At a time when economic diversification has become a roaring political rhetoric, mining in solid minerals easily represents a means of achieving that purpose. Mining offers three distinct merits as a driving force for economic diversification. First, mining offers the government a chance to stimulate economic activities outside Lagos, Abuja and Port Harcourt (Nigeria’s economic tripod) to other regions in the country in dire need for investments. Thus these states can exploit their natural resources to attract investments, create jobs and earn revenues. Mining also offers the government a distinct opportunity to boost export earnings from non-oil sources especially in these times, when the country’s currency crisis triggered by the 2014 oil price crash, has demonstrated the need to diversify foreign exchange earnings. Thirdly, mining also creates important raw materials for other manufacturing operations such as steel which is produced from iron ore. All these underscore the importance of mining in solid minerals to the Nigerian economy.
Despite these significant potentials, there are only few bright spots at the moment to draw optimism from. And that is why the government must work closely with invested stakeholders to bring current projects (outside granite and limestone mining) to fruition. These current projects such as the Segilola Gold Project and the Agbaja Iron Ore Project will quickly serve as the much needed exemplars of Nigeria’s mining credentials.
Nigeria will require generous fiscal incentives to attract investments into solid minerals especially in gold and iron ore. This is because the country is already at a natural disadvantage due to the low reserves position of these minerals. These fiscal incentives should increase the competitiveness of iron ore and gold mining. This is particularly germane for iron ore mining in Nigeria which suffers uncompetitiveness due to high production and freight costs.
Age-old challenges such as illegal and artisanal mining have festered for too long and eventually metamorphosed into entrenched interests that will not be easily eliminated. Current efforts aimed at formalising these practises need to be reviewed from a dispassionate perspective. But then, regulatory weaknesses that led to the entrenchments of illegal mining must be addressed. The World Bank’s support towards strengthening regulatory and institutional capacity must be considered as the industry’s brightest hope. We are cautiously optimistic that this World Bank’s institutional support will lead to a holistic review of institutions and strengthen their capacity to adopt global best practises.
While the regulatory support from the World Bank will help improve institutional capacity, the abdication of solid minerals for oil and gas also weakened private sector capacity resulting in an under-par value chain that cannot meet the GDP ambitions of the Mining Road Map, which seeks a 10% CAGR growth in four years. This is why we believe Nigeria must stimulate foreign direct investment in the mining space and local mining companies must seek joint venture arrangements with credible international junior mining companies. These junior mining companies will not only help stimulate capital, but also the much needed technical expertise and also help inculcate best practices in the industry.
Overall the financial condition of the industry reflects weaknesses and high risks. We believe the bankable credentials of the Industry need to be improved upon in the short to medium term.