Since Independence, economic diversification has been a consistent theme running through most development plans and the policy agenda of successive administrations of the Federal Government. There has long been a realization in policy circles that Nigeria’s dependence on proceeds from the oil and gas sector is unsustainable. We all recognize that we cannot build long term development and prosperity on the back of oil receipts alone. An economy built solely on a commodity that is susceptible to revenue shocks and global market volatility is a highly vulnerable one. Our recent stint with economic recession has driven this fact home clearly. According to the National Bureau of Statistics, although Nigeria has now exited recession, our economic recovery was driven mainly by oil. The oil sector still accounts for 70 percent of government revenues and 95 percent of export revenues thus claiming the lion’s share of our GDP.
What is however clear is that oil revenues are simply not enough to match the demands for social mobility, economic opportunities and public goods now being levied on the government by a fast-growing population. We bear witness to this not only in the form of the fiscal crisis evidenced by the inability of states to fulfill their obligations to their employees but also in the telltale signs of social discontent around us.
Early on, President Muhammadu Buhari identified the mining sector as essential to the administration’s aim of cultivating multiple sources of economic growth and diversifying Nigeria’s revenue base. It is his conviction that even as oil remains important, its share of the overall portfolio of revenue sources must diminish while growth in other sectors increases the size of the whole pie. The Economic Recovery and Growth Plan (ERGP) reflects this conviction and recognizes the mining sector as one of Nigeria’s most promising growth sectors. The ERGP further acknowledges that Mining’s contribution to GDP doubled from 2010 to 2015, and projects to grow the sector’s GDP at an average annual growth rate of 8.54 per cent (2017-2020).
Our roadmap which we painstakingly developed through a process of wide-ranging consultation with stakeholders in the industry also stipulates the transformation of the sector into one of Nigeria’s most strategic economic hubs in the near term.
Mining is truly Nigeria’s next frontier of opportunity. Our obsession with oil revenues has long distracted us from the untold potential for wealth and jobs creation that subsists in this sector. Nigeria’s bountiful resource base goes far beyond the popular impression that Nigeria is all about oil.
Before the advent and rise of oil, the mining sector was a major contributor to Nigeria’s revenue base and was a leading employer of skilled and unskilled labour. In the early 20th century, the city of Jos in central Nigeria was a globally renowned centre of tin-mining. By the 1930s, a map showing the distribution of tin production would have basically highlighted six regions – Malaya, Bolivia, Dutch East Indies, Nigeria, Siam and China. Nigeria, China and Siam accounted for 15 to 25 percent of global tin production. Up till 1960, Jos was the sixth largest producer of tin in the world. Similarly, the eastern Nigerian city of Enugu became known as coal city due to extensive coal mining activities. Thus, mining had put Nigeria on the global economic map before being eclipsed by the discovery of crude oil.
Regardless, the country’s mineral riches remain evident and largely untapped. Nigeria has the second largest deposit of Bitumen in the world and there are over 1 trillion tons of coal resources in her soil. There are also significant quantities of coltan, Iron ore, gold, granite among others. The ample geographical distribution of these resources makes Nigeria one of the most exciting jurisdictions of opportunity in Africa. The Nigerian mining sector is diverse in mineral resources, including high value commodities (e.g. gold), bulk commodities (e.g., iron ore and tin), as well as gemstones and dimension stones. Nigeria’s natural resource portfolio has at least 44 known mineral assets that include precious minerals, base metals, bulk minerals and what are known as rare earth minerals.
Among our most promising mineral assets are Gold, Iron Ore, Barite, Bitumen, Lead, Zinc, Tin and Coal. We have good reason to believe that the available data of our reserves understates what our country has been blessed with by providence in many instances. For one thing, some of the geosciences data at our disposal which are being updated give us reason to be cautiously optimistic that our mineral endowments exceed what is currently estimated.
In contrast with the limited spatiotemporal occurrence of hydrocarbon resources within our territory, solid minerals deposits are far more evenly spread out across Nigeria. According to the National Extractive Industry Transparency Initiative (NEITI), solid mineral deposits are scattered all over Nigeria. In other words, the Mining sector has the potential to generate the rising economic tide that will lift all our boats. We now have unimpeachable geological evidence that confirms a truth we have always intuited – that every zone, region and state in Nigeria has something to bring to the national table of resource riches.
The question then is, why have we not been able to leverage the clear plenitude of mineral resources to create prosperity? The most obvious answer is that the national fixation on oil over the course of decades diminished our imagination, and eroded our resolve to exploit other sources of wealth. The influx of petrodollars paradoxically created a perverse incentive – one that discouraged us from fully maximizing our resource potential. Simply put, oil wealth made us lazy. However, with the coming of this administration, a convergence of political will, economic adversity and emergent opportunities has lent fresh impetus to the quest for economic diversification.
More concrete constraints inhere in our constitutional architecture which centralizes control of natural resources in the federal government. This principle effectively prevents states from fully exploring their economic potential. It eliminates incentives for states to participate beneficially in mining since taxes and royalties do not accrue directly to them. This, in turn, forecloses what would have been an avenue through which states could increase their internally generated revenue.
There is a broad consensus that this arrangement requires reform and it touches on one of the most topical debates in contemporary public discourse – the debate around restructuring. In the emergent post-oil-centered dispensation, a regime of fiscal federalism which devolves economic power to states and municipalities is now imperative. States must depend on internally sourced revenue and taxable productive endeavour as against federal grants. Since 1999, it has become increasingly clear that many of our national developmental objectives now fall within the purview of states rather than the federal government. What we need now is for this recognition to become institutionalized through the devolution of powers and resources from the centre. As states are unshackled from federal control, they will become freer to engage in regional and inter-state collaborations to meet the scale of the demand on the ground.
Ideally mines exploration should be transferred from the current exclusive federal jurisdiction to state jurisdiction. To truly diversify the economy, we must decentralize resource governance. States fully empowered as economic actors would exploit the resources in their domains and be locked in healthy competition for investment and economic growth while creating jobs and economic opportunities for the people at the grassroots. This would amplify the incentives for state governments to pursue smart policies aimed at making their states business friendly and competitive. The overall consequence of this would see Nigeria experience a nationwide resource boom.
This outcome requires considerable investment of political capital, serious institutional heavy-lifting including legal and legislative reforms as well as a constitutional amendment. This sort of reform engineering process requires much tenacity and strategic patience. It will take time but the demands upon us are urgent. Consequently, our approach to this challenge has been two-fold. While recognizing the inadequacies of the present order, we have not let the apparently onerous costs of wholesale reform discourage us. Instead, we have located small windows and corridors of opportunity that allow us to carry out institutional innovation within the parameters of what currently exists.
Even as we continue to advocate for greater decentralization of economic levers, we are also highlighting the latitude that states can take advantage of to work within or around the current arrangements. As part of our efforts to incentivize greater participation by states in the sector, we have seen to the establishment of the Mining Implementation Strategy Team (MIST) and the National Council on Mining and Mineral Resources Development (NCMMRD). State Governments are represented on the MIST and every state commissioner in charge of the mining sector in the respective states is a member of the NCMMRD. While the MIST is designed to effectively monitor the implementation of the Roadmap, the National Council on Mining and Mineral Resources Development (NCMMRD) is a well-structured platform where stakeholders in the sector can converge periodically to develop policy advisory, validation, and other interventions, to effectively guide Government in achieving the targets set forth in the Roadmap.
We have further extended the thirteen percent (13%) derivation principle to states, for them to benefit from mining activities within their jurisdictions. We are also committed to building the capacity of state governments to actively participate in mining enterprise through Special Purpose Vehicles and Joint Ventures with private sector players, and we continue to support state governments in this regard.
Beyond deepening cooperation between the federal government and state authorities, we are also nudging state governments towards greater regional collaboration. Regional cooperation is essential to the full maximization of solid minerals because often the occurrence of natural resource deposits cuts across state and even regional boundaries. Thus, states must establish forums of regional cooperation to exploit the commercial potential of the resources in their domains. Take nearby Ilesha which has proven deposits of gold. Those deposits belong to a rich vein that cuts across states in the southwest and in the north-west zones. If the states with this vein are to fully benefit from their resources, they must create frameworks of regional economic cooperation. In this way, nature itself points us towards the necessity of cooperation if we are to fully benefit from the resources she has so generously deposited in our land. There is a clear case to be made that such joint ventures represent a win-win situation for all of us.
In what can be taken as a first step towards formal inter-state collaboration on mining matters, state governments recently agreed to establish a forum of state commissioners responsible for mineral resources development in their respective states, to constantly engage the federal government on crosscutting areas in mining activities.
More broadly, we have undertaken the Review of Existing Mineral Royalties and Licensing Fees leading to increased revenue into the federation account. The ministry is also conducting a structured expansion in federal revenues across the entire mining value chain with an initial priority on improving reporting, tax collection, royalties, personal taxes and company tax. To stem the illegal trading of minerals, the ministry has registered over thirty Mineral Buying Centers, and enacted the Revenue and Reporting Compliance Agreement with the Nigeria Customs Service, which has improved the policing of mineral exports.
We are beginning to see positive results and signs of the immense potential within the sector as we look to boost non-oil sources of revenue.
Towards Full Spectrum Value Maximization in Resource Governance
In the context of the mining sector, economic diversification also means full spectrum exploitation of natural resources by leveraging every link of the value chain towards shared prosperity. We are executing a departure from the perception of resource-rich locales as extractive farms and a shift towards value-added economic activities. The idea is to explore the broad range of economic endeavours that can be derived from the efficient utilization of these resources. As the ‘Roadmap for the Growth and Development of the Nigerian Mining Industry states, “Nigeria’s ambition should be to create a globally competitive sector capable of contributing to wealth creation, providing jobs and advancing our social and human security. Nigeria can achieve this by focusing on using its mining assets to drive domestic industrialization initially, and then migrate to winning in global markets.”
It should be noted that in pursuit of our aspirations for the mining sector, we have been chastened and are being guided by Nigeria’s unsavoury track record in the oil and gas sector. The fact that more than half a century after oil was struck in Oloibiri, Nigeria still imports refined petroleum products is a testament to the as yet unfulfilled promise of our hydrocarbon riches. Instead of using oil as a launch pad for bigger industrial ambitions, we settled for a minimalist approach to resource management that effectively made Nigeria a glorified site for extraction. Haunted by this failure, we are determined not to repeat the same mistakes going forward.
Overall, in the Oil and Gas Sector, as much as the Mining sector, what this administration is effectively doing is to evolve a new paradigm around resource exploitation. No longer will our communities simply be used and dumped or serve as mere sites for extraction. For the new resource economy to benefit our people, we have taken an activist posture towards issues of developing local content and ensuring a transfer of skills and technology that will be to our nation’s advantage in the medium to long term. While we are committed to maintaining a liberal business environment, we are also mindful that the new resource economy results in a win-win situation for all stakeholders. This is why we intend to see to it that host communities are directly and positively impacted by the activities that will be undertaken in their domains.
Our strategy for building the mining sector is to initially focus on using its industrial mineral endowment to support its industrialization. It is now a government policy directive to support private industry by building overall competitiveness (e.g. quality, price, loss ratios) and improving the ease-of-doing-business, in collaboration with other government agencies. Our aim is to create domestic demand by competing to replace ores and minerals currently being imported. In due course, as domestic processing expands, Nigeria will build a cost-led sector and foster production expertise in select non-industrial minerals.
We are committed to investing in a range of enablers including bulk handling terminals, railroad and rolling stock capacity, technical and engineering capacity, regulatory reform, reorganization of the Ministry itself, and expansion of access to financing to drive sector transformation. The Mining Sector Roadmap prioritizes a near-term strategy for industrial and energy minerals and the steel sector. This strategy aims to boost the local economy through utilization of domestic minerals, deploy energy minerals for domestic use and industrial power generation with specific emphasis on Nigerian coal resources, and developing the steel sector to provide a solid backbone for the manufacturing and industrial economy.
All hands must be on deck to grow our solid minerals potentials, Explorationists inclusive. One of the major challenges that has historically undermined the sector has been the dearth of geological data on our mineral assets. As you know, the vast expanse of Nigeria is still largely greenfield and we have a lot of grounds to cover in conducting adequate exploration to generate bankable data on our minerals. Consequently, the bulk of the funds we have unlocked for the sector is being channeled into exploration, with about US$100 million earmarked already. Yet, we still come far behind the exploration spend of other jurisdictions, even in the region, with Burkina Faso reported to spend US$400 million annually on geological prospectivity.
To further our objectives, in partnership with the Nigerian Sovereign Investment Authority (NSIA), we have reached an advanced stage towards creating a Mining Investment Fund of about US$600 million to provide adequate funding for exploration and allied activities. We have also restructured our Solid Minerals Development Fund, (SMDF), and in partnership with the Bank of Industry (BOI), we have facilitated a mining fund of N5 billion mainly for artisanal and small scale miners to access capital to fund exploration and operations in their mining fields. We recognise that in order for our reforms to be sustainable, we need to deepen the knowledge assets of practitioners in our mining space and have thus consolidated a partnership with the Nigerian Mining and Geosciences Society, and also operationalised MoUs with more advanced mining jurisdictions, such as Australia, China, Morocco, South Africa and Great Britain, for capacity building, technical exchange programmes, and training in geo-sciences.
Our approach makes clear that although we are very much interested in positioning ourselves for global competitiveness and relevance, we have no desire to get sucked into a competitive advantage morass that revolves around basic extraction. We are playing for far higher stakes. We are determined to address the huge internal demand for our resources. Our inward focus is driven by the desire to ensure that the exploitation of our resources generates jobs locally. Indeed, we project that Nigeria can expect an increase in demand for steel in the coming decade driven by increased industrialization that will ignite a surge in building construction, power, automotive construction, agriculture, road and bridge building, military technology and infrastructure development, refinery investments, machinery for rubber and plastics, as well as textiles. This ever-widening vortex of hunger for steel and iron ore is an opportunity for local and international investors to participate in the consolidation and expansion of Africa’s largest economy.
In tandem with the administration’s goal of reducing an import bill that depletes our foreign exchange reserves, import substitution is very much a big factor in how we intend to drive developments in the sector. Take, for instance, Nigeria’s iron ore and steel sector. Steel is the world’s most important engineering material and is indispensable to any country’s industrialization. Nigeria is the 12th richest country in the world in terms of iron-ore deposits – with over 2 billion tonnes – and yet she imports an estimated an estimated $3.3 billion worth of processed steel and associated derivatives. Despite the country’s relatively robust iron ore reserves, only 18 of the paltry 30 steel rolling mills are operational, producing 2.8 million tons per annum using 100 percent scrap metal. These figures represent a gross under-utilization of our iron ore resources, and are vastly inadequate to sustain our industrial ambitions. In addition, the $3.3 billion of much needed foreign exchange spent on steel imports annually could be judiciously deployed.
Considering the foregoing, it should be evident we do not envision extraction simply as an end. For us, exploiting solid minerals serves the larger goals of industrialization and building local manufacturing capacities. We are very much focused on the beneficiation of mineral ores and refining them into industrial products. Examples include metal fabrication and alloy manufacturing, and, in the case of energy minerals (e.g. coal) – power generation. These spinoffs will generate employment as will the heavy investments in logistical and transportation infrastructure required by the sector.
Recently, the Nigerian Export Promotion Council (NEPC), reported a 3.2 percent appreciation in exports which it cited as evidence that the Buhari administration’s emphasis on economic diversification is yielding results. It is noteworthy that companies in Nigeria are now exporting our Steel to countries as far as Japan. Just yesterday, the Quarter 3 GDP figures issued by the Nigerian Bureau of Statistics show that the industrial sector grew at 8.83% mostly due to mining and quarrying activities.
Although the journey has only just begun, the indices are positive and the future is bright. There is a strong basis for creative optimism about our economic destiny. If we all apply and dedicate ourselves to the course of moving Nigeria beyond oil, we will inaugurate a new era of broad-based prosperity in Nigeria.
By Dr. Kayode Fayemi, CON
Nigerian Special Envoy and Minister of Solid Minerals Development
 “World of Tin,” Time, May 7, 1934
Roadmap for the Growth and Development of the Nigerian Mining Industry: On the Road to Shared Mining Prosperity (2016) p.19
Roadmap for the Growth and Development of the Nigerian Mining Industry: On the Road to Shared Mining Prosperity (2016) p.9
 Ibid p.14
 Ibid p.14