Minerals offer Nigeria new revenue as oil falters

As crude oil production declines, mineral extraction could offer Nigeria a way to generate revenue to fund its budget, with the growing wave of activity in the sector registering the strongest growth in five years.

Mineral commodity production in Nigeria rose to 89.48 million tonnes in 2021, the highest in five years, according to data from the National Bureau of Statistics (NBS) on the back of government policies aimed at exploiting the sector.

The overall production of mineral products in 2021 increased by 39.19%, from 64.3 million tonnes recorded in 2020 to 89.48 million tonnes in 2021, indicating an improvement in production.

Minerals like limestone, granite and laterite were the three largest resources mined in 2021, the report said.

This modest success validates government policies led by President Muhammadu Buhari aimed at encouraging public-private partnerships, revamping abandoned projects, organizing artisanal miners into cooperatives and encouraging funding from lenders to the industry under the impetus of Olamilekan Adegbite, Minister of Mines and Steel Development.

Artisanal miners often endanger themselves and cause environmental havoc in host communities due to their crude mining method. Therefore, the ministry began to organize them into cooperatives.

Thus began efforts to formalize their operation which would allow them to deploy modern mining tools to ensure more revenue generation and job creation.

At a recent conference, the minister said that in countries with strategic mineral deposits, the mining sector contributes substantially to foreign exchange earnings.

“Foreign direct investment in the mining sector creates a massive inflow of foreign exchange for mineral exploration and development with a positive impact on infrastructure and employment,” he said.

Nigeria has yet to reap the benefits of a thriving mining sector. Insecurity issues posed by criminal gangs and the activities of illegal alien minors continue to pose significant challenges.

According to a PwC Nigeria study, the availability of reliable geological data, access to finance, regulatory requirements to increase government “grip”, shortage of skilled labor, preponderance of artisanal mining activities, weak infrastructure, widespread corruption, environmental degradation and increased stakeholder expectations are common features of mining in Nigeria.

“But there are huge opportunities and potentials for companies that are focused and eager to be part of new industry developments,” the analysts said.

Also Read: From Garden to Gold Mine: Africa’s Unexpected Minerals Tycoon

According to the Minister, one of the main obstacles to the accelerated development of solid minerals is the underdevelopment of financing mechanisms for the mining sector.

“The Nigerian banking system has limited exposure to mining, which is likely due to lack of sufficient understanding of the sector,” he said.

For many risk-averse lenders, the mining sector presents more risk than they can handle. Others who burned loans to the energy sector became more cautious.

However, Nigeria’s dire economic situation, marked by declining crude oil revenues, creates the perfect opportunity to diversify income.

Since May, Angola has produced more crude oil than Nigeria, having missed its OPEC production quota. Crude theft is worsening in the Niger Delta and investors are fleeing the region due to insecurity and poor government policies.

OPEC’s monthly report for August showed Nigeria’s oil production fell 74,000 barrels per day (bpd) to 1.08 million bpd in July from 1.26 million in June, based on direct communication.

Angola’s oil production reached 1.18 million bpd in July, compared to 1.17 million bpd in June, based on direct communication.

But Nigeria has more than 44 mineral deposits present in commercial quantities in more than 500 locations across the country, according to Adegbite. Analysts say that to get the most out of it, mining needs to be transformed beyond small-scale operations across the country.

According to BNS data, on the state profile analysis, Ogun State recorded the highest production in 2021 with 32 million tons, followed by Kogi with 18.4 million tons and Cross-River with 11.64 million tons. However, the least mineral production was recorded in Borno with 231 tons.

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