Why Foreign Investors Shun Nigeria's Solid Minerals

An aerial view shows the central business district in Nigeria's commercial capital of Lagos, April 7, 2009. REUTERS/Akintunde Akinleye , a photo by Pan-African News Wire File Photos on Flickr.

Why Foreign Investors Shun Nigeria’s Solid Minerals

SATURDAY, 04 MAY 2013 00:00 BY MARCEL MBAMALU (NEWS EDITOR) AND NKECHI ONYEDIKA (ABUJA)

• How Gold ‘Poachers’ Stole N8 Trillion In 2 Years

• FG Moves To Standardise Mining Practices

THE Federal Government, at the weekend, came under intense criticism for failing to attract core foreign investments in the solid minerals sector, whose potential revenue, experts say, could dwarf current oil proceeds.

Pat Okedinachi Utomi, a professor of Political Economy and founder of the Lagos-based Centre for Values in Leadership (CVL) expressed the concern that easy money from oil, its attendant corruption and “hazardous” licensing regime, deter serious investors from launching deep into Nigeria’s mining market.

The country is said to be losing trillions of naira to “poachers” in the underground economy, especially the gold sector

Permanent Secretary in the Ministry of Mines and Steel Development, Mr. Linus Awute, was recently quoted as saying that, in just two years, the nation lost over N8 trillion to neigbouring countries as a result of illegal mining and exportation of unprocessed gold alone.

The two-year N8-trillion loss to gold poachers would amount to N4 trillion per annum, an equivalent of Nigeria’s national budget, going by the structure of current and expenditure estimates in the last five years.

Another stretch of analysis reveals this amount as representing over 10 per cent of Nigeria’s Gross Domestic Product (GDP), going by the 2011 official figure of $238.92 billion (N37 trillion).

Describing this business as being far beyond control, Awute particularly fingered Ghana as the major route, where Nigerian gold is illegally being processed.

Local media quoted the Permanent secretary as saying that “the amount of unprocessed gold that has left Nigeria through neighbouring countries, Ghana in particular, and being processed in Ashanti, is enormous.”

But international journalist, Alan Katz, paints a picture of another major route that is probably more significant than the Ghana channel.

In his graphical representation of the “mine-to- world-market” movement of unprocessed gold from the Nigerian State of Zamfara, Alan says (gold) ore is collected from mines near Sunke, bagged and brought by motorcycles to villages like Dareta or Sunke, where villagers grind it and then wash the mix over a ridged board.

The villagers, who do the processing themselves, then use mercury to extract the gold, the result of which is sold to gold traders in Gusau, the Zamfara State capital, where the remaining dirt and impurities are separated.

The gold, according to Alan, is then driven to the Benin border and turned over to dealers from the port city of Cotonou, who then sell it to wholesalers from Europe and the Middle East from where it is introduced to the world market.

Meanwhile, the Federal Government has expressed commitment to ensuring that mining activities in the country are controlled and follows professional best practices.

This follows the release of N800million for remediation of 400 homes affected by lead poison in Bagege village in Zamfara State while the consulting firm, Teregraphics International Foundation has declared that by June 2013, it will hand over certificate showing that the village is clean.

Minister of Information, Mr. Labaran Maku, who stated this when he led the Good Governance Team on an inspection of the village, noted that President Jonathan had instructed the Ministers of Environment, Health and Solid Mineral Development to network and ensure that the issue of led poison anywhere in the country is prevented.

Maku, who lamented the high number of people killed by lead poison in the country, said that government would ensure that miners operating in the country do not endanger the safety of Nigerians.

He noted that lead poison is an issue of international concern due to the high level of death recorded, the pollution of the environment as well as the danger the issue poses to the survival of young people in the community.

A top management personal in the Ministry of Mines and Steel Development, who disagreed with the allegation of corruption and incoherent legal framework in mining administration, said foreign investors would need more “geological information” before they could venture into the market.

He said the Ministry is currently embarking on “road shows” in Australia, Canada and South Africa with a view to attracting these “big-time” investors.

Debunking allegations of corruption and touting, he noted that informal mining remains a major challenge to the sector even as he explained that all that investors from big-time mining countries — South Africa, Canada and Australia — need enough geological information.

Asked whether the Ministry is not in a position to provide such information, hesaid, “the Ministry is already doing its best on that.”

The Federal Government, he said, does not want to be involved in mining operations but would provide the necessary legal framework for private sector investors to do business.

“Government just needs to oversight as regulator and administrator, putting in place the legislative framework, which is already on ground, ” the source told The Guardian in a telephone chat.

“The Minerals and Mining Act of 2007 and Mining Regulations of 2011 are there. The Metallurgy Bill is being worked on to effectively oversight operations in the steel sub-sector of the economy.”

According to him, the country is losing enormous revenue to “informal mining”, which could surpass oil proceeds. “That is the reason efforts are being made to formalise operations to make sure informal miners form cooperatives and apply for their licence; they can then be monitored and the issue of illegal mining will be addressed. You cannot take royalties because they are unknown. We do not call them illegal, but informal miners.

“If they form cooperatives, we can give them recognition. One thing about the whole 34 mineral types is that, apart from the South-South, every local government, especially in the North, has a site. That is a lot of money.”

Officials of the Federal Ministry say the country has discovered over five hundred (500) locations of mineral deposits, nine of which may be promoted for commercial gains. The nine include Gold, Lead/Zinc, Iron ore, Coal, Tin Ore, Bitumen, Columbite, Tantalite, Wolframite and industrial minerals.

Yet, 33 of the solid minerals are said to be in exportable quantity that could create the much-needed competition for the oil sector, in terms of revenue earnings. Walking this talk has, however, remained impossible, as these minerals remain officially untapped. Instead, a network of smugglers appears to do it better!

“Utomi puts the blame at the doorstep of the Ministry, which, according to him, has not adequately created incentives for transparent exploraton of Nigeria’s touted minerals. He also believes that the easy money from oil will continue to asphyxiate whatever remains of the incentive for solid mineral exploration.