The Nigerian economy has over the years relied heavily on crude oil for foreign exchange earnings and government revenues. As with mono-economies, this reliance makes Nigeria vulnerable to fluctuations in crude oil prices and production.

This year, the twin shock of the coronavirus pandemic and the fall in crude oil price led to a multifaceted impact on the economy.

Nigeria has been talking about diversifying the economy and weaning it of dependence on petro-dollars. Last week, there appeared to be a credible step in that direction when Nigeria for the first time refined its own gold and purchased the refined product into a new gold reserve.

The Central Bank of Nigeria (CBN) paid N268 million for 12.5-kilogramme gold bar, and will now use it as a reserve instrument.

This is considered a step toward the actualisation of economic diversification in Nigeria, as gold futures trade up to $1800 dollars per ounce. But the journey to fully harness the potentials in the mining sector will be long and perilous.

Rampant illegal mining

While presenting the locally mined gold bars by the Presidential Artisanal Gold Mining Development Initiative, President Muhammadu Buhari disclosed that Nigeria lost about $3bn to the smuggling of gold between 2012 and 2018.

Aside from gold, Nigeria is also endowed with about 43 other minerals now lying untouched in various parts of the country. The mining of these deposits is dominated by artisanal miners who exploit these deposits without licence thereby depriving the government of revenue.

Gold deposits are mostly found in Zamfara, Osun, Oyo, Kogi, Jigawa, Plateau, Kwara, and Nasarawa, with active illegal mining going on on these sites.

Following the order from the federal government to stop illegal mining in Zamfara, a large number of the miners relocated to Osun state to continue their work, an investigation by PREMIUM TIMES showed.

Illegal miners @ Akad, Ilesha

The investigation revealed that the activity was aided by local chiefs and the police who took advantage of the regulatory failures of the mining sector.

Section 44 (3) of the Nigerian Minerals and Mining law of 1999 provides that ownership and control of all minerals in Nigeria is vested in the federal government, which is mandated to manage such natural resources as may be prescribed by the National Assembly.

Gold(en) attention

Last year, President Buhari launched the Presidential Artisanal Gold Mining Development Initiative (“PAGMI”), a comprehensive artisanal and small-scale gold mining development programme.

The initiative was launched to foster the formalisation and integration of artisanal gold mining activities into Nigeria’s legal, economic, and institutional framework.

It was the initiative that refined the 12.5kg purchased by the CBN.

Central bank of Nigeria building

Also, in February, the Minister of Mines and Steel Development Olamilekan Adegbite, announced that two refineries have been licensed to produce gold for export and reserve purposes.

“We have licensed two refineries in Nigeria. They will refine gold and of course produce bullion that the CBN [Central Bank of Nigeria] can buy at international prices,” he said.

He, however, did not give details of the refineries.

Economic potentials

If well harnessed, gold will liberate the Nigerian economy from solely depending on crude oil as it has the ability to generate more revenue than crude oil.

Gold, being a leader in the precious metals market, gets overpriced when the price of crude oil falls.

According to the Nigeria Mining Growth Roadmap, Nigeria’s gold reserve is estimated at 200 million metric tonnes.

Trading Economics placed Nigeria as the sixth largest country with gold deposits in Africa, with an average of 21.46 tonnes from 2000 to 2019 and reaching an all-time high of 21.51 tonnes in July 2019.

According to the 2018 Solid Mineral Audit conducted by the Nigerian Extractive Industries Transparency Initiative (NIETI), the government massively loses revenue through under-reporting black market activities.

It also said the black market activities generally pose security risk which is a disincentive for investors. “Therefore, the subsector may not be able to attract sufficient investment to realize full potentials,” it said.

It recommended that the government should expedite action on the proposed national gold policy so as to arrest further revenue loss and return sanity to the gold mining environment to make it attractive to world-class investors.

Other recommendations include:

“Government to also step up strong measures to rid the gold mining environment of unauthorized miners whose activities pose security threat.

“Increased monitoring of holders of gold titles, including their banking activities so as to detect under-reporting for prompt action. MID, collaborating with MCO is encouraged to pay closer attention to activities of gold titleholders and or activities in identified gold corridors” it said.

Expert speaks

The President of Nigeria Mining and Geosciences Society, Gbenga Okunola, said the yet to be explored gold in Nigeria is in economic and abundant quantity.

“If you look at the western half of the country, from the south to the north, there is a geological series of terrain we call the schist belt, where you have the main gold-bearing areas,” he said

Mr Okunola, who is also a professor of geology, said the schist belt starts from Ilesha and cuts through to the southern part of Sokoto.

He said a major company had been able to do serious exploration in Ilesha and pull about 500 thousand ounces of gold in a small area of 100 to 200-kilometre square.

“Ilesha alone has about 40 locations, we may be talking about over four million ounces of gold in Ilesha alone,” Mr Okunola said.

Need for big investors

Although he commended the federal government on the initiative, he said the country cannot rely on the artisanal miners.

“I will want to sound a note of caution. The Nigerian gold resource is big, we cannot only just open it up to artisanal miners, we have to look at the big-time players too and see how we can attract them.

“If you look at the big gold producing nations, they are not just relying on artisanal gold, there is a need for proper exploration.”

Mr Okunola said the limitation is that artisanal miners cannot go beyond 20-30 metres. “By the time they do this, the land becomes almost unmineable for any big-time mining.

“We have to look at it with cautious optimism, and an eye to bring big investors into the industry so that it can be sustainable,” he said.

Nigeria needs to industrialise

An economic analyst, Basil Enwengbara, said what Nigeria needs is to industrialise the economy.

“The gold issue is good because it can bring more revenue and also boost the scarce foreign reserve but it is not enough, it is not a policy we should focus all our energy on,” he warned.

“There is no better way to industrialise the economy than to invest in small businesses. Imagine if we could empower two million Nigerian small business owners?”

He said such a step would bring an economic industrial revolution in Nigeria, from small production to big supply and creation of jobs.