Nigeria’s Solid mineral: How governance issues keep the country poor

“IN terms of natural resource endowments, our country could as well be the biblical Promised Land, a land flowing with milk and honey, just that the milk and the honey have not been appropriately harnessed to nourish and benefit the mass of our people,” the Executive Secretary, Nigeria Extractive Industries Transparency Initiative (NEITI), Waziri Adio began in his paper, entitled Extractive Sector Transparency, Value Maximisation, and Nigeria’s Economic Recovery, delivered at the third Annual Lecture of the Dauda Adegbenro Foundation Held at the University of Ibadan, late last month.

“Nigeria is blessed with large deposits of 44 different minerals spread across the country. According to data from the Ministry of Mines and Steel Development, Nigeria has, among others, 639 million metric tonnes proven reserves of coal but production is only at 0.04 million metric tonnes; has three billion metric tonnes proven reserves of iron ore but production is only 0.07 million metric tonnes; has five million metric tonnes proven reserves of lead/zinc but production is at 0.6 million metric tonnes; has one million metric ounces proven reserves of gold but production is 0.14 million ounces; and has 568 million metric tonnes proven reserves of limestone, but produces only at 11 million metric tonnes,” he continued.

Despite the abundance of solid minerals in the country, according to Adio, “the sector has contributed minimally to national output.”

The Minister of Solid Minerals Development, Dr Kayode Fayemi, said last year that: “Nigeria’s solid minerals sector makes up about 0.34 per cent of gross domestic product (GDP). That means that based on current official exchange rates, the mining sector contributes N400 billion in value to the economy.

“While that is a significant role, it is smaller than its true potential as the vast majority of our mining assets have yet to be exploited. In fact, what has been happening in the sector has more or less been operating sharply below capacity, with many mining operations manned by small scale artisanal miners, as opposed to the large scale players,” Fayemi said at the time.

Data from the National Bureau of Statistics (NBS) shows that solid mineral sector only accounted for 0.12 per cent of GDP and 1.45 per cent of total non-oil exports in 2015, whereas, back in the 60s, it contributed “about five per cent to our GDP,” according to the NEITI boss.

The solid mineral “provides enormous opportunities for job and wealth creation, for economic growth, and for revenues to government,” Adio said in an earlier interview with this reporter, asking that the government provides “business-friendly regulatory framework and investible geo-physical data, provides needed oversight and reduces, if not eliminate, illegal operations, and puts in place incentives and sanctions for value-addition.”

If properly developed and monitored, Nigeria’s solid minerals sector could create three million jobs in one year, increase GDP by 20 per cent by 2020 and contribute 30 per cent of the nation’s power generation by 2020, according to PwC’s estimates.

“Facilitating the production of coal needed to fire coal-fired power plants that would contribute 30 per cent of the nation’s power generation by 2020,” just as the sector could “revitalise the entire steel sector for the operation and production 12.2 million tonnes of liquid steel per annum by 2020, thus helping the country become “a major regional and global producer of aluminium and steel products,” according to PwC.

Governance issues, as one of world’s richest countries remains one of world’s poorest

Nigeria contributes a considerable share of the world’s extractive resources, and is known to have the third largest manufacturing sector in Africa. Until recession hit Africa’s largest economy, with its population of 175 million; it was thought to have been on the track to becoming one of the 20 largest economies in the world by 2020. But the country, which currently ranks 17th on World Atlas’s Richest Countries in Africa index at $5,900 per capita; is considered one of the poorest in the world, largely due to governance issues in the country.

With 37.1 billion barrels of proven oil reserves, Nigeria has the 11th largest oil reserves in the world and is the world’s eighth largest exporter of crude oil. Nigeria’s proven gas reserves of 180.1 trillion cubic feet place it as the ninth largest gas reserves in the world. Aside of that, its 44 solid mineral types available in commercial quantities include tin, iron ore, limestone, gold, gypsum, kaolin, lead/ zinc, coal and bitumen, with most states in the country having one type of solid mineral or the other. For instance, Nasarawa State alone is reported to have over 20 solid mineral types including tantalite, barite, copper, iron ore, tin ore, coal, columbite and aquamarine, with reports that coal is present in about 13 states, with proven reserves of 639 million metric tons.

However, due to “largely governance issues” and “partly low production, natural resource endowment has not translated to prosperity for the mass of Nigerians,” Adio said.

Nigeria is one of the poorest countries in the world, going by the 2016 UNDP Human Development Index (HDI), which ranked Nigeria 152 out of 188 countries, behind South Africa, Kenya, Gabon and Ghana and yet, it is one of the wealthiest in the world in terms of natural resources.

The HDI measures human development in terms of educational attainment, life expectancy, and per capita income and in the UNDP report, Nigeria was not captured among the top 20 in Africa. “In a related vein, data from NBS show that the period between 1980 and 2010 witnessed a steady increase in poverty rate in Nigeria. While 27.2 per cent of Nigerians were considered poor in 1980, this increased to 46.3 per cent 1985 then 69 per cent in 2010. In raw figures, the number of Nigerians adjudged to be poor increased from 17.1 million in 1980 to 112.47 million in 2010, an increase of 558 per cent. The massive inflow of rents from the oil sector has not made a positive dent on human welfare in Nigeria,” Adio said.

A 2016 United Nations (UN) report on Nigeria’s Common Country Analysis, (CCA) indicated that the country is “one of the poorest and most unequal countries in the world, with 64% of her population living below poverty line.”

The situation, the UN said has not changed over the decades, rather, it is increasing. “Poverty and hunger have remained high in rural areas, remote communities and among female–headed households and these cut across the six geopolitical zones, with prevalence ranging from approximately 46.9 percent in the South West to 74.3 percent in North West and North East,” it added.

Increased population, bleak future

Available data indicate that Nigeria’s population will increase to an approximately 200 million by 2019 and over 400 million by 2050, becoming one of the top five populous countries in the world.

Nigeria’s current population of 175 million ranks the country as the most populous nation in Africa and the seventh most populous in the world.

But development experts are worried about the projected growth, as the current realities of Nigeria are frightening. If about 70 per cent of the country lives (about 126 million) live below the poverty line, according to National Bureau of Statistics (NBS), this signals a “bleak future” for the country, Dr Olumuyiwa Omobowale, a development sociologist at the University of Ibadan said.

The UN’s ACA report had encapsulated that youth unemployment which stood at 42 per cent in 2016 contributes to “poverty, helplessness, despair and easy target for crime and terrorism,” adding that: “over 10 million children of school age are out of schools with no knowledge and skills.”

Dr Omobowale told this reporter in an interview that: “One of the ironies of Nigeria is that Nigeria has a huge working population between 15 and 60 years of age but huge chunks of this population are actually jobless. These are well trained Nigerians but they are jobless, which predicts a bleak future for the country.”

It is predicted that in another three years (2020), about 122 million young people in Africa will enter the job market, per data from McKinsey Global Institute, a significant number coming from Nigeria. A record 1.3 billion of 2.4 billion new people expected on the planet by 2050 are projected to come from Africa, per data from the UN’s World Population Prospects.

Nigeria’s growth rates could be a good thing, if the there were infrastructures or provisions to accommodate the growth, Kayode Ajayi-Smith said in an earlier interview with is a reporter. Currently though, there are several challenges posing significant threats to attaining the Demographic Dividend in Nigeria, he said.

Nigeria’s failure to reduce inequality – the Oxfam report

It will be recalled that Oxfam International in July 2017 indicted Nigerian government over its inability follow to through on its commitment to reducing inequality in the country, as it said that the Nigerian government is “failing” to make use of the tools available to it towards tackling “this global scourge.”

Oxfam said that while a number of governments such as Sweden, Chile, Uruguay and Namibia have shown that they can tackle growing inequality by taking clear steps to reduce it, “unfortunately, many other governments, including Nigeria and India, are failing to make use of the tools available to them to tackle this global scourge. Unless they take concerted action now, they will fail to end poverty and fail to make sustainable economic progress that benefits everyone in society.”

The indictment came in a report, Commitment to Reducing Inequality Index (CRI), by Development Finance International (FDI) and Oxfam, where Nigeria ranked the lowest of all the 152 countries surveyed, taking the 152nd position on the chart, just as 112 of the 152 countries surveyed were found to have done “less than half of what they could to tackle inequality.”

The Nigerian government’s “failure to tackle this growing crisis is undermining social and economic progress and crucially, the fight against poverty,” Oxfam said. Inequality, it said, has been linked with crime and insecurity, lower economic growth, and poor health and other outcomes, stating that: “The consequences for the world’s poorest people are particularly severe.”

The report, which measured the Nigerian government’s action on social spending, tax and labour rights, the “three areas found to be critical to reducing the gap,” also found that although the country has recorded positive economic growth for many years, poverty has increased.

The problems: Lack of planning for infrastructure

“A well developed mining industry thrives on well established transportation network, which supports the movement of equipment to mining sites and the evacuation of minerals for sale and export,” Cyril Azobu, Partner, Mining sector leader and Head consulting at PwC said in a report, “Developing the solid minerals sector: Quick wins for the new government.” He said although there are currently a number of infrastructure development initiatives in road and rail, being embarked upon by the federal and state governments, “these however do not take into consideration planned linkage with existing or intended mining sites. Infrastructure is a key element for the success of any mining industry.”

Azubo said: “The federal government needs to take a holistic view regarding infrastructure development and mining sector plan, and execute in synergy. There is therefore a need to develop a master plan for roads and rail for federal and state adoption. All identified mining locations should be considered when drafting this master plan, and it should be made mandatory for adoption by any level of government embarking on infrastructure development. The linkage of mining sites via rail or roads, and the resultant ease of transportation of minerals for sale, would act as catalyst for the development of the solid minerals sector.”

Lack of technical competences

“Mining without sub-surface knowledge cannot be sustained,” Francisco Igualada, Senior Mining Specialist, Energy and Extractive Industries (GEEDR), World Bank, said in an interview ahead of the Nigeria Mining Week in Abuja next month. According to him, “even if Nigeria was a country with a developed mining sector in the 70s and 80s, skills are very reduced -in the full range of disciplines related to the mining cycle. Note that this aspect is certainly a common denominator to most African countries.”

He recommended that “we the need to improve human resources skills and adequate geological, geophysical, geochemical as well as mining & metallurgy training.” According to him, “boosting precompetitive geoscience data and sound deposit valuations is key to attract serious investors in Nigeria where geological & mining potentialities are known to exist but no large corporations are present only junior exploration companies.”

Insufficient policy and regulatory frameworks

Policy on artisanal mining Nigeria is recorded to have less than 0.5 per cent of GDP from mining of solid minerals. However, this figure is solely from the formal mining sector, Azubo said, adding: “The artisanal mining sector is largely informal and is fraught with the use of crude equipment and extremely dangerous working practices.

“It is estimated that about 80 to 85 per cent of current mining activities in Nigeria is via artisanal and small scale mining. Furthermore, the sales channel is largely unofficial and embedded with smuggling and distribution cartels leading to loss of revenue from taxes, royalties, exposure of miners to uncontrolled risks, uncontrolled and non-systematic evacuation, resulting in environmental degradation, erosion and excessive pollution, among other negative effects.”

Azubo, therefore, urged that there is an urgent need to formalise the artisanal and small scale mining by formulating policies aimed at “achieving integration of informal artisanal miners into the formal mining sector, training and equipment supply, funding, possible absorption by bigger companies and enlightenment on safe mining practices,” among others.

“Moving from recession to sustained recovery”

For the extractive sector to drive sustainable growth and development in Nigeria, Adio said Nigeria needs to focus on fully optimising the “opportunities that resource endowments offer and go beyond the easy and lazy approach. For now, we are still scratching the surface. Value optimisation would mean going beyond just exporting crude oil and refining petroleum products for domestic consumption and export, harnessing gas instead of flaring it, and becoming major players in the petrol-chemicals arena.

“The real value is in value-addition; otherwise we remain price takers and marginal players. It would mean changing the solid minerals sector form an abandoned and artisanal-dominated sector to a major contributor to GDP, to exports, to industrial development and to jobs. Clear and predictable legal and regulatory frameworks, reasonable incentives, and aggressive marketing would be needed.”