Lecture on Nigeria's Solid Minerals
Transcript of Lecture on Nigeria's Solid Minerals
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A LECTURE ON NIGERIA’S SOLID MINERAL RESOURCES
AND NATIONAL DEVELOPMENT
I am profoundly pleased to have been invited to
give this lecture on Nigeria’s solid mineral resources
and national development to the National Defence
College. My pleasure is even more compounded,
given the diversity of the audience and that the
invitation comes at a time in when Nigeria is seeking
to raise the profile and importance of its mining
sector.
I would like to start my lecture by discussing mining in
a global context and then come back to that of
Nigeria. In a moment of reflection, we would all be
amazed at how much of a direct relationship our
daily existence has to the mineral products that are
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developed and processed from mines all over the
world. Our roads are constructed with bitumen, our
buildings with dimension stones, aluminum for our
cars, infrastructure and power, our power is
generated from coal, and our cement from
limestone, and on and on it goes. As a result of the
growing industrial demand for these minerals, the
global commodities markets have experienced a
period of historic increase in market prices, after thirty
(30) years of price stagnation, starting from 2002.
Consequently, the major international mining
companies (Rio Tinto, BHP Billiton and Anglo
American) have reaped a tremendous windfall in
their profit rates during this period, prior to the global
financial crisis. This growth in the demand and prices
of mineral commodities has been attributed to the
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economic growth of the BRIC countries – Brazil,
Russia, India and China. China and India, in
particular, seem to have an unlimited need for solid
mineral materials, in spite of the current financial
crisis, and are expected to drive the recovery of
commodity prices in the short-term and higher prices
in the long term.
A consequence of the increased demand for
minerals is the increased status and attractiveness of
the continent of Africa as a nirvana for for those who
seek solid mineral products, as a result of its
significant proportional wealth of global mineral
reserves. Relative to total global reserves, Africa is
estimated to have 30 percent of bauxite, 60 percent
of manganese, 75 percent of phosphates, 85
percent of platinum, 80 percent of chrome, 60
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percent of cobalt, 30 percent of titanium, 75 percent
of diamonds and 40 percent of gold. With the
exception of South Africa, Africa remains relatively
under-explored, relative to its solid mineral wealth.
Not only is the African continent blessed, but Nigeria
has been put on notice that it has serious
competition, in terms of promoting its mining sector.
The impact of mining on respective solid mineral
producer socio-economies runs the gamut from
negative to positive. At the negative end is the
example of Zambia and the Democratic Republic of
Congo, major mining countries that have suffered
from related social and economic issues. These
issues include inadequate economic rent recovery,
economic marginalization of immediate mining
communities, inefficient allocation of mining
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revenues to social benefits, inadequacy of tax
receipts from mining as a function of investor
incentives, adverse environment impact.
Conversely, at the other end of the spectrum, we
have countries like Ghana, South Africa, Canada
and the U.S. that are doing very well exploiting their
mineral resources. In 2007, for Ghana, mining
contributed 5% to its GDP, accounted for 12% of
government’s revenue and 41% of total export
earnings and employed over 500,000 people; South
Africa, mining directly contributed approximately 7%
to its GDP, accounted for 12.4% of total company
tax, 25.2% of the country’s total foreign exchange
earnings and employed slightly under a million
workers; for Canada, mining contributed $42 billion or
3% to its GDP, with mining industry payments of $8
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billion to the government, mining constituted 19% of
total exports, with direct employment of 363,000
people.
Clearly, not only does Nigeria have quite a ways to
go, to be classified as a mining country, its challenge
is also one that allows it to reap the benefits of
responsible exploitation of its mineral resources, such
as employment generation, community
development, tax contribution, infrastructure
development, foreign currency generation, while
avoiding the pitfalls previously described. I believe
that the stakes are too high for Nigeria not to.
Nigeria is a country that is extraordinarily endowed
with a range of solid minerals that include gold, iron
ore, coal, baryte, zinc, lead, bitumen, etc. To date,
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over thirty-four (34) different solid mineral types
across the thirty-six (36) states of the Federation, plus
the Federal Capital territory, have been identified.
Of remarkable note is that there is not one state
without the presence of, at least, a solid mineral.
Conversely, there are states that have been
endowed with multiple solid minerals, such as Enugu,
Nasarawa, Kogi, and Kaduna.
In view of this vast solid mineral blessing, the Ministry
of Mines and Steel Development has adopted a
strategy that places a special focus on seven (7) of
the minerals. The minerals of special focus are
bitumen/tar sand (estimated reserves of 27 billion
barrels of oil equivalent), coal (estimated resource of
2.7 billion tonnes), iron ore (estimated resource of 3
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billion tonnes), Limestone (estimated resource of 2.23
trillion tonnes), Barytes (estimated resource of 14
million tonnes), Lead/Zinc Sulphides (estimated
resource of 1 million tonnes), and gold. In the case
of gold, coring done this year, by one of the junior
mining companies, to the depth of 3,000 meters, has
proved more than 300,000 ounces, with 2 million
ounces estimated. The importance of this already
stupendous piece of good news is best appreciated
within the context of the knowledge that Nigeria has
gold schist belts in the western half of the country
that are similar to those of Ghana. As you may know,
Ghana produces ten (10) percent of the world’s gold
and is the second largest producer of gold.
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Ladies and gentlemen, the preceding information
was the good news. Unfortunately, mining in Nigeria,
which goes back to 1905, under the auspices of the
Royal Niger Company (NRC), currently contributes
less than one (1) percent to our Gross Domestic
Product (GDP). With the advent of the discovery of
oil in the late fifties and its primacy in Nigeria’s
economy, mining has suffered a drastic reduction in
its role, economically. Nigeria has gone from being,
at one time, the world’s largest exporter of
Columbite and the 6th largest producer of Cassiterite
(Tin), to a net importer of solid mineral material, for
industry. In this period of neglect, Nigeria’s mining
sector was beset with illegal mining, smuggling of
gemstones and other high value minerals, loss of
local and international expertise, related
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environmental degradation, lost tax revenues, etc.
Furthermore, the government’s policy, concerning
mining fluctuated from encouraging private sector
participation to direct participation (hence, the
establishment of the Nigerian Mining Corporation)
and back to Nigeria’s current status of market-led or
private sector orientation. However, I must clarify that
the government’s direct participation was principally
driven by a need to fill the vacuum left by the exit of
foreign companies engaged in mining, due to the
civil war. Unfortunately, in the approximately forty
years of decline of the country’s mining sector,
Nigeria has missed out on the various opportunities to
capitalize on the upswing of commodity prices.
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I stand before you today as a realist who recognizes
that Nigeria cannot continue to remain a mono-
product economy. While recognizing its blessing of
oil endowment, Nigeria must work very hard to
diversify its economy, as necessary to achieve its
vaunted 7-point Agenda. A recent study that was
done on the economies of the Gulf Cooperation
Council, which is comprised of Bahrain, Kuwait,
Oman, Qatar, the Kingdom of Saudi Arabia and the
United Arab Emirates (UAE), all oil producing
countries, concluded the following:
Mono-product or highly concentrated
economies are subject to greater economic
volatility from external shocks;
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Volatility in concentrated economies may
spawn structural unemployment issues and
engenders systemic risks;
Poor economic diversity is linked to low
productivity and competitiveness; and
Diversification is a critical component of a
sustainable economy.
As a result of the above described situation,
Nigeria has a mixed blessing situation of relatively
virgin mineral fields and a lack of national
economic contribution of the same fields.
However, I am happy to say that, as a result of the
Federal Government of Nigeria’s recognition of
the previously specified conclusions and the
critical economic role of mining, happy days in the
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mining sector are ahead. I must say that this
recognition is even more so, given the direct
relationship between with the government’s
objectives, relative to the Vision 20:2020
framework. Thus, the Federal Government, over
the last few years, has embarked on various
initiatives, as necessary to revive and revitalize the
mining sector.
Principal amongst these initiatives has been the
enactment of the 2007 Minerals and Mining Act.
The importance of this Act cannot be
overemphasized. The Act establishes the
foundation for the regulation of the sector,
addresses the fundamentally important issues of
mining title administration (such as ownership,
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transparency, transferability and security of mining
titles), community development agreement,
mining environment considerations, investor
incentives, etc. Nigeria’s Mining Act is considered
to be superbly representative of international best
practices in mining legislation. Consequently,
review of the resultant mining regulations has
recently been concluded by its Ministry of Justice.
In the area of artisanal mining and small scale
mining; Nigeria is working assiduously to formalize
this segment of the mining community by forming
cooperatives, establishing buying centers and
providing extension services. In addition, in
partnership with the World Bank’s Sustainable
Management of Mineral Resources Project
(SMMRP), the Ministry of Mines and Steel
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Development is providing grants, up to a ceiling of
$50,000, to the lower end of the ASM cadre.
In furtherance of the Ministry’s partnership with the
World Bank project, there is a program of on-going
institutional capacity building. Accordingly, the
Ministry is formulating policies that will, not only
stand the test of time, but ensure for the robustness
of the sector; the Ministry is also streamlining its
services to ensure for efficient and expeditious
service delivery; and Ministry personnel are being
trained to ensure that they attain the expertise
necessary for providing the regulatory and policy
guidance for the sector, consistent with the
Ministry’s new role as regulators, rather than as
direct participants in the sector.
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A fundamental requirement for investors in the
mining sector is access to geosciences data,
relative to the location and estimates of the
minerals. Mindful of this fact, the Ministry has
recently completed the airborne magnetic survey
of the entire country, with the results currently
being interpreted. The Ministry is also diligently
working geological, mineral, and geo-chemical
mapping of the country. One area of recent
activity, which is of significant personal interest, is
the focus that the Ministry is bringing to bear on
Nigeria’s gemstones. Under the SMMRP activity,
the Ministry is putting in place a gemstone
certification process, which also encompasses the
various steps and processes distribution. In
addition, the certification process is being
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complimented by an awareness building program.
In pursuit of bringing greater awareness to
Nigeria’s gemstones, some of which are quite
unique, the Ministry has reached an arrangement
with an internationally renowned Nigerian-born
jeweler, to design a jewelry line, using Nigerian
gemstones exclusively. It is expected that this line
of jewelry will be displayed at both international
and domestic fashion events. The Nigerian
government believes that heightened awareness
of its gemstones has the principal benefits of
creating a market for ASM producers and
mitigating the illegal smuggling of the country’s
gemstones.
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The Ministry, over the course of the year, has
embarked on a major investor outreach program,
the pinnacle of which was the recent forum, titled
“Creating a Durable and Investor Friendly
Framework for Mining in Nigeria,” that was held at
the London Stock Exchange last month – a first of
its kind. In other to convey the importance of
these investor outreach activities, it is important
that context be provided. I will start by using an
analogy. Due to the vast mineral richness of the
African continent, Nigeria’s situation is similar to
that of being one of many beautiful marriage-age
daughters in a family. As a result, Nigeria must
strive that much harder to ensure that the suitors
come directly to its door. The other issue is that
mining is heavily capital intensive and requires
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cutting edge technology and expertise.
Unfortunately, these are resources that Nigeria
does not readily have access to, domestically. As
such, Nigeria must seek investors, exploration,
development, and production companies from
international sources, with the objectives of foreign
direct investment, technology transfer and local
capacity building. Unfortunately, Nigeria cannot
attain these objectives by staying home and
simply trumpeting its vast mineral endowment.
As Nigeria soldiers on, relative to the various
initiatives that have been previously described,
and as it moves from the direct participation
model of yester-years to that of market-led or
driven model, as part of the reform of the nation’s
mining sector, it is mindful that no model is perfect.
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As such, Nigeria must strive to ensure that it avoids
all the negative consequences of market-led or
private sector driven mining, in the Ministry’s new
role of regulators and establishing the environment
requisite for a robust mining sector.
As to the question, “Where does the future of
mining lie in Nigeria,” I must state that from my
vantage point, it is a very bright future. However,
the brightness of that future is predicated on
Nigeria’s ability to maintain the enabling
environment necessary to attract the capital that
is fundamental to the development of the sector.
Understandably, there is an indirect relationship
between capital investment and risk. Mining
investment is no different. From the Ministry’s
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perspective, it is beginning to see some dividends
of the reforms that have been previously
described. More and more, as Ministry personnel
travel out for investor outreach programs, they are
receiving significant interest from individuals and
companies that are interested in mining the
country’s minerals directly, as well as partnering
with local Nigerian miners. In addition, the Ministry
is building the capacity of local miners, which is
critical to the pyramid structure of mining
development. Given that it takes 7 to 9 years for
successful development of a mine, I have every
confidence that the mining sector will take its
rightful role in positively contributing to Nigeria’s
sustainable development, thereby, ensuring for the
attainment of the objectives of its Vision 20:2020.
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Again, I thank you for your invitation and wish you
all good luck in your studies.