NIGERIANS are looking up to the Minister of Solid Minerals Development, Dr. Kayode Fayemi, to turn the sector into a major foreign exchange earner to cover the gaps created by falling oil price. Going by that expectation, his focus should be on how to make Nigeria’s solid minerals sector contribute as much as the oil and gas to government’s coffers and even more, considering the enormous resources the country has in various states of the federation.
But the question has often been asked as to how the solid minerals sector can rank with petroleum as Nigeria’s highest earner of foreign exchange when there are no strong government policies targeted at encouraging investment in the sector. Much of what we have going on in the sector are illegal mining by all manner of artisanal miners. Yes, the sector can be profitable if the right policies are put in place because if we are serious with solid mineral exploitation, the country can make huge resources. In fact, the estimate is that the country can earn $10 billion by doing just 10 minerals out of more than 34 of such Nigeria has in commercial quantities. But consider that, against NNPC, which says it is targeting about $30 billion in five years from hydrocarbon exploration.
Experts believe that in a year or two, Nigeria’s solid minerals alone can generate up to that, according to Mr. Dele Aiyemibo, the Vice President of Association of Metal Exporters of Nigeria (AMEN). Even statistics from the Central Bank of Nigeria (CBN) recently pointed out that out of the 34 minerals identified in the country, only about 13 currently being mined, processed and marketed, fetched the nation about N1, 742, 990 trillion in just six years. That was even as government is not giving so much attention to the sector, in terms of big investment, or grants to operators in the sector.
Now, you can begin to imagine what we can do when there is support from the government. A breakdown of the Central Bank of Nigeria’s report on minerals exports from Nigeria, shows that within six years, the amount received from the trade in solid minerals ranged from $182.110 million in 2010 to $522.600 million in 2014. In 2015, the foreign exchange (forex) inflow into the country within the first three quarters stood at $517.08 million. In 2011, it was $141.640 million. In 2012, it stood at $213.700 million, while in 2013 it was $165.860 million.
The above figures would have been even higher if the Federal Government had supported the sector on value addition – that is, processing the minerals into the forms for making finished products – as against the current practice of exporting most of them raw.
What that translates to is loss of revenue, even to the government, as the government could not generate proper revenue, said Mr. Seun Olatunji, the President of AMEN.
There is, indeed, every reason to believe that regulation of artisanal miners is fundamentally poor. That is part of the reason we had lead poisoning in places like Zamfara and other states in the North. Today, most states are owing salaries to civil servants because they have not been able to exploit the abundant minerals in their domain. So, there is need for a stronger political will in regulating and exploiting these vast resources so that rather than wait to share from the Federation Account, states can become self-reliant through exploration of resources available to them.
It’s high time the government created the enabling environment for foreign investors to come into the sector, and once that is done it will open the floodgates for foreign investment. There is nothing stopping foreigners from setting up smelting plants in Nigeria if they are convinced that there are policies on ground to guarantee their investment. This also means that when they buy the minerals here or when they mine it locally, they would process it into the forms that can be used to produce finished products. When they mine the raw lead, for instance, they would process it into ingot that can be used to make car battery, inverter battery, alloys and all manner of finished products. When they start to establish plants that make the minerals into finished products, you will start seeing growth in employment. The GDP will grow and this will reduce importation of batteries, as there is only one company that produces batteries currently in Nigeria.
Apart from gold, there are also gemstones and plenty of mica – used for pigment in paint. This is available in commercial quantities in Osun State. With those gemstones available, you can create processing centres called Lapidiaries for gemstones cutting and polishing. So, instead of exporting the gemstones raw (because gemstones have more value, you can just put a little in your pocket and travel abroad and sell them for millions of dollars), foreigners can come in and buy. That way, they will generate money into the government’s coffers.
If we grow this sector to the point of producing globally competitive final products from the abundantly available raw materials, we would have succeeded in achieving the much desired import substitution, conserve our foreign reserve and possibly earn some foreign exchange.
Before the sector can achieve this feat, it must first overcome some of its challenges, which include lack of regulation, lack of funding, poor processing facilities, poor quality control and decrepit infrastructure, like roads, to mention just few.
The way to go is to concession some of the critical infrastructure that are commercially viable, such as transport infrastructure – rail lines, highways, seaports, airports, among others, and invite private sector capital to build this infrastructure under Build Operate and Transfer (BOT), because “the availability of these minerals opens up opportunities in areas like export and use in domestic industries for generation of foreign exchange and internal revenue; emergence of new industrial sites and downstream products; employment generation for Nigerians, particularly in the rural areas where the minerals are found.
The multiplier benefits to the citizenry are enormous. In fact, the solid minerals sector can very easily be the largest employment sector of the economy, since deposits abound in virtually every state of the federation. Other benefits are technology transfer and development of infrastructure, especially in the rural areas (roads, hospitals, rails, schools and housing).
On financing, we expect the Bank of Industry (BoI) to help interested companies secure equipment to process the minerals. If BoI provides equipment for the companies, the companies can crush the products at that point. The Federal Government can set up Public Private Partnership (PPP) arrangement that will enable crushing plants spring up in different parts of the country so that people can crush them before exporting.
There should also be policies that would attract foreigner direct investment in the sector so that miners with requisite skills from places like South Africa and the South America, where mining is done big time, can come in.
• This is excerpt of a paper to have been delivered by Mr. Osagie at the New Telegraph Economic Summit, in Lagos last week.