Nigeria is looking forward to mining dislodging oil as a major revenue earner. Consequently, the Ministry of Mines & Steel Development is offering various mouth-watering fiscal and regulatory incentives to woe investors. The incentives, industry stakeholders say, could make Nigeria a global destination of choice for investors in mining, if sustained. Assistant Editor CHIKODI OKEREOCHA reports
The last couple of months have been particularly demanding for the Minister of Mines & Steel Development, Olamilekan Adegbite. The prevailing economic realities caused by the double shocks of the COVID-19 pandemic and revenue shortfall resulting from the crash in oil prices have put him on his toes, as the search for a sector with the potential to reboot the economy appears to focus on the mining sector.
The devastating impacts of the deadly COVID-19 virus and dwindling oil prices have forced a strategic refocus on other sectors considered as high growth sectors particularly mining. Consequently, Adegbite has rolled up his sleeves and gone to work to further open the mining sector to increased trade and foreign investments.
Nigerian Geological Survey Agency (NGSA) Director-General Dr. Abdulrazaq Garba said: “The mining sector is all about data, quality data for investment decision making. The process of mining or extraction of what is in the earth crust requires understanding of how the earth crust preserves these mineral commodities.”
NGSA is a parastatal under the Ministry of Mines and Steel Development. It is the nation’s custodian of all geosciences information. Established in 2006, the Agency’s statutory role is to provide relevant and up-to-date geosciences information necessary for economic development.
Garba told The Nation that a bankable geosciences data in the mining ecosystem is private sector-driven, because “There is a limit to government spending on mineral resources evaluation and exploration.”
He, however, said NGSA strives to provide beyond the basics, offering several layers of information required to boost investors’ confidence in the nation’s mining space.
Garba added that the Agency was developing a state-of-the-art infrastructure that will make accessibility to geosciences data much easier than it used to be in the past for the exploration of the vast mineral resources within the country.
The NGSA boss also said the minister has been supportive of the sector through the promotion of the National Integrated Mineral Exploration Project (NIMEP), standardisation of NGSA laboratories, good governance and institutional reforms in the mining sector, among others.
NIMEP is the Federal Government’s flagship rapid response to the dearth of investible geoscience data in the mining sector.
“We are continuing to upgrade and expand our data base to de-risk the Nigerian mining jurisdiction to make our potentials more palatable to investors,” Adegbite told The Nation.
The NGSA, which coordinates the NIMEP project, is also said to have undertaken additional ground investigations nationwide to upgrade the national minerals data base to a more investible level.
Also, all existing geological data are being archived in a digitalisation program handled by the British Geological Survey (BGS). The BGS was engaged by the ministry to build a national electronic geo-data archiving management system (Nigerian Geo-data Centre) at the NGSA.
Making mining more business-friendly
As part of efforts to make mining more business-friendly and attract investors, the ministry under Adegbite’s charge has put in place a regime of transparency and accountability in the issuance of mining licenses.
For instance, the “first-come-first-serve” and non-discretionary granting of mineral titles policy of the Mining Cadastral Office (MCO) now ensures the issuance of six types of licenses and permits to cover all activities from exploration to mineral production, as well as granting of licences between 30 – 45 days using transparent rules and regulations.
“The recent establishment of the Investment Promotion and Mineral Trade Department, to address investment opportunities and competitive pricing of the entire supply chain, is indicative of our zeal and preparedness to welcome global investment partners,” Adegbite said.
Wooing investors
Going by the avalanche of fiscal and regulatory incentives put in place by the Federal Government, through the ministry, to de-risk the sector and woo investors, mining looks good to attract the required investment that will enable it put the economy on the path of sustainable recovery post-COVID-19.
For instance, by the provision of Section 25 of the Mining Act, operators are granted exemptions from paying custom/import duties on imported plants and machinery.
The Act also gives allowance to a firm to set up a tax deductible reserve for environmental protection, mine rehabilitation, reclamation and mine closure costs. In other words, money for environmental remediation will be tax free.
The minster, who made this known at the “2020 Mining in Indaba”, Cape Town, South Africa, also said mining firms would enjoy an accelerated capital allowance of 95 per cent on qualifying capital expenditure incurred in the year in which the investment is made, as well as tax holidays of between three and five years.
Adegbite added that firms may benefit from waiver of applicable royalties, even as there is the assurance that corporate income tax in the sector will range from 20 to 30 per cent. This, according to experts, is quite competitive in the international market.
Similarly, where a holder of a mineral title earns foreign exchange from the sale of its solid minerals, it may be permitted by the Central Bank of Nigeria (CBN) to retain a portion of same for use in acquiring spare parts and other input required for mining, which otherwise would not be available without the utilisation of such earnings.
Some legislation also provides for other forms of irresistible benefits, particularly to foreign investors, in that they protect their investments from expropriation. For instance, Adegbite said under the new legislation, there is room for 100 per cent ownership of mineral properties.
What this means is that prospective foreign investors, most of who have been holding back for fear of having their lawful and legitimate enterprises nationalised, can heave a sigh of relief, as their investments will no longer be taken away from them.
It is easy to see why making mining more business-friendly to attract investors has become one of Adegbite’s major preoccupations. For one, Nigeria’s stock of mineral resources is widely credited with having the capacity to kick start a boom in the mining industry and by extension, the economy.
Beyond oil and gas for which Nigeria is highly ranked and known for globally, huge deposits of solid minerals abound in the country.
Officially, there are 44 different mineral types that occur in commercial quantities in more than 500 locations across the 36 States and the Federal Capital Territory (FCT).
Already, seven of these minerals have been tagged as strategic for immediate development. They include Coal, Iron Ore, Bitumen, Gold, Limestone, Lead/Zinc, and Barite.
These minerals were designated as strategic because of their potential to make significant contributions to Nigeria’s economic development. But these strategic mineral assets are available across the country as proven reserves.
Besides, despite having a history of mineral production, Nigeria, essentially, is still widely considered a Greenfield, which means that appropriate investments are required to unlock its full potential.
This must be why Adegbite has been partnering with a broad spectrum of stakeholders in the industry to deepen the reforms he outlined when he was appointed Minister in August 2019 and also foster a conducive ecosystem for private sector participation and growth. And the result of the partnership, as well as presentations made at various international mining fora may have started manifesting.
For instance, National Steel Raw Materials Exploration Agency (NSRMEA) Director-General Umar Albarka Hassan said the on-going NIMEP exploration projects on gold, iron ore, lead-zinc ores, barite and other precious metals have generated so much interest amongst international mining investors.
While noting that reports of these works are being awaited with keen interest, Hassan told The Nation that this is in addition to the exploration works on bauxite, silica sand, manganese and chromite being carried out by NSRMEA, Kaduna, towards the sourcing of raw materials for Ajaokuta Steel plant in particular and other local steel plants.
He listed other activities carried out to include facilitation of sustainable mine development and operations, which culminated into the development of the first large scale gold mine in Osun State by Thor Exploration, the Canadian firm that was granted license to mine gold in Nigeria through the Segilola Gold Project in Ogun State, south west Nigeria.
There is also the commencement of formal artisanally-mined gold purchase scheme and refining through the Presidential Artisanal Gold Mining Development Initiative (PAGMI) and other private initiatives driven by Dukia Gold and Kian Smith for harnessing local gold production, refining and sale of refined gold bars to CBN towards building its gold reserve.
Launched in 2019 by President Buhari, PAGMI is a comprehensive artisanal and small-scale gold mining development programme that seeks to streamline the nation’s solid minerals value chain largely dominated by foreign middlemen.
The initiative regulates the mining, processing, and refining of precious metals especially gold by informal miners whose activities in the sector are said to be currently undermining the Federal Government’s efforts at leveraging mining to diversify the economy, create jobs and increase revenue.
By Hassan’s admission, “This action (PAGMI) has facilitated formal gold trading, leading to improvement in royalty collection from gold dealers as well as stopping the exploitation of miners by gold trading syndicates.”
His counterpart at Mining Cadastre Office, Obadiah Nkom, expressed optimism that royalty waivers for gold exploiters will encourage compliance with royalty payment.
“We have streamlined our operations at Mining Cadastre Office to make it easier for investors to apply for mining licenses online,” Nkom said, noting that the mining sector has indeed, become more business-friendly.
Other developments that may have signaled the emergence of a more business-friendly mining sector include efforts at curbing illegal mining, including the establishment of mining cooperatives to encourage artisanal miners to bid for legal licenses; the provision of surveillance vehicles for the Mines Inspectors across the country; increased inter-agency co-operation.
This, according to Head Advisory & Consulting and Mining Sector Leader, PwC Nigeria, Mr. Cyril Azobu, has led to some arrests of local and foreign illegal miners. He also said there has been support for revamping the operations of Mineral Buying Centers across the country.
“We have also seen increased state governments participation in the sector following better collaboration between the Federal Government and the States in the development of the sector.
“The states have also increasingly received the 13 per cent derivation for national solid minerals, providing incentive for developing the sector and monitoring revenue collection,” Azobu added, in PwC’s recent advisory outlook titled “Unlocking the Potentials of the Mining and Steel Sector in Nigeria.”
The outlook, co-authored by PwC’s Associate Director and Head Mining Sector Business Development, Mr. Habeeb Jaiyeola, however, recommended that the strategic nature of the seven minerals identified in the 2016 Mining Roadmap needs to be continuously reassessed.
“This will prevent the country from investing so much in a resource, and at the point of harnessing the investment, the value of the resource becomes low due to diminished global relevance,” the report said, adding that key infrastructure such as access roads, dedicated rail lines, power, etc remain a challenge.
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