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Economic Diversification : Nigeria Revives its Mining Industry

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Economic Diversification : Nigeria Revives its Mining Industry

Nigeria plans to create the « Nigerian Solid Minerals Corporation » to attract foreign investment and diversify its overly oil-dependent economy.

Overview of the Nigerian Mining Sector

Nigeria enjoyed decades of successful mineral exploitation during the colonial era, marked by profitable exports. The sector accounted for 4.5 % of Nigeria’s GDP in the 1960s and 5.6 % in 1980. Since independence in 1960, however, the country has struggled to make its mining sector profitable.

Brief History of the Mining Sector

In 1970, as part of its industrialization drive, the Nigerian government began using iron ore and coal to produce steel. This initiative gave rise to the Ajaokuta Steel Company, Delta Steel Company, and Osogbo Steel Rolling Mills. At the same time, the Nigerian Coal Corporation and the Nigerian Mining Corporation attracted increasing investment for domestic use and surplus exports. Exploration and mining of materials such as limestone and granite increased sharply as a result of Nigeria’s infrastructure development projects.

However, the privatization policies introduced under the presidency of Olusegun Obasanjo (1999-2007) led to a decline in extractive activities. On the other hand, this privatization encouraged foreign direct investment (FDI) in the exploitation of various minerals. This included gold, iron ore, coal, gypsum, lead, zinc, tin and columbite. This focus led to the development of the Solid Minerals Roadmap in 2012, which aimed to add value to mining and processing. Although it was relaunched in 2016 to ensure continuity and coherence of sectoral policies, little significant progress has been made.

Nigerian mining resources

Nigeria has significant deposits of exploitable minerals spread across its states. Its subsoil is particularly rich in limestone, which is found in more than 30 states of the federation. The largest identified deposits are in the South West and North Central regions. In addition, the land in the North-Central and South-West regions is rich in gold.

Kogi, Enugu, Niger, Zamfara and Kaduna states together hold the 12th largest iron ore reserves. Closely related lead-zinc ores are found in commercial quantities along the Benue Trough. Either from the city of Abakaliki in Ebonyi State through the Middle Benue Mine to the Upper Benue Mine in Bauchi State.

Lithium, Nigeria’s « new oil »

Lithium is mainly used in the production of rechargeable batteries. Its essential role in the relentless search for green energy has made it the country’s « new oil ». Companies such as Thor Explorations and Spain’s Rio Narcea Recursos have already begun to explore this strategic resource.

Untapped and unexplored mining potential

Recognizing the importance of mineral resources, Nigeria is committed to developing its extractive sector. According to the Nigerian Extractive Industries Transparency Initiative (NEITI), the country currently has over 50 minerals in commercial quantities. Despite this wealth, the minerals sector will contribute barely 2 % of the national GDP by 2022, despite accounting for over 80 % of mining activities.

Economic Contribution and Production Potential

Between 2016 and 2018, mineral extraction generated a total profit of only 5 billion NGN (Nigerian Naira). Specifically, profits recorded in 2016 amounted to 1.6 billion NGN. In 2017, they reached 1.5 billion NGN, reported by 59 companies. The following year, profits increased to 1.9 billion NGN, reported by 69 companies.

Due to the lack of adequate data and monitoring, it is impossible to accurately assess the quantities of minerals produced, sold, or used. Royalties are therefore calculated based on information reported to the regulatory authorities. Of the 3,163 companies with 1,443 licenses, only 30 % were actively engaged in mining. Illegal and artisanal miners continue to dominate, accounting for about 80 % of mining operations in the North West region.

Paradox of imported mining

Instead of becoming an exporter, Nigeria has become an importer of minerals such as iron ore and salt. The value of solid mineral imports increased by 74.39 %, from 23.56 billion NGN in the first quarter of 2021 to 41.09 billion NGN in the same quarter of 2022. These imports consisted mainly of calcined gypsum or calcium sulfate plaster, with a value of 6.87 billion NGN coming from Turkey and 1.87 billion NGN from China.

Nigerian Solid Minerals Corporation

The first milestone in the revitalization of the mining sector, the Nigerian Solid Minerals Corporation is a state-owned company with subsidiaries operating in 7 priority areas. According to Nigeria’s Minister of Mines, Alake, no timetable has been set for the creation of the new company. However, he provides some clarification on the integration of the National Iron Ore Company and the Bitumen Concessioning Program into the new public entity. He emphasizes the new company’s goal of encouraging local financial institutions to support mining.

Seven key minerals of interest

Nigeria is one of Africa’s richest countries in terms of mineral resources, both in terms of diversity and abundance, valued at over 700 billion USD. To attract significant foreign investment, the country’s Federal Ministry of Mines is seeking agreements with multinational companies. Based on an investment-friendly regime, the focus is on the extraction of the following minerals

  • Gold, with reserves estimated at 1 million ounces
  • Coal
  • Iron ore, with reserves of 3 billion tons
  • Limestone (568 tons)
  • Bitumen, with reserves of 1.1 billion barrels
  • Lead/zinc and baryte, with reserves of 15 million metric tons.

These resources play a key role in various sectors such as the oil industry, construction, and jewelry manufacturing. There are 2 million operators in the mineral extraction sector, including more than 633 small companies and 251,500 registered miners. However, the sector needs to overcome several obstacles if it is to make a greater contribution to the economy and human development.

Nigeria’s coal potential

Nigeria has low-sulfur, low-ash bituminous coal deposits located primarily in the northeastern, north-central, and southeastern regions of the country. However, this resource has not contributed significantly to GDP. Nevertheless, coal is one of the top 7 minerals of interest to the « Nigerian Solid Minerals Corporation ». It is particularly important to one of the government’s flagship programs, the revitalization of the Ajaokuta steel mill.

It is important to emphasize that coal is a fossil energy resource that is likely to experience an inevitable decline, influenced by global climate change. Coal has long been used as a primary energy source in power generation and other industrial applications. However, its use is increasingly being questioned due to its environmental impact, particularly the greenhouse gas emissions generated during its combustion.

Future Horizons for the Mining Sector

The previous administration of President Muhammadu Buhari undertook several initiatives to strengthen Nigeria’s mining sector. These included the establishment of the National Geodata Center, the Mineral Clinics, and the Nigerian Mining Sovereign Wealth Fund, as well as the passage of the Nigerian Minerals and Mining Act 2023. With these foundations, the administration led by President Bola Tinubu and overseen by Minister Alake is regulating prospecting and mining.

In October, Minister Alake announced the activation of a mining police force to curb illegal mining. Illegal miners have been given a 30-day ultimatum to leave occupied sites and join legally constituted artisanal cooperatives.

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