Nigeria minerals mining oil

Nigeria's mineral wealth offers economic growth beyond oil

Nigeria's mineral wealth offers economic growth beyond oil
Nigeria's government wants to set up a new mining company, the Nigerian Solid Minerals Corporation / Nigerian Bureau of Public Enterprises (BPE)
By Jason Mitchell April 10, 2024

Mining minerals presents Nigeria with an opportunity to diversify its economy away from its heavy reliance on oil exports.

Africa’s most populous country (228mn people) has an abundance of mineral resources. It boasts more than 40 mineral deposits — including kaolinitic clay, gold, gypsum, iron ore, lead, zinc, phosphate and tin — across more than 500 sites in its 36 states. Baryte, bitumen, coal, gold, iron ore, limestone, lead, zinc and coal have been identified by the federal government as strategic mineral deposits, based on their economic value. 

Nigeria has vast mineral deposits — whose value is estimated at $700bn — but the industry is not fulfilling its potential. Currently, the sector is contributing less than 0.5% of the country’s GDP (estimated at $395bn by the IMF). According to industry experts, the minerals and mining sector could generate more than $25bn by 2025 but it is far from reaching that target. The sector only earned 193.59bn Naira ($148mn) in 2021, according to Nigeria Extractive Industries Transparency Initiative. The formal mining industry employs around 130,000 people. 

Nigeria is Africa’s second-biggest economy ($395bn) after South Africa ($401bn), according to IMF estimates. Income per head is only $1,730 a year. 

The country’s economic model has been wedded to oil and gas since oil was first discovered in 1956. Its proven oil reserves are 23bn barrels while its gas reserves amount to 160trn cubic metres. Nigeria is Africa’s biggest oil producer, with hydrocarbons accounting for 60% of government revenue and 90% of foreign exchange earnings. It produces around 1.4m barrels of oil per day but the government — led by President Bola Tinubu since May 2023 — has set a target to expand it up to 4m barrels per day by 2030. But critics say that objective is overly ambitious and only commits Nigeria to pursuing its dated oil economy model when the country should be seeking to diversify. 

The urgency for economic diversification is heightened by the volatility of oil prices, a lack of transparency about the oil revenues obtained and the push towards adopting cleaner energy sources. Minerals mining and processing stand out as one of the key ways to achieve greater diversification.

Other African countries such as Ghana and South Africa boast mining sectors that are good contributors to their GDP. In Ghana, for example, mining is estimated to make up 5% of GDP and 37% of its exports while South Africa’s solid minerals account for 18% of its GDP, half of its foreign exchange earnings and around 1mn jobs.

Nigeria’s mineral wealth can be found throughout the country. More than 40m metric tonnes (mt) of talc deposits have been identified in Niger, Osun, Kogi, Ogun and Kaduna states. Gypsum is an important input for the production of cement. Currently, the country’s cement production is put at 8mn mt while the national requirement is 9.6mn mt. About 1bn mt of gypsum deposits are spread over many states. There are more than 3bn mt of iron ore deposits found in Kogi, Enugu, Niger states and the Federal Capital territory. Iron ore is being mined at Itakpe in Kogi state and is already being “beneficiated”, up to 67% iron. “Beneficiation” refers to the transformation of a primary material (produced by mining and extraction processes) to a more finished product that has a higher export sales value.

An estimated 10m mt of lead and zinc veins are spread over eight states. Proven reserves in three prospects in the east-central area are 5m mt. Bentonite and baryte are the main constituents of the mud used in drilling all types of oil wells. Nigerian baryte has specific gravity of about 4.3. Over 7.5m mt of baryte have been identified in Taraba and Bauchi states. Large bentonite reserves of 700m mt are available in many states. 

There are proven reserves of both alluvial and primary gold in the schist belt, located in the south-western part of the country. The deposits are mainly alluvial and are currently being exploited on a small scale. The occurrence of bitumen deposits in Nigeria is indicated at about 42bn mt. Analytical results suggest that this potential resource could be used directly as an asphalt binder. The country’s coal is one of the most bituminous in the world owing to its low sulphur and ash content and, in this way, is more environment-friendly. There are almost 3bn mt of indicated reserves in 17 identified coal fields and over 600m mt of proven reserves.

There are salt springs at Awe in Plateau state and at Abakaliki and Uburu in Ebonyi state, while rock salt is available in Benue state. A total reserve of 1.5mn mt has been indicated. Gemstones mining has been booming in a number of parts of Plateau, Kaduna and Bauchi states for many years. The gemstones include sapphire, ruby, aquamarine, emerald, tourmaline, topaz, garnet and amethyst. The zircon and flourspar are among the best in the world. An estimated reserve of 3bn mt of high-quality kaolinitic clay has been identified in many locations in the country. 

Nigeria is a major producer of tantalite and columbite, essential minerals used in the electronics industry. The Jos Plateau region in the central part of the country is well-known for its tantalite and columbite deposits. According to geological surveys, Nigeria has an estimated reserve of over 31,000 mt of tantalite and 3,000 mt of columbite.

The mineral sector is regulated by the Minerals and Mining Act 2007 and vests control and ownership of all properties and minerals to the Federal Government. It prohibits the exploration or exploitation of minerals without a permit. 

In September 2023, the government announced plans to set up a state-backed company, the Nigerian Solid Minerals Corporation, to provide funding to its mining sector and manage the country’s minerals. It plans to offer private investors at least a 75% stake in the new organisation, which will focus on the extraction of gold, coal, iron ore, bitumen, lead, limestone and baryte. 

Dele Alake, Nigeria’s Solid Minerals Minister, said in an interview at the time: “The proposed corporation will seek and secure partnership investment agreements with big multinational companies worldwide to leverage on the attractive investment-friendly regime operating in the country to secure massive foreign direct investment for the mining sector.”

Lawmakers are now drafting legislation to create the new company and are considering folding moribund state-owned miners, the National Iron-Ore Company and Bitumen Concessioning Programme, into it. They also want to set up a special mines police force to tackle rampant illegal mining. 

Furthermore, on 28 March 2024, the government said that it will only issue new mining permits to companies that present a plan for local ore processing. Like many African countries — including Namibia and Zimbabwe — Nigeria is eager to become more involved in the “beneficiation” of its minerals. The country plans to offer investors a range of incentives, including tax exemptions on the import of mining equipment, streamlined processes for obtaining electricity production licences, permission for the total repatriation of profits and improved security measures. 

"In exchange, we have to review their plans for setting up a plant and how they would add value to the Nigerian economy," said Segun Tomori, a media aide to Alake.

Construction materials like granite, gravel, marble and sand are experiencing high demand locally because of a growing housing deficit and ambitious infrastructure development projects. However, despite the increasing demand for minerals, particularly industrial minerals, the mining sector struggles to meet local needs, let alone tap into its export potential. This is partly due to the inability to attract significant investment for new exploration. 

A number of factors contribute to this challenge. Inadequate infrastructure — including transportation networks, power supply, and water resources — poses logistical hurdles for mining operations and drives up production costs. Additionally, complex and ambiguous regulatory frameworks, overlapping jurisdiction among government agencies and bureaucratic bottlenecks create further obstacles for potential investors. Moreover, rampant illegal mining activities, often conducted by artisanal miners without proper regulation or environmental safeguards, worsen environmental degradation and lead to revenue losses for the government.

Furthermore, the environment for private-sector mining is unattractive due to various reasons such as the lack of accurate geological information, inadequate systems to manage the information, poor performance of government institutions, limited enforcement of regulations, insecurity in host communities, and insufficient human talent and capacity to effectively manage the sector.

Many promising projects languish in the exploration or feasibility stage owing to difficulties in accessing financing for project design, construction and production. The high capital risk and expertise gap associated with the sector have continued to pose significant challenges for accessing private sector funding and investments. 

In November 2022, the previous government under president Muhammadu Buhari (in office between 2015 and 2023) launched the Electronic Mining Cadastre plus (eMC+ ). This digital cadastral system grants access and manages titles for all existing investors and prospects in real-time and around the world. It helps significantly with the ease-of-doing-business, but staff at the mining cadastre office require proper training in the new technology. 

Artisanal and small-scale mining (ASM) plays a significant role in the country’s mining industry, with over 10mn people engaged in formal and informal operations. The sector accounts for about 10% of gold and over 90% of the country's diamond production. Also, it plays a crucial role in producing other minerals including lead, zinc and tin. 

But a major challenge for ASM in Nigeria is its informal and unregulated nature. According to estimates, over 1,000 children work in artisanal and small-scale gold mines in the country, and many workers lack adequate protective equipment or training. For example, in September 2023, Zamfara State banned mining activities following violence by artisanal miners, which had a negative effect on the business and capital investment of licensed miners. 

The government must make a greater effort to formalise the artisanal mining sector and to police host communities to prevent illegal mining activities. Effective engagement between the government, title holders and host communities is crucial to reducing the conflicts and disruptions experienced by current operators in the sector.

There is no doubt about Nigeria’s vast mineral resources. However, its mining industry’s development lags behind other African countries like Ghana, South Africa, Zimbabwe and Angola. It should take a cue from these other states. The Angolan mining sector, for instance, has experienced significant investment stemming from the country’s commitment to a stable regulatory framework. 

There is considerable scope for increasing mining’s contribution to Nigeria’s GDP significantly through strategic reforms, investment promotion and value addition. A conducive business environment —including improving the ease of doing business and a functional and stable regulatory framework — would help a lot. By addressing regulatory bottlenecks, promoting responsible mining practices and harnessing the benefits of beneficiation, Nigeria can diversify away from oil. 

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Nigeria minerals mining oil