African Mining Brief

NIGERIA: Mining to the Rescue?

Nigeria has woken up to the reality of the need for a well diversified economic base and has taken steps along the road of establishing alternative mineral resources. Seni Bello looks at developments culminating in the recently held 4th Annual International Mining Investment Conference and Exhibition

In the past oil rich countries like Nigeria have paid scant attention to other untapped mineral resources. The oil wealth and the accruing petro-dollars blinded many such countries to the vicissitudes of life and impermanence of nature. It took the crashing of international oil prices for them to wake up from the dream. But as the time worn saying goes, it`s better late than never.

Nigeria, the archetypal Africa mono –economy power seems bent on diversifying its oil dependent economy in view of this harsh reality. And by all indications, the country is dead serious about it, this time. Currently, the solid mineral sector accounts for between 0.05 and one percent of Nigeria's Gross Domestic Product (GDP) despite the country having significant coal and iron ore reserves as well as several known gold, uranium, tin and tantalum deposits. This situation is no longer acceptable to the country’s rulers, who have seen the necessity of seeking alternative fund for major developmental projects in view of the dwindling oil revenue.

Diversifying Nigeria’s Economy
Onno Rhul, the Country Director of World Bank in Nigeria emphasised this point recently in Abuja. He said the only way Nigeria can take its rightful place in the committee of nations is by diversifying its economy away from oil. The mining sector is one of those sectors like services, industry, telecommunications and entertainment that can make this happen. He lamented how the sector has been ignored and neglected. Mr.Kuhl however believes that situation will be changed with the support of organisations like his.

It was the former President Olusegun Obasanjo who took up the task of belling the cat by creating a Ministry for Solid Minerals Development. This ministry has since been renamed Ministry of Mines and Steel Development with the rejuvenation mandate of the sector still intact. Prior to the creation of the new ministry of solid mineral development, enquiries and demands were being made for Nigerian solid minerals, especially coal.

Orders to the tune of 15 million tons of coal export can yield the nation about US$1 billion per annum. The high demand for Nigerian coal is attributed to its low sulphur and moderate ash content. In order to increase coal production to meet the demand, government is encouraging private investment by offering various incentives including joint ventures. The Nigerian Coal Corporation is being reinvigorated and equipped and some of its obsolete equipment replaced to enhance increased production.

Other measures taken by the government include formulation of well-articulated policy objectives and programmes, the implementation of which will avail the nation of the enormous opportunities offered by mineral wealth. The focus of these programmes is the development of the solid mineral sector with a view to improving its economic importance relative to other sectors of the economy. They are designed also to facilitate a favourable climate for foreign investors.

Deregulation of the mining sector under the Nigerian investment promotion council Decree 1995 allows for 100 percent foreign ownership of mining operations and other related enterprises. Free repatriation of capital profits and dividends are added incentives. World Bank finance for mining is now readily available through several agencies. These include the Multilateral Investment Guarantee Agency (MIGA) of the World Bank, the International Bank for Reconstruction and Development (IBRD), the International Finance Co-operation, which funds mostly private sector activities and the International Development Association.

Funding the Mineral Sector
In addition, the government in partnership with the World Bank pooled US$120 million two years ago to fund the solid minerals sector through the establishment of a project for sustainable management of mineral resources in an attempt to address issues of artisan and small-scale mining as a poverty reduction strategy.

The project has many components including the development of an independent cadastral system, the acquisition of geophysical and geochemical data, the strengthening of the sector’s regulatory frameworks, capacity building of officials and enhancements of artisans and small scale miners. While some of the component has taken off and some progress made in their implementation, a major component, funding which had US$10 million specifically reserved for it was delayed.

However, late 2009, seven mining cooperative societies and three mining communities selected as the first beneficiaries were given cheques of various sums. Another set of 23 mining societies and eight communities were also given grants of various amounts. In furtherance of empowering small scale miners, the Ministry has created an artisan and small scale mining department within the Ministry and has so far registered over 500 cooperatives. Mrs Allison –Madueke, Minister in charge of the sector, said recently. South Africa is also assisting the country in gathering its geophysical data.

Mining Seminar The 4th Annual International Mining Investment Conference and Exhibition was hosted by Nigeria on Tuesday, May 19, 2009 at the Transcorp Hilton Hotel, Abuja. The event with the theme “Strategic Innovations and Investment Opportunities in Mineral Exploitation: A panacea for the Global Economic Crisis” was hosted by the Honourable Minister of Mines and Steel Development, Mrs Diezani Alison-Madueke. The conference and exhibition was a private sector led initiative aimed at propelling the rapid development of the mining sector in Nigeria and West Africa.

The Conference brought investors, miners, bankers, financial institutions, mineral traders, consultants and professionals involved in the mineral business and the government policy makers together; to expose local and foreign companies in the mineral business to Nigerian mega banks that have positioned to take a leading role in this imminent mining revolution; to help industrialists access cheap raw materials on a sustained basis from the mining industry; to provide an opportunity for junior and major mining companies to review geological data from the Geological Agency of Nigeria on world class virgin deposits; to present the legal and regulatory environment and what stakeholders can expect in the future; present the basic requirements to facilitate entrance into mining business in Nigeria.

Speakers at the Conference included Mr. Tim McCutcheon the Co-Founder DBM, Capital Partners, Russia, Mr Abel Malinga the Head, Mining and Beneficiation IDC, South Africa, Dr Chris Omerua the MD/CEO BGL, Private Equity, Nigeria, Mr. Fasina Ayedun the MD/CEO Multiverse Resources PLD and Dr. Laurence Robb, Savannah Gold Corporation, UK amongst others.

Visible Results
The efforts taken together have started yielding results. Investors from the Peoples Republic of China have shown interest in Nigeria's mining and steel sector, ministry officials have said. Marshall Gundu, Head, Public Relations Unit, Ministry of Mines and Steel Development, disclosed this in Abuja.

Mr. Gundu said some Chinese investors declared their interest in the sector when they recently visited the ministry. He said the delegation included Shouhua Jin, Director, Capital Operation, China Railway Construction Corporation Limited and Chen Xiaoxing, Director/Vice President, China Civil Engineering Construction Corporation.

Mr. Jin said the China Railway Construction Corporation had been in existence since 1947 and had been into handling transport infrastructure, real estate management, mineral development and design of various steel works.

"We are in the country to gather more information on Nigeria's Mines and Steel Sector to facilitate our investment plans. The determination of the Chinese government to invest in the country is for the mutual benefit of the two nations.''

Suleiman Kassim, Permanent Secretary, Mines and Steel development, who received the delegation, assured them of Nigeria's willingness to partner with China to develop the sector. "The partnership will bring about positive results by moving Nigeria forward and the investors will get value for their investment" he said.

He also said that Nigeria would gain a lot from the technology and expertise of China through the partnership as the Chinese investors visit Ajaokuta Steel Company Limited and the National Iron Ore Mining Company, Itakpe both in Kogi State.

The availability of solid minerals such as kaolin, barite, limestone, galena, pyrite, chalcopyrite, iron-ore, lead-zinc deposits, tin, quartz, feldspar, beryl, coal, tourmaline, clay, sand, bentonite, wolframite, phosphate, and diatomite to mention but a few, opens up an opportunity for the country in the following areas; exports and use in domestic industry for generation of foreign exchange and internal revenue. Increased employment of Nigerians particularly in the rural areas where these minerals are found.

The multiplier benefits are enormous. Indeed, the solid mineral sector can very easily become the largest employment sector of the economy, since deposits abound in virtually every state of the federation. It is a consensus among stakeholders that if this present momentum is sustained, the nation would be better off for it.