Nigeria: What is the Key to Improved Export Earnings from Mining?

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“Bargaining makes you come up with the best ideas.” – Trey Parker

Nigeria is mostly known for its rich oil reserves which constitute the country’s economic mainstay, despite being well-endowed with other sources of revenue such as agriculture and mineral resources.

A mineral resource on its own cannot contribute to the wealth of a nation, unless exploited and processed, and this is determined by the level of technological and regulatory structures on ground.

In the July 2009 Blueprint of the country’s Vision 2020, Nigeria’s minerals and metals sector was denoted as a key sector, crucial to the successful execution of Government’s economic diversification strategy, and the attainment of growth, wealth creation and poverty reduction.

The blueprint is a culmination of the efforts of a collection of seasoned industry and academia experts brought together under the auspices of the Nigeria Vision 2020 strategy development program.

 

Under the Radar Rip-offs

Most of the exports from Nigeria’s mining sector today, are products of artisanal miners who sell to agents that rip them off, as well as conceal the transactions from government agencies, thereby depriving the state of revenue.

Underlining the potential of the sector, the blueprint outlined the path towards the rapid transformation of the minerals and metals industry, its emergence as a strategic catalyst of growth for the Nigerian economy, and its return to global relevance in the production of minerals and metals in a stable and sustainable manner.

Today, seven years after the report’s recommendations, Nigeria officially continues to record zero revenue from mining, despite exports from the sector.

According to Prof. Ibrahim Garba, the Vice-Chancellor, Ahmadu BelIo University, Zaria, the sector is highly informal as small-time miners account for more than 90 per cent of the country’s solid minerals exports.

“90 to 95 per cent of all the minerals that are produced are obtained from the small (artisanal) miners. So, the real people that benefit from mining are not miners, they are actually traders; they (small miners) have agents that buy the minerals from them and export.

“And some of them (traders) evade the formal way of exportation, so in the end, when you go to the box, you will find out that there is practically zero level of mineral production from Nigeria officially.’’

 

Building Capacity for Artisanal Miners

The dominance of these small-time miners who do not have significant capital to fund their activities, was the reason why the 2009 blueprint recommended the creation of an enabling environment to foster the development of the junior exploration segment of the industry.

The vice-chancellor, who is also Chairman, Committee on Solid Minerals Roadmap Development, disclosed that a lot of work needs to be done at the moment to revive the mining sector given the potential it has to contribute significantly to the country’s GDP.

However, if one of the recommendations of the report had been adopted by now, which is the establishment of Junior Miners and Consultants in the mining industry, the interests of these miners and the country’s economy would have been secured.

The issue of export activities flying under the radar would have been largely mitigated through the professionalism of the consultants as they would have provided extension services in form of technical assistance and support services to local miners.

By now the country should have had established license buying centres to serve as an interface between mining cooperatives/licensed miners, local users and export markets.

Furthermore, sufficient control and empowerment of the artisanal and small-scale mining operations, would have been achieved.

 

Legal and Regulatory Framework

The blueprint recommended the transformation of the minerals and metals sector to be built on two fundamentals: Institutional and human capacity; Legal and Regulatory Framework, as a non-negotiable requirement for sustainable growth.

At a recent capacity building programme to improve negotiations for export contracts organised by the African Development Bank (AfDB), it was emphasized by the African Natural Resources Center (ANRC) Director, Sheila Khama that governments needed to understand the context in which negotiations occur because governments will be in a better position to translate these internal and external factors into a coherent mandate to support the development of a negotiation strategy.

This is key to effective negotiations, she stressed.

Discussing the role of a sound legal environment, the ALSF Director, Stephen Karangizi added that the African Mining Legislation Atlas and Resourcecontracts.org are online platforms the ALSF is supporting to promote transparency and accessibility to information.

“In the context of individual unique challenges that many countries face, access to information is important and these online platforms are intended to catalyze research and policy debates on legal and regulatory issues,” he added.

Recognising that natural resources revenues have the potential to contribute to Africa’s transformation but that the ability to negotiate fair deals is a critical missing link, the ANRC and ALSF have put negotiations at the centre of their collaborative efforts.

Explaining the AfDB’s approach Sheila Khama said “In addition to strategic and tactical considerations, knowledge of global industry structures and the economic value of the assets being negotiated are essential for strengthening the bargaining position of the African countries.”

With the enactment of the Nigerian Minerals & Mining Act of 2007, a significant milestone was achieved with regard to having an appropriate legal framework in place for the sector. However, optimal value can only be realized if the provisions and stipulations of the laws are fully enforced and consistently applied.

“Sincerity of purpose with regards to achieving the vision will ultimately be measured by Government’s ability to guarantee the benefits of a stable legal and regulatory framework to all entities in the industry,” the report said.

 

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