Minister of State’s Speech at the China Mining Conference

Protocols, Salutations and Introduction

Distinguished ladies and gentlemen, I bring you greetings from the Federal Republic of Nigeria. I must start by thanking the organisers of this conference – the Ministry of Land & Resources, People’s Republic of China; the Tianjin Municipal People’s Government; and the China Mining Association; for the invitation graciously extended to the Government of Nigeria, to participate in this event, which is renowned as one of the largest global gatherings focused on minerals exploration and trading. This conference has become a leading platform for the exchange of ideas, and for deliberations on the crucial challenges faced by policy makers, operators, investors and other stakeholders in the industry, and we are pleased to be a part of it.
I also wish to salute the chairman of this session, Hon. Wang Min, Vice Minister of Land and Resources, Peoples Republic of China, and my distinguished fellow panellists on this session: Hon. Matt Canavan, Minister for Resources and Northern Australia, Australia; Hon. Guillermo Shinno, Deputy Minister of Energy and Mines, Peru; and Hon. Mosebenzi Joseph Zwane, Minister of Mineral Resources, Republic of South Africa.

Our participation in this conference is coming at a time of renewed momentum in the relationship between the Federal Republic of Nigeria and the People’s Republic of China. Our two countries have developed strong and enduring bilateral relationships over the last 45 years. In 2014, Sino-Nigerian trade relations reached a record volume of 18 billion USD, which is the highest in history, and in 2015, despite the economic downturn, the trade volume still reached 15 billion USD and accounted for 42 per cent of the volume of trade between China and the entire West African sub-region. Nigeria is still China’s leading export destination and largest trade partner in Africa, with more individuals and corporations taking advantage of improved relations to extend the frontiers of their businesses. As President Muhammadu Buhari of Nigeria has consistently said during his state visits to China, Nigeria is strengthening our policy, regulatory, and institutional frameworks and regimes, to create a very optimal investment climate for Chinese and other investors in the minerals sector. Our new Road Map offers very competitive and investor friendly incentives, which I am proud to say compares favourably with the best in the world.

Global Mining Development Trends and Strategies for the Global Market Place
The global mining industry in recent years has been characterised by a number of definitive megatrends that have changed the industry globally; and forced stakeholders in the sector to make necessary adjustments in the way the industry is regulated, the way mining operations are conducted, and the way investments into the industry are made. One of the major trends impacting on the industry is the slump in the prices of commodities which has been sustained to a very large extent over recent years.

Global Downturn in Commodity Prices; the Portents and the Opportunities
The global commodities market has suffered a number of severe challenges in the past 3 years. From sharp price declines to job losses, to mine closures; the impact has reverberated across the world. And we know it has not ended. What we are experiencing does not appear like a normal business cycle disruption. This could be the beginning of transformational reordering of the mining sector globally. To survive, companies have had to adapt by cutting costs, introducing more innovations, automating certain operations, and generally striving to be more efficient by being more productive with less operating expenses. Countries also have to do more to create the attractive context for their mining sectors to thrive. Changing fiscal terms will be a necessity but insufficient. We have to be more creative about what additional support we can provide as regulators and policy makers. This season presents an opportunity to reset our mining sectors to become more efficient, safer, more profitable, and ultimately, more aligned with our human development goals – this is exactly what Nigeria is doing.

Nigeria, Repositioning for Market Advantage
Governments across mining jurisdictions in the world are responding with different strategies to the challenge of the slump in commodities’ prices, especially resource rich countries that depend on income from commodities to sustain their economies. For us at the Nigerian Ministry of Mines and Steel Development, we have a mandate to urgently reposition our mining sector to contribute to the Nigerian Government’s priority agenda of diversifying our economy, by scaling-up its capacities to create jobs, increase revenue, and catalyse domestic growth and the industrialization of our country. This is however coming at a time of severe contraction in the global commodities market, posing a challenge to attracting foreign and domestic investors to the sector in the short term.

We have however recently launched a Roadmap for the Growth of the Nigerian Mining Sector – a radical plan to unlock our country’s mining potential and grow the sector over the next two decades, with short, medium and long term targets. While we wait out the rebound of prices in the global commodities market, the overarching objective of the roadmap in the short to medium term is looking inwards, with a beneficiation strategy that would see us encouraging value-addition to our minerals locally – particularly industrial minerals – largely to meet domestic demand. This is a strategy that has worked for us in the past with the beneficiation of limestone. Annual domestic demand for limestone is about 18 million tons, yet, though Nigeria has had known endowments in limestone and gypsum for decades, this did not result in self-sufficiency in cement production until we encouraged local beneficiation to meet local demand.

Today, with eight cement companies operating in Nigeria, and an aggressive import substitution strategy via consistent policies that have encouraged the local manufacturing of cement, cement manufacturers in our jurisdiction have moved Nigeria from being a net-importer of cement to a net-exporter in less than a decade. Almost $10 bn was saved in foreign exchange over the last ten years, with $2bn from savings in 2014 alone. The Dangote Group, Nigeria’s largest cement producer, is projected to earn over $600m in 2016 from cement exports. The cement industry today has created jobs for thousands of Nigerians, and continues to contribute to the economic prosperity of several host communities.
This is an exciting time for investors to join us on this journey, as we are working with all stakeholders in the industry to encourage the replication of the limestone success story in the beneficiation of our abundant reserves of other industrial minerals, towards powering the industrialization of our country, and creating shared prosperity for investors and all other stakeholders. Take the opportunities in the steel sub-sector for example, we project a steady increase in domestic demand for steel in Nigeria in the coming decade, driven by increased industrialization efforts that will ignite a surge in spending on building construction, power, automotive construction, agriculture, road and bridge construction, military technology and infrastructure development, refinery investments, and other heavy duty machinery.
According to a recent report by the National Integrated Infrastructure Master Plan, Nigeria’s current “core infrastructure” stock (roads, rail, ports, airports, power, water, ICT) gap based on international benchmarks is estimated to be USD80 billion. To fund the infrastructure needs of its growing economy over the next 30 years, Nigeria would need to spend about USD 3 trillion. This projected investment would allow Nigeria close its current infrastructure gap and sustain an ideal infrastructure stock level of 70% of GDP as it builds and maintains infrastructure assets across all its seven key sectors. Iron Ore and Steel would account for the bulk of the material inputs needed to industrialise Nigeria.
May I reiterate that there is a veritable hunger for steel and iron ore domestically and across the sub-region, which presents a huge opportunity for local and international investors to participate in the consolidation and expansion of Africa’s largest economy. We eagerly await your partnership in this endeavour. Our optimism is also informed by the fact that current local producers are meeting less than 25 percent of demand. Despite the country’s relatively robust iron ore reserves, only 18 of the 30 steel rolling mills are actually operational, producing 2.8 million metric tons per annum. These figures represent a gross under-utilization of our iron ore resources, and are vastly inadequate to sustain our industrialisation ambitions. In addition, there is the opportunity for import substitution as the $3.3 billion of much needed foreign exchange currently being spent on steel imports annually could be judiciously deployed to other strategic national priorities.
Balancing Sustainability Concerns, Mining and Development
Another key issue being debated globally at this time is how stakeholders will work together to balance the global mining sector’s obligations to a number of Sustainable Development Goals (SDGs), such as our climate change commitments, and the urgent need to address poverty and inequality in our country. President Buhari has recently ratified the Paris Climate accords during this year’s United Nations’ General Assembly in New York. This development places significant pressure on Nigeria’s emerging mining and power sector. Nigeria has a significant power generation deficit, with less than 5,000MW serving the household and industrial needs of over 175 million people. Building 30,000MW of coal fired power plants can help close that gap. Utilising our coal assets also requires that we expand coal mining, issue new licenses and revive old mines. That will also mean that we can use mining led job growth to help create jobs in rural mining communities and end extreme poverty. Nigeria is however also strongly committed to environmental sustainability!

In the US for example, EPA regulations on the coal industry have been implicated in the bankruptcy of so many coal miners. We certainly do not want to have such an experience in Nigeria. We will therefore welcome insight from other countries on ways to manage this challenge.

Even as we have our eyes set on accelerated industrialisation; ecological justice is one of the major planks of our approach to the repositioning of the Nigerian mining sector. We will ensure operators comply with global best practices in resource extraction by integrating all relevant protocols on environmental conservation in the conduct of mining and all related businesses. This approach is informed by our belief that the environment itself is a resource and has to be safeguarded even as we unearth its endowments. Our goal is to facilitate a better deal for the local communities where these minerals are located, ensuring genuine communal buy-in and benefit. Transparency is also a key consideration in how the mining industry is now being run. President Muhammadu Buhari recently joined other world leaders to commit to Open Governance and Transparency principles – transparency in the extractives industry is crucial to that commitment. We are fostering a culture of openness which will, in turn, elicit the trust of all stakeholders. This is the cornerstone of the recently launched Road Map which I mentioned earlier.

The Evolving Role of the State
Another major issue which we must deliberate on is the role of the state in Mining. From the tragedy at Marikana in South Africa to the Vale/BHP dam collapse in Brazil, and the mine collapses in China, Peru, to name a few, it is pertinent to ask, what should be the new role of the state in protecting the mining industry? Should we as regulators start revising the rules to protect the environment, workers and mines? And if we do so, do we risk going too far as the US might have, or not do enough and risk losing public trust? Nigeria believes that if we all share best practices and leverage each other’s wisdom as Nigeria is beginning to do with South Africa, Australia and other countries, we can build a more prosperous future in the industry that balances safety, jobs, stewardship, and smart regulation.

Preparing for a Disruptive Future
Finally, we must learn from the oil industry whose cost structure has forever being changed by the introduction of a new drilling technology. We have to ask ourselves, can what is happening to the oil industry happen in mining? Today, we are anticipating a slow recovery from what was a spectacular crash in mining markets. The wreckage is all around us. Can this downturn get worse? If we observe key technology innovation trends around the world, the key question we have to ask is what impact will shifting to a more digital, renewable fuel world have on us? For example, will the rise of Tesla and electric cars be good for mining? How about the expansion in the use of drones and robots at home and in the work place? These technologies could drive demand for specialty metals and ores, benefitting markets with these endowments. While we may not know the answers to these questions, we believe that if key mining states collaborate to share process innovation, market insights and set clear regulatory frameworks to handle such disruptive technologies, we will jointly prosper while keeping mining competitive.

Building Partnerships
Outside of South Africa, African mining markets still have a great deal of development to unlock. Whether it is intensifying the levels of ore processing, or expanding transport infrastructure to cater to mining, or training the next generation of mining engineers, African countries still require significant capital inflows. Therefore, we are seeking the continued partnership and perspectives of key global mining leaders to support us as we reshape the market. When your mining companies come to you and ask, should we go to Nigeria or Guinea or Liberia or Tanzania, we want the answer to be yes. We also want you to reach out to us so we can offer the best possible assistance to ease the path for investment inflows. We will also reach out to you to ask that you encourage your technical teams and specialized services providers who can bring disruptive innovations into mining to help us fast track our learning process. For example, if we can have a cheaper, more accurate way of conducting geological surveys, we would most certainly welcome it.

Conclusion
I wish to restate that despite all the challenges facing the mining industry presently, Nigeria is cautiously optimistic about the future of mining. Perhaps starting at the position we are in, we can afford a measure of optimism. We are looking forward to continuously engage closely with our peers and key mining stakeholders across the globe to ensure that our optimism is backed by real action. We are here to learn from your experiences as well. We will continue to strive to ensure that Nigeria remains your destination of choice in the mining industry. Finally I wish to emphasize that growth and prosperity in the industry must be inclusive and translate into significant improvements in the socio-economic conditions of our respective citizenry. That is what will ensure that a more positive future emerges for all in mining and related sectors.

Thank you for your attention.
Hon. Abubakar Bawa-Bwari
Minister of State for Mines & Steel Development
Federal Republic of Nigeria
Tianjin, China | Saturday, September 24, 2016