Solid minerals sector: Nigeria’s new wealth seeking effective exploration

Miners at work

Despite huge solid mineral deposits in the nation, the sector is yet to be fully exploited in the face of vast opportunities that investors can exploit, writes ALEXANDER CHIEJINA

Fifty one years after Nigeria’s independence, the solid minerals sector is yet to take off fully. In an age when countries around the world are tapping into their natural resources, the nation has continued to rely almost entirely on oil wealth, relegating the bulk of other mineral resources to the background.

Up until the oil boom of the 1970s, Nigeria’s economy was largely sustained by the exploitation of solid minerals. Coal and tin were among the natural resources mined on a massive scale, with the former being used to generate electricity, power the railway network and meet the demands of regional and international markets. Going further, lead and zinc were a significant source of export revenue, and Nigeria was the world's largest exporter of columbite.

Despite the laudable achievement solid mineral exploration generated to the economy, however, the country’s reliance on the monolithic product-crude oil- and subsequent membership of the Organisation of Petroleum Exporting Companies (OPEC) in 1971, made mining activity witness stagnation, and even decline.

Only recently, the National Bureau of Statistics revealed that while petrodollars dominate the economy, solid minerals contribute less than 1 percent to Nigeria’s Gross Domestic Product (GDP), as against its 10 percent contribution prior to crude oil exploration and government's Nationalisation Policy to take over 60 percent of all shares of major companies in the country.

It turned out that stringent measures imposed by the government to nationalise these companies and enterprises did not benefit either the government or the investors, as most foreign miners abandoned their mines and returned to their countries.

However, in a bid to reverse this trend, President Goodluck Jonathan revealed that the focus of his administration is to attract Foreign Direct Investment (FDI) and diversify the nation’s revenue base by reducing dependence on oil revenue to about 50 percent by 2020. This, the president re-echoed, while speaking with leading Australian mining and solid mineral investors during the recently concluded Commonwealth Heads of Government meeting (CHOGM) summit in Perth, Western Australia.

In spite of the president’s avowed commitment to the development of Nigeria's solid minerals sector (with over 33 solid minerals in sufficient quantities for commercial exploitation), given its huge potentials for boosting the national economy, economic experts have decried the slow growth of development in the solid mineral sector of the Nigerian economy, as they proffer ways through which the sector, which is a goldmine yet to be discovered, can effectively be tapped into for wealth generation.

In an interview with BusinessDay, Loretta Aniagolu, chief executive officer, LOC Metals and Minerals Limited, revealed that citizens and states with solid mineral deposits are losing out of millions of Naira due to the lack of active solid mineral exploration in the country.

While disclosing the vast potentials for Nigerians in the mining sector, Aniagolu, daughter of the famous justice of the Supreme Court, Anthony Aniogolu, noted that major obstacles to developing Nigeria’s mining sector include lack of expertise and trained hands, disinterest by banks to finance such mining operations, community bottlenecks and absence of certified laboratories in Nigeria for analysing solid mineral samples before export.

According to the chief executive “Nigeria was known for mining during the colonial time sadly, the good hands retired and then handed over the baton to the younger generation who have no requisite training and expertise in the sector. Unfortunately, our universities are mere centres of theory devoid of solid mineral exploration.”

Echoing the sentiment of Aniagolu, Tope Adebanjo, country representative, Tasaree International Limited, disclosed that while the solid minerals sector is the future of the nation’s economy, virtually all the foreign direct investments coming into the country are in the petroleum industry, and recently the telecommunications industry.

According to Adebanjo, “Mining should be one of Nigeria’s major success stories. Instead, it has been plagued by the same factors that undermine the country’s potential generally – deteriorating infrastructure, uncertain government policies and overdependence on oil. Given the huge amounts of capital required by mining operations and the long-term nature of projects, investors cannot be blamed for thinking twice about putting their money into the sector. The current government is trying to lure investors to its solid mineral deposits, which were sidelined in the race for oil in the 1970s,” Adebanjo stated.

Mobile sand washing machine

 Also lending his view during at a recent miners forum at Abuja, David Adulugba, Executive Director/Chief Executive Officer, Nigeria Export Promotion Council (NEPC) revealed that given the necessary attention, the non-oil sector has equal potential of competing favourably, if not better than the oil sector.

For Adulugba, “Nigeria has high potentials in solid minerals, no doubt, yet not much efforts have been made in its exploration and exploitation compared to what are obtainable in similar endowed countries such as Canada, Australia, South Africa and others. However, current government efforts in putting down the requisite regulatory and environmental infrastructure in line with President Jonathan's national transformation programs are critical requirement for success.

 “The Council in its determination to support the mineral sector development, created the solid minerals unit to map out significant development programs and projects for the solid mineral sector to help stop the incessant smuggle of Nigerian solid minerals and to earn revenue for the nation through payment of royalties and foreign exchange earnings,” the NEPC boss disclosed.

 

Sector challenges

 

 Risk evaluation is a reality of life in the mining world. However, before investors and banks spend money on new projects, they would normally want to know what risks are attached to the geology of a certain prospect, or the availability of infrastructure in a particular mining area. Also, the condition of the market into which the developer hopes to sell its commodity is yet another concern.

For Tope Adebanjo, one factor that affects investor sentiment in Nigeria’s mining is ‘aids’. Adebanjo stated that while the alarming infection statistics are readily available, the impact on the mining industry seems to be a well kept secret apart from generalisations and projections.

“The difficulty of getting estimates particular to the mining industry and the potential effect on operations has resulted in a big debate. You said that the business community has been largely ignorant of the economic potential in this sector. Don’t you think it is because the community has found a ‘comfort zone’ in oil?”

Aside this, the limited success of Nigeria’s investment drive in the mining sector has also been linked to lack of modern geophysical data, which is the bedrock of modern mining.

New face for mining

If the FG can cement a favourable policy framework to make foreign investment both attractive and tenable, Nigeria’s solid minerals sector could finally shake off the status of oil’s ‘poor relation’ and provide a lucrative, sustainable drive that will set the economy on the road to industrialisation.

 A close look at the solid minerals sector reveals that investment opportunities are enormous – some of which are not limited to mining, quarry, gemstones trading, smelting and refining, mining training school, trading metal exchange, sales of mining equipment, trading in scrapped metals, prospecting and exploration, recycling and warehousing, polishing and slabbing factory, world class lapidary for gemstones and world class laboratory for chemical analysis.

It is estimated that the industry will require an investment of $10 billion annually if Nigeria is to achieve the aim of becoming one of the top 20 world economies by 2020. The government must also take measures to ensure that the exploration of Nigeria’s mineral wealth benefits a greater proportion of the population than the oil sector has.

Sani Shehu, president, Miners Association of Nigeria, feels the Federal Government only needs to spend half of the money it commits into oil on the sector for it to achieve success.

According to Shehu, “Before now, it was believed that there was no gold deposit in the country. But this has recently been proven wrong. The industry is so huge that if you want to quantify it, it may turn to be much more than what we get from crude oil. What the government should do is to put half of what it has invested in the oil industry into solid minerals. Mining is a capital intensive industry.

“Government should do more to ensure proper harnessing. Government, as a matter of responsibility, should develop infrastructure to mining sites. The government of South Africa invested heavily in mining and now their solid minerals sector is well developed. While we appreciate government’s regulatory position, we still want it to do more to enable the operators to do their jobs effectively.”

While explaining that an average miner needs about N200million to start, Shehu stated that  the scenario today is pathetic as those miners who thought they could start with about N10million are already meeting with disappointments; therefore, funding is a very critical factor every miner to needs.

“It is difficult to get money from the banks because they don’t understand the sector. We want the government to facilitate things by way of guaranty or authentication. We are appealing to the government in the spirit of diversifying the economy to arrange for an easy access to finance to enable miners acquire the necessary machineries. If this is done, miners will be in a good condition to do their jobs and pay the needed royalty. It will also enable the sector to become a formidable revenue earner to the Federal Government.”

Dr Mohammed Musa, Minister of mines and steel development

Given the limited success of Nigeria’s investment drive in the mining sector which has been linked to lack of modern geophysical data, which is the bedrock of modern mining, having carried out first and second phases of the airborne geophysical survey funded by World Bank under the sustainable management of minerals resources project in the ministry of mines and steel development, the mining sector may witness a boom in the next few years if the ministry for mines and steel development can create awareness of the availability of the contemporary data in exploration and market very effectively.

More importantly, if the Federal Government can cement a favourable policy framework to make foreign investment both attractive and tenable, Nigeria’s solid minerals sector could finally shake off the status of oil’s ‘poor relation’ and provide a lucrative, sustainable drive that will set the economy on the road to industrailisation.  No doubt, investors are watching and waiting in earnest to take calculated risks if adequate contemporary data in exploration are made available.