Fayemi: Nothing in our laws prohibit states from going into mining operations
Dr. Kayode Fayemi, minister of solid minerals and chairman of the Nigeria Extractive Industry Transparency Initiative (NEITI) told The Guardian steps taken so far to get the sector working, as well as challenges that must be overcome in order to have a robust and revenue yielding ministry.
We Still Have Much To Do, To Make The Industry Investors Friendly
Nigerians are looking to the solid minerals ministry to spin the FDI magic; what are the constraints in attracting investors to put money into solid minerals; and who are those who have indicated interest?
It is important to state that the solid minerals sector is a very competitive environment. If we are going to ask companies to come and invest, we have to encourage them. If Nigeria is going to ask the likes of Rio Tinto, or Anglo American, the major mining institutions, to leave where they are and come to Nigeria, which is perceived all over the world, rightly or wrongly, as a difficult place to do business, we must do something. From the country’s ranking in the World Bank Ease of Doing Business annual survey, it is evident what the challenges are. If one looks at the Fraser Index that looks at mining sector generally, particularly attractiveness of global mining destinations, Nigeria is almost non-existent on that ranking.
Since we are starting from such a low base, we must have something we are offering that would give an investor a serious reason to come to Nigeria. The only other way Nigeria can get the investor to come here without bothering about that, is to have minerals of such high grades and quality that they would ignore all the difficulties of doing business and come around. To do that, we have to make the country’s geological prospectivity to be independently verifiable as first class, high grade mineral resource. The good news is that a lot of investors are showing interest in our mining sector. But we need to put certain measures in place to attract the big players.
Some argue that the laws that make solid minerals the exclusive preserve of the Federal Government still restrict states from aggressive participation. What is the situation now? And if the laws were to be amended today, do you see states having the resources to invest on their own, apart from looking for foreign partners?
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 thinks 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.
In addition, government has said it is happy to introduce states to private sector operators who approach the ministry looking for prospective exploration opportunities in certain places in the sector, to avoid running into problems. Government has also argued in the new Road map that the section of the law that talks about consent of states, since one cannot get exploration license, or mining lease without consent from the host community. This is clearly a lesson from the country’s experience from the oil and gas sector concerning the Niger Delta crisis. We have also seen over the years that consent is often abused by elements within the same host communities, giving two or three letters to different companies, thereby causing conflict. We are introducing a new line of action that consent from the host community has to be ratified by the state.
Under the new arrangement, states have a greater legitimacy, as far as issuing of license is concerned. They know who the land belongs to, because they are the ones who issued the certificates of occupancy for the land in that state. Once the investor is able to go through that process, government would now ask: Yes, we have seen the host community document, but has it been certified by the state? So, one can see that gives the states a greater leverage, participation and knowledge, so they would not come later and accuse government that some people just came from the community and take things without their knowledge, based on license issued from Abuja. No! Government would be able to refer to your license ratification, that on a particular date, your office in charge of mineral resources, ministry of environment or natural resources in the state approved that this is the right host community to deal with in relation to this particular property. That would go a long way in reducing the tension we have seen in communities over rights to mineral resources.
We must strengthen the relationship between federal and the states. If mining is going to work in Nigeria, the tripartite arrangement between the investors, federal government (issuing the licenses) and the state governments (where the resources are located), must align seamlessly.
What are the gains of the resolution of Ajaokuta concessioning challenges inherited from the last administration and how was it brought about; did your government benefit from the paper works that were inherited from the last government, but which could not be tidied?
It is important to say that government is a continuum. So, regarding the Ajaokuta issue, it is a legal issue that has dragged for long. Since the concessional agreement was terminated, leading to a protracted legal tussle, before government opted for mediation. What we have demonstrated is the commitment to get Ajaokuta running at the shortest time possible. With President Buhari’s avowed commitment to ensure Ajaokuta be put to use, we have to deploy all our energy to resolve the legal encumbrances. Yes, the immediate past administration had commenced the mediation process. What we did was to speed up the process through our commitment to a timely resolution and that paid off, leading to the modified concessional agreement reached on August 1.
There are conditions precedent in the agreement government signed. This includes a joint audit between the federal government and the Global Infrastructure Limited. The review is ongoing now. There is a period in the agreement (150 days) within which the audit should be completed. The agreement was signed on August 1.
So, we are on course for the exercise to be completed as soon as possible. Once that is done to the satisfaction of all parties, the legal release of Ajaokuta Steel to the Federal Government would follow immediately. Don’t forget Ajaokuta Steel was gotten back in order for the Indians to have the remaining part of the concession for NIOMCO, Itakpe, which was concessioned for 10 years, out which the Indians had utilized three years by the time the revocation occurred. Then they took Nigeria to Arbitration Court.
Now, as a trade off, for them to release all the monetary claims they had on Ajaokuta Steel for the illegal revocation of contract and loss of business, Nigeria also conceded that NIOMCO should be returned for the remaining duration of the concession. Once the audit is completed, to both parties’ satisfaction, and Nigeria has Ajaokuta Steel back, then we take it up from there. And when you asked what I am going to do with Ajaokuta, I will tell you that government has decided that we have spent enough on Ajaokuta but we still want the benefits of Ajaokuta. How best to get these benefits, either from commercialisation, outright privatisation, PPP concession or any other aspect to asset sales, and at that stage we then involve critical players like the ICRC, BPE and hire a transaction adviser and then the NCP’s approval of whatever we decide on.
I can however say that we have had unsolicited interests from both private investors and state owned enterprises from countries like China, Ukraine, Russia and Belarus but when we get to that point it will be open and whoever is able to give us indubitable track record of steel production and money in the bank will be considered.
Cottage business is said to be the magic for industrial growth; what are plans to harness and expand cottage mining, which is currently constrained by regulations and funds?
You cannot formalise operators in the sector without inputs from the states. What we have agreed in principle with states is they are the ones to carry out first level of enumeration. If you are into mining, formal and informal, go and register at the state level. The federal government is prepared to support the state to undertake that exercise. Those who have been registered in the states will strengthen their capacity, to help find access to finance for such registered mining operators, and even provide equipment beyond the shovels and diggers.
But, that also enables us to capture the number of people operating in the sector. That’s what government is doing now. We have ceded the responsibility of registering miners to the states, just like if we want to know who the farmers are. Ministry of Agriculture in Abuja cannot determine who the farmers are. It is the ministry in charge of the resource at the state level that can say, local government by local government, these are the people registered as farmers. That’s the approach government is taking. It speaks seriously to the whole question of decentralisation of responsibilities in the sector.
That does not remove the point the federal government still has the role to monitor compliance to regulations, to ensure uniformity, support and safer mining practices.
When one says one is a miner, one must let government know where and what one is mining. In addition, government has also ceded to states responsibilities from managing the mineral buying centres the ministry built years ago. The numbers of states that have approached the ministry and are given the rights are growing by the day – Zamfara, Benue, Sokoto, etc. We have told them to go and manage the centres. We will provide all the support required.
For government, the principle is that one does not do mining from the federal capital. It is a local activity. The responsibility of the federal government is to regulate and ensure the necessary oversight is provided. If we are to succeed, mining cannot be micro-managed from Abuja.
What do you intend to achieve with the roadmap?
The roadmap focuses on four things. First is geological prospectivity: mining is about searching, if you don’t search, you won’t find, and it is when you search that an independently verifiable evidence of what you find becomes attractive to the average investors out there. So, we have captured that and then looked at where the gaps are in terms of the geological information available in the sector and we believe that it is inadequate, it is not of investment grade and not as precise as what you will find in the oil and gas sector for example.
With an OML in the oil sector, you can get almost to the letter how many barrels you will be pumping from a field and in how many number of years you will do that, with that you can go to a financial institution to get funds for investment. We need to get our mining information to that level. We have a geological survey agency that is statutorily empowered to gather the data but we cannot really say it has the level of what we want and one of the ways we have decided to go about this is to promote collaboration with other geological survey agencies and we have being talking to the Australians, Chinese and British in this regard.
We are also partnering with private exploration companies with a view to deriving from whatever results of such exploration activities, a mutually beneficial arrangement.
The second area tackled by the roadmap is the legal and regulatory environment. We are now talking about an agency that encapsulates all of our regulatory institutions: the Mining Cadastral Office, Mines Inspectorate Directorate, and Mines Environmental Compliance Unit under one roof but at an arm’s length relationship with the ministry, similar to what you have in NERC or NCC, but also with the capacity to generate its own resources and undertake compliance and enforcement in a much more dedicated and committed manner.
This will necessarily lead to a tweaking of the law and also the structure, operations and funding arrangement of the agencies being collapsed and reworked. That is what the roadmap implementation strategic team is working on with a view to producing a bill that can go to the Federal Executive Council and the National Assembly.
The third area is the relationship between states and the federal government. I have often said that if we are to succeed in mining operations in Nigeria, we cannot hold on rigidly to the principles of exclusivity that is enshrined in our constitution. But not holding on rigidly to it does not mean flouting it but working out an arrangement that is beneficial to all the critical stakeholders, which include the host community, governments and investors who need predictability of investment in this regards. What we have done was to decide how best States can become critical players and the first is that the 13 per cent derivative in oil and gas does not really specifically say oil and gas but also for all mineral resources and that is being implemented now.
Another is the principle of consent that is required by law. Right now consent is given by the host community and we have run into series of conflicts especially when minerals straddle through two communities and each gives consents to two different investors and creating unnecessary legal wrangling. So, we have introduced a new step which is revalidation of consents by the States because in any case land belongs to the State governments in trust for the communities and there is nothing that says the State should not determine the rightful consent giver and by that it frees us from the troubles around license award. We have looked at our approach to license. There is nothing in the law that prohibits States from owning licenses. Mineral rights are exclusive to the federal government but if a State establishes a special purpose vehicle that applies for license, it has as much right to do so like any other private company and we will treat it that way.
In principle, we cannot give a State license as a legal entity but we can give to a company in which a State has an interest. The issue for us is how best to advance the relationship between the States and the federal government. The final principle enshrined in the roadmap is the management of artisanal miners and the role of the federal and State government in that. We feel we should devolve a lot of responsibilities concerning artisanal miners to the States because they are operating largely at the State level and so the registration and enumeration of who is an informal miner should be handled at that level whilst support can come from us by way of organising them into cooperatives, capacity building and supporting with technology and tools, as well as access to finance.
That is the best way for us to measure much more accurately the contributions of mining to job creation and GDP because a lot of that is lost in the underground economy that we run in the sector.
As chairman of NEITI, are you alarmed that despite years of transparency talks, we still have these huge levels of unremitted sums in the extractive industry, and still not having the technology to compel accountability?
I’m not alarmed because I’m privy to what government is doing under the leadership of President Buhari. Asking a Minister to chair the Board of NEITI is in itself a demonstration of the fact that this is receiving attention at the highest level of government. Coupled with the work that NEITI is doing in moving the extractive sector from opacity to transparency, Mr President was in London for the Commonwealth Anti Corruption Summit and he took the significant step of signing up to join Open Government Partnership, an initiative which seeks to deepen the various anti graft measures in the county and achieve our objectives. So, whether you judge us by the actions we take as a government or by the body language of our key actors, there can be no doubt that the government’s commitment is strong and relentless. We are very focussed on strengthening the capacity of the institutions charged with the responsibility of promoting government’s anti corruption agenda whilst insisting that actions have consequences, crimes have punishment
As the country scrounges for funds to deliver on budget 2016 and in the long run diversify the economy, what message do you have for Nigerians?
I urge our people to cooperate with the government in its efforts to reposition the economy. A lot of damage had been done to the economy, but the sincerity of the present administration in fixing it is never in doubt. What is required of the people is cooperation. Each citizen has a role to play, while government provides the direction.
On our part as a ministry, we intend to build a minerals and mining sector initially focused on using its industrial mineral endowment to support its industrialization. Government policy should seek to support private industry by building overall competitiveness (e.g. quality, price, loss ratios) and improving the ease of doing business. We should seek to create domestic demand by competing to replace ores and minerals currently imported. Over time, with an expansion in domestic processing, we would build a cost led sector, as well as production expertise in select non-industrial minerals.