ANALYSIS: Tasks ahead of Dele Alake in Nigeria’s solid mineral sector

President Bola Tinubu recently assigned portfolios to ministers as part of efforts to drive his ‘Renewed Hope’ agenda for Nigerians.

The president split the erstwhile Ministry of Mines and Steel Development into two: the Ministry of Steel Development and the Ministry of Solid Minerals Development.

The development comes against the backdrop of Mr Tinubu’s promise during the campaigns to revive the Ajaokuta Steel Complex if elected as president. The rejigging of the ministry can thus be ascribed to the president’s commitment to prioritising the development of mineral resources in the country.

The new Ministry of Steel Development is expected to focus mainly on the moribund steel sector with the Ajaokuta Steel Complex as its flagship, while the Ministry of Solid Minerals Development will continue to play its oversight function as the sector’s regulator.

Nigeria’s extractive sector is critical to economic diversification, but numerous challenges plague it. While the challenges are inexhaustive, experts opine that some pertinent issues must be addressed to make the sector productive and contribute significantly to the growth of the economy.

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The Roadmap

The Nigeria Mining Growth Roadmap was developed to address the numerous issues confronting the sector with the aim of placing the mining sector on a global map. It highlighted immediate, short, medium and long-term timelines for key actions.

According to the roadmap, “Should Nigeria successfully implement the proposed recommendations, growth is expected to return to the sector through new exploration activity, operations and production from active mining, functional (and expanded) processing and refining capacity, and higher value-addition in exports. The net outcome will be the creation of thousands of direct jobs and potentially hundreds of thousands of indirect jobs. Furthermore, the impact on GDP will also be significant as industries can use the sector’s output better, substituting for imports”.

Similarly, the roadmap stated that the sector should be able to contribute three per cent to GDP by 2025.

However, the roadmap has not been implemented, seven years after its development. As a result, the sector still contributes less than one per cent to the national GDP, minerals are still largely exported without beneficiation, access to funds is still difficult for miners, gender inequality still thrives, and Nigeria is yet to judiciously utilise the potential inherent in the sector.

The new minister, therefore, is expected to drive the implementation of the roadmap to ensure growth and overall development of the sector.

Illegal mining

For decades, illegal mining activities have been prevalent in the industry due to the government’s negligence and abandonment of the once-thriving sector. Currently, 80 per cent of mining operations in Nigeria are artisanal in nature and primarily informal. Illegal mining activities continue to sabotage the economy as corruption thrives.

The former Minister of State, Mines and Steel Development, Uchechukwu Ogar, confirmed that Nigeria loses $9 billion annually to illegal gold mining and smuggling.

Sadly, some of these economic saboteurs are foreigners, who do this with the connivance of security personnel. While several arrests have been made, the powers that be often frustrated the efforts to get them prosecuted, according to the immediate past minister, Olamilekan Adegbite.

Apart from revenue loss, illegal and unregulated mining is also associated with environmental degradation, loss of livelihood, conflicts and loss of cultural heritage, among others. Experts expect the new minister to address the concern and effect appropriate regulatory controls in the sector.

The seven strategic minerals

Nigeria has over 44 identified solid minerals across the country but prioritises the exploitation of seven based on data availability and economic viability. These minerals are gold, baryte, iron ore, lead/zinc, coal, limestone and bitumen. However, as time evolves, there is a need to revisit these minerals. In the era of energy transition, some of the previously identified strategic minerals are termed low on priority. For example, coal is a major carbon emitter and a major contributor to global warming. There is a global debate on phasing down coal to mitigate climate change, even though some experts opine that Nigeria’s (and indeed Africa’s) technological and industrial growth record makes such an action counter-productive.

Also, barite has a lot of industrial uses, but it is mainly used as a drilling fluid in the oil and gas industry in Nigeria. As the world shifts focus away from fossil fuel to renewable energy, the demand for baryte is expected to reduce.

The minister is therefore expected to drive these conversations and make informed policy decisions that will ensure adequate development of the sector.

State and Community participation, ownership

The constitution vests primary ownership and control of mineral resources in the Federal Government of Nigeria. This means that even though the resources are sitting in the states, the states have little control over them. Experts have argued that the law is a major detriment to the growth of the sector and a major reason for the illegalities around its operations. In 2021, the former governor of River State, who is the current Minister of FCT, Nyesom Wike, and his counterpart, Governor Seyi Makinde of Oyo State, decried the failure of the federal government to use its mineral resources to develop the nation. They requested that states should be allowed to mine their resources.

As the minister begins to think of ways to ensure productive use of the resources, experts expect that these bottlenecks will be addressed.

Insecurity

Insecurity is one of the major challenges bedevilling the solid minerals sector. For the sector to attract meaningful investment, the issues of insecurity need to be seriously tackled. Mining, especially illegal mining, has been linked to insecurity in many communities. For instance, in Zamfara, arms are being exchanged for mineral ores, and certain powerful and well-connected individuals conspire with foreign nationals to plunder the nation’s resources. Insecurity associated with mining activities includes community unrest, banditry, kidnapping, gender-based violence and terrorism. Chinese nationals, for instance, have been linked to the funding of militant groups and accused of abuses and inadequate wages in the mining sector. The minister is expected to work with security agencies and other regulatory bodies to check that the practice.

Fiscal Regime

One of the primary challenges impeding growth in the Nigerian solid minerals sector is a lack of revenue earnings formula. Even though revenue generation in the industry is believed to have exponentially grown following the re-enactment of the Nigerian Minerals and Mining Act in 2007, experts termed this movement ”motionless”. This “motion-less movement” is linked to the absence of a clear fiscal regime in the sector. Some of the fiscal issues include a lack of a well-defined fiscal framework, erroneous and unreliable production statistics, revenue leakages, disproportionate and unjustified tax incentives, and the involvement of subnational governments. There is also the issue of multiple taxation in the sector, all of which the minister is expected to address to drive growth.

Solid Minerals Development Fund

The Solid Minerals Development Fund (SMDF) was established in 2007 to drive investment in the mining sector and as a way to reduce over-reliance on the oil sector.

The fund is said to have been used for “extraneous expenses” such as the rehabilitation of roads and drainages in some states, the funding of the 2015 general elections and the African Cup of Nations. According to the findings, N738.7 billion and $3 million had been illegally disbursed from the fund for the above-mentioned purposes.

If Mr Alake is desirous of developing Nigeria’s solid minerals sector, he must ensure the judicious use of the SMDF.

Experts Speak

The President of Women in Mining in Nigeria, Janet Adeyemi, told PREMIUM TIMES she expects the new minister to cut costs by diverting funds proposed to attend international conferences to establish pilot projects nationwide. She also urged the minister to promote indigenous conferences instead, support NGOs and make international conferences private sector-led.

“That said, the social impact of mining should be taken seriously. When you look at the social aspect of mining, it could equally cripple the society. A whole community can be wiped off, and aquatic life can be lost through poisoned water,” she said.

“Apart from Environmental Impact Assessment (EIA), there’s a need to have a mining index, what we call ESG (Environmental, Social and Governance). ESG should be taken seriously; then, there should be certification. Every company should be mapped according to its ESG component.

“It is high time Nigeria upgraded its strategic minerals, noting that it should not be static and should constantly change with global needs. “Our policies must not equally be static. We must keep rejigging it in line with global best practices. However, if you look at the mining sector, right now, we don’t have data. There is a need to have comprehensive data.”

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Mrs Adeyemi, a geologist, said the nation’s legal framework needs to be upgraded in line with best practices to address gender and child labour issues.

She also noted that funding is a major issue in the sector.

“Bank of Industry (BOI) should be made to account for the 2.5 billion domiciled in its custody. Who has benefited from the 2.5 billion for over how many years? It has become a cash cow for some people in government. Given the threatening global inflation, the government needs to jumpstart access to quick loans because they are relative to procurement.

“There is a need to build the sector by having a robust engagement with NGOs working in the sector because the ministry can never have the capacity to address the needs of the 774 local government,” she said.

Another geologist and mining expert, Emily Achor-Offodile, spoke on the need to revisit the roadmap to assess where the country is and devise the way forward.

She explained that making the country a mining hub would mean “the encouragement and stimulation of beneficiation and value addition of minerals to promote employment and wealth creation, sustained efforts on foreign direct investment and capacity building for ministry staffers”.

Amara Nwakpa, the executive director of Shehu Musa Yar’dua Centre, stated that policy adoption is essential to make the sector more productive.

“It is obvious the extractive landscape is rapidly changing due to the global energy transition. You see that a lot of attention is now moving towards solid minerals, especially critical raw materials. So we need a policy covering some of these critical materials, guaranteeing that Nigeria plays a vital role in the critical mineral value chain,” he said.