Solid Minerals: How States And Individuals Can Make Billions

Solid Minerals: How States And Individuals Can Make Billions

Wednesday, April 26, 2017 9:22 am


Dr Kayode Fayemi

Dr Kayode Fayemi, Minister for Solid Minerals and Steel Development, has a big assignment. He is to revive the dead mining sector and make it an alternative revenue source for the Federal Government. Nigeria has never, in its history, been in need of diversification like this! This is because, given the activities of militants in the Niger Delta (who bombed pipelines with no more efforts than stepping on maggots), which affected oil outputs and the fall in its price in the world market, revenue from that sector plumetted. The minister, therefore, is like one of the doctors who have been assigned to revive a patient in a coma and make him his family’s bread winner again in a short time. Apart from this, he is to see to it that despite that mining is on the exclusive list, inividuals and states can legitimately make money through it. In his words: “We need to bridge the gap between law and reality and that is why we decided that we must help those informal miners (as we call them) to become formalized and we must support them with access to finance, tools, technical knowledge, skill development that can enable them upscale their activities. In other words, we must help miners, rather than letting them remain in that rudimentary level where middle men come to cheat them out of the little they get…” Here is the full interview that Fayemi granted ADEMOLA ADEGBAMIGBE and YOMI OSOBA

Q: We congratulate you again on your position and the big task given to you to help diversify the economy. Now what are the challenges you met when you became minister and how have you been able to overcome them?

Well, first it is too early to start talking about overcoming the challenges met. You know Nigeria has been obsessed with the attention given to oil and gas over the last four decades and that has taken our eyes off the ball as far as other sectors like mining is concerned. So, coming to a sector that has been neglected and underfunded, the deep seated challenges in the sector would not be overcome overnight. Although, I came into it with a very clear mandate from the president, which is to reverse the neglect and improve the fortunes of the sector particularly in terms of job creation and revenue generation. To demonstrate his own commitment, Mr President also sent two ministers to a Ministry that has been hitherto superintended by a single minister since 1995 when it was first created.

Before then mineral resources used to be a part of petroleum ministry or part of the Ministry of Mines and Power, from the time of the late Alhaji Shetimma Ali Monguno in the first republic and under subsequent Ministers until General Abacha created the Ministry of Solid Minerals Development in 1995 with Alhaji Kaloma Ali as its first Minister. Coming to the challenges, they were many. We met a Ministry that was not only underfunded, in which staff morale was at its lowest but also one in which motivation was lacking. We met a Ministry in which significant work had gone into making the legal framework attractive to investors and comparable to any around the world, but one in which enforcement of those laws left a lot to be desired.

We met a legacy of litigations on key assets of government under the Ministry’s supervision, particularly Ajaokuta steel Plant, the National Iron Ore Mining Company, Itakpe, the Aluminium Smelting Plant in Ikot Abasi to mention a few. We met a Ministry that is deficient with regards to the availability of bankable geological data for prospective mining investors and a Ministry that was experiencing a very tense relationship between the Federal Government, States and the host communities. The challenge of illegal mining and its concomitant effect on safer mining practices was also there. This is not exhaustive, but these were the major issues met.

And what have you done so far to overcome these challenges?

Well I have given you about 4, 5 challenges that are very central to turning around the sector. The challenges create the larger challenge which is the perception that Nigeria is not a mining nation. The smaller challenge or the practical challenges give vent to that view in the minds of investors when they talk about Nigeria. They say Nigeria is not a mining nation, forgetting that Nigeria has the fourth largest reserve of bitumen in the world, and the second largest of iron ore deposits in Africa, there are abundant coal resources. There is limestone all over the country; we have moved from being an importer of cement products to being self-sufficient and now an exporter. Many of these things are not even known to the ordinary Nigerians , let alone to outsiders. So the challenge of perception is very key and that is also why I am talking to you because media organisations play a critical role in influencing public opinion about what is happening across the board. We are often accused of not talking enough in this government to the media or communicating our achievements.

So, how have we resolved the specific challenge of insufficient funding? This is not a sector that has to depend exclusively on government funding and our vision as encapsulated in our roadmap (that’s the first thing we developed coming into office) is that government will play the role of an enabler and not an operator. An enabling role for us includes providing access to finance for genuine miners. We developed a road map that sets out in very clear terms what we want this sector to become and how we want to get there. But in terms of what government has been able to do with regards to insufficient funding, you will notice that funding in this sector has significantly improved, yet it is not where we want it to be. But when I became minister in November 2015, the budget of 2015 was just coming to an end in terms of implementation. This ministry had an allocation of 1 billion naira, for its capital expenditure, out of which the Ministry was only able to access N352million – not even 50 percent of what was appropriated.

We witnessed a significant shift in the 2016 budget that we prepared and capital funding moved from N1billion to almost N8 billion. By December we had almost received 50 percent of that N7.3 billion that was allocated to that sector for capital expenditure. That is a major jump in percentage terms. With the 2017 estimates currently before the national assembly, capital expenditure proposals doubled to N13 billion from last year’s N7.3billion. That is just federal budget allocation, we have also been taking additional steps for the first time in this sector. The sector has benefited from the natural reserve development fund (which had never been given to this sector before this current administration) with the approval of N30 billion as an intervention fund for exploration, strengthening capacity, providing access to finance for artisanal miners.

We took that bold step and the president approved it and the federal executive council ratified the president’s approval and we have N30 billion now to assist in focusing more on exploration activities. This is because mining is research. If you don’t search you don’t find and you don’t know what you have. It is only when you carry out geological prospectivity that you will have a sense of what you have. Everybody will tell you that oh Nigeria has mineral resources all over the place but they can’t tell you the specific place where those minerals are, in what quantity they are, whether they are commercially viable or not.

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Is that currently being done by your ministry now?

As we speak, we have our geological survey officials in virtually all the states of the federation doing a mineral mapping exercise just to update what is it that we have. So you have that N30 billion which we haven’t accessed in addition to the allocation of 2016 and 2017 which I mentioned. The ministry has been trying to raise funds from the banks in the last four or five years and we finally succeeded. Coming on stream, we have managed to use our own efforts to get another $150 million for the sector over the next five years from the World Bank. Again we will focus on those challenges that I pointed to, geological data generation, artisan and small scale mining formalization, strengthening enforcement of the laws and bringing Ajaokuta and Itakpe Mines to life.

There are certain individuals who lay claim to certain mining areas as their ancestral land; yet their activities are informal, illegal. How are you handling such in the new scheme of things?

Instead of wielding the big stick on these so called illegal miners, it is very difficult to tell somebody who is just using digger and shovel in his ancestral land that what he’s doing is illegal, he can’t get his head round it because it is his father’s land! His fore fathers have done mining all their lives, and then you tell the person that somebody who has a license from a minister from Abuja, is the legitimate owner which is what the law says. But we need to bridge the gap between law and reality and that is why we decided that we must help those informal miners (as we call them) to become formalized and we must support them with access to finance, tools, technical knowledge, skill development that can enable them upscale their activities. In other words, we must help miners, rather than letting them remain in that rudimentary level where middle men come to cheat them out of the little they get; where they expose themselves to environmental threats in the communities. They inhale a lot of illegal materials – mercury, poisonous materials as they wash what they find in the communities. We will use part of the resources we have raised in supporting those in the informal mining business.

Minister of Mines and Steel Development, Dr Kayode Fayemi (middle) during an inspection of Dangote Cement Plc’s limestone mining site in Ibese, Ogun State recently

We are also strengthening partnerships and collaboration between federal and state governments. This is because we know mining will not succeed unless federal and state entities work together. The truth of the matter is that according to the law of the land, land is an exclusive preserve in the hands of the state government, what is beneath the land is my responsibility. I don’t have control over land anywhere, even my boss, President Muhammadu Buhari doesn’t have control over land anywhere. So we need to engage those who have the control over land in order to access their land, although the law is cognizant of the host community. We ask the host community to always give consent to whoever wants to obtain license. They cannot get license without approaching the real owners, the community owners. We have also streamlined that now so that the ministry cannot do it on their own without Certificates of Occupancy. So we are hoping to get states where the resources are involved in the consent process. In the end, what will work is to ensure that there is a synergy between us – Federal, the states and the host communities and that we believe this will help reduce the tension that always leads to conflict in those communities. In addition to that, we have tried to work around the perennial challenge of mining being exclusive, by advising states to create their own special purpose vehicles as a means of legally engaging in mining as a business.

States are advised to improve their internally generated revenue. How can they do that in the mining sector when it is on the exclusive list?

Yes, we know that states want to engage in Mining and we agree that they should not depend exclusively on Abuja for resources , hence the need to generate legitimate resources outside of allocations from federation account. We said to states, yes, you cannot apply as states but there is nothing in the law that stops you from applying for licenses as Ekiti State Investment Company or Nasarawa State Mineral Development Entity, you can set up special purpose vehicles, have a joint venture agreement with a technical partner and apply. We will give you and we have been giving them, so that has resolved a major tension between the states and federal government. I agree that this resolution is more administrative than legal in the sense that we are not the ones empowered by the constitution to make laws, it is the Legislature of Nigeria that can change the constitution of the country. For now we just want to get a logjam resolved and that is the way we are working with states to resolve that logjam.

How far with the litigation on Ajaokuta?

On litigation we have also managed in the space of one year that we have been in office to resolve the Ajaokuta litigation and we are now in the process of recovering the plant and putting it back to use in public interest.

If an individual wants to go into mining, how easy is the licencing process?

We have different categories and we state precisely what you can do to get the license. However, there are people who have taken licenses over the years and have not done anything with the licenses collected. One of the first things we did when I became minister was to implement the ‘use of lose’ clause that is in the law that you either use it and show evidence that you have been mining or that you have been exploring or you lose it. And after we published the advertisement, a lot of companies tried to revalidate their status. Others who could not do it lost their licenses. We give those licenses to people who we feel are better placed to develop the resources that are all over the place. We have also designated some places as special mining areas which government has special interest in, to look for a high grade investor who can come and help develop those rich resources where they exist. And in pursuit of our partnership and relationship with states, we are opening zonal offices of our mining cadastral units so that they are closer to communities, to people who want to engage in mining and are ready to do the work. We are doing these to bring the licensing arrangement closer to those who are interested in mining.

What about foreign miners?

What we are doing to ease doing business with foreign miners is that we are developing our IT infrastructure in such a manner that you can actually access our web portal from around the world and you can also apply online for a license. This is because we have information on the coordinates that you may be interested in, looking at your Google map. We are currently automating our IT infrastructure and also digitising all records in order to place them on the web portal so that you don’t have to be in Nigeria to know what we have in Nigeria. You have an indicative sense of what we have, you can get it from our web portal and if you now want to pursue it further beyond just seeing it online, you can then come and find out more about it. Processes and procedures are all going to be digitised and accessible on the web portal, so you are right, foreign miners can get more information about what is available.


Dr Fayemi during tour of the Birnin Gawari gold field, in Birni Gwari, Kaduna State recently


But critics say Nigeria’s immigration laws are cumbersome…

Yes, that is also being addressed globally, not just for mining investors. I can tell you, not just at our level. At our level we are willing to give proper introduction to Nigerian Immigration Services of our prospective private sector investors and they have been very cooperative. At least from our sector, we can confirm, there is no time that we approach the Nigerian immigration service that they didn’t give approval for visa on arrival for our investors. But this is even being streamlined and standardized by the Presidential Committee on Doing Business which is chaired by the Vice President and this is going to be more seamless and stress free. If you are an investor and you have evidence of what you are coming to do in Nigeria, you just get your visa when you come to the country.

What about the security implication of that?

Of course we are sensitive to security issues and of people who may want to use it as a cover for nefarious activities. But we cannot let that undermine our broader objective of making investment or making Nigeria the investment destination attractive to outsiders. So there is a coordinated mechanism which involves Ministry Of Interior, Ministry Of Trade, Vice Presidents Office, Ministry Of Finance, Ministries that are involved in investment decisions as for their sectors, Agric, Mining and so on and so forth. It is increasingly becoming very easy for genuine investors to come here without stress.

Last December, your ministry announced that solid mineral sector contributed N2.8 billion and that it was not the true picture of what ought to come in. What are the other areas you will make stronger to improve your ministry’s revenue?

Companies operating in our sector pay taxes to the Federal Inland Revenue (FIRS). Their taxes, their company taxes go to federal inland revenue service. So, if you do your overall calculations by delineating what mining and mining related activities contribute to the FIRS, then you are talking of hundreds of billions as monies generated by this sector. And we are doing that, we are working with the FIRS to really identify mining taxes for our own information. Equally, we are very convinced that taxes, royalties, fees in this sector are still grossly understated, that’s why we went to the National Economic Council to seek approval for independent revenue consultants to work with our federal mining officers on a state by state basis, Although we have increased the revenue since we came in by that N2.8 billion that you said, that is still not a true picture in our view, based on the assessment that we have done on mining activities and we want to pursue that vigorously this year.

We are looking at five years back duty of mining related taxes, royalties and fees to ensure that all the companies in the sector pay what they ought to have paid. Henceforth, that would become a model for pursuing our activities. It is not just us saying this, NEITI that monitors revenue from the extractive sector came to the same conclusion that this sector is not really getting an accurate sense of the revenue accruable to it and we need to be doing more about that.

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