Mining benefits waste away amid drive to diversify economy
Nigeria's overdependence on oil has made the country vulnerable to external shocks associated with the hydrocarbon industry. DEBORAH DAN-AWOH discusses the importance of the country exploring the mining sector as an alternative revenue source.
The jury is still out on whether the discovery of oil in the country in 1956 was a blessing or a curse. This is because the country's reliance on oil as its primary source of revenue has harmed its economy significantly.
Oil accounted for less than 2% of the country's exports in the 1950s, while agriculture contributed 60-70% and mining accounted for approximately 7%.
However, the 1973 oil boom changed everything, transforming the country from an oil-producing to an oil-reliant state.
According to the National Bureau of Statistics, oil accounted for 77.24 percent of total exports in the fourth quarter of last year, while agriculture, which used to be the mainstay of the economy, contributed only 2.68 percent and solid mineral goods were only 0.33 percent.
Crude oil contributed N1.88 trillion, or 35% of the total N6.36 trillion generated by exports in Q4 2022, while mining brought in only N21.03 billion (0.33 per cent).
External stocks associated with the oil industry arose as a result of the country's overreliance on oil as a foreign exchange earner. Any international event that has an impact on crude oil prices has an immediate impact on the country's revenue. For example, the President, Major General Muhammad Buhari-led administration experienced a recession in 2016 and 2020 as a result of external shocks such as an oil market glut caused by shale production and the COVID-19 pandemic. The ongoing Russian-Ukrainian conflict is also affecting the country's economy.
Meanwhile, stakeholders have launched campaigns to encourage Nigeria to diversify its revenue sources. The mining industry has been identified as having a high potential to be a major foreign exchange earner for the country. According to experts, if properly harnessed, the mining industry could contribute about 7% of the country's GDP annually, similar to how it contributed 5% of the economy in 1980 before declining to less than 1% in 2022. The country is endowed with over 44 solid minerals.
Olamilekan Adegbite, Minister of Mines and Steel Development, recently stated at a mining and solid minerals conference that the mining sector had been overlooked in the discussion about reducing Nigeria's reliance on oil and gas.
"The whole point of this gathering is to look into funding the sector, and how do you do that?" he said. To inform people about the possibilities that this sector has to offer. Unfortunately, we do not appear to have the total value. Every year, the CBN spends hundreds of billions of naira on agriculture. That's great. We need to feed ourselves, so we must applaud that, because I believe Thailand regrets the fact that we are now planting rice and no longer import rice from Thailand. However, the CBN must do more.
"Every month, every state of the federation sends a representative to Abuja, who is either their commissioner for finance or their accountant general. They go and distribute the revenue collected in the federation account, which belongs to the three levels of government. The majority of the funds come from the oil and gas industry.
"So, in the interim, fossil fuel will linger because if you want electric cars by 2030, what will you use to power them with? We don't yet have those minerals. That is why a forum like this is critical. It will help us understand the importance of putting the right funds into the sector so that we can reap the most benefits from this explosion."
According to a recent report by KPMG, while the global mining industry suffered as a result of the COVID-19 pandemic in 2020, as mining sites were forced to suspend operations for extended periods of time, it was a significant source of revenue for countries that made the best of it.
Nigeria is abundant in solid minerals such as gold, lead/zinc, limestone, salt cassiterite, clay, dolomite, gold, marble & tantalite, gypsum, lignite, manganese, uranium, barite, coal, gemstone, gypsum, iron ore, bitumen, phosphate, glass sand, and so on.
According to an Aljazeera report, the majority of today's electronics are made from a variety of minerals ranging from aluminum to zinc.
Globally, 1.5 billion smartphones will be sold by 2021, up from 122 million in 2007. More than half of the components of a mobile phone, including its electronics, display, battery, and speakers, are made from mined and semi-processed materials such as lithium, manganese, cobalt, and graphite. According to stakeholders, with China at the forefront of mineral exportation, a number of its resources are sourced from various regions, including Africa.
According to reports, a non-oil-producing country such as South Africa generates an estimated $125 billion per year from mineral resources, while Asia generates approximately $1.8 trillion from mineral resource sales.
According to the South African Institute of International Affairs, the United Nations stressed at the twenty-seventh Conference of the Parties (COP27) that current climate responses are insufficient to avoid severe climate change.
"To get on track, the transition from fossil fuel-based to renewable energy sources will have to be ramped up significantly. Africa's minerals will be critical in this transition."
However, strong management capabilities from policymakers, as well as a willingness to adapt and the ability to balance short- and long-term goals, will be required.
According to the Nigeria Extractive Industry Transparent Initiatives, the country loses about $9 billion per year due to illegal gold mining and smuggling.
On the contrary, Mrs. Zainab Ahmed, Minister of Finance, Budget, and National Planning, stated during the presentation of a gold coin to her by the Lagos Futures and Commodities Exchange in Abuja that, despite claims to the contrary, the country already had the framework in place to drive diversification.
"Our GDP today has a 6.4 percent contribution from the oil and gas sector, so 94.6 percent of the Nigerian economy is from other sectors. The mining sector is one of the sectors that we have been attempting to fully activate."
More specifically, Ahmed emphasized the country's lack of attention to the mining sector and its negative impact on the economy.
"The mining sector is still very small today, but that is on the government's side. However, in the private sector, and now I am glad to say in the states, there are very active mining activities taking place. Unfortunately, we have not received the full value of mining activities until now. Mining activities have largely been artisanal; many participants take our minerals without reporting it, without the government or even the miners receiving full value for it."
Ide Udeagbala, National President of the National Association of Chambers of Commerce, Industry, Mines, and Agriculture highlighted the mining sector's potential, saying that Nigeria's mineral repositories include copper, manganese, lithium, and other elements required for the global green transition.
Nonetheless, he cautioned that this aspect of the green transition should be carefully managed in order to avoid the mistakes and missed opportunities seen in the oil and gas industry.
"First, the government should invite interested investors in the mining of these raw materials and request they establish or set up industries in Nigeria for which these mineral repositories are to be used and the manufacturing of the finished/final products are carried out within the country. Electric motor batteries, for example, require copper, manganese, and lithium.
He urged the government to create incentives to attract FDIs and investors, such as tax breaks and a moratorium period of at least two to three years to allow such investors to recoup some of their initial investment costs while also ensuring compliance with court orders and judgments on their investments.
"There should also be allowances and opportunities for highly skilled technical expatriate staff of the investors' choice, with a possible technology transfer arrangement to Nigerians, among other investment incentives," he added.
The Vice President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa, told The Nigerianwatch that the nation possesses solid minerals which are a big part of the economy, "until the beginning of the oil boom Nigeria was a major exporter of coal-cobalt mining. So we have mining experience, but due to the oil boom, we have abandoned all of this. So, now that the economic constraint is changing, we can return to those areas and build on our experience."
Idahosa explained that the government can also benefit from the country's strong geophysical and mining professions.
"So it is a matter of the government decided to expand the sector. The current administration has launched a geophysical survey of the entire country. As a result, the majority of our mining resources have been identified and are now available to investors. Then there's a portal where investors can get all of their information.
"There are opportunities there; perhaps the new administration can intensify marketing of the information to the investment community, both domestic and international, because that information is available but not everyone has it," he said.
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