Oil slump: Solid minerals to the rescue?

The solid minerals sector is adjudged as one of the viable areas for diversification of Nigeria’s economy following the decline in oil fortunes. ELEOJO IDACHABA reports:

Nigeria’s economy, which has been overly dependent on petroleum, has continued on the downward slide following decline in oil fortunes world over. This development has brought to the fore the need to further diversify the nation’s economy.

While the attention of the President Muhammadu Buhari-led administration has been majorly on the agricultural sector, the solid mineral industry is believed to hold a lot of fortunes for Nigeria.

For industry watchers the time has come for Nigeria to tap fully into its solid mineral sector especially as fortunes from the oil sector continues to dwindle.

Almost all the states of the federation has solid minerals, especially in the northern states, and are believed to be in large quantities that the proceeds can replace revenues from oil.

Zamfara’s bold move

In line with this, the Zamfara state government, recently, took a bold step and established a gold reserve in the state, the first of its kind in Nigeria, starting with 31 kg of processed gold that would be deposited in a bank.

The Zamfara state Governor, Bello Matawalle, during the ceremony said gold was entirely mined and refined by local artisanal miners in the state.

According to Matawalle, the decision to undertake and fully establish the project is borne out of economic and social considerations as he said the novel idea would have massive impacts on the indigenes and country at large both now and in the future.

“My administration will subsequently continue to buy gold from our local miners so as to gradually improve the reserve.

“Even though our state, like other states of the federation, is grappling with competing demands from the public, the resources at our disposal are meagre. We feel it is of utmost significance to invest in the future of our people.

“The establishment of the gold reserve, therefore, is part of the relentless efforts by my administration to diversify the state’s economy by exploring all potentials of the state and maximally utilise them for the benefit of both the present and future generations,” he said.

The governor explained that the reserve has relatively better returns on investment (ROI) when compared to financial equities such as stocks.

Matawalle, who emphasised the need to diversify the economy, cited the near collapse of the oil sector as justification for the diversifation into the solid minerals sector.

Analysts have said that given the federal government’s drive to diversify the economy, the bold step by Zamfara state government was a welcome development.

It is also said to have great potential for increased employment generation, higher IGR, savings of hard-earned FOREX and other spill-over effects on the economy.

We’re taking advantage opportunities – Minister

Speaking on the prospect of the solid mineral sector, the Minister of Mines and Steel, Olamilekan Adegbite, said Nigeria was aware of the exponential growth opportunities inherent in the mining sector and making plans to take advantage.

He said, “As a matter of fact, the government is targeting that the mining industry will start contributing as little as 3 per cent of the country’s gross domestic product (GDP) over the next five years. At the moment, the sector accounts for a mere 0.3 per cent.”

He noted that some of the minerals that have been identified by the government in its strategic solid mineral investment effort include gold, lead, zinc, limestone, coal, amongst others.

Analysts have said it was interesting how the government was now talking about investment in solid minerals, even more interesting is the fact that it’s happening when the country was suffering revenue shortage as oil export has continued to generate lesser income.

Blueprint Weekend checks revealed that artisans and illegal migrants had taken advantage of government’s lacklustre attitude in the past to carry out illegal mining to enrich individuals.

According to a report in a business journal, on monthly basis, about 500kg of gold was reportedly smuggled into neighbouring countries like Niger and Togo and from where the raw materials find their way to the Middle-east.

“Perhaps, a day will come when Nigeria will fully take advantage of the mining opportunities available to it. After all, other successful African economies such as South Africa and Botswana depend almost entirely on mining,” the journal said.

Statistics on industry prospect

Writing on the need for diversification, Banwo & Ighodalo, solid mineral experts said, “Recognising the precarious nature of an oil-dependent economy, emphasis has continued to be laid on diversification through development of the non-oil sector as a sure way for the country to stay on a steady recovery path in the short term; stabilise the economy in the medium term and build a formidable economic bulwark against external shocks such as oil price volatility in the long term.”

They noted that about 44 different types of non-oil mineral resources including gold, copper, iron-ore, limestone, bitumen, lignite, coal, lead/zinc, gypsum, kaolin, sapphire, granite, laterite, sand, and clay) abound across the 36 states of the country and the Federal Capital Territory which are enough to contribute to the overall GDP.

The annual statistics by Nigeria Extractive Industries Transparency Initiative (NEITI) on solid minerals audit report puts total revenue from the sector in 2013 at N33.86 billion and in 2014 at N55.82 billion thereby accounting for just 0.11 percent of GDP.

The report said in 2015, a marginal growth was recorded with accrued revenue hitting N69.2 billion and amounting to 0.33 percent contribution to GDP.

Also, figures by the National Bureau of Statistics (NBS) shows that minerals and mining sector contributed 0.55 percent to Nigeria’s GDP in 2016.

The minerals and mining sector could rake in more than US$25 billion by 2025 and contribute up to 3 percent of GDP.

The sector, according to report, is a game changer and growth driver for the economy. This is why the current goal of government to raise non-oil revenue through diversification would be better achieved by building a competitive mining value-chain capable of contributing to wealth creation through employment generation and domestic industrialisation.

FG backs states on diversification

In 2016, the Minister of Mines and Solid Mineral Development, Dr Fayemi Kayode, said: “There is nothing in the law prohibiting states from establishing their own special purpose vehicles for mining operations and approaching the mining cadastral office for a license.

“If any state has gold and the states think it will be best harnessed by managing it in partnership with a private technical partner, there is nothing in the law that says Kaduna, Bauchi, or Ogun states cannot use their special purpose vehicles to apply to the Ministry of Mines and Steel Development for a license, as long as the land is free and unencumbered.

“Anybody can have it. What one does with it, in accordance with the Mining and Minerals Act, as long as they follow the law, has no objection to any state benefitting maximally from its equity participation with a technical partner.

“The ministry would be willing to assist the states with data available to government countrywide, where necessary.”

Also, speaking at Chatam House in London, Fayemi said, “In Nigeria today, the Muhammadu Buhari administration has as one of its strategic priorities the diversification of economy’s revenue base from over-dependence on crude oil which historically has been her mainstay.

“We are now looking to grow other promising sectors such as the mining and agriculture sectors. As the federal minister in charge of the former, I am pleased to share insights into what I believe to be Nigeria’s next frontier of opportunity.

“Our decades-long fixation on hydrocarbon resources has obscured the immense scale of riches we have in the solid minerals sector and its potential to power a new age of economic growth.

“Nigeria’s minerals and mining sector is still largely under-developed despite its glorious past and abundance of mineral resources for development. “These minerals can be broadly categorized according to use, into five groups: industrial minerals such as barite, kaolin, gypsum and feldspar, limestone; energy minerals such as bitumen, lignite and uranium; metallic ore minerals such as gold, cassiterite, columbite, iron ore, lead-zinc and copper; construction minerals such as granite, gravel, laterite, sand; precious stones such as sapphire, tourmaline, emerald, topaz, amethyst and garnet.

“These mineral assets are available across the federation in varying mixes and proven reserves. No corner of Nigeria today is lacking in solid mineral assets.

“It is significant to note that among the minerals which occur in significant commercial quantities in different parts of the country are limestone – for which annual national demand is 18 million metric tons and which has driven the growth of Nigeria’s cement industry; talc – over 40 million metric tonnes of talc deposits have been identified; gypsum – over a billion metric tonnes of gypsum are spread across the country; bitumen – Nigeria has the second largest deposit of bitumen in the world; coal – there are over 1 trillion metric tons of coal resources on our soil.

“There are also significant quantities of several other minerals in Nigeria’s natural resource portfolio of at least 44 known mineral assets.

“Our most promising mineral assets however are gold, iron ore, barite, bitumen, lead, zinc, tin, coal and limestone.”

In the same vein, the federal government has continued to encouraging state governments to invest in mining in order to increase their revenue base and ultimately create wealth for the people.

The Minister of state for Mines and Steel Development, Uche Ogah, during a recent courtesy visit on the Benue state Governor, Samuel Ortom, in Makurdi on the need for optimisation of revenue generation, urged state governments to support the programmes of the Mineral Resources and Environmental Management Committee (MIREMCO) as it would aid it in enhancing revenue generation from mining operations.

 Governor Ortom said the state was willingness to adopt the federal government’s policies that would bring revenue growth and development to the state.

He therefore went ahead to solicit the ministry’s collaboration in mineral exploration while disclosing that a lot of unexplored minerals abounded in the state.

“Benue state government would readily take advantage of any opportunity to create jobs and put smiles on the faces of Benue people,” he said.

The minister further used the forum to unveil federal government’s willingness to revive the mining of barites in the country.

He therefore advised miners of barite to organise themselves into a single association that would cover the interest of all barite miners in the country.

In April 2017, the federal government launched  Economic Recovery and Growth Plan (ERGP) towards the diversification of the nation’s economic base from oil to the non-oil sector.

The arrangement, according to Investigation, targets seven percent economic growth by year 2020 with a more aggressive growth rate of 8.54 per cent for the solid minerals sector for the same period.

Also, as part of efforts to diversify the economy, the government plans a $7 billion investment in mining and steel for the next 10 years with a projected increase in the sector’s contribution to GDP.

This is as government was said to be pushing for legislation that would continue to guarantee 100per cent foreign ownership of mining projects in Nigeria in order to attract foreign direct investments (FDI) in the sector.

It was also learnt that government was working on establishing a regulatory agency independent of the ministry to take over the roles of existing regulatory units in order to facilitate transparency.

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