Advisory Partner and Mining Leader at Pricewaterhousecoopers (PwC) Nigeria, Cyril Azobu, told ROSELINE OKERE that replacing crude oil with solid minerals as economic mainstay will take years of consistent efforts to get the policy environment right, investing in critical infrastructure and creating a sector that will be more attractive to investors. He also emphasised the need for indigenous mining firms to make themselves more attractive to foreign investment and funding.
Nigerian mining companies need to make themselves more attractive to foreign investment and funding, says Azobu
Many are of the view that the country is not earning commensurately from the exploitation of her solid minerals by foreign firms. So, are you satisfied with foreign participation in the solid minerals?
No, I am not satisfied with the current level of foreign participation in the sector and indeed, we have a lot more to do in this regard. A number of incentives have been put in place to help attract global mining companies including, tax holidays, import duty exemptions, and even provision for 100 per cent foreign ownership of mining concerns. While this is commendable, other issues around security of mining sites and infrastructure need to also be addressed before we can get the level of foreign investment the sector needs to experience a boom.
Also, indigenous mining companies need to make themselves more attractive to foreign investments and funding. This involves structuring their businesses and operations in line with global best practices. There is need for better financial record keeping and reporting; proper audits of financial statements; recruitment of the right resources; corporate governance and tax compliance, etc. This is one area with large room for improvement, as the sector becomes more formal.
Activities of illegal miners are also raping the Federal Government of resources. Are there no ways of immediately ending this?
There has over the years been a preponderance of largely informal operations fraught with the use of crude equipment and extremely dangerous working practices because of the absence of a formal policy on artisanal mining. Therefore, the first step in tackling illegal miners is to address this by providing training, access to funding and organising them into cooperatives. This will help them formalise their activities.
For example, the N5b fund put together by the SMDF and the BoI, which artisanal miners can access through the ministry by forming cooperatives, is a laudable idea. We hope and expect that the initiative reaches the stakeholders it was meant for. Also, private sector players should invest in niche areas of the mining lifecycle. Example, laboratories for testing, machinery leasing, purification and delineation equipment etc. Artisanal miners working as cooperatives can access these. It will assist them realise more value for their mining activities before sale to traders of mined products.
There is also the need to forge proper community alliances for when localities have greater stakes in mining operations, it makes for improved security and protection of mining sites and investments. In addition to that, the recently established Mines Police Division and the Joint Task Force on Mines Surveillance should be empowered to deliver on their mandates.
There is also the need for the establishment of more mineral buying centres and improved collaboration with the Nigeria Customs Services for policing of mineral exports.
To what extent can benefits accruing from the solid mineral sector be harnessed for the country’s economic development?
Nigeria is a fast evolving mining jurisdiction. The sector’s contribution to Nigeria’s GDP currently averages only about 0.5 per cent, but we know it can contribute much more given that most of the country’s rich solid minerals endowment remain largely untapped. So, for the most part, we are yet to fully harness the sector for economic development.
Historically, there has been a focus on oil and gas as the main source of government revenue, with the solid minerals sector suffering protracted neglect.
It is cheering to note, however, that we are seeing a remarkable shift in thinking among policymakers towards other sources of revenue for government besides oil and gas. The solid minerals sector is one such source that has got some attention with efforts made in a number of critical areas to develop it and make it more attractive to investors.
So, can the sector come in handy in aiding development for sustainable economic growth?
As a firm, PwC has always advocated for increased focus on solid minerals development for sustainable economic growth in the country. This has become even more urgent with the uncertainties around crude oil prices and the long-term projections of its relevance as an energy source. Replacing crude oil as the mainstay of the Nigerian economy is possible, but it will take years of consistent efforts to get the policy environment right, investing in critical infrastructure and creating a sector that will be more attractive to investors, both foreign and local. The current ambition as captured by the Mining Roadmap is for the sector to contribute up to three per cent of GDP by 2025.
Every state is blessed with solid minerals, so, why are we still at this stage of solid mineral development? Why is crude oil contributing about 90 per cent of our forex earnings?
As I mentioned earlier, we have a situation where for a very long time, the solid minerals sector was neglected by the government. The agriculture sector also suffered from this neglect. Because of this, the sector has remained underdeveloped with no real structures put in place by successive governments to unlock its potential.
In addition to this, a number of other challenges have held the sector back. Notable among these includes access to funding for investors. Nigerian banks have historically been averse to financing the mining industry due to a host of reasons including, a poor understanding of the technicalities of the sector, unwillingness to deploy long-term funding, and non-availability of bankable feasibility studies.
Funding challenges have also been identified as the reason for the inability to embark on detailed geoscience data gathering. Existing licenses are worth just the mineral titles without any reliable information on estimated quantity. Mining licenses in Nigeria cannot be used as collateral for loans, as done in other global mining hubs.
Other challenges in the sector range from insufficient infrastructure to policy uncertainty and in some instances, regulatory conflicts. They also include, a weak mechanism for gathering, disseminating and archiving critical geological data required by investors and policymakers and the preponderance of informal or illegal mining activities with attendant environmental impacts. It’s important to note here that the ministry has made some progress in this regard with the launch of the centralised eGIS web portal, with supporting ICT infrastructure that offer real time information on mining sector as well as electronic submission of licences, permits, certificates etc.
There is also the challenge around security, which has also affected foreign investments in the sector. The North Central, North East and North West regions are known to have some of the country’s major mineral deposits. Due to the threat of terrorism and other forms of social unrest, mining activities in these areas have slackened with foreign entrants discouraged by the threats. Related to this, is the threat caused by illegal miners who, with their knowledge of the local terrain, may pose security challenges to legitimate mining activities.
Which are Nigeria’s most endowed states in terms of solid minerals deposit?
There is a very wide variety of mineral deposits occurring across many states in the country. Perhaps, the focus really should not be on which state is the richest, but on the efforts to develop these endowments. The new mining roadmap identified seven strategic minerals of commercial quantity to be accorded priority including coal, limestone, lead/zinc, bitumen, barite, gold and iron ore. There is also focus on the development of bitumen and steel. The Nigerian bitumen belt spans across Ogun, Ondo, Lagos and Edo states. Despite this endowment, about 80 per cent of asphaltic materials used for road construction in the country are still being imported.
What is the best way to control environmental pollution resulting from solid mineral exploitation?
By tackling illegal mining operations and ensuring a better regulatory framework guiding the activities of mining companies, especially as it concerns the environment.