Nigeria's economy was largely dominated by agriculture and mining of solid minerals prior to the discovery of crude oil in 1956. The agrarian economy, characterized by the export of cash crops like palm produce, cocoa, rubber, timber, and groundnut, positioned Nigeria as a major exporter of farm produce. Concurrently, the mining sector (the Sector) saw Nigeria become a major producer of tin, columbite, zinc and coal by the 1940s. The cultivation of large expanse of arable lands and abundance of viable / priced minerals propelled the economy, leading to the development of infrastructure and institutions, including first-generation universities.
The discovery of crude oil in Oloibiri, Bayelsa State, brought about a transformative era for Nigeria's economy. This discovery fueled the industrialization of the country, with the Sector becoming an enabler for other sectors of the economy, such as construction, transportation, and the fast-moving consumer goods (FMCG) sectors. The significant export earnings from crude oil soon out-paced those of agriculture and mining, leading to the neglect of the latter. Nigeria became a mono-product economy, vulnerable to international oil politics and attendant uncertainty of export earnings. This shift marginalized the development of solid minerals, leaving the Sector in comatose. Illegal mining began to thrive, marked by inefficient practices, illegal trading, ecological degradation and substantial revenue loss to government through smuggling.
The sustained reliance on oil revenues (at the expense of other critical sectors) has overtime presented other challenges to Nigeria's development aspirations. The cyclical nature of the oil sector, marked by booms and dooms continued, until Covid-19 pandemic (Covid 19) struck in early 2020. Covid 19 exacerbated the situation, leading to sharp declines in oil demand in 2020 till 2022, and the inability of the government to meet revenue projections. As of 2023, Nigeria's debt stock stood at NGN97.34 trillion1, representing about 42 percent of GDP, which highlights the financial strains resulting from shortfalls in oil revenues.
In the face of these challenges, oil exports accounted for about 81.23% of Nigeria's foreign exchange earnings during Q4 of 20232, and the 2024 Federal Government's (FG) budget still heavily relies on oil, reflecting 43%3 of expected revenue generation. However, the continued dependence on oil revenues poses a threat to the economic development of the country and the well-being of its citizens. The President has acknowledged this reality, advocating for diversification, and has emphasized the country's past giant strides in the mining, agricultural and manufacturing sectors. The global push for modern technology and the reduction of gas emissions through alternative energy sources have also reignited interest in solid minerals on a global scale. There is therefore no better time than now to focus on solid mineral development in Nigeria, as one key sector which offers great potential in bridging the revenue gap and for diversifying the economy.
Challenges and Barriers to Solid Minerals Development
Navigating the path to development is typically fraught with challenges, and the mining sector in Nigeria is no exception. Nigeria has significant reservoir of solid minerals, with over 44 identified minerals dispersed across the country, including lead-zinc ores, gold, tin, niobium, gypsum, coal, lithium, gemstones, and many more. However, despite this abundance, the development of these minerals in the country lags behind that of some African counterparts (such as Guinea, Botswana, the Democratic Republic of Congo (DRC), Ghana, Cote D'Ivoire, and South Africa) who derive significant revenue from mining of solid minerals. Going by the available statistics, the Sector contributed only 0.77%4 to the nation's Gross Domestic Product (GDP) in 2023 (a fall from 0.84% that it contributed in 2022). Why has Nigeria not yet fully realized its solid mineral potentials? Some of the key challenges to the development of this sector are discussed below.
- Lack of Political will:
Economic diversification, using solid mineral development as a key lever, has been a policy priority for successive governments in Nigeria, albeit, with little success recorded overtime. For example, the Nigeria Mining Growth Roadmap (which was developed in 2016 to address the numerous issues confronting the Sector and to place the mining sector on the global map) highlighted immediate, short, medium, and long-term objectives and timelines for key actions. One of the key objectives of the Roadmap is for the Sector to be able to contribute three per cent to GDP by 2025. Seven years later, the Sector is yet to hit a 1% contribution to GDP mark, year on year. The reason for this lackluster performance is not far-fetched – lack of political will to execute the plans and actions contained in the Roadmap!.
Political will to act or not to act, plays a pivotal role in steering the course of policy statements, and in this instance, solid mineral development, as the lack thereof has impeded the implementation of the strategies well-articulated in the Roadmap and inhibited the growth of the Sector. Added to this problem, is the lack of continuity of policies and processes, and the potential "start-stop" syndrome that have bedeviled the Sector, due to changes in the leadership of the supervising ministry/changes in government. Institutions are difficult to build in an environment of frequent changes in leadership and uncertainty of policy direction.
- Slow technology adoption and inadequate Geoscience Data
The Sector's technological inclination necessitates advanced machinery and / or equipment throughout the mining value chain, from exploration (geophysical data generation), to drilling, quarrying, processing and refining. However, such machineries are expensive and not manufactured in-Country. Hence, the Sector is dominated by artisanal and small-scale miners who resort to unsafe mining practices with attendant health-related challenges and meager returns, both for the miners and the FG. Furthermore, lack of reliable geoscience data poses a credibility question on alleged reserves of some of the critical minerals, impedes investment decisions and makes the Sector less attractive to foreign investors. A reliable geoscience data not only provides the location and nature or type of minerals but also gives an indication of the estimated reserves of the mineral deposits. The previous administration had introduced the National Geodata Center (NGC)5, located at the Nigerian Geological Survey Agency (NGSA) with the aim to boost investment decisions, research, and the overall ease of doing mining business in the country. However, the expected dividend of this noble initiative is yet to crystalise given the evident paucity of reliable geologic data. There is therefore an urgent need for the FG to embark on detailed geo-science data gathering, and to ensure such data is readily available upon request by serious investors.
- Lack of Funding:
Inadequate funding remains a critical challenge in the solid mineral development landscape. The capital-intensive nature of mining operations demands substantial financial backing, both from the government and private investors. However, Nigeria has struggled to attract the necessary investments due to a combination of factors, including but not limited to insufficient bankable projects (due to limited geoscience data about reserves), policy uncertainty, security concerns, and global economic dynamics.
- Infrastructural deficiency:
It is no gain saying that infrastructure is a key element for the success of solid mineral development in any economy. For mining to thrive, it requires developed infrastructures ranging from well-established transportation network (for seamless pit-to-port processes i.e., the movement of equipment and personnel to mining sites and the evacuation of ore or minerals for sale and / or export), to security and reliable power supply. The previous administration recognized the importance of rail as a vital backbone to support industrialization and economic development. Indeed, significant mileage has been achieved in this regard, most notable being the commissioning of the Itakpe-Warri rail line (given its strategic positioning in the steel-rich state of Kogi). However, in order to significantly improve overall transportation and economic capacities of the rail network, it is expedient to link all the nation's ports of origin and destination – Apapa, Tin Can, Onne, Calabar Ports- to the rail network.
Since Nigeria continues to grapple with unstable electricity supply, insecurity and lack of good road and rail networks, these challenges affect the economics of basic mining proposals. Funding will typically flow in the direction of greater returns on each US$ invested on mining project. Where miners would have to provide all or most of the infrastructures needed to operate, this may depress expected returns, and make such mining proposals unattractive. Therefore, to achieve deep rooted growth in the Sector, the FG needs to promptly close the identified infrastructural gaps to catalyze the development of the Sector.
- Illegal Mining
This challenge is by no means the least of all. Illegal mining steals directly from the government's coffers thereby depriving the nation from benefiting from the gains of solid mineral development. The FG needs to strengthen its security apparatus to be able to contain and curtail the nefarious activities of illegal miners. In this regard, security outfits including the Nigerian Customs Service and the Mine Police, need to tighten their grip and ensure that illegal miners are apprehended, penalized and where possible, made to formalize their business activities.
A case for accelerated Solid Mineral Development
As noted above, the current administration recognizes the substantial benefits that solid mineral development can bring to Nigeria. It is therefore a welcome development that the President split the erstwhile Ministry of Mines and Steel Development (MMSD) into two: the Ministry of Steel Development (MSD) and the Ministry of Solid Minerals Development (MSMD). The restructuring of the ministry is arguably an indication of the President's commitment to prioritizing the development of mineral resources in the country, through a more focused approach. The expectation is that with the split, both ministers have their job well cut out for them, and stakeholders would hold them accountable for their efforts in using mining as a pillar of growth and diversification of the economy. Consequently, a case for the development of the solid minerals sector can be made as follows:
- Alternative Revenue Generation
Nigeria's economy is oil-dependent, and thus exposed to the vagaries and international politics around the resource. Furthermore, majority of the states constituting the federation depend on allocation from the Federation Account and Allocation Committee (FAAC), to meet their financial and fiscal needs, the former of which also depends, substantially, on crude oil revenue. We must break this jinx! State governments must explore the various solid mineral deposits abound in their states as alternative means of IGR – either by creating SPVs solely to work the mines/minerals or in partnership with private investors under the PPP framework. Apart from such ventures paying royalties and taxes on minerals explored to the government, it will also create employment opportunities for the teeming youths, who would in turn pay income tax on their salaries and remuneration to their states government.
- Strategic Global Positioning amidst Energy Transitioning
The world is on the journey towards energy transition, moving away from fossil fuels and transitioning to low-carbon energy and / or renewable sources. As global demand for metals and minerals increases, especially for those deemed critical (e.g., copper, nickel, and lithium), a drastic reduction in the global demand for oil and other related fossil fuels could dampen the fortunes of oil-rich countries like Nigeria. We are at the cusp of a major shift in energy sources and usage. Hence, there is no better time than now for the FG to make strategic decisions to position the economy for a future without oil, given the abundance of the much sort-after critical energy minerals like lithium and nickel in the country.
- Boost Industrialization and Increase Mining Contribution to GDP
Solid mineral has a huge potential to serve as a catalyst for boosting Nigeria's industrialization and by extension, the Sector's contribution to the nations GDP. The processing and refining of raw minerals into finished products open a large pool of market, both domestically and internationally. As stated above, mining contribution to GDP stood at 0.77% at the end of 2023, with a potential for exponential growth where solid mineral development is given due attention, especially in the wake of the increasing global demand for critical energy minerals.
- Foreign exchange earnings potentials
One other key benefit of developing the solid mineral sector include increase in Nigeria's foreign exchange earnings through export of crude / raw, processed and / or refined minerals. The transformation of the Sector is expected to result in a significant increase in Nigeria's foreign exchange earnings. Exporting minerals can help our balance of trade, especially in an import-dependent country like Nigeria.
The development of the Sector also creates employment opportunities through the absorption of skilled and unskilled labor, especially from host communities harboring the mining operations. Nigeria's unemployment rate as at Q3 of 2023 was 5%6, having a 0.8% increase from Q2. At 5% unemployment rate, Nigeria could use solid mineral development to solve this problem, to a large extent.
The Way Forward
In the face of daunting challenges, the prospects for solid mineral development in Nigeria remain promising, albeit with the need for concerted efforts to navigate the path forward. Hence, strategic measures and proactive steps must be taken to address the existing challenges and create an enabling environment for the Sector to thrive. Such measures should include: -
- Policy Reforms:
To drive solid mineral development, implementing robust policy reforms is imperative. The government holds the reins in formulating, enacting and enforcing policies that will catalyze the sector's advancement. Recent policy pronouncements have showcased the commitment to reform the Sector, with a focus on attracting investments and fostering sustainable practices.
Additionally, initiatives to protect the interests of host communities should be established / implemented as it reflects a commitment to responsible and sustainable mining practices. In this regard therefore, we will suggest that the current government revisit the Roadmap, refine its contents as applicable to speak to the current dynamics, and implement it to the letter.
- Strengthening Infrastructure and Technological Capabilities/Geoscience data:
The advancement of Nigeria's technological and infrastructural capabilities is pivotal for solid mineral development. There is a need for investments in technology to jumpstart the development of the sector, through enhanced and efficient exploration, extraction, and processing techniques. Moreover, substantial efforts need to be directed towards bolstering basic infrastructure, including road networks and stable electricity supply. Beyond this is the need to also enhance geoscience data gathering and collation for evaluation of mining proposals and development of bankable mining projects.
- Combatting Insecurity:
Addressing security concerns is paramount to attracting investments in the mining sector. Business operations do not thrive in an environment of insecurity. A collaboration between security forces and the mining industry would foster a secure business environment for investors. The government's commitment to ensuring the safety of investments in the sector is crucial for building confidence among local and international investors. Recent collaborations between security forces and the mining industry operators signaled a proactive approach to addressing security concerns and enabling an environment, conducive to investments. Furthermore, the recent inauguration of the Transport and Mining Marshals by the Honorable Minister of Solid Minerals Development may help to foster a more secured climate for the operators.
- Establishment of Institutional Support:
The establishment of institutional bodies dedicated to overseeing eco-friendly and safe mining activities is a commendable step. Such organizations include international aid agencies, government agencies, and non-governmental organizations (NGOs), among others. Specifically, the FG introduced the Federal Ministry of Environment and the National Environmental Standards and Regulations Enforcement Agency (NESREA) to enforce environmental laws, standards, guidelines, and regulations. Nevertheless, more work is required to instill grass root compliance and achieve a more sustainable mining ecosystem.
Conclusion
The potential of solid minerals to reinvigorate Nigeria's economy is evident, but realizing this potential requires a departure from the focus on oil. The neglect of the minerals sector and the rise of illegal mining activities underscore the urgent need for strategic interventions. There is a need for the FG to expedite action to implement policies supporting solid mineral development. This includes investing in modern technologies, infrastructure, and sustainable practices. Collaborative efforts with international partners can also provide insights and support to maximize the benefits of solid mineral utilization.
It is necessary for the current administration to build on the gains recorded by the previous administration in respect of the overall mining sector to ensure the upward trajectory is sustained. While there is a tremendous opportunity for the Sector to thrive and become the country's economic mainstay, it must be done well and responsibly. To attract investors, Nigeria needs to embrace robust environmental, social, and governance standards that protect communities and the environment.
Footnotes
1 Reports | National Bureau of Statistics (nigerianstat.gov.ng)
2 Reports | National Bureau of Statistics (nigerianstat.gov.ng)
3 Tax Alert - Issue No. 12.3 - KPMG Nigeria
4 Q4 2023_GDP Report (1).pdf
5 nigerian-mining-sector-watch-(volume5)(19052023).pdf (kpmg.com)
6 Reports | National Bureau of Statistics (nigerianstat.gov.ng)
The opinion expressed in this article is solely personal and does not represent the views of any organization or association to which the authors belong.