has been the lack of available data on mineral resources. Public dissemination of comprehensive and precise data on revenue creation, expenses, and other critical statistics is required. In addition to fostering good governance, this will make it possible for stakeholders and civil society organisations to monitor and evaluate projects effectively.

The government has responded by developing an information site, the Nigeria Mineral Resources Decision Support System, where investors can view details about infrastructure and mineral resources. Before now, potential foreign investors needed to fly to Nigeria to get the information they needed.

“The importance of data for investors cannot be overemphasised. With accurate data, investors will be able to project the commercial value of mineral deposits and make informed investment decisions. We have signed an MOU with German firm, GeoScan GmbH, and we are making strenuous efforts to partner with scientific and data-driven agencies, renowned globally, to be able to generate the requisite big geo-data that will attract international big players,” minister Alake asserted.

He said that an aeromagnetic survey has been conducted across the country, in collaboration with the World Bank, which has given a superficial analysis of mineral spread and deposits, stressing that a more detailed exploration is being pursued.

Bringing communities onboard

A key part of rebooting the industry will be giving local communities a sustainable stake in the industry. The oil industry’s failure to achieve this over many decades has provoked political unrest, oil theft and militant activity.

Advocates say the creation of a National Solid Minerals Areas Development Commission, fashioned after the Niger Delta Development Commission, could help to encourage sustainable practices, guarantee fair benefit distribution, and stimulate socio-economic development in mining communities.

Alake said that revised guidelines for Community Development Agreements makes it mandatory to get the consent of host communities before applying for mining licences. The revocation of dormant licences and the inclusion of plans for value addition are now federal government policies. In April, the federal government revoked 924 dormant licences spanning exploration, mining, small-scale mining, and quarrying under its new “use it or lose it” approach.

The costs of a failure properly to involve local communities in the past are displayed by the mushrooming illegal mining industry. Widespread illicit mining operations increase environmental degradation and imperil the lives of artisanal miners who operate without appropriate safety regulations or ecological safeguards.

President Bola Tinubu attributed the escalation of violence in the country’s north to unlawful mining. The illicit extraction of gold, diamonds, and other resources has been linked to Islamist terrorist organisations and organised crime. The cost of illegal mining of all types is estimated at $9bn annually.

To address the issue and promote the growth of a just and secure mining sector, the government recently recruited 2,200 mining marshals. Dozens of people were taken into custody by the government in connection with illicit mining operations in April and May, in what the mining industry called “the coercive component of the administration’s carrot and stick approach to combating illegal mining undermining security in the sector”.

The persuasive component, the minister said, entails artisanal miners forming co-operatives to legalise their operations. Alake pointed to the launch of 152 new co-operatives between September and April as evidence that artisanal miners are prepared to meet the government half way as it pursues its ambitious reform efforts.

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Olumide Adesina