28 August 2013

Nigeria Digs Deep in a Bid to Revive Its Mining Sector

analysis

Nigeria forgot about its once lucrative mining industry. But through regulatory changes and foreign investment, it is now trying to regain its lost past.

When people talk of Nigeria's natural wealth, most immediately think of oil. After all, Nigeria's black gold accounts for up to 95% of the country's foreign exchange income and 80% of government revenue.

But, unbeknownst to many, oil is not the only precious resource lying under Nigerian soil. Though long neglected and forgotten, Africa's most populous country also contains a vast array of precious minerals, from its 2.7 billion metric tonnes of iron ore to its 3 billion tonnes of coal to its 2.2 trillion tonnes of barite, a mineral used for drilling.

In fact, Nigeria was a major producer of mined metals before oil was discovered in the 1950s and came to dominate the economy. But now it seems the government is trying to regain a lost past. This June, Nigeria's Minister for Mines and Steel Musa Mohammed Sada said in an interview with Reuters that Nigeria is aiming "to increase mining's contribution to the economy to 5% by 2015, from its current level of 0.5%" - a tenfold increase. And amidst a raft of new legislation and push towards privatisation, the mining sector can also expect to benefit from the financial and technical support of developmental partners such as the World Bank.

Neglect and decline

Organised mining in Nigeria began as early as 1903 under the British colonial government. And by the 1940s, Nigeria had become a major producer of tin, columbite, and coal.

However, the discovery of Nigerian oil in 1956 led to the rapid decline of the mineral extraction industries. In the 1950s, global demand for petroleum products was increasing - pushed in part by post-WWII reconstruction efforts - while the international market for mineral commodities was weaker. Understandably therefore, the Nigerian government and industry alike took the decision to shift their focus from minerals to the newly-discovered and more lucrative oil resources.

The Nigerian Civil War (1967-1970) also played its part in the decline of mining since it forced many mining experts to leave the country. Then, during the 1970s, the government's drive for indigenisation and privatisation led to a monopoly by state-owned corporations and wealthy government-backed elites. Under their watch, mismanagement and corruption caused productivity to plummet.

As Abdullahi Ahmed, a professor of History at the University of Nigeria, Nsukka, told Think Africa Press, "The Nigerian civil war crippled numerous industries in Nigeria and the mining sector was one that badly suffered. With oil, then as it is now, providing wealth for those in power, nobody took mining seriously and Nigerians are now suffering the consequences".

The age of renewal

However, having neglected the once lucrative sector for the past few decades, the Nigerian government increasingly appears willing to revive the mining industry. Investors are being sought for 34 different types of mineral - including iron ore, coal, barite, gold, uranium and copper - found in commercial deposits at 450 sites scattered across the country.

This will build upon the stimulus provided by foreign institutions and governments. For instance in 2004, the World Bank committed $120 million to help establish the Sustainable Management of Mineral Resources Project (SMMRP). And since then, the World Bank, along with the Canadian International Development Agency (CIDA) and the Australian Agency for International Development (AusAID), has launched a further two-year programme to support mines and steel development in Nigeria. This project is expected to build upon earlier reforms implemented within the SMMRP. And the support will help identify mineral resource corridors, improve education and training for mining sector employment, and update the fiscal regime for mining.

Meanwhile, the government has also been trying to create a regulatory environment attractive to foreign investors, such as by loosening regulation and taxation policies through the 2007 Minerals and Mining Act. This act reduces government participation in the mineral sectors to the role of "administrator-regulator", and allows exploration and mining licences to be held in full by foreign companies. It also provides a more favourable taxation regime to foreign mining companies; royalty payments are relatively low -- less than 5% -- and Nigeria's corporate tax rate is a competitive 35% of net profit, with mining companies exempt from all other Nigerian taxes. As part of the ongoing reform programme, the Ministry of Mines and Steel Development (MMSD) is also divesting its ownership in the sector.

Health and environment

However, while economic de-regulation may be useful for attracting investors, Nigerian mining is also calling out for much enhanced regulation of the health and safety kind. Indeed, regulatory deficiencies and the dangers of small-scale, unsupervised mining still plague the Nigerian mining sector.

These issues were made particularly apparent after the 2010 outbreak of lead poisoning in Zamfara State, which resulted in the deaths of over 400 children and left more than 3,500 children in urgent need of medical assistance. The epidemic -- considered one of the worst lead poisonings in modern history -- was linked to gold-mining activities. Unbeknownst to those involved in local artisanal and small-scale gold mining, high levels of lead existed in contaminated soil samples which were released into the air as lead-infused dust during the search for gold deposits.

The government response has been slow, with the 850 million Naira (about $5.3 million) fund budgeted for the environmental clean-up only being released in January 2013, more than two years after the outbreak.

Nnimmo Bassey, an environmental justice advocate on the board of the Health of Mother Earth Foundation (HOMEF), told Think Africa Press, "It is well known that the poisoning happened because of the lack of standards in the informal solid mineral mining sector in Nigeria. We have a lack of standards as well as a lack of regulations and enforcement of what regulations there may be. The absence of these allows artisanal miners and others to utilise chemicals, methods and practices that are detrimental to the environment and the people and this is where we went wrong".

Momentum is key

If mining is to benefit the country therefore, the Nigerian government will have to ensure there are strict health and environmental regulations to protect miners and the wider public.

But for now, many industry expert are focussing first and foremost on boosting the industry and developing its full potential. "Mining in Nigeria is still in its infancy stage", Vaughan Wickins, Mining and Metals Executive at Standard Bank, explained to Think Africa Press. "We just hope the government continues in its new policy direction."

Clearly much depends on the sustained commitment of the Nigerian government to truly expand and enhance the mining sector, especially as it could take several years for benefits from the reforms to be realised. And to sustain momentum for reform, it is important the government continue to place emphasis on strengthening institutions, transparency and accountability. Otherwise incentives offered to foreign investors could fall prey to the fate of other government initiatives of the past, and remain only an attractive mirage and could-have-been.

Lagun Akinloye, a British Nigerian, studied Sociology and Social Policy at the University of Leeds. He is particularly interested in the history and politics of West Africa, specifically Nigeria.In addition to his role at Think Africa Press, Lagun is an executive member of the Central Association of Nigerians in the the(CANUK)Email: lagun.akinloye@thinkafricapress.com. Follow him on twitter @L_Akinloye.

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