Nigerian govt to allow investors take lion’s share of planned mineral extraction company
The lion’s share of a state-backed solid minerals company, currently in the works, will go to private investors and the public who will be able to own not less than three-quarters of its shareholding.
While the government will hold up to 25 per cent in the so-called Nigerian Solid Minerals Corporation, the public will hold the same proportion of stake, while the rest is planned to be owned by private investors, Minister Dele Alake told a conference arranged by BusinessDay in Abuja on Tuesday.
The idea is to make the entity private-sector-driven as part of the strategies to make it appealing to the big multinationals the government is targeting as investors to get the largely comatose mining sector off the ground.
The share capital of the corporation will be N1 billion, Mr Alake said.
Allowing the government to take only a quarter of the ownership, while the remainder of the shareholding and its control is to avoid the error of the past, whereby state control of two mining enterprises – National Iron-Ore Company and Bitumen Concessioning Programme – caused both enterprises to run aground.
The two companies will be merged with the proposed corporation, which will develop metals like gold, baryte, lead iron ore, bitumen, limestone and coal.
Africa’s biggest economy wants to end its fixation on oil and gas, which accounts for about 65 per cent of the government’s revenue and more than 85 per cent of exports, making it a mono-economy.
Rampant resource theft, a backlog of unpaid royalties running into trillions of naira and a contribution as meagre as less than 1 per cent to GDP are grim indicators of how little Nigeria is earning from a sector analysts say holds the key the shifting the economy away from oil.
But the sector is getting increased attention from the government.
A wave of new reforms
The government is upping efforts to establish mining police to man mines, curb illegal mining and combat insecurity, one of the biggest bugbears that have scared investors away.
A technical committee made up of representatives of the armed forces, the Nigerian Police Force and related government agencies converged in Abuja on Tuesday at the behest of the Inspector General of Police, Kayode Egbetokun, to dialogue on ways to address illegal mining in the country.
Mr Alake said his ministry is “working with the legislature to establish the legal and legitimate foundation for the institution” (Nigerian Solid Minerals Corporation).
The Solid Minerals Committee of the House of Representatives is to meet from 12 to 13 February to hold the first policy dialogue on the proposed law that will set the company up.
In the pipeline is the digitalisation of mining application processes “to improve the ease of doing business in the sector,” Mr Alake said in a Twitter post.
The development of big data on the seven priority minerals and their deposits is also part of the line-up of policies of the ministry.
Mr Alake said that mining firms will be made to comply with the revised Community Development Agreements (CDAs), failing which sanctions will result.
If there is any major factor that has caused the Nigerian extractive industry to suffer arrested development over the years, it is because the sector is big on policies but small in implementation, a national business and human rights roundtable, organised by the UN Global Compact Network Nigeria said last August.
Ignoring CDAs is commonplace among holders of mining licenses, most of whom go about the mining business with little or no plan to give anything in return to the communities that host them.
“It’s there in the Mining Act. So it’s not a new development. It is compliance that is the issue,” Kelechukwu Okezie, a steering committee member of the Federation of Mining Host Community told PREMIUM TIMES.
“Oftentimes there are loopholes in the implementation. Oftentimes due to inefficient monitoring, they don’t do what they are supposed to do. As a result of this, the host communities also, they are sabotaged. The problem there is lack of effective and efficient monitoring by the regulatory agencies,” he added.
“There should be a law that should stipulate that the host community should be part-owners of the resources in their land.”
Environmental pollution and degradation remain big issues and have stoked resource conflict in host communities, with mining operators having little or no regard for environmental, social and governance (ESG) standards.
READ ALSO: FG transportation rebate programme a huge success – Alake
Like many countries in Africa, that has made Nigeria a poster child for the resource curse.
“PwC found that mining companies with higher ESG ratings outperformed the overall market during the peak of the COVID-19 crisis,” consultancy Pricewaterhouse Coopers said while making a case for adhering to ESG principles by Nigerian mining operators in its report, Nigerian Mining – Progress but Still a Long Way to Go, issued last July.
“These companies achieved an average total shareholder return of 34% over the previous three years, surpassing the general market index by 10%. This demonstrates the positive correlation between strong ESG practices and financial success,” it added.
Missed opportunities
Nigeria has overabundant mineral resources, which have been valued at over $700 billion.
Its neglect of solid minerals in the past has robbed it of the much-needed revenue required to drive development and fund provision of key infrastructures after an oil boom in the 1970s forced past administrations to shift away from minerals, an opportunity resource-rich South Africa has leveraged to transform its economy to the most industrialised on the continent.
Mining accounted for roughly 60 per cent of South Africa’s exports equivalent to $30 billion in the first half of 2023 alone, according to the South African Revenue Service, and contributed over 7.5 per cent to the economy in 2021.
In neighbouring Ghana, mining generates 5.7 per cent of GDP and accounts for about 40 per cent of gross foreign exchange earnings, while the sector contributes 12 per cent to the Zambian economy.
Before oil became the new gold, solid mineral contribution to GDP was between 4 and 5 per cent, according to PriceWaterhouseCoopers. That fell to as low as 0.17 per cent between 2018 and 2022.
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The lion’s share of a state-backed solid minerals company, currently in the works, will go to private investors and the public who will be able to own not less than three-quarters of its shareholding.
While the government will hold up to 25 per cent in the so-called Nigerian Solid Minerals Corporation, the public will hold the same proportion of stake, while the rest is planned to be owned by private investors, Minister Dele Alake told a conference arranged by BusinessDay in Abuja on Tuesday.
The idea is to make the entity private-sector-driven as part of the strategies to make it appealing to the big multinationals the government is targeting as investors to get the largely comatose mining sector off the ground.
The share capital of the corporation will be N1 billion, Mr Alake said.
Allowing the government to take only a quarter of the ownership, while the remainder of the shareholding and its control is to avoid the error of the past, whereby state control of two mining enterprises – National Iron-Ore Company and Bitumen Concessioning Programme – caused both enterprises to run aground.
The two companies will be merged with the proposed corporation, which will develop metals like gold, baryte, lead iron ore, bitumen, limestone and coal.
Africa’s biggest economy wants to end its fixation on oil and gas, which accounts for about 65 per cent of the government’s revenue and more than 85 per cent of exports, making it a mono-economy.
Rampant resource theft, a backlog of unpaid royalties running into trillions of naira and a contribution as meagre as less than 1 per cent to GDP are grim indicators of how little Nigeria is earning from a sector analysts say holds the key the shifting the economy away from oil.
But the sector is getting increased attention from the government.
A wave of new reforms
The government is upping efforts to establish mining police to man mines, curb illegal mining and combat insecurity, one of the biggest bugbears that have scared investors away.
A technical committee made up of representatives of the armed forces, the Nigerian Police Force and related government agencies converged in Abuja on Tuesday at the behest of the Inspector General of Police, Kayode Egbetokun, to dialogue on ways to address illegal mining in the country.
Mr Alake said his ministry is “working with the legislature to establish the legal and legitimate foundation for the institution” (Nigerian Solid Minerals Corporation).
The Solid Minerals Committee of the House of Representatives is to meet from 12 to 13 February to hold the first policy dialogue on the proposed law that will set the company up.
In the pipeline is the digitalisation of mining application processes “to improve the ease of doing business in the sector,” Mr Alake said in a Twitter post.
The development of big data on the seven priority minerals and their deposits is also part of the line-up of policies of the ministry.
Mr Alake said that mining firms will be made to comply with the revised Community Development Agreements (CDAs), failing which sanctions will result.
If there is any major factor that has caused the Nigerian extractive industry to suffer arrested development over the years, it is because the sector is big on policies but small in implementation, a national business and human rights roundtable, organised by the UN Global Compact Network Nigeria said last August.
Ignoring CDAs is commonplace among holders of mining licenses, most of whom go about the mining business with little or no plan to give anything in return to the communities that host them.
“It’s there in the Mining Act. So it’s not a new development. It is compliance that is the issue,” Kelechukwu Okezie, a steering committee member of the Federation of Mining Host Community told PREMIUM TIMES.
“Oftentimes there are loopholes in the implementation. Oftentimes due to inefficient monitoring, they don’t do what they are supposed to do. As a result of this, the host communities also, they are sabotaged. The problem there is lack of effective and efficient monitoring by the regulatory agencies,” he added.
“There should be a law that should stipulate that the host community should be part-owners of the resources in their land.”
Environmental pollution and degradation remain big issues and have stoked resource conflict in host communities, with mining operators having little or no regard for environmental, social and governance (ESG) standards.
READ ALSO: FG transportation rebate programme a huge success – Alake
Like many countries in Africa, that has made Nigeria a poster child for the resource curse.
“PwC found that mining companies with higher ESG ratings outperformed the overall market during the peak of the COVID-19 crisis,” consultancy Pricewaterhouse Coopers said while making a case for adhering to ESG principles by Nigerian mining operators in its report, Nigerian Mining – Progress but Still a Long Way to Go, issued last July.
“These companies achieved an average total shareholder return of 34% over the previous three years, surpassing the general market index by 10%. This demonstrates the positive correlation between strong ESG practices and financial success,” it added.
Missed opportunities
Nigeria has overabundant mineral resources, which have been valued at over $700 billion.
Its neglect of solid minerals in the past has robbed it of the much-needed revenue required to drive development and fund provision of key infrastructures after an oil boom in the 1970s forced past administrations to shift away from minerals, an opportunity resource-rich South Africa has leveraged to transform its economy to the most industrialised on the continent.
Mining accounted for roughly 60 per cent of South Africa’s exports equivalent to $30 billion in the first half of 2023 alone, according to the South African Revenue Service, and contributed over 7.5 per cent to the economy in 2021.
In neighbouring Ghana, mining generates 5.7 per cent of GDP and accounts for about 40 per cent of gross foreign exchange earnings, while the sector contributes 12 per cent to the Zambian economy.
Before oil became the new gold, solid mineral contribution to GDP was between 4 and 5 per cent, according to PriceWaterhouseCoopers. That fell to as low as 0.17 per cent between 2018 and 2022.
Support PREMIUM TIMES’ journalism of integrity and credibility
Good journalism costs a lot of money. Yet only good journalism can ensure the possibility of a good society, an accountable democracy, and a transparent government.
For continued free access to the best investigative journalism in the country we ask you to consider making a modest support to this noble endeavour.
By contributing to PREMIUM TIMES, you are helping to sustain a journalism of relevance and ensuring it remains free and available to all.
Donate
TEXT AD: Call Willie – +2348098788999
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