15 December 2012

Nigeria: NEITI Uncovers N4 Billion Loss From Illegal Solid Mineral Mining

An inaugural audit report on Nigeria's solid mineral sector which was commissioned and released by the Nigeria Extractive Industries Transparency Initiative (NEITI) has shown that approximately N4.048 billion royalty payments due to the federal government for four years was missing.

The audit report which was presented in Abuja indicated that base-line information gathered from scoping studies that were conducted earlier in the sector revealed that there are discrepancies between government receipts and operating companies payments within the periods.

The four-years cycle audit which was specific on operations in the sector from 2007 to 2010 also indicted Federal Government agencies saddled with the regulation of the sector of negligence of due process and disregard for extant laws guiding operations in Nigeria's solid mineral sector.

Chairman of the National Stakeholders Working Group (NSWG) of NEITI, Mr. Ledum Mitee said while presenting the report that of all discrepancies noticed in the audit process, prices used for the calculation of royalty payments in the sector were not in tune with the current market value of excavated mineral components, thus leading to huge loss of revenue to Nigeria.

Mitee said: "For example royalty for a tonnage of granite is still a pittance of N800 which is the price as at 2002. Today in 2012, the minimum market price on royalty per ton is N2,500. The prices used for the calculations on all mineral deposits are long overdue for review. We calculate that about N4.048 billion is total revenue lost as a result of these outdated rates that have been used for royalties in the sector."

He noted that several factors, including illegal mining, inadequate investments and lax regulatory and monitoring framework or measure have for decades prevented the solid mineral sector from attaining its full potentials, adding that the report as hoped, will help Nigeria embrace the potentials in the sector.

Accordingly, a total of 78 companies were covered in the audit process, which spanned physical, financial and process audits; the companies were found to be majorly engaged in construction, manufacturing, artisanal mining and mineral buying centres

"Between 2007 and 2010 the audit reports show government receipts was N54.56 billion while remittances from the companies was N53.87 billion reflecting a little over N687 million discrepancies, which is 1.25 per cent of total government receipts over companies' payments.

The total royalty, ground rent, tax and levies paid by the companies in 2007 to 2010 was N2.21 billion , N173.93 million, N51.37 billion and N122.91 billion respectively," Ledum stated.

adequate details of activities by the major players (companies and entities), and inadequate details of the operating /production cost in the major companies/entities financial statements.

"The audit also established that the solid minerals sector is controlled mainly by construction companies (quarrying sites) and cement manufacturers, making them the major players in the industry. This is unhealthy for a sector that should attract full time investors with the capacity to establish factories and industries. Most of the companies audited do not submit their annual tax returns to Federal Inland Revenue Service (FIRS). There is lack of synergy between the Mining Cadastral Office and the state mines inspectorate thus allowing illegal miners to thrive and those without proper licenses."

The Chairman also noted that the lack of requisite capacity and logistics to effectively monitor the production of companies in order to determine tonnages, production levels and royalty payments have provided companies the opportunity declare irregular records without proper verification.

Meanwhile, the Executive Secretary of NEITI, Mrs. Zainab Ahmed has said the oil and gas audit report for the period 2009 to 2011 will be presented to the public in early 2013 considering that the audit exercise had already been concluded by the independent auditors contracted for the job.

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