Solid minerals resources as effective means of exiting the crude oil curse
Nigeria’s solid minerals sector accounts for about 0.3 per cent of its Gross Domestic Product (GDP) due to the over-dependence on crude oil resources. The domestic mining industry is still at the developing stage, leading to the importation of minerals that could be produced in the country. Roseline Okere, Assistant Editor, Energy & Solid Minerals, examines the sector and how it could be used as means of economic diversification.
The Bitumen reserve in Nigeria is twice the volume of existing crude oil. However, it is sad to admit that most of the Bitumen used for the country’s road construction and maintenance are imported.Considering that Nigeria’s vast mineral wealth cannot be exploited all at once, few minerals could be prioritized for development.
According to the recommendations of the Mining Implementation and Strategy team, Nigeria’s priority minerals will be those for which data exists around commercial viability and based on these criteria, seven strategic mineral resources have been identified as priorities.These are Iron ore, Coal, Bitumen, Limestone, Lead/Zinc, Gold and Barite. These resources are priorities for Nigeria’s domestic industrialization and infrastructure requirements.
Barite for instance is imported from Morocco in huge quantities with foreign exchange by oil producing companies for the drilling of crude oil and Nigeria has it in commercial quantities in Nasarawa, Cross River to name a few.Ghana for example, prioritized gold and it contributes more than 14 per cent to the country’s Gross Domestic Product as at 2014. Gold also accounts for 25 per cent or more of the country’s export value.
The Democratic Republic of Congo has prioritized coltan (columbite – tantalite), which is used in the electronic industry for capacitors and high power resistors. Current price of tantalite ore is $158.90 per kilogram compared to a barrel of crude oil at $80. Nigeria is blessed with both minerals in commercial quantities.
With these testimonies, it is evident that the Nigeria’s solid mineral sector has the ability to replace oil and gas as the main source of revenue generation very easily, Chairman of the Mining and Solid Minerals Group, Lagos Chambers of Commerce and Industry (LCCI) Otunba Babatunde Alatise, told The Guardian in an interview.
Solid Mineral sector in Nigeria has remained underdeveloped due to long period of neglect and dependence on crude oil.The Nigerian Minerals and Mining Act (2007), with globally competitive sector incentives has been in place since 2007, however, the sector’s growth and contributions to GDP have remained less than ideal.
Although, the Federal Government has implemented a number of reforms aimed at addressing the sector’s underdevelopment to ensure that the various natural resources of the country are harnessed for self-sustained growth and development, the impact is yet to be felt in terms of its contribution to the country’s revenue generation.
Before independence, Nigeria’s economy, although based on agric-economy was viable and self-sustaining. However, the discovery of petroleum and its exploration enhanced cheap and consistent flow of foreign exchange earnings.To enhance the sector’s contribution to revenue generation in the country, Alatise emphasised the need for the Federal Government to provide enabling environment for the sector to thrive.
He stated that the solid mineral sector holds capacity to generate five million jobs in the next 10 years if the ongoing reform in the sector successfully passes through.According to him, global best practice holds that no party should serve as operator and regulator simultaneously.Alatise also stressed the need to set an inclusive legal, regulatory and operational framework/model that internalises the activities of mining artisans and other informal operators in the industry.
He stated: “Government should improve on creating an enabling business environment with the right policies. Coupled with the above, security challenges, civil unrest and corruption must be surmounted.“Asides the discovery of crude oil in 1956, the Nigeria solid mineral sector experienced further set back due to indigenization decree introduced by the military causing many expatriates had to leave the country due to the unfavorable policy. A more recent security challenge is Boko haram and alleged herdsmen attack.
“The northern part of the country is richly endowed with lots of valuable minerals but presently the area is not investment friendly due to the growing rate of killings.“The non-existence of a viable commodity exchange is also a factor. The unstable rate of foreign currencies against the Nigeria is not encouraging.“Infrastructure deficit should be met. Ports and roads leading to internal market should be constructed. Capacity building and training for all MDAs involved especially Nigerian Customs Services to avoid the continued undocumented export of our Mineral resources.”
Also, the Publicity Secretary of the association, Tony Nwakalor, frowned at the stringent condition for accessing the solid minerals intervention fund.He said there was need for the Federal Government to remove all obstacles to easy access of the N30 billion intervention funds for the development of the mining sector.Nwakalor, who decried lack of available geo-science data in the sector, said: “We acknowledge that economic geological data from National Geological Survey Agency’s exploration activities is not readily accessible by investors and other stakeholders.”
The Advisory Partner and Mining Leader at Pricewaterhousecoopers (PwC) Nigeria, Cyril Azobu, said that attention should be given to the solid minerals sector with the uncertainties around crude oil prices and the long-term projections of its relevance as an energy source.
According to him, replacing crude oil as the mainstay of the Nigerian economy is possible but it will take years of consistent efforts to get the policy environment right, investing in critical infrastructure and creating a sector that will be more attractive to investors both foreign and local.He said that the current ambition as captured by the Mining Roadmap is for the sector to contribute up to three per cent of GDP by 2025.He stated: “Nigeria is a fast evolving mining jurisdiction. The sector’s contribution to Nigeria’s GDP currently averages only about 0.5 per cent but we know it can contribute much more given that most of the country’s rich solid minerals endowment remain largely untapped. So for the most part, we are yet to fully harness the sector for economic development.
“Historically, there has been a focus on oil and gas as the main source of government revenue with the solid minerals sector suffering a protracted neglect.“It is cheering to note however that we are seeing a remarkable shift in thinking among policymakers towards other sources of revenue for government besides oil & gas. The solid minerals sector is one such source that has gotten some attention with efforts made in a number of critical areas to develop the sector and make it more attractive to investors.”
As the Federal Government is making efforts to increase the contribution of the solid minerals sector to Nigeria’s economic development, it is also fighting hard to curtail the activities of illegal miners.For example, the Minister of Mines and Steel Development, Abubakar Bawa-Bwari, tasked Nigeria Customs Service Central Bank of Nigeria and the Nigeria Ports Authority recently to put the guidelines together to ensure that unprocessed minerals were not taken out of the country legally or illegal.
The Minister said that unprocessed solid minerals were being exported from Nigeria on a daily basis and sold at a cheaper rate.He said that Nigeria is endowed with gold and gemstones located in several states but are presently being exploited by Artisanal and Small Scale miners.These minerals, he added, are mostly smuggled out of the country in an unrefined and unprocessed form, leading to massive loss of revenue for the government and producers, as gold and gemstones are mostly not appropriately priced.’’He said adding value to minerals before they are exported would go a long way in contributing to the nation’s Gross Domestic Product.