7/30/2019 Mining in Nigeria

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SO

LIDMI

NERAL

BUSINESSDAY: www.businessdayonline.com Monday 23 January 2012

6 BUSINESSDAY OUTLOOK 2012

By ull year (FY 11), the Na-tional Bureau o Statisticsestimated that Nigeriasmining sector contributed

less than 2.5 percent o Gross Do-mestic Product (GDP).

A 2009 estimate put the contri-bution o the sector as low as 0.3percent. Tis contrasts sharply withSouth Arica where mining contrib-

uted 19 percent o GDP and providedabout 1 million jobs (500,000 jobsdirectly) in 2009.

Nigeria has what it takes to bea solid mineral exporting colossuson the Arican continent. Accordingto the governor o Zamara State,Abdulaziz Abubakar Yari, a recentsurvey indicated that Zamara hashigh quality mineral deposits worth$40 billion. And that is just one outo 36 states which make up Nigeria.Indeed, there is no state in Nigeriawhich does not wield one mineralresource and most o these resourcesare in commercial quantity.

In 2012, eorts to build up Ni-gerias mining inrastructure and

urther attract oreign investors willtake the center stage. Te process oreorm in the sector has assumed adrastic seriousness in the past ewyears; though growth in the sectorhas been slow.

As inrastructure is a major prob-lem o the solid miniral sector, in 2012there will be eort to reduce inra-structural defcit (roads, railways andenergy). Over $8 billion is planned tobe invested in railroads alone.

Four years ago, initial steps were

taken to bring more transparencyand reduce bureaucracy in the solidmineral sector through legislation.But this has not attracted the kindo external attention it was designedto attract.

As o FY 11, over 4,000 explora-tion licenses had been granted todierent companies, and about 50international mining companies

were already carrying out mining ac-tivities in Nigeria. More are expectedin 2012 and there are indications thatthose already operating in Nigeriawill increase their stakes.

As indicated by the honorableminister o Mines and Steel Devel-opment, Arch. Musa MohammedSada, the frst large goldmine (it isestimated to have a proven reserveo over 650 thousand ounces o gold)in Nigeria will be operational in OsunState in 2012.

Tere are many more investmentvehicles or investors who are readyto eectively engage the solid miniralsector in Nigeria. Nigerias bitumenreserve is estimated at over 42 billion

tones the countrys Iron ore reservewhich is over 3.6 billion tons is spreadacross fve states.

Various quantities and qualitieso gold, cassiterite, tantalite, wol-rameite, beryl, gemstone, kaolin,mica, barites, iron ore, copper ore,zinc ore, among others are availablein Nigeria the daunting task is theinability o government to attract theright quantity o investment to drivethe sector to become one o Nigeriascash cows.

cost o mining (occasioned by lacko inrastructure and bureaucracy).

Solid mineral mining occupies aback stage in Nigeria and at best 2012will be a year that the equation will betilted slightly away rom that position.

Tough the sector will not im-mediately become 100 percentunctional and rise to be a majorcontributor to GDP in 2012 it will-

nontheless move in that direction.Indeed, data rom the Ministryo Mines and Steel developmentindicate that extraction activitiesgenerated $135 million in 2009, asagainst $35 million in 2005. Tis isevidence that it could compete withthe oil sector in no distant time.

But the number o years will notbe ewer that 5-10 years as even theminister o Mines and Steel Devel-opment has admitted that there isalways a considerable lag betweeninvestment in solid mineral andreturns to the economy.

In 2012, the Ministry o Minesand Steel Developments MineralInvestment Promotion Unit will beully operational. Te unit was set upin late 2011 in response to the issueo making entry into the industry lesscumbersome especially or oreigninvestors. When ully operational, theunit will oer both local and oreigninvestors the opportunity to have

easy access to inormation, especiallyelectronically.raditionally, there are two prob-

lems with the solid mineral sector inNigeria. Te frst is lack o exact inor-mation regarding availability o min-erals. But that aspect is being takencare o through geophysical mapping(which has been conducted on over46 percent o Nigeria).

Te second problem is directlylinked with attracting investmentinto the sector and that is becauseinvestors have had to grapple withthe uphill task o managing high

Mining in Nigeria:

Long road from reality

Unlike in Judeo-Christianreligion, when visions, areconceived in economies,there is need or eective

econometric modeling and planningto determine the variables and nec-essary actions which will make the

visions come true. Te case o vision2020 is that o a loty vision which wasnot domiciled on the right sacrifce tomake it come through.

Our econometric simulations onthe Nigerian economy reveal thati the current rate o growth o GDPand population is sustained in thenext eight years, Nigerias GDP percapita will be a mere $2,384 by 2020.

Sadly, this was the average GDP percapita o the top 20 economies (whichNigeria seeks desperately to be like)as at 1997.

Our orecasts which are basedon data provided by the World Bankalso indicate that by 2020, i the

While South Africa and smaller African countries have enjoyed significant contributions from the solid mineral sector, Nigeria

has not. OBODO EJIRO examines the challenges facing the sector while pointing out what has been done and what is being

done to make the sector more investment friendly.

20:2020; from vision to mirage?top economies are to maintain the

average growth rate which they haveexhibited in the last ten years, (that isi the developed economies can shakeo the current economic doldrums)they will have average per capitaincome o about $60,525 by that time.

I the status quo does not changein Nigeria, the country will remain arbehind. Te problem o Nigerias slowGDP growth and high populationgrowth is an old one. Not that popula-tion growth is the major problem buti we continue to grow population

without corresponding GDP growthand reduction in corruption, ouruture is threatened.

Historic data rom the World Bankindicates that on average, nationsin the frst twenty economic groupattained GDP per capita in excesso $1,223 (which was our per capitaincome a ew years ago) around 1960.France, Norway, and the UK had percapita income o $1,320, $1,441 and$1,382 by 1960 and have consistently

grown since then. One ully under-

stands that Vision 20:2020 is a wildgoose chase when one recons with thereality that the goal is to attain an eco-nomic standard which we could notattain in 50 years, in just eight years.

As o 1960, Niger ias GD P percapita was a mere $91 and has justmanaged to grow by 25 per cent inthe last 50 years. In the same period,Norway grew per capita income by59 per cent while France gained 34percent. On average, the High IncomeCountries (HIC) recorded 30 per centincrease in GDP per capita in the last50 years, while Nigeria saw a rise o alittle less than 25 per cent.

Our simulations reveal that Nige-ria needs to grow at an uninterruptedrate o between 9.5-12 per cent perannum in the next eight years or miss

vision 20:2020 altogether. And sincethis is unlikely to happen we can as

well come up with a better and morerealistic vision.

Given the current circumstances

there are two choices or Nigeria. I

the country cannot automaticallyimplement policies that will grow theeconomy at a aster pace, then it hasthe option o shiting the goal post.Clearly, the idea o merely believ-ing that developing inrastructure

will grow the economy is not goodenough.

Inrastructure is a necessarybut not suicient condition ordevelopment. We need to start ask-ing ourselves the questions: From

which sector o the economy will oureconomic miracle emerge? Whatpolicies are we putting in place tomake the identifed sectors realisti-cally viable?

Policy makers and governmentswithin Nigeria need to answer thesequestions. Nigerias political eliteshould in a sense start thinking likethe Chinese. What the Chinese did

was to set targets or dierent sectorso the economy and work towardsthose targets.

OBODO EJIRO