Friday 18th August, 2017
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Mining sector: Unmet expectations in 2016, huge potentials in 2017

Mining sector: Unmet expectations in 2016, huge potentials in 2017

In 2016, a lot was expected from the Nigeria mining sector as the federal government identified it as a major revenue earner with huge potentials, especially in the face of dwindling receipts from the oil and gas industry.
 
However, looking at 2016 which witnessed a lot of activities and efforts by government in the sector geared towards increasing its revenues, there still abound many unmet expectations.
 
The Minister of Mines and Steel Development, Dr. Kayode Fayemi for the purpose of giving accounts of his stewardship in the past one enumerated the ministry’s efforts to boost the sector as well as tackle the challenges that militated against the progress of the industry.
 
He also acknowledged the fact that President Muhammadu Buhari gave them mandate to reposition the mining sector, to contribute optimally to the achievement of this administration’s strategic goal of diversifying the economy, create jobs and broaden the range of economic opportunities available to Nigerians.
 
According to him, "As we all know, 2016 has been a challenging year for the global economy, one of the toughest since the world emerged from the great recession about seven years ago. Much of the world has struggled to achieve growth seen in prior years, with slowing growth in China and India; continued depression in commodity price levels; escalating conflict and tensions in the Middle East; as well as the rise of populism and anti-globalization sentiment in the West, with its uncertain effect on the future of markets,"
 
Armed with the roadmap developed last year, the ministry laid the foundations for the take-off of the effective implementation of its provisions in the years ahead.
 
Insufficient funding:
 
The 2016 capital budget for the ministry and its agencies increased from N1 billion in the previous year to N7.3 billion. This has been expended on strengthening the Mines Inspectorate, Geological data generation and IT infrastructure. The ministry expects an improvement in budgetary allocation to the ministry in the 2017 budget.
 
The ministry sought for N30 billion (approx. $100m) intervention fund from the Federal Government, partly to focus on exploration, formalization of artisanal miners, and providing access to funding for genuine miners. For the first time since 2004, they got approval for this amount by securing access to the revolving mining sector component of the Natural Resources Development Fund.
 
The ministry is working with the Nigerian Sovereign Investment Authority, the Nigerian Stock Exchange and others to assemble a $600 million investment fund for the sector which they hope to conclude and operationalise by the second quarter of 2017.
 
The ministry has also secured support from the World Bank for $150 million for the Mineral Sector Support for Economic Diversification (MSSED or MinDiver) program, a critical component of which is to provide technical assistance for the restructuring and operationalisation of the Mining Investment Fund, which would make finance available to ASM operators through development finance, micro-finance and leasing institutions. The fund will also help to bring back on stream previously abandoned proven mining projects like tin ore, iron ore, coal, gold and lead-zinc.
 
Lack of geological data
 
The ministry is working to retrieve old data obtained on the various mineral deposits across the country, as well as enter into joint ventures with private exploration companies to generate new data from greenfield explorations. It hopes that analysis of this information will help to further buttress our speculations on the quantity and quality of mineral deposits in the country.
 
The ministry is also engaging world class exploration companies to collaborate with data generating agencies towards providing bankable data to attract big players in the mining sector.
 
The ministry has also initiated discussions with SGS, a world renowned materials testing company, to activate the NGSA Laboratory Facilities in Kaduna towards achieving ISO 17025 accreditation within the shortest possible period. The objective is to significantly reduce the thousands of mineral samples being shipped abroad for analysis thereby reducing the huge revenue loss and correspondingly incentivize the mining sector.
 
Low productivity
 
According to the Minister, "We have improved the productivity of the sector by tripling the ministry’s contribution to the federation account to about N2 billion in 2016, up from N700 million in 2015.
 
"Increased productivity in our mining space has also led to significant discovery of mineral deposits, the most noteworthy being the large find of high-grade nickel a few months ago in Dangoma, Kaduna State by an Australian mining company operating in Nigeria.," Kayode said.
 
Weak Institutional Capacity
 
There is widespread consensus that the country's mining code ranks amongst the best in the world. The challenge has always largely been the effective enforcement of its provisions.
 
For the first time in very many years, the ministry implemented a provision in the Nigerian Minerals and Mining Act, 2007, which allows for the revocation of non-performing or defaulting mineral titles. This exercise led to the revocation of a number of titles, and the generation of revenue to the federation account from titleholders who met the deadline to regularize their statuses.
 
The exercise which made non-performing mineral titles available for acquisition by serious operators/investors, also sent a strong signal to the mining community of improved capacity to properly regulate the industry, and penalize those that deprive the country of due revenue.
 
According to the Minister, "We have strengthened the capacity of the MCO ( Mining Cadastral Office) to ensure a seamless process for obtaining exploration licenses, permits, and approvals for willing and credible investors. In the coming year, we intend to decentralise the operations by establishing six regional outposts for the MCO to further fast track the procurement of licenses and titles. The MCO is also benefitting from current improvement in our IT infrastructure and our interactive web portal.
 
"We have reinvigorated our mines surveillance efforts, with the deployment of newly trained and empowered officers across the federation which has led to veritable improvement in security in the sector. Today, we would also be commissioning 38 new vehicles which have been procured for our officers in the field for greater efficiency," the minister said.
 
Illegal mining and community challenges
 
Illegal mining has been a major challenge to the sector. As a result some illegal miners were arrested in 2016. The minister also said the ministry was working with state governments and relevant ministries to formalize and manage artisanal miners, while also working with defence and security agencies to curb the actions of illegal mining in the country.
 
According to Kayode, "We are also providing guidance on suitable benefit sharing mechanisms (e.g. foundations, trusts and funds) and their applicability in different mining operations at all levels of engagement on behalf of mining communities.
 
"Furthermore, we are working with our artisanal miners to organize them into effective cooperatives that will facilitate their access to financial and commodity markets through grants and the establishment of mineral buying centres," he added.
 
Also, other challenges that militated against government efforts in repositioning the sector last year include: limited supporting I infrastructure, limited cooperative federalism, low productivity,
 
weak ease of doing business and perception issues and protracted litigations on legacy assets.
 
However, to boost the sector, the Minister has assured that it would explore all possible means to reposition mining in 2017.
 
In his words, "In 2017, we would continue to work to make our mining sector more competitive in the global mining space, and relevant to our domestic needs and strategic sovereign goals. In line with our roadmap, we would focus on priority areas of competitive advantage to drive growth.
 
He said, “Nigeria’s priority minerals will be those for which data exists around their continued commercial viability (e.g. proven reserves) adding that seven such mineral resources – iron ore, coal, bitumen, limestone, lead/zinc, gold, and barite – have been identified as key for Nigeria’s domestic industrialisation and infrastructure requirements.
 
"Nigeria will initially focus on the domestic market, trading ore and processed materials to domestic buyers at a quality level comparable to imported materials to win market share from imports. As global commodity markets recover, Nigeria will then seek to serve both domestic and export markets. Nigeria will also seek to exploit its mineral assets in such a way as to preserve and extend the life of its holdings for future generations and manage cash earnings carefully," he added.
 
The President, Miners Association of Nigeria (MAN), Shehu Sani said “the aspiration that mining should be an additional option is just a mere expression without a commensurate investment that is needed ".

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