Solid Minerals as revenue source in Nigeria: Between mirage and reality

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By; Lawal Umar Mayere.

The dwindling fortunes in the oil sector due to the downward slide of its price necessitate the diversification of the economy. There is no doubt that Nigeria is blessed with various types of solid minerals all over the country. However, the sector has been the most unorganized despite the fact that the mining act has adequate provision to make the sector organized.

The sector’s contribution to the gross domestic product (GDP) of less than 1% at present is a big challenge and a source of concern. The current Minister for Solid Minerals, Dr Kayode Fayemi has rightly acknowledged the great task ahead of the present administration in rejuvenating the nation’s solid mineral sector.

The over dependence on oil revenue is the major factor for the neglect of other sectors of the economy. As a result, the solid minerals sector is the worst hit leaving it with no concrete policing. The revenue generated was mostly from the applications sent to the Mineral Cadastral Office (MCO). Permits, licences and leases were issued without correspondent follow up to ensure control as most companies obtaining exploration licences continue to go ahead with mining activities without obtaining the proper mining title which is against the law.

Thus, out of about 4,614 permits, licenses and leases issued by the Federal Ministry of Solid Minerals, about 2,954 (64%) are exploration licenses (EL) and only 56 (1.2%) are mining licenses (ML) and 848 (18.4%) are reconnaissance permit (RP), while 756 (16.4%) are small scale mining leases (SSML). There is therefore a disconnect between high approval of EL and very few mining leases awarded. This may be due to lack of capacity of both capital and technical know-how, as well as proper control as many might be doing actual mining activity using exploration license.

Based on this analysis, it can be seen that both RP ad EL are types of titles obtained at exploration stage. While SSML and ML are titles obtained at mining stage. Thus it can be seen that about 82% of overall titles are exploration titles, and 1% represent full Mining Lease title.  As such, the key problem areas identified are; exploration, competent agency, infrastructure, access to funds and marketing.

Therefore, issuance of several mining exploration licenses (EL) without obtaining actual mining lease titles leads to loss of revenue both to the Federal Government and State Government. This problem may change as a result of the frantic efforts the Federal Ministry of Solid Minerals is making to involve both State Governments and Local Governments as well as Miners Association of Nigeria to have proper control.

DOCTRINE OF USE IT OR LOSE IT

The Minister’s intention to use the doctrine of ‘use it or lose it’ is a good initiative. However, it should not be a situation whereby titles are revoked and allocated to other companies on the same kind of conditions. Since it is now the era of ‘change’, we expect a positive change in this sector which will be beneficial to the Government. In that line, the following measures are recommended:-
(1) We believe in the words of Mr. President that the solid mineral sector needs to be reviewed to ensure that the sector becomes a major source of revenue to the Government.
(2) There is the need for the Federal Government to establish National Mineral Exploration Agency (NMEA) that will be saddled with the responsibility of prospecting minerals by undertaking proper exploration and feasibility study on selected minerals to ascertain reserves before issuing a mining lease to serious investors.

This will have the advantage of preventing the issue of short-changing the Government. The cost of the exploration and feasibility study will be paid by the allotee. This will provide a solution to the problem of lack of capacity earlier mentioned and also ensure sustainability in the mining sector.

The National Steel Raw Materials Exploration Agency (NSRMEA) has acquired expertise in mineral exploration especially in the field of core drilling, as such should be expanded to cover not only steel raw materials but all other solid minerals. In other words, the conversion of the agency to the National Minerals Exploration Agency (NMEA) will be much easier as there is already an existing structure on ground.

(3) Henceforth, mining companies who wish to carryout exploration should only be issued with Reconnaissance License (RL) which is currently known as Reconnaissance Permit (RP). The license (RL) should confer to the holder the right to search for a specific mineral within the licensed area by geochemical and photogeological surveys or other remote sensing techniques as a first stage of exploration. Upon satisfactory completion of the first stage, drilling or excavation permit can be issued to verify the exploration. This will go a long way in preventing land dilapidation and illegal mining which is a source of concern.

(4) The Federal Government through the NMEA should identify and explore a mineral per each senatorial zone from across the 36 states of the federation. Once the mineral deposits have been established, mining license shall be issued to the mining companies for full mining activities.

(5) A law to be created whereby all mining leases issued as a result of exploration by NMEA can be used as collateral for bank loan dedicated to mining. Other data obtained during the exploration can be sold to prospective miners hoping to obtain mining lease.

(6) We recommend the establishment of solid minerals development bank. This will provide for a loan scheme that will be investor friendly loans specially designed to cater for the various stages of the mining cycle, making funding more accessible to the miners with a low interest rate and repayment terms more reflective to the realities in the mining sector.

CONCLUSION

As earlier highlighted the key problem areas in the mining sector are; exploration, competent agency, infrastructure, access to funds and marketing. As such, enough time of study must be given to formulate proper policy otherwise the much expectation on this sector can be a mirage.

The President and the Minister have strong political will to revive the solid minerals sector. As such, they should focus on the judicious use of the 3% of the federation account which is always set aside for the development of natural resources. The fund can be used to finance the activities of exploration by the National Mineral Exploration Agency (NMEA) as well as setting the solid mineral development bank or setting a special loan scheme at the bank of industry. For revenue on solid minerals to be a reality, concrete steps must be taken with systematic plan of action.

Mayere is the Chairman – Miners Association of Nigeria, Kaduna State Chapter.

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