Nigeria’s overreliance on oil has made its economy susceptible to external shocks associated with the hydrocarbon industry. DEBORAH DAN-AWOH writes on the need for the country to explore the mining sector as an alternative revenue source
The jury is still out as to whether the 1956 discovery of oil in the country has been a blessing or a curse. This is borne out of the fact that the country’s reliance on oil as its main source of revenue has done a lot of harm to its economy.
In the 1950s, oil was less than two per cent of the country’s export, as agriculture contributed 60-70 per cent and mining was about seven per cent of its export during this period.
However, the oil boom of 1973 changed the course of everything, making the country evolve from an oil-producing country to an oil-relying state.
In the fourth quarter of last year, oil accounted for 77.24 per cent of the country’s total export while agricultural, which used to be the mainstay of the economy, contributed only 2.68 per cent and solid mineral goods were merely 0.33 per cent, according to National Bureau of Statistics.
Of the N6.36tn the country generated from export in Q4 2022, crude oil contributed N1.88tn, 35 per cent of the total sum, while mining brought in just N21.03bn (0.33 per cent).
With the country’s overreliance on oil as a foreign exchange earner came external stocks that are associated with the oil industry. Any international event that impacts crude oil prices has a direct bearing on the country’s revenue. For instance, the President, Major General Mahammadu Buhari-led administration experienced to recession in 2016 and 2020 due to external shocks – a glut in the oil market due to production from shale and the COVID-19 pandemic. The ongoing Russian-Ukraine war is also having an impact on the country’s economy.
Meanwhile, there have been campaigns by stakeholders for Nigeria to diversify its revenue base. And one sector identified has great potential to be a major foreign exchange earner for the country is the mining industry. Experts have said if properly harnessed; the mining industry could contribute about seven per cent to the country’s Gross Domestic Product annually, as it contributed five per cent to the economy in 1980 before declining to less than one per cent in 2022. The country boasts over 44 solid minerals.
The Minister of Mines and Steel Development, Olamilekan Adegbite, while speaking at a mining and solid minerals conference recently, said the mining sector had been neglected in the conversation regarding the need to reduce Nigeria’s dependence on oil and gas.
He said, “The whole essence of this gathering is to explore funding the sector, and how do you do that? To tell people about the possibility of what this sector can bring to the table. Unfortunately, it seems we do not have the total value. The CBN has spent hundred of billion naira every year on agriculture. That is good. We need to feed ourselves, so we must say kudos to that because I think Thailand is regretting the fact that we are now planting rice and we do not import rice from Thailand anymore. But the CBN needs to do more.
“Every month, every state of the federation goes to Abuja, represented by either their commissioner for finance or their accountant general. They go and share the revenue that has come into the federation account, which belongs to the three tiers of government. Most of the funds come in from oil and gas.
“So, in the interim, fossil fuel will linger because if you want electric cars by 2030, what will you use to power them with? We don’t have those minerals yet. That is why a forum like this is very important. It will help us to realise the importance of putting the right funds into the sector so that we can benefit maximally from this explosion.”
KPMG in a recent report said that although the global mining industry suffered negatively from the impact of the COVID-19 pandemic in 2020 as mining sites were forced to suspend operations for extended periods of time, it was a major source of revenue for countries that made the best of it.
Nigeria is rich in solid minerals such as Gold, lead/zinc, limestone, salt cassiterite, clay, dolomite, gold, marble & tantalite, gypsum, lignite, manganese, uranium, barite, coal, gemstone, Gypsum, iron-Ore, bitumen, phosphate, glass-sand, etc.
A report by Aljazeera also pointed out that most of the electronics used today are based on a number of minerals – from aluminium to zinc.
In 2021, some 1.5 billion smartphones were sold around the world – up from 122 million units in 2007. More than half of a mobile phone’s components – including its electronics, display, battery, and speakers – are made from mined and semi-processed materials such as lithium, manganese, cobalt, and graphite. Observations from stakeholders state that with China at the front seat of mineral exportation, a number of its resources are sourced from different regions including Africa.
A non-oil-producing country such as South Africa generates an estimated $125bn per year, from its mineral resources, while Asia generates about $1.8tn from the sale of mineral resources-reports have shown.
The South African Institute of International affairs reported that at the twenty-seventh Conference of the Parties (COP27), the United Nations emphasised that current climate responses were insufficient to avoid severe climate change.
“To get on track, the transition from fossil fuel-based to renewable energy sources will have to be ramped up significantly. Africa’s minerals will play a key part in this transition.”
However, this will require strong management capacities from policymakers and a willingness to adapt and the ability to balance short- and long-term goals.
According to the Nigeria Extractive Industry Transparent Initiatives, the country records an annual loss of about $9bn to illegal mining and smuggling of gold.
On the contrary, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, during the presentation of the Gold coin to her by the Lagos Futures and Commodities Exchange in Abuja, said that despite claims on the need to diversify the economy, the country already had the framework in place to drive diversification.
“Our GDP today has a 6.4 per cent contribution from the oil and gas sector, so 94.6 per cent of the Nigerian economy is from other sectors. One of the sectors that we have been trying to activate its full potential is the mining sector.”
More so, Ahmed emphasised the country’s poor attention to the mining sector and the adverse impact on the economy.
“The mining sector today is still very small, but that is on the side of the government. But in the private sector and now I am glad in the states; there are very active mining activities that are taking place. Unfortunately, until now, we have not been getting the full value of the mining activities. Mining activities have been largely artisanal; there are a lot of participants that take out our minerals without reporting it, without the government or even the miners getting full value for it.”
Highlighting the potential of the mining sector, the National President of the National Association of Chambers of Commerce, Industry, Mines and Agriculture, Ide Udeagbala, said that Nigeria’s mineral repositories including copper, manganese, lithium, etc., which are needed for the global green transition.
Nevertheless, he warned that this aspect of green transition should be carefully managed to avoid the mistakes and lost opportunities experienced in the oil and gas sector.
“First, the government should invite interested investors in the mining of these raw materials and request they establish or set up industries in Nigeria for which these mineral repositories are to be used and the manufacturing of the finished/final products are carried out within the country. For example, copper, manganese, and lithium are required for electric motor batteries. “
He encouraged the government to create incentives that will attract FDIs and investors through tax holidays and a moratorium period of at least two to three years for such investors to recoup part of the costs of the initial investment and guarantee the rule of law while assuring obedience to court orders and judgments on their investments.
He added, “There should also be allowances and opportunities for employment of highly skilled technical expatriate staff of the investors’ choice with a possible technology transfer arrangement to Nigerians among other investment incentives.”
The Vice President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa, told The PUNCH that the nation possesses solid minerals which are a big part of the economy, “until the beginning of the oil boom Nigeria was a major exporter of coal-cobalt mining. So, we have experience of mining, but because of the oil boom, we abandoned all these. So, now that the economic constraint is changing, we can go back and build on our experience in those areas.”
Idahosa explained that the government can also take advantage of the strong geophysical and geo-mining profession in the country.
“So, it is a matter of the government deciding to grow the sector. The current government has set up a geophysical survey of the whole country. So, most of our mining resources have been marked and are now available for investors. Then there is a portal where investors can access all information.
“There are opportunities there; perhaps the new administration can intensify marketing of the information to the investment community both local and international because that information is available but not everyone has the information,” he remarked.
Share your story or advertise with us: Whatsapp: +2347068606071 Email: info@newspotng.com
