Nigeria Mining Sector: An Overview | KPMG | NG

Nigeria Mining Sector: An Overview

Nigeria Mining Sector: An Overview

There are plans to bolster production and beneficiation of industrial and ferrous minerals by initiating policies that stipulate minimum local content threshold for the utilization of these minerals by various industries/sectors.

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Nigeria is endowed with vast reserves of solid minerals, including, but not limited to, precious and base minerals, industrial minerals, energy minerals and metals. The country was a major exporter of tin, columbite and coal in the 1960s to early 1970s. However, activities in this sector began to nose-dive considerably by the mid-1970s due to a number of political and economic factors, especially the significant focus on crude oil production as a major source of foreign exchange for the country.

Successive Governments at the Federal level have demonstrated commitment to revamp the sector. For example, in 1999, a new national focus and strategy on mining evolved and this culminated in the enactment of the Nigerian Minerals and Mining Act (the Act) in 2007, amongst other policy efforts. However, these efforts have only led to a minuscule growth in the sector; with the sector’s contributions to the Nation’s Gross Domestic Product (GDP) remaining at less than 1% as at 2015. By the first half of 2016, Nigeria entered into a period of economic recession, which continued in the third quarter of the year. The recession was primarily due to dwindling Government revenues; caused by the twin problems of severely impaired local crude-oil production, and low global oil prices. As part of the economic recovery plan, the Government prioritized the diversification of the country’s revenue base as paramount, and identified agriculture and mining as the pivotal sectors.

To demonstrate Government’s commitment to the diversification plan, the Ministry of Mines and Steel Development (MMSD or the Ministry) issued a revised sector growth and development roadmap, with the objective of addressing the key challenges identified in the sector and outlining strategies for rapid development and utilization of key minerals and metals. One of the targets of the roadmap is the growth of the sectors’ total contribution (direct and indirect) to Nigeria’s GDP to about 10% by 2026. The Government has launched a N30 billion intervention fund to open up the sector to multinational companies. The fund will be used to promote exploration and research. Government is also open to negotiation with respect to the concession of the country’s railway infrastructure to boost evacuation.

Nigerian’s mining sector can be categorized according to the key activities in the sector as follows: exploration and mining (upstream), processing and beneficiation (midstream), and marketing and transportation (downstream). Only the upstream and downstream subsectors are currently active. The Government plans to implement some initiatives to enliven the mid-stream subsector. For example, there are plans to bolster production and beneficiation of industrial and ferrous minerals by initiating policies that stipulate minimum local content threshold for the utilization of these minerals by various industries/sectors.

Whilst the downstream subsector is dominated by individuals and indigenous companies, the upstream subsector is dominated by small scale/artisanal miners, and local integrated manufacturing companies (for example, cement manufacturers that extract limestone for use). Also, a few junior mining companies have executed joint venture arrangements with indigenous companies for mining operations. As at December 2016, a total of 2,395 companies and individuals were licenced to operate in the upstream sub-sector.

This article is an excerpt from our Thought Leadership document "Nigerian Mining Sector Brief" . Click here to download the publication.

© 2017 KPMG Professional Services in Nigeria, a limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

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