Minister’s Speech at The Nigerian Mining Sector Year 2016 in Review and Projections for Year 2017 Session

Protocols

The Minister of State, Hon. Abubakar Bawa-Bwari;

The Permanent Secretary, Mr. Mohammed Abass;

Directors and staff of the ministry;

Members of the Press;

Distinguished Ladies and Gentlemen

 

Introduction

Distinguished ladies and gentlemen, I welcome you to today’s media briefing, which is for the purpose of giving accounts of our stewardship over the past 12 months, and sharing highlights of our plans and projections for the Nigerian Mining sector in the year 2017, within the context of our long term vision.

About this time last year, on Monday, December 21, 2015 to be precise, I had the duty of presenting our inaugural ministerial briefing, a little over a month after His Excellency President Muhammadu Buhari inaugurated me and my brother minister, Hon. Abubakar Bawa-Bwari into his cabinet, and assigned us as Minister and Minister of State, respectively, to this ministry.

President gave us the mandate to reposition the Mining Sector, to contribute optimally to the achievement of this administration’s strategic goal of diversifying our economy’s revenue base, creating jobs, and broadening the range of economic opportunities available to Nigerians.

The inaugural ministerial briefing came after initial consultations, and diagnostics of the challenges facing the Nigerian Mining sector. We shared our understanding of the issues with you, our strategy for addressing them, and the principles that would guide our interventions. These challenges include:

  • Insufficient Funding
  • Lack of Geological Data
  • Weak Institutional Capacity
  • Limited Supporting Infrastructure
  • Limited Cooperative Federalism
  • Low Productivity
  • Illegal Mining and Community Challenges
  • Weak Ease of Doing Business and Perception Issues
  • Protracted Litigations on Legacy Assets

We have elaborated on these challenges in a number of prior briefings and public paper presentations, so I will not go into too many details on them now. I am certain everyone associated with this industry is already quite familiar with the perennial issues that had before now stunted the growth of our mining sector, and made our jurisdiction unattractive to global mining majors.

We don’t dwell on talking about the challenges because we appreciate that Nigerians are eager to know what the future holds for those interested in the sector. We appreciate the enormity of the expectations Nigerians have of us, and understand Nigerians desire immediate solutions to all these challenges – more so as in the errors of the past have put our economy in dire straits.

We would therefore focus this briefing on providing feedback on the key reforms we have commenced, and our outlook for the future as we chart a path out of the woods, into a glorious future for mining in Nigeria. Before we outline our major achievements in addressing the Nigerian Mining sector’s challenges so far, let us consider the context of the macro-economic environment within which the sector has fared in the past year.

Review of Year 2016

As we all know, 2016 has been a challenging year for the global economy – one of the toughest since the world emerged from the great recession about 7 years ago. Much of the world has struggled to achieve growth seen in prior years, with slowing growth in China and India; continued depression in commodity price levels; escalating conflict and tensions in the Middle East; as well as the rise of populism and anti-globalization sentiment in the West, with its uncertain effect on the future of markets, e.t.c.

Both the IMF and the World Bank have revised their projections of global growth for 2016 and 2017 downwards, from those issued at the start of the year. Consequently, earnings for many African countries have been significantly affected by the fall in commodity prices and many of them are, as a result, experiencing a recession for the first time in a long time – Nigeria not being an exception.

In August this year, the National Bureau of Statistics (NBS) announced that Quarter 2, 2016 Gross Domestic Product (GDP) declined by -2.06%, signaling a recession. GDP further contracted by -2.24% (year-on-year) in real terms in the third quarter, exacerbated by the steep decline in oil and gas production due to acts of vandalism and sabotage of oil export facilities.

According to the NBS however, growth in the non-oil sector of the economy returned to positive territory in Quarter 3, largely due to improved performance of Agriculture and Mining – the two frontiers of this administration’s economic diversification agenda. Miningsector growth averaged 7% in the same quarter.

Let me use this opportunity to draw your attention to the fact that the growth that we are witnessing in the non-oil sectors of the economy, in spite of the general contraction, is a result of this administration’s deliberate efforts in line with our diversification agenda.

It would however be immodest of us to take the credit for the green shoots of growth we are beginning to see in the industry. Much of what has been achieved has been a result of the collective efforts of all stakeholders, based on our shared vision for the sector which we have articulated in a roadmap. Our ministry considers all stakeholders as partners with a common goal, which is why we spend time engaging with our publics, providing feedback, sharing our vision, and eliciting more concerted participation – this is why we are here today.

This partnership approach is what guided the scripting of our “Roadmap for the Growth and Development of the Nigerian Mining Sector”. The document was produced through a robust process of consultations and stakeholders’ engagements. A multi-stakeholder committee submitted the draft roadmap on March 31, 2016, which was subsequently shared with state governors, the National Economic Council, and other key stakeholders as part of an extensive feedback/validation process, which also included a two-day workshop with state governments, and other stakeholders held in Kaduna state between May 25 and 27, 2016. A number of ideas that emanated from the stakeholder engagements and submissions from States and sector operators were incorporated into the Roadmap, which has been subsequently approved by the Federal Executive Council on August 31, 2016.

Armed with the roadmap, in 2016, we laid the foundations for the take-off of the effective implementation of its provisions in the years ahead. Some of the modest achievements which accounts for the growth being recorded are as follows:

Insufficient Funding

  • The 2016 Capital budget for the ministry and its agencies increased from N1bn in the previous year to N7.3bn. This has been expended on strengthening the Mines Inspectorate, Geological data generation and IT infrastructure. We expect an improvement in budgetary allocation to the ministry in the 2017 budget.
  • We sought for N30bn (approx. $100m) intervention fund from the Federal Government, partly to focus on exploration, formalization of artisanal miners, and providing access to funding for genuine miners. For the first time since 2004, we got approval for this amount by securing access to the revolving mining sector component of the Natural Resources Development Fund.
  • We are working with the Nigerian Sovereign Investment Authority, the Nigerian Stock Exchange and others to assemble a $600M investment fund for the sector which we hope to conclude and operationalise by the second quarter of 2017.
  • We have secured support from the World Bank for $150mn for the Mineral Sector Support for Economic Diversification (MSSED or MinDiver) program, a critical component of which is to provide technical assistance for the restructuring and operationalisation of the Mining Investment Fund, which would make finance available to ASM operators through development finance, micro-finance and leasing institutions. The fund will also help to bring back on stream previously abandoned proven mining projects like tin ore, iron ore, coal, gold and lead-zinc.
  • We have also commenced capacity building on Mining Finance within banks and financial institutions, in order to build their knowledge assets in the sector, for them to better evaluate and finance bankable feasibility studies and business plans by enterprising miners.

Lack of Geological Data

  • We are working to retrieve old data obtained on the various mineral deposits across the country, as well as enter into joint ventures with private exploration companies to generate new data from our Greenfield explorations. We hope that analysis of this information will help to further buttress our speculations on the quantity and quality of mineral deposits in the country
  • Our Nigerian Geological Survey Agency (NGSA) has undertaken additional ground investigations nation-wide to upgrade our National Minerals Database and to further ascertain the assays of our mineral assets to the level that can easily attract financial investments, and assure operators of the scope of operations required for further exploration and/or mining.
  • NGSA has also signed MoUs and Technical Cooperation Agreements with the China Geological Surveys, Shandong Mineral Exploration Agency and the National Office Hydrocarbons and Mines ‘ONHYM’ of Morocco. The collaborations are intended to leverage on the expertise and state-of-the-art technologies of these organizations in assisting Nigeria generate investor friendly geoscience data.
  • The Ministry is also engaging world class exploration companies to collaborate with our data generating Agencies towards providing bankable data to attract big players in the mining sector.
  • The Ministry has also initiated discussions with SGS, a world renowned materials testing company, to activate the NGSA Laboratory Facilities in Kaduna towards achieving ISO 17025 accreditation within the shortest possible period. The objective is to significantly reduce the thousands of mineral samples being shipped abroad for analysis thereby reducing the huge revenue loss and correspondingly incentivize the mining sector.

Weak Institutional Capacity

  • There is widespread consensus that our mining code ranks amongst the best in the world. The challenge has always largely been the effective enforcement of its provisions.
  • For the first time in very many years, we implemented a provision in the Nigerian Minerals and Mining Act, 2007, which allows for the revocation of non-performing or defaulting mineral titles. This exercise led to the revocation of a number of titles, and the generation of revenue to the federation account from titleholders who met the deadline to regularize their statuses. The exercise which made non-performing mineral titles available for acquisition by serious operators/investors, also sent a strong signal to the mining community of our improved capacity to properly regulate the industry, and penalize those that deprive the country of due revenue.
  • We have strengthened the capacity of the MCO to ensure a seamless process for obtaining exploration licenses, permits, and approvals for willing and credible investors. In the coming year, we intend to decentralise the operations by establishing six (6) regional outposts for the MCO to further fast track the procurement of licenses and titles. The MCO is also benefitting from current improvement in our IT infrastructure and our interactive web portal.
  • We have reviewed the explosives act and stemmed cases of explosives’ proliferation, pilfering and diversion, in partnership with the NSA’s office. We have also improved collaboration between the ministry and our security agencies to address illegal exportation and smuggling of minerals; and the NSCDC, the Nigeria Police and the Military are all helping in checkmating cases of illegal mining activities.
  • We improved our capacity to ensure sustainability in our mining sector by producing the Mining Environmental Regulatory Compliance Handbook, as well as the guidelines for Environmental Protection and Rehabilitation Programme to ensure sustainable mining in Nigeria.
  • We have worked with partners to carry out several capacity building workshops for different aspects of the industry, including a two-day policy and capacity building workshop on the mining sector organized in collaboration with the Australian Government, with the aim of building the Nigerian Mining sector’s capacity to deliver enhanced mineral exploration and mining regulations, and promote ongoing education and training in mineral policy governance.
  • We have reinvigorated our Mines Surveillance efforts, with the deployment of newly trained and empowered officers across the federation which has led to veritable improvement in security in the sector. Today, we would also be commissioning 38 new vehicles which have been procured for our officers in the field for greater efficiency.

Limited Supporting Infrastructure

  • Infrastructure required for the proper functioning of the minerals and mining ecosystem such as railroads, competitive financing systems, mine and asset security and related support services are being developed in convert with other government entities. For instance, as part of our efforts to de-risk the sector, we are in discussions with the Bank of Infrastructure, as part of a consortium, to attract private capital investments for critical mining infrastructure, which will help to jumpstart necessary investments. Equally, we are working collaboratively with the Ministry of Transportation to develop the Central Rail Corridor and with the Ministry of Power, Works and Housing on the development of Coal to Power projects.
  • We have also commenced the development of mining resource corridors around contiguous States and along key infrastructure like railways, to help establish cluster industrial zones, which will become the fulcrum for increased economic opportunities and growth.
  • We believe that when states are able to determine their comparative advantage within the mining resource corridors, they can also make meaningful infrastructural investments to support our modest efforts.

Limited Cooperative Federalism

  • In order to encourage beneficial participation of state governments in the mining sector, we have gotten approval for the implementation of the constitutionally guaranteed 13% derivation for mineral revenue to states, similar to the derivation that oil-producing states currently enjoy from the federation accounts.
  • Furthermore, we have also reviewed our approach to licensing with regard to state ownership. While in principle, we cannot give states licenses as separate legal entities, companies in which the states have an ownership interest can bid for and receive licenses. We are also working closely to build the capacity of state governments in structuring Special Purpose Vehicles to participate in Mining in their jurisdictions, without undermining private sector players and ultimately discourage mining activity within their states. The relationship of states and mineral host communities is also being streamlined. A 2-day capacity building workshop for this purpose is holding in Sokoto State from tomorrow, which is billed to attract mainly representatives of all the state governments.
  • We believe that these administrative mechanisms will help to douse the tension of subsidiarity between the Federal Government and States, pending the enactment and institutionalisation of a more enduring resolution of the FG-SG relationship in regards to natural resource governance.

Low Productivity

  • We have improved the productivity of the sector by tripling the ministry’s contribution to the federation account to about N2Bn in 2016, up from N700M in 2015.

Illegal Mining and Community Challenges

  • We are working with the state governments and relevant ministries to formalize and manage our artisanal miners, while also working with defense and security agencies to curb the actions of illegal mining in the country.
  • Under the MinDiver program, we have commenced the modalities for capacity building in community-based organizations and other community representatives, helping them participate in key decisions in mining operations and processes.
  • We are also providing guidance on suitable benefit sharing mechanisms (e.g. foundations, trusts and funds) and their applicability in different mining operations at all levels of engagement on behalf of mining communities.
  • Furthermore, we are working with our artisanal miners to organize them into effective cooperatives that will facilitate their access to financial and commodity markets through grants and the establishment of mineral buying centers.

Weak Ease of Doing Business and Perception Issues

  • I am glad to share that we are working with the Federal Government to ensure the implementation of the statutorily guaranteed 3-year tax holiday for new investors in the mining sector, starting from the date the investor begins mining operations. We are also extending the Export Expansion Grant Scheme to the Mining Sector, as highlighted by Mr. President in his 2017 Budget Speech delivered last week.
  • Other provisions of the Minerals and Mining Act 2007 are also beginning to see determined enforcement. In particular, our offer of 100% foreign ownership of mining projects to willing investors, and the elimination of import duties on mining equipment brought into the country. We also continue to work with relevant public institutions to ensure that 100% repatriation of mining investments or profits are guaranteed.
  • Also, the Federal Government is fully focused on making it easier to do business in Nigeria, and is taking actions to improve our ranking in the World Bank’s Ease-of-Doing-Business index, while we continue to address issues towards improvement in the Fraser’s Investment Attractiveness Index.

Protracted Litigations on Legacy Assets

  • We have made progress in resolving the legal issues around our legacy projects, particularly Ajaokuta. We have signed a Modified Concession Agreement (MCA) that has allowed for the commencement of the return of the entity to the Federal Government of Nigeria. We are at this time concluding an audit process, further to which we would fully take over the plant. The next stage would be to determine the most appropriate steps to select a new core investor with the requisite financial, administrative and technical capabilities to ensure Ajaokuta is finally put to work after several false starts in the past. We expect this process to be fully on stream by the second quarter of 2017.

In many of the instances we have outlined, the work only just began in 2016, but would be sustained and scaled up in 2017, to deliver greater results. Our prospects for doing more depends on our collective commitment to our shared vision, and the sustenance of our collaboration with all stakeholders in building a productive and sustainable mining ecosystem that delivers shared prosperity to all.

We must therefore express our profound gratitude to all those that have worked with us in one way or the other, including Mr. President; the Vice President; the Senate and House of Representatives Committees on Mines and Steel, as well as the committees on Appropriation, Privatisation and Public Accounts. We also thank our sister government ministries, departments and agencies; development partners, State Governments and other community stakeholders; members of the roadmap drafting committee; partner embassies and high commissions; the Nigerian Miners Association; the Nigerian Mining and Geosciences Society; the immediate past permanent secretary of the ministry and the incumbent permanent secretary of the ministry; and all staff of the Ministry of Mines and Steel Development and its entities; e.t.c.

Our partnerships with partner governments and organizations have been consolidated during the year 2016. We have strengthened our partnership with the governments of Australia, Canada, China, South Africa, the United Kingdom and the United States of America, as well as with institutions such as the UNDP, ECOWAS, the Ford Foundation, OSIWA, amongst others, on areas such as geosciences data generation, knowledge sharing and capacity building.

On a regional level, expectedly, Nigeria continues to take the lead in the implementation of the Africa Mining Vision (AMV). Two Nigerians have been elected to the leadership of renowned mining-related regional bodies including the Director General of the Nigerian Geological Survey Agency, Mr. Alex Nwegbu, who has been elected as the President of the Organization of African Geological Surveys (OAGS), and Prof. Gbenga Okunlola, who was elected President of the Geological Society of Africa (GSAF). These are platforms that will improve the visibility of Nigeria within the African mining community as well as ensure that we remain relevant on issues relating to our national interests in the sector.

 

Outlook for the Year 2017 and the Years Ahead

As we look to the years ahead, starting with the year 2017, I will briefly share with you highlights of our expectations and projections. Our work plan and budget for the year 2017 is inexorably guided by the provisions of the roadmap, particularly the immediate-, short-, medium-, and long-term targets we have set. While it is important to note that the implementation of the 2016 budget would be ongoing till May 2017, this administration has proposed an increased budget estimate for the sector in the 2017 budget proposal.

In 2017, we would continue to work to make our mining sector more competitive in the global mining space, and relevant to our domestic needs and strategic sovereign goals. In line with our roadmap, we would focus on priority areas of competitive advantage to drive growth. These are:

Priority Minerals:

Nigeria’s priority minerals will be those for which data exists around their continued commercial viability (e.g. proven reserves). Seven such mineral resources – iron ore, coal, bitumen, limestone, lead/zinc, gold, and barite – have been identified as key for Nigeria’s domestic industrialisation and infrastructure requirements. In addition, selective emphasis will be placed on other mineral assets that are critical to existing downstream projects (e.g. manganese for the steel industry). For example, before the end of Quarter 1, 2017, the Bitumen blocks would be available for interested investors to bid.

Served markets:

Nigeria will initially focus on the domestic market, trading ore and processed materials to domestic buyers at a quality level comparable to imported materials to win market share from imports. As global commodity markets recover, Nigeria will then seek to serve both domestic and export markets. Nigeria will also seek to exploit its mineral assets in such a way as to preserve and extend the life of its holdings for future generations and manage cash earnings carefully.

Potential Operators/Participants:

Nigeria will focus on building a competitive enabling environment and sector for all entrants, rather than attempt to pre-select winners and losers. While an explicit bias will be in place to encourage formalisation of artisanal miners, the broader goal is to encourage a competitive industry structure.

Target Customers:

Nigeria’s initial customer focus is to serve companies and end users that already purchase minerals and process material from offshore sources. These will include customers in the cement, oil, power and industrial sectors. For instance, substituting imports of coal with domestically sourced coal would be an example of such a step.

Specific objectives of the roadmap that would guide our work in 2017 include:

  • The set-up of the Mining Implementation and Strategy Team (MIST) to drive the effective execution of the roadmap.
  • The set-up of the Council of Mining and Mineral Resources. The roadmap is the strategy aimed at strengthening stakeholder relationships – federal and state governments, industry, and civil society stakeholders.
  • Restructuring and reorganization of the MSMD for more efficient operations, and enforcement of established laws and regulations governing the mining sector, particularly as it relates to our regulatory authority and processes.
  • Expansion of coverage, resolution, and access to geosciences data in Nigeria, and the development of the full value chain capacity, from exploration to mines development, to processing and beneficiation.
  • Commencement of the process of working with national & state legislatures and governments to address gaps, and resolve conflicts in mineral resource legislation.
  • Harmonizing (financial) incentives for attracting mining majors and juniors to Nigeria and catalyse investments in infrastructure.
  • Building the knowledge base in the Nigerian mining ecosystem with trainings in local technical/managerial skills and capabilities required in the industry.
  • Providing trainings and extension services for ASMs to improve their productivity.
  • Deepening the financial services expertise and access to funds to drive sector growth and drive the expansion of supporting infrastructure for mining.
  • Establishment of a mega regulatory agency, that would comprise the existing Mining Cadastre Office; as well as the Mines Inspectorate, Artisanal & Small Scale Mining; and Mines Environmental Compliance departments, as contained in the approved roadmap. This new agency coming onboard would have the full independence and powers to effectively regulate the industry in a much more transparent and efficient manner, in keeping with global best practices.

Also, 2017 would also see the full commencement of the substantive World Bank support program– the Mineral Sector Support for Economic Diversification Project (MinDiver), which will be part of an overall mechanism through which the initiatives of the Roadmap are expected to be realized.

MinDiver will be financed primarily through a loan from the bank and is designed to deliver results in three phases: the short-term results (1-2 years post implementation), medium term results (3-5 years) and longer-term results (5+ years), in line with the roadmap.

As such the MinDiver project will seek to develop the downstream sector and enhance competitiveness (by providing practical technical assistance based on “proof of concept” investment/transaction) and bring assets to a higher developed stage within the conventional mining cycle.

Accordingly, I am pleased to announce today, Monday, December 19, 2016 as the formal take-off of the implementation of the roadmap. Also, I am equally delighted to announce the composition of the Mining Implementation and Strategy Team (MIST), which would be responsible for coordinating the implementation of the plans and proposals in the roadmap. Foremost professor of geology, Prof. Gbenga Okunlola will chair the MIST, which will be co-coordinated through our Directorate of Planning, Research and Statistics.

Conclusion

I must end this briefing by appealing once again for patient perseverance as we take the right measures, and implement sustainable reforms that would outlive our tenure of office, and set our mining industry on the path of sustainable growth.

I invite you to join us as we continue on this road to rebuilding this sector, unlocking its full potential, and making it one of the key sources of our future prosperity.

 

Thank you for listening.

 

Dr. Kayode Fayemi, CON

Minister

Abuja, Nigeria | Monday, December 19, 2016