The Nigerian government earned ₦416.32 billion from the solid minerals sector from 2007 to 2018, an analysis by the Premium Times Centre for Investigative Journalism [PTCIJ] and Centre for Democracy and Development (CDD) has revealed.
Over half of that amount was earned between 2015 and 2018.
The figure emerged from data analysis, industry review, and review of documents obtained by PTCIJ and CDD from the Nigeria Extractive Industries Transparency Initiative (NEITI) through a Freedom of Information (FOI) request.
The figure is not eye-turning when compared to what Nigeria earned over the same period from the oil and gas sector. But experts and operators in the mining sector say its huge potential means much more would accrue if Nigeria properly harnesses its vast solid mineral resources.
According to the NEITI report, “Nigeria has published eight cycles of solid minerals audit reports since it signed up to the EITI. The sector has contributed ₦416.32billion in revenues to the federation in 12 years. Over half of this figure or (N279.0 billion) was earned between 2015 and 2018”.
The report shows a remarkable increase in revenues accruing to the Federation from the solid minerals sector over the years.
A breakdown of the accruals shows that in 2018, the total contribution by the sector to the revenue of government was N69.47 billion, up from the 2017’s total contribution of N52.76 billion. In 2016, the contribution was 43.2 billion and N64.5 billion in 2015. In 2014, Nigeria earned N49.1 billion as revenue from the sector and in 2013, it was N30.2 billion. In 2012, it was N25.5 billion and in 2011, the total was N27 billion.
The sector contributed N17 billion in 2010, N19.1 billion in 2009; N10.5 billion in 2008 and N7.5 billion in 2007.
The just released NEITI report also exposed the fluctuations in revenue earnings from the sector during the 12 years. For instance, in 2015, N64.46billion accrued to the federation, while in 2016, the earnings dipped to N43.22billion. It will be recalled that 2016 was the year Nigeria slid into a recession.
The contribution in 2018 was N69.47 billion, the highest since NEITI commenced reconciliation of payments in the sector. The figure shows an increase of N16.71 billion, representing 31.67 per cent, over the 2017 revenue of N52.76 billion.
The 2018 earnings of N69.47 billion also accounted for 16.69 per cent of the total revenues (N416.3billion) from the sector from 2007 to 2018.
A major component of government revenue from mineral deposits are royalties which returned N12.3 billion over the 12-year period. The other sources of revenue are taxes, permits, annual services and sub-national payments. The NEITI 2018 report stated that sub-national payments and other taxes accounted for “₦1.54 billion, representing about 2.23 per cent of total government revenue from the sector.”
NEITI’s record of royalty payments is based on the materiality threshold; a benchmark used to establish what payment will be reported or reconciled. This threshold is set per audit cycle as required by EITI. Figures used for this report are based on the threshold set for each year, according to NEITI.
A mineral royalty means payments to the holder of the mineral rights for minerals that are extracted from the land and sold in the markets. Mineral royalties were the most popular fiscal instruments used by governments to collect mineral rent prior to World War II.
The Nigerian Minerals and Mining Act (NMMA 2007) provides that royalty is chargeable on minerals obtained in the course of exploration or mining operation. The computation of royalty payable is based on the quantity of minerals consumed/used or sold in line with the Minerals and Mining Regulations 2011. Royalty payable is calculated based on the government-approved rate. Under the existing regime, applicable royalty is three per cent to five per cent calculated ad valorem on revenue and every company engaged in mining activities is required to pay to the government.
For the 12 years under consideration, the Nigerian government earned a total N12.3 billion. If the collection of royalties improves, there would be a considerable increase in revenue from the mineral sector for the Nigerian government, especially at a time when Nigeria’s major source of revenue, oil, is no longer profitable.
Nigeria’s Mining Sector
Nigeria is blessed with commercial deposits of many solid minerals from tantalite to barite, limestone, gold, bitumen, kaolin, topaz, etc. The quantity of the deposits in more than 500 locations across Nigeria suggests that the solid mineral sector, if well harnessed, can compete favourably with the oil and gas sector in the country.
The British colonial government created the Mineral Survey of the Northern Protectorates in 1903 and the Southern Protectorates in 1904. Nigeria started major production of coal, tin, and columbite in the 1940s. In 1956, when oil was discovered, the focus shifted from mining to oil and the mineral industries suffered. In the 1960s, the civil war led to mining experts leaving the country and mines being abandoned. Mining regulations drastically changed, and productivity declined. Following the rapid decline in solid minerals production, successive administration formulated a plethora of policies to reactive and revive the sector, including the creation of public-funded mining institutions in the 70s and 80s and subsequently followed by privatisation of those institutions in the 90s. In the late 1990s, the government started selling the institutions to private investors because of the failure to revive the sector .
The relatively low production output of Nigeria’s solid minerals constitutes a major challenge to the economy, particularly because this key sector offers such great potential for the diversification of the Nigerian economy. Prior to the 1960s, mining was a mainstay of the economy, contributing up to 50 per cent of the GDP.
But this high level of contribution declined precipitously, starting from the 1960s after the discovery of oil and gas which diverted the interest of both the government and investors from the mining of solid minerals.
Annual Royalty payment to FG
According to NEITI, the materiality threshold for 2007-2011 was one million naira and data from the agency showed that in 2007, total royalty earned was N340.3 million from 65 companies. The same number of companies made a payment of N446.6 million as royalties to the federal government in 2008 and N499.2 million in 2009.
In 2011, N572.4 million was earned in royalties from 66 companies.
The materiality threshold for 2012-2013 was doubled to two million naira and the government earned N1 billion in 2012 from 56 companies, and in 2013, N1.1 billion from 59 companies.
Unilateral disclosures started in 2012, i.e reporting all companies payments, but only the payments of companies that met the prescribed threshold were reconciled.
In 2014, N1.3 billion was earned as royalties from 39 companies and N1.2 billion in 2015 from 42 companies. N1.6 billion was earned in 2016, N1.5 billion in 2017 from 59 companies and N1.9 billion from 69 companies in 2018.
A total of 69 reporting companies out of the 720 companies that paid royalties in 2018 met the materiality threshold of ₦3 million royalty set for the report.
12 Years Sector Contribution to FG Revenue
Many troubles of the mining sector
The Nigerian mining sector is bedevilled by a number of problems, chief among which are shady practices that have been identified by various stakeholders and in previous NEITI audit reports. An analysis by PREMIUM TIMES in January revealed that the Nigerian government might have lost about N4 billion in three years, owing to illegal practices and corrupt activities of companies operating in the sector.
The many schemes through which these companies have defrauded the government include non-remittance of revenues, unlicensed mining and evasion of taxes, illegal practices, and incessant smuggling of solid minerals out of the country.
Illegal mining scourge
Most of the mining in Nigeria is carried out illegally. Indeed, the gold deposits in Zamfara State and the tantalite deposits in Kogi State are largely being mined illegally by a ‘cartel’ that mines and carts away the minerals in collaboration with ignorant and vulnerable members of the host communities.
Beyond Zamfara, active illegal mining is going on in Osun, Oyo, Kogi, Jigawa, Plateau, Kwara and Nasarawa States today.
An investigation by PREMIUM TIMES in December 2019 exposed how illegal mining thrives in Osun State even with the support of the police and local community chiefs.
The December investigation showed that when the federal government ordered a stop to illegal mining in the north-west state of Zamfara in April 2019, most of the non-licenced miners simply moved about 700 kilometres southwest and relocated to Ilesha, Osun State to continue their illegal business.
Findings by PREMIUM TIMES showed that the illegal miners were still operating, joined in the illegal business by foreigners, especially Chinese nationals.
On Sunday, the Osun government announced the arrest of 17 Chinese men and some Nigerians including a traditional ruler for illegal mining.
Illegal mining in Osun state is not new. However, the influx of new entrants, including the Chinese, has taken the dangerous mining activities to the level of endangering the environment. Their activities are aided by corrupt local chiefs and the police who capitalise on regulatory failures, PREMIUM TIMES investigation revealed.
Slack federal control and leakages
Section 44 (3) of the Nigerian Minerals and Mining Law of 1999 vests the ownership and control of all minerals in Nigeria in the federal government, which is mandated to manage such natural resources in a manner as may be prescribed by the National Assembly.
The Ministry of Mines and Steel Development is responsible for granting licences to operators. Any operator without a licence from the ministry is deemed to be carrying out illegal activities. However, there continues to be questions as to how well the ministry has fared in issuance of licenses and its ability to curtail illegal mining activities.
A policy expert, Patrick Okigbo, attributed the lack of strict measures to curb illegal mining to the way Nigeria is managed on all fronts. He said the reason why the solid minerals sector has not been able to earn Nigeria much revenue was because of too many leakages.
“The sector is dominated by artisanal miners, people who with no licenses from government, with no government involvement, go into the various areas, pay off the local leaders and they have access to mine the resources and they take the resources out of the country without paying any royalties, without paying government any taxes, without the government getting a share of natural resources.
“So if you go to a state like Nasarawa, and even Kaduna and so on, we have a lot of artisanal miners who mine all kinds of precious metals. The mines are sold to individuals by the locals, the government does not get much out of it.
“The challenge of the sector is basically the same challenges that we have across the board in all the other sectors where individuals are making money, and it becomes difficult for the government to take control of the sector, especially again when you are working with both the bureaucracy that has more incentives of turning a blind eye, especially if some of the money is signed away into private pockets.
“But I think what is going to happen now is, with oil out of the door or maybe heading out of the door, the government will have no other choice but to do the heavy lifting required to fix the sector and ensure that it gets the royalties.
“Is it going to be easy? No. But I think if we realise that our backs are against the wall, then it forces us to do the needful, it forces us to go in there no matter what the challenges are, resolve these challenges and then we move,” Mr Okigbo told PREMIUM TIMES.
Potentials of Nigeria’s solid minerals sector
Though Nigeria’s economy is highly dependent on oil as the main source of revenue, the country has over 50 natural resources deposited in commercial quantity across its 36 states and the Federal Capital Territory. These resources include limestone, gold, coal, gypsum, kaolin, sapphire, granite, copper, iron ore, sand, clay, laterite, and bitumen.
According to a report, the natural resources sector of Nigeria loses N50 trillion annually to untapped resources.
The Nigeria Investment Promotion Commission (NIPC) in a report estimated that the current commercial value of seven of the country’s solid minerals [Iron ore, Coal, Lead/Zinc, Bitumen, Gold, Limestone and Barite] runs into trillions of dollars. Indeed, Nigeria’s Ministry of Mines and Steel Development claims that the country loses about $40 billion annually in unexploited gold alone [168.29 per cent of Nigeria’s 2017 budget of N7.28 trillion budget; higher than oil revenue in 2015 ($37billion), and far higher than the 2016 oil revenue of $26billion.]
Kabiru Mohammed, the President of Miners Association of Nigeria (MAN), in an interview said solid mineral can help the government in diversifying the economy. He lamented that the federal government did not appear to realise the huge potential in the sector.
“What am I trying to say? If you hear the presidential address where the president came up with a package in which some ministries like Ministry of Trade and Investment, Ministry of Transport, Central Bank of Nigeria and a few other financial institutions were mandated to work together and come up with a formula that can push the economic stress that everybody is facing now in the country, the Ministry of Mines and Steel development was not mentioned.
“I was surprised at the exclusion of the solid minerals ministry because the sector is central. All the industries that are expected to be assisted or at the end of this coronavirus are expected to climb up cannot survive without the resources of the solid minerals sector to activate their industry. We supply them with the necessary raw materials, just like kaolin is used in pharmaceutical companies and other things.
“The government should pay particular attention to the solid minerals sector at this critical time so that even after the coronavirus must have ended, our solid minerals would be bouncing and alive and able to attract investors. The government cannot afford to stay without any other source of revenue, and the only potential source of revenue now is the solid minerals. I expect the government to allocate a special fund on this sector so that no matter how we are going to float, the sector can rescue us from the economic crunch,” Mr Mohammed said.
How best to improve royalty operations
In previous years, NEITI had called for a comprehensive action plan to shift attention from oil to the development of the solid minerals sector in the face of dwindling oil revenue. Experts also argued that the current royalty collection regime can be improved upon.
Mr Mohammed of MAN said “the methodology of royalty collection has not been a very effective one, and that is why recently the current minister of mines and steel development put up a committee where we can look into the way the royalty is being collected and then come up with an improved way of doing the collection.
“Definitely, there should be adequate revenue for the government. The only thing that we want is that the royalty being paid should be commensurate to reasonable adjustment in the response of the government to our feelings and yearnings.
“The package is being put into a single structure which then I believe the minister will now recommend to the federal government for possible approval. Then, based on the committee’s assessment and agreement, it will now be placed into the arena of the mining circle where each and every mineral will now be attracting rent as deemed fit.”
Mr Mohammed said to stop miners evading royalty payment, the method of collection of royalty should be fine-tuned.
“I must confess, some of us Nigerians don’t like to pay our dues to the government,” he said.
He recommended that the government should do proper records, enumeration and database of operators. He also urged that operations in the sector be technology-driven.
“If these recommendations are executed and due attention is given to the mining sector as part of Nigeria’s economic diversification plans, the sector is likely to yield quick gains that can effectively cushion the otherwise devastating impact of the fluctuating oil and gas sector,” the mining association chief said.
”Support to this report was provided by the Centre for Democracy and Development (CDD-West Africa) and it is made possible through funding support from Trust Africa.”