Mining is a strong sector throughout the African continent. In comparison to other African countries, however, Nigeria does not rank particularly high for its mining. The country’s mining sector’s contribution to the National GDP averages at 0.33%. The sector is largely underdeveloped, and its uplifting possibilities have gone ignored for decades. This is despite the country’s wealth of minerals available, which have gone virtually untapped. Most of its mining is occurring on a small-scale level. However, this has not always been the case. In the 60s and 70s, Nigeria’s mining sector contributed between 4-5% to its GDP, revealing its once strong results. And now, there has been a commitment to raising the country’s mining potential to what it once was.
The lowdown:
The key issue affecting this weak mining status is that Nigeria’s approach to mining has long been reactive when it needs to be proactive. Nigeria’s participation in the global mining market is not as strong as it should be. Global trends have revealed a shift towards the use of sustainable energy minerals, and thus this demand should be a focus for all mining countries. Nigeria has yet to fully take advantage of the global demand for minerals, which could greatly contribute to strengthening its mining sector. The solid minerals sector had experienced a consecutive 9 quarters of negative growth since 2014, which is only picking up now in 2017. There are many other challenges Nigeria’s mining sector faces that have contributed to its weak status. Issues such as insufficient infrastructure, regulatory conflicts, political uncertainty, and access to financing have led to an inconsistent and poorly focused sector. Nigeria, and greater sub-Saharan Africa, saw a broad-based slow-down last year, according to the International Monetary Fund.
The come-up:
Recently, the Nigerian government has made moves to actively combat the sector’s weak status, and diversify its economy. In 2016, a commitment to uplifting Nigeria’s mining sector was made. They have made a shift with their policies, hoping to encourage investment. For example, the government has reintroduced the Board of the Solid Minerals Development Fund, in order to intervene in the governance and availability of funds for the mining sector. There has also been a N30bn Mining Intervention Fund approved by the Nigerian government. This fund has been set up to be used in geo-data gathering, a major issue barring investments in the sector. Along with this, we can see greater government and state participation in the sector, providing an enabling environment for investors. Furthermore, there is an active attempt to reduce the prevalence of illegal mining, through the creation of the Mines Police Division, as well as the Joint Task Force on Mines Surveillance, working with other police officials to crack down on standard requirements and procedures. There will also be further incentives set up for those interested in investing in the Nigerian mining sector, such as a three-year tax holiday, and exemption from import and customs duties.
In an interview, Mining Industry leader at PwC Nigeria, Cyril Azoba, expresses his belief that mining will become Nigeria’s new oil in the next 5 years. He further goes on to say, “We’ve had years of a lull in global investment, commodity prices went down, the years of supercycles in South Africa and China industrialisation are gone. The industry globally is looking a lot more promising. What, then, will happen is that they will start looking for where opportunities are. If you look at all these global economies, their reserves are hitting zero. What I mean by hitting zero is that they have mined and over-mined those areas. You know in South Africa, for example, they have reached the matured stage. So, where are they going? Where there are new markets.” As such, whilst they might not have a strong reputation yet, the Nigerian mining sector is primed to have successful growth.
What do you think? Let us know in the comments below!
