REVEALED: After 10-year lull, mining revenue up by 500%

After a decade long period of lacklustre performance, the mining sector is finally “going for gold” as its revenue profile increased by an unprecedented 500% in 2017 — under the leadership of Kayode Fayemi as minister of mines and steel development. 

This is according to the latest occasional paper series released by the Nigeria Extractive Industries Transparency Initiative (NEITI) on Thursday.

The fourth issue in the series, the report assessed the sector’s performance and revenue profile relative to the extractive industry which also comprises of the oil and gas sector.

The report revealed that in the period under review (2007 to 2016), the mining sector made only $1.78 billion dollars out of the $476.8 billion dollars recorded in the extractive industry.

The bulk of earnings recorded in the industry was in the oil and gas sector which contributed $475 billion within the 10-year period.

This shows that the revenue government generated from solid minerals averaged a mere 0.41% of the total earnings from the extractive industry, compared to the 99.59% earned from oil and gas.

Although it seemed there was a temporary reprieve between 2008 and 2009 when the sector’s revenue contribution increased by 0.23%, the next two years witnessed some form of latency.

Contribution to revenue in 2010 and 2011 remained at 0.25% but marginally increased to 0.32% in 2012.

In the 10-year review period, the NEITI report said mining’s contribution to the extractive industry was less than 1% when compared to the oil and gas sector’s dominance.

The NEITI report revealed that the mining sector has the potential to “sharply contribute to the GDP” but this is not the case as it is currently lagging behind its peers in Africa.

Nigeria’s mining sector’s contribution to GDP is a paltry 0.55% compared to the 40%, 25% and 18% that Bostwana, Democratic Republic of Congo, and South Africa contribute to their national GDP respectively.

The poor performance is recorded despite the fact that the nation is endowed with about 44 different minerals comprising of high-value commodities and are found in commercial quantities in 450 locations around the country.

Some of the problems identified as a bane to the sector’s development include dearth of relevant information, poor funding, weak fiscal regime, poor inter-ministerial and inter-agency collaboration, inadequate technical capacity, illegal mining operations and opacity of industry laws and regulations.

These issues, especially the governance aspect, have in no small way affected the influx of investments to the mining sector, leading to a poor perception among foreign investors.

From comatose to thriving?

In a welcome turn of events, the mining sector’s revenue profile increased by 500% in 2017 from the 0.94% contribution in the previous year, according to NEITI.

The 2017 fourth quarter (Q4) and full year GDP report released by the National Bureau of Statistics (NBS) showed that coal mining, a sub-sector, grew by 2.86% in Q4 2017 from -38.49% in Q3 2017 and 0.44% in Q4 2016.

Metal ores, another sub-sector, grew by 31.86% in Q4 2017 from 10.70% in Q3 2017 and 7.03% in Q4 2016.

Listing some of the factors that led to an improved revenue profile, the report said: “It is however noteworthy that with some efforts, the revenue profile for 2017 has been reported by the office of statistics to have improved by 500% over the previous years.

“This positive development has largely been due to improved logistics provision for mines inspectors, and reshuffling and strengthening of the relevant departments.

“However, even these latest improvements fall short of performance projections at the start of the reforms, considering the enormous mineral potential and endowment of Nigeria, as such steps should be taken to attract major miners to the sector by improving the policy environment.”

In its recommendation, NEITI said that the government should boost investors’ confidence for the mining sector to maintain a robust revenue profile, thereby leading to sustainable growth and development.

“Nigeria’s low score in Policy Perception Index should be reversed through further removal of barriers to investment,” the report read.

“While efforts have been made by the current government to improve the ease of doing business score, further attempts should be made to increase the ease of access to critical information, not only about minerals deposits but even about ownership of mineral titles in the country.

“Mining policies should also guarantee predictability and consistency of application of rules.”

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by administrator News