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Mines And Solid Minerals Underdevelopment

By Babs Odukoya
20 December 2009   |   10:34 am
The Minister of Mines and Solid Minerals Development, Mrs Dieziani Alison -Madueke was in Beijing China recently where she addressed an Investment Forum and announced that the Government of Nigeria has approved a three-year tax holiday for new companies in the Solid Minerals sector. The companies are to commence payment of income taxes after three years beginning with accumulated tax liabilities of those previous three years. She also announced to that audience the reduction of company income tax from 35% to 30% and capital gains tax from 20% to 10%. Other incentives, according to the Minister, include import duty exemption on mining equipment and regularised repatriation of foreign capital.

The Minister must have figured that Nigeria, and herself as envoy, may be taking the world by storm in Beijing by delivering a long speech on the lofty vision of the Ministry and announced that, in particular, Nigeria has offered a three year tax holiday to new mining firms. She was saying nothing new; being that locally these initiatives were announced years ago and the world has moved far ahead of mere tax holidays as a lead factor in the incentives for long term investment as required in mining endeavours.

The tragedy of our situation is that 14 years after the Ministry of Mines and Solid Minerals was established, the activities of that sector still contribute about 1% of Nigeria’s Gross Domestic Product. Under the civilian democracy, from 1999, Nigeria has had eight cabinet Ministers (including a Minister of State) in charge of what is, even to the uninformed, a critical economic challenge.

The Ministry of Solid Minerals Development was established in 1995 to boost non-oil exports. And ever since, it has been empowered with substantial budget allocation, and tellingly, a $120million loan from the World Bank. These were for the establishment of a project for sustainable management of mineral resources in an attempt to address issues of artisanal and small-scale mining as a poverty reduction strategy as well as policy review work on new mining Laws, creation of new specialised agencies in the exploration, exploitation of solid minerals in Nigeria. And yet, the contribution of 1% to GDP is glaring.

The Ministry once declared that the country had adopted 34 mineral substances for priority development, amongst which are Uranium, found in six states, Diamond, in two states, Coal and lignite found in five states, Tantalite, Barites, Lead, Iron Ore and Gold. We are still awaiting the rigorous initiatives, as distinct from a junket habit to any gathering outside the country, to attract otherwise sceptical investors with other competing options to invest their resources in Nigeria.

Part of the reason for this underdevelopment is that the philosophy of Government as applied to the solid minerals sector is jaded. Unlike the revised laws which have borrowed from other jurisdictions, our administrators are still mired in the workings of the oil upstream sector where a variety of monopoly practices aided by long association of the players tend to exist, regardless of announcements of new findings.

Another reason is the paradox that in the face of the struggle for resource control and the search for increased locally generated revenue, State and Local Governments have not sought to repeal the exclusivity of Federal Government for solid minerals in their territory. For one, they may be much faster in taking the challenge of developing the economic potentials and pay federal royalties as should be the case.

Nigeria’s response should not be a rehash of three years tax holidays where seven years, for instance, may even be more imaginative. Foremost in our requirement for our Mines and Solid Mineral sector is the urgent need for strategic partnerships. We suggest that Nigeria should seek out baskets of the key critical requirements of skills, technology and finance deliverable on a turnkey basis, and invite them in. Nigeria should find pools of technical and local expertise comparable on a world best practice basis, proven track record in mining and a commitment to sustainable working capital and provide them competitive terms.

The lessons of the Ministry’s serial cancellation of bids for several minerals are still fresh and with the present global financial crisis, not many international firms would be excited to respond to the Ministry of Mines and Solid Minerals in Nigeria solely on the basis of a tax holiday incentive. Investors cannot be fooled for too long and alongside discounting our reputation for unethical practices, is the added sheen of lack of creativity by recurrent leadership in the Ministry. We require not just tax holidays for the sector but a set of initiatives and energies representing a fresh and unique single thrust able to bring modern mining skills, modern management skills, adequate finance, and technology for the delivery of an economic asset and establishing a legacy.

In an earlier comment, we had called for contrition from the political and civil service leadership for the hardship thrust on our people by the failure to energise the abundant mineral resource in Nigeria. The missed opportunities in competing for investment destinations, in technical and general employment creation and the hardcore economics of improving Nigeria’s productive index are regrettable.

The prayer is that instead of a vision so dimmed and energy so misdirected, a Government that is committed to solid minerals development and a leadership to champion the investment flow into solid minerals, beyond tax holidays, should emerge immediately. That the solid minerals sector contributes a mere 1% to GDP is bad news.