Country in focus - Nigeria: rumours, reluctance, and risks

All hopes are set on the mining industry to place the Nigerian economy on a new, diversified growth path, writes Leon Louw.

  Flag-map of Nigeria.svg
Capital Abuja
Official language English
Major other languages  Hausa, Yoruba, Igbo, Fulani
Population +140 million
Currency  Nigerian Naira
Main religions Islam and Christian
Rail network +4 660km (standard/narrow gauges)
Road network +195 000km
Major ports  Lagos, Port Harcourt, Warri, Calabar, Onne, and Sapele
Major airports Abuja, Lagos, Kano, Port Harcourt, Enugu, Kaduna, Maiduguri, Yola, Calabar, Sokoto, Owerri, Jos, and Ilorin
Climate

Temperature range: 22–36˚C 
Seasons: rainy and dry seasons

Vegetation Rainforest in the south and savanna in the north 

Nigeria’s reliance on oil has put the country’s decision-makers in a precarious position. The drop in crude oil prices in 2014 precipitated an economic crisis that dampened a then galloping GDP growth rate. To turn the sluggish, creaking economy around and to ensure long-term sustainability and growth without hindering current initiatives requires a drastic and innovative plan. Mining’s contribution to the economic growth of Nigeria has been negligible since the early 1950s, despite the country’s abundance of mineral resources.

Market day in Lagos. The Nigerian economy is in serious need of change, with mining punted to drive a more diversified economy.
Image: Dr Nicolaas SteenkampMost of the mining in Nigeria is done by artisanal miners.
Image: Dr Nicolaas SteenkampActing president of Nigeria, Prof. Yemi Osinbajo (on left), was a guest speaker at the National Mining Summit and emphasised the urgent need to diversify an ailing economy away from oil. Image: Leon Louw

In contrast to Lagos, Abuja is a well-organised and well-run city where it is relatively easy to get around.
I*mage: Leon LouwThe National Mining Summit, part of the ConMin West Africa exhibition, was held in Abuja, the capital of Nigeria, in June.
Image: Leon Louw

Before Shell-BP discovered oil in Oloibiri (a small community in the Bayelsa State of the eastern Niger Delta) in 1956, coal mining had ignited the small, but growing colonial economy. However, as oil fever gripped the Niger Delta and revenue streamed into government coffers, the leaders relinquished the long-term potential benefits that coal mining could offer the country’s economy.

History of coal mining in Nigeria

  • Coal was first discovered in Nigeria in 1909 at the Udi Ridge in Enugu by a British mining engineer, Albert Kitson.
  • In 1914, the first consignment of coal made its way to the United Kingdom from the newly created ports at Port Harcourt.
  • By 1916, the Ogbete Mine produced more than 24 511 metric tons per annum (Mtpa) of coal. Over time, other mines sprang up in the region that later became the Enugu State.
  • Coal production hit an all-time high of 790 030Mtpa in the early 1950s, before it faced a steady decline and most mines were abandoned.

Government reforms
The Nigerian government under President Goodluck Jonathan (2010–2015) and then under newly elected President Muhammadu Buhari (2015 to date), recognised the gravity of its structural constraints when the country was headed for negative growth and then recession. (Buhari has fallen ill and has not been seen in Abuja lately, reportedly receiving treatment in London.) Buhari, and in his absence, acting president Prof. Yemi Osinbajo, emphasised the urgent need to diversify an ailing economy away from oil. They earmarked mining as the pillar of the new diversification drive.

As a blueprint to nurture the mining industry, government started working on the Roadmap for the Growth & Development of the Nigerian Mining Industry in 2016. “We set up a multi-stakeholder committee to develop the road map for the transformation of the minerals, mining, and metals sector,” said Dr. Kayode J Fayemi, minister at the Nigerian Ministry of Mines and Steel Development. Fayemi was speaking at the National Mining Summit that took place in the Nigerian capital of Abuja from 13 to 15 June 2017. The Mining Summit formed part of the first ConMin West Africa exhibition organised by Afrocet Montgomery and IMAG. The Ministry used the summit to introduce its ‘Roadmap’ to a diverse audience of international delegates.

The Nigerian Minerals and Mining Act, with globally competitive sector incentives, has been in place since 2007; however, the sector’s growth and contributions to GDP have remained less than ideal, accounting for only about NGN400-billion in GDP (about 0.33%) in 2015. “To address this challenge, we began a process to deepen reforms, attract new investors, and collaborate with a wide network of partners and stakeholders to build an attractive mining ecosystem,” Fayemi told delegates on the first day of the summit. The government has set an ambitious goal of increasing the mining sector’s GDP contribution to 10% by 2020.

Current Nigerian President Muhammadu Buhari has fallen ill and has not been seen in Abuja lately. 
Image: Informationng.comActing president Prof. Yemi Osinbajo is driving the diversification strategy to kick-start the Nigerian economy. 
Image: Leon LouwDr Kayode Fayemi, minister at the Nigerian Ministry of Mines and Steel Development, introduced the department’s Roadmap for the Growth & Development of the Nigerian Mining Industry to a diverse audience of international delegates. 
Image: Dr Kayode Fayemi


 

Exhibiting in Nigeria

African Mining chatted to Jamie Pearson, marketing and operations manager at event organiser Afrocet Montgomery, at ConMin West Africa 2017.

IMG 2365Jamie Pearson, marketing and operations manager at Afrocet Montgomery.
Image: Leon Louw 

Tell us more about Afrocet Montgomery.
Afrocet Montgomery is a joint venture between event organiser Afrocet, which was set up by my father, and Montgomery, a company that organises shows and events all over Africa. Afrocet has been running exhibitions in Kenya and Nigeria for more than 35 years. We signed a partnership in April 2015. Since then we have managed two shows in Nigeria: Securex West Africa in Lagos, and a packaging, printing, and food processing show that also takes place in Lagos. From that partnership, the ConMin West Africa exhibition was born of a collaboration with IMAG, a subsidiary of bauma Germany, and other shows across the globe. 

What role do you think will the mining industry play in Nigeria’s development?
The government of Nigeria has put a lot of emphasis on moving away from oil money and looking at ways and means to diversify the economy. Mining and agriculture are the big sectors they are looking at. The Mining Summit was initially planned to be only a Nigerian conference; yet, as the conference progressed, the organisers looked at expanding it to the West African region. As a result, we hosted the ministers from Niger and Côte d’Ivoire. In addition, we had speakers from Kenya and South Africa. That is where it is moving to.

Will Afrocet Montgomery play a big role in the future of the mining industry in Nigeria?
Yes, certainly. By bringing the stakeholders together, it allows for conversations to take place that did not happen before.

Will this become an annual event?
Yes, we will be running annually; that is the plan. Next year’s show will be in May, though, but it will be in Abuja again.

How easy or difficult is it to do business in Nigeria?
Doing business in Nigeria is not straightforward. It is getting better, though. The market is opening up, but I guess it is still not easy, especially in the mining industry, where there are concerns about land ownership. That is one of the key issues the government has pledged to look into to make it easier for investors. As event organisers, we try to make it as easy as possible for exhibitors by providing the hotels, the airlines, and the freight. This is all part of the exhibitor package. But Nigeria always comes up with something new when you are doing business. Nevertheless, everybody knows there is potential. In the end, you just have to tap into the right relationships, and I think that is why people who have visited the country continue to return.

What are the benefits for a company to exhibit in Nigeria?
Companies that exhibit at ConMin West Africa can be assured that they will meet delegates of calibre at a quality show. We bring together as many stakeholders as possible to generate leads for them. The whole point of an exhibition is business networking and connecting high-quality people and possible investors.

Are you happy with the show; did it all go according to plan?
It was the first time I was involved in an event where the acting president came to town. The first day was fantastic and I think everybody was amazed and taken aback by it all. The people who came through the doors over the entire three days were mostly key decision-makers and end-users. The last couple of days [of the event] have been a big learning curve for us, but we now have 12 months to work out a plan for next year and build on the summit, which is now a very strong platform.


The people that came through the doors of the show over the entire three days were mostly key decision-makers and end-users. 
Image: Leon LouwNext year’s ConMin West Africa show will be held in Abuja, Nigeria, in May 2018. 
Image: Leon LouwStakeholders from across Nigeria converged upon Abuja to be part of the National Mining Summit. 
Image: Leon LouwConMin West Africa offers exhibitors the opportunity to network with decision-makers at a quality show. 
Image: Leon Louw


Small-scale miners
Judging by the excitement when ConMin opened the conference doors in Abuja, such a formidable target might not be that far-fetched. Many Nigerian nationals are in possession of mining rights, but a lack of funding and foreign investment is preventing them from developing their projects. Apart from a dearth of capital, insufficient infrastructure, confusion about the issuing of exploration and mining rights, a lack of enough geological information, artisanal mining, and meeting community expectations are just some of the challenges faced by miners in Nigeria.

According to Emanuel Azakere, a small-scale gold miner in the Benue State, the most serious challenge is that miners like him do not have access to capital. “That is the major problem; if we had the capital, we could take the project to the next level. But we don’t have money,” Azakere told African Mining at the Mining Summit.

“The reason why I am at the Mining Summit is because I’m looking for investors to assist me with further exploration work and to mine the gold. We have done detailed exploration and analyses, and can guarantee that the project is worth investing in,” said Azakere.

Applying for a mining or exploration right in Nigeria is not that straightforward, though. The country (a federation) is divided into 36 very powerful, almost independent states. While the minerals belong to the Federal Government (national government), the land on which it will be mined belongs to the State Government. In some cases, the State Government has already applied for the mining right from the Federal Government, in which case applications need to be lodged first with the State Government. To confuse matters further, the local communities and chiefs might hold the rights, but even if they do not, one must engage and get permission from them to mine, even before thinking of applying for a mining right from the Federal or State Government.

“Compliance is a major issue and can be confusing,” said Azakere. Even for local Nigerians, getting the papers sorted out can be a long, drawn-out process. “I have taken the necessary steps and applied for a mining right from my State Government Commissioner for Solid Minerals. The Commissioner is prepared to give me, and the investors, the necessary protection,” said Azakere.

According to Azakere, basic infrastructure like roads, rail, and electricity is non-existent at his mining site. “We will have to discuss all these issues with the investors. At the moment, we need an excavator and a high-powered water pump to do the washing, as we use the water from the stream. But we intend sinking a borehole in future,” said Azakere.

Rumours and reluctance aside, Nigeria could potentially become the next best playground for miners with a big appetite for risk.

Security a concern
Protection and safety for international visitors to Nigeria is a risk that keeps most investors away. Whether kidnappings are real or a means for security companies to create a market and generate cash, is beside the point. The fact that all vehicles transporting more than three ‘Western’ visitors, whether in Lagos or Abuja, must be accompanied by a heavily armed guard, is enough to scare the most intrepid African adventurer. As is the continued rumours about kidnappings in the oil fields of the Niger Delta and Boko Haram attacks in the north of the country. Whether these rumours are true or not, the perceptions about Nigeria as an unsafe and risky jurisdiction to invest in, persists.

“I am not sure why people have this perception,” said South African Andrew Lane, Deloitte Africa energy & resources leader. Deloitte was the strategic partner of the Abuja Mining Summit, and Lane is no stranger to the country, having supported the Nigerian office for the past year or so. “I certainly have never felt or experienced the country as a risky or unsafe place, but we have to accept that this is the perception,” he told African Mining. “Reports about Boko Haram in the north and endemic corruption doesn’t help Nigeria’s cause,” Lane added.

Observations from Deloitte Africa
During ConMin West Africa 2017, African Mining had the opportunity to speak to Andrew Lane, Deloitte Africa energy & resources leader.
IMG 2363
Andrew Lane, Deloitte Africa energy & resources leader.
Image: Leon Louw

Andrew, what was Deloitte’s involvement at the ConMin West Africa Mining Summit?
In our capacity of strategic partners, Deloitte assisted with determining the agenda and identifying speakers and panelists.

What is your opinion about the conference?
I thought it was an extremely valuable conference. The mining industry in Nigeria has been around for quite a long time but it has been in the doldrums for years, ever since oil was discovered. It formed about 5% of the GDP in the 1970s and it now contributes less than 0.3%. There definitely are good deposits in the ground and the Minister has a progressive plan on the table.

Do you think Nigeria will attract some of the majors?
The mining industry is in an interesting space. The majors have become so risk averse and so compliance driven and they only look after what they call Tier 1 assets. I doubt if they understand the risk in this part of the world well enough to get involved. Here the risks are so much higher, there are more uncertainties, and the danger of corruption is higher, so you need investors that are resilient and prepared for that kind of risk. 

Do you regard it as an opportunity for smaller, junior mining companies to consider Nigeria?
Because it is an early-stage industry, you will always get juniors coming in at the bottom of the value curve. They will be proving up resources. That space will always be attractive to junior mining companies, but remember, that part of the value curve is always the riskiest.

What are the major challenges and risks in Nigeria?
There are massive infrastructure challenges in Nigeria. I think all the intent is there, but I also think there is some work to be done. The question is, how do you actually make a number of junior miners successful? Add onto that the whole artisanal mining scene — how do you include those? Are those junior miners in the making? I doubt if we will see any of the majors in Nigeria soon. Not unless some of the risks have been mitigated.

That said, the two risks miners really care about are geological risk and regulatory risk. The quality and the comprehensiveness of the geology in Nigeria are not great, but miners understand that — those are the risks they deal with. The question of regulatory risk is a more serious concern. The Minister has assured everybody that their title is assured. However, the Minister told me a few months ago that the mining cycle and the electoral cycle do not marry, so the intent might be there, but only when subsequent regimes maintain the regulatory framework will people know and say yes, we believe you. Investors will have to be certain that the regulations will stay the way they are.

Another factor that we must keep an eye on in this part of the world is artisanal mining. It is all very well for the government to say it is your mining right and you can use it, but if you get there and you find that it is currently being mined by a group of artisanal miners, that is difficult. You can’t just chase them away. It is people’s livelihoods — dealing with people who are invading your property is one thing, but dealing with people who are already there and mining when you arrive is another matter. The balance of power is different. You cannot tell these people you are an illegal miner — they have been operating there for hundreds of years. 


 

Major minerals and Nigerian States of occurrence

  • Gold: Cross River, Edo, FCT, Kaduna, Kano, Kebbi, Kwara, Niger, Osun, Zamfara.
  • Iron ore: Edo, Enugu, Kaduna, Kogi, Taraba, Zamfara.
  • Lead/zinc: Kano, Ebonyi, Bauchi, FTC, Plateau, Nasarara, Taraba, Zamfara.
  • Coal: Benue, Ebonyi, Enugu, Gombe, Kogi, Nasarawa, Plateau.
  • Lignite: Abia, Anambra, Delta, Edo, Gombe, Imo.
  • Bitumen: Edo, Enugu, Lagos, Ondo, Ogun.
  • Limestone: Abia, Adamawa, Akwa Ibom, Benue, Cross River, Borno, Ebonyi, Enugu, Gombe, Kebbi, Ogun, Sokoto, Taraba, Yobe.
  • Marble: Edo, FCT, Atsina, Kogi, Kawar, Niger, Oyo, Plateau, Zamfara.
  • Barytes: Benue, Cross River, Nasarawa, Taraba, Adamawa.
  • Cassiterite: Adamawa, Bauchi, Ekiti, FCT, Jigawa, Kaduna, Kano, Katsina, Kogi, Kwara, Ondo, Plateau.
  • Manganese: Cross River, Kaduna, Kebbi.
  • Tantalite/columbite: FTC, Kaduna, Kwara, Kogi, Nasarawa, Niger, Osun, Oyo, Taraba, Zamfara.
  • Columbite: Bauchi, Ekiti, Jigawa, Kaduna, Kano, Kogi, Kwara, Nasarawa, Osun, Plateau, Taraba, Zamfara.
  • Gypsum: Anambra, Bauchi, Bayelsa, Edo, Enugu, Gombe, Ogun, Sokoto, Taraba, Yobe.
  • Phosphate: Abia, Edo, Ogun, Sokoto.
  • Silica sand: Akwa Ibom, Anambra, Bayelsa, Delta, Edo, Enugu, Jigawa, Kano, Lagos, Ondo, Ogun, Rivers.

Source: Nigeria’s Solid Mineral Resources and National Development


Nigeria’s immense potential
The country hosts an abundance of mineral resources. Various minerals have been discovered in more than 500 locations across Nigeria. According to Fayemi, at least one mineral can be found in each of the 36 States of the Federation and the Federal Capital Territory. “The Ministry of Mines and Steel Development has identified coal, bitumen, iron ore, limestone, barytes, gold, and lead/zinc as having strategic economic importance for the country,” said Fayemi.

High-level decision-makers delivered enough good speeches at ConMin West Africa to give Nigerians hope that the revival of their mining industry is well and truly underway. In his speech, acting president Prof. Yemi Osinbajo gave credence to the Ministry of Mines and Steel Development’s ‘Roadmap’. Osinbajo said the comprehensive 20-year plan will elevate Nigeria to become one of the top mining destinations in Africa. “Already, the ease of doing business in the country has improved significantly. The process of getting a visa is much easier and quicker than before, the airports at both Lagos and Abuja have been upgraded, less documents for imports and exports are required, and land and property rights for foreign investors are being reviewed,” said Osinbajo.
Most delegates agreed that the ‘Roadmap’ is a good plan. The proof will be in the pudding, though, as the saying goes. “Plans are easy; I guess the main challenge is implementing these plans,” said Lane.

Why Nigeria?
Nigeria is a complex country. Its diversity of cultures, sheer size, and intricate political system make it one of the most intriguing countries in the world in which to conduct business. The failure of Nigeria to attract investors is a perplexing debate. It is vast, diverse, and rich in natural resources. A spirited and youthful population creates an energy unknown to those who have not set foot in the most populous country in Africa. The country’s geology is varied and the Federal Government hopes that exploration and junior mining companies would soon realise the enormous potential underlying its soils. And they should. Nigeria’s mining industry has been given a clean canvas. The country is an ideal destination for intrepid mining companies with a large appetite for risk. But a word of caution: the only way to do business in Nigeria is to collaborate with a local who is well connected. Nigeria is a potential regulatory minefield, and without local knowledge, it is almost impossible to negotiate your way around its challenges. Government’s plans for the mining industry are grand, but the road to becoming a top mining destination will be rocky and challenges will have to be addressed.

The challenges
According to Iman Tunkarimu, business development manager for Nigerian mineral exploration company Geodel Integrated Systems (GISL), the two major challenges in Nigeria are the lack of infrastructure and security. “Security is a big concern, but the Nigerian government has been working really hard to improve the situation and it is improving all the time,” said Tunkarimu.

“The challenges are not really that serious. If a company does its research well, it will be able to cross those hurdles without any stress,” said Tunkarimu.
For Tunkarimu, nothing is as important as communication and building relationships with local communities and other stakeholders. “If you get the community issues sorted out, things will be smooth enough for you to mine in Nigeria. It is just doing it the right way —- let’s say, doing it the Nigerian way. Nigerians are traditional, so if you understand the culture and the people in the area close to the mine, that relationship will go a long way,” she said.

International mining companies in Nigeria

  • Kogi Iron Mining (KCM) – Australia
  • Comet Mining Co. – Australia
  • Goidel Mining – UK
  • Tongyi Mining – China
  • Royal Salt Ltd – UK
  • Century Mining – UK
  • Eta-Zuma Group of companies – Ukraine
  • Equator Mining – South Africa

Achieving success in Nigeria
A company that has been successful in the country is PW Nigeria (PWN), one of the largest civil engineering construction and mining contractors in West Africa. According to Chris McQuillan, mining contracts manager at PWN, the company has more than 40 years’ experience in doing business in West Africa. As part of the PW Group, it was involved in major gold projects, including Obuasi, Teberebie, Obotan, and Wassa mines in Ghana, Syama Mine in Mali, Youga Mine in Burkina Faso, and North Mara Mine in Tanzania. “Currently, PWN is concentrating on the Nigerian mining market and the largely untapped reserves and associated development opportunities,” said McQuillan.

McQuillan adds that PWN has acquired exploration licenses for two potential gold projects in the north of Nigeria. PWN has operated 20 quarries and provided logistical, technical, and engineering support and solutions across a wide range of mining projects, including tar sands targets in Ondo State and coal prospects in Enugu and Kogi states.

PWN’s two gold targets are in Niger State and covers an aggregate area of 216km² over highly prospective terrain on the Nigerian schist belts. McQuillan says PWN acquired the associated exploration licences in early 2017 and a phased exploration programme has already begun, which includes an initial first pass target testing drilling programme.

To assist in this development, PWN has recently established a partnership with UK-based drilling company Meridian Drilling (Meridian Drilling Nigeria). Meridian Drilling Nigeria has two modern diamond drill rigs capable of up to 800m depths and a reverse circulation (RC) rig with a capacity of about 120m. “The RC rig has recently started in Kaduna State, working for the State Government on a greenfield gold project. Budgets are in place for both RC and diamond core drilling at both PWN exploration licences in Niger State,” says McQuillan.

PWN has recently provided logistical support for MS Analytical’s sample preparation laboratory, which is scheduled to open in the third quarter of 2017. MS Analytical is a Canadian-based laboratory that specialises in mineral exploration sample analysis, including fire assay services, ICP-OES analysis, as well as metallic screening and specific gravity (bulk density) testing. The new preparation laboratory in Abuja will offer clients a cost-effective method of analysing samples and provides a missing link in the Nigerian mining sector, as high sample shipping charges can now be avoided in the early stages of exploration.

In June 2017, PWN also entered into an agreement with Plateau State Government to collect and collate all available geological data on mineral deposits within the State so that the stakeholders can better identify potential targets and aim the available financial support at specific targets. This is critical to the State and will be key to the regeneration of the mining sector in Plateau State, which at one time was one of the world’s largest tin producing regions.

Coal jump-starts the economy
While the above efforts have been directed at the development of the mining market, PWN has also been involved in more immediate contract mining and infrastructure provision for the international market. In 2016, PWN entered a memorandum of understanding (MoU) with ASX-listed Kogi Iron Mining (KCM) in relation to an iron ore project in Kogi State. PWN has already executed rehabilitation works on the Agbaja plateau road network, which has helped strengthen the already robust relationship between the Agbaja community, KCM, and PWN. It also undertook bulk sampling on behalf of the client, whereby industrial samples of iron ore were collected and packaged for shipping outside of Nigeria for further testing.

In another development, the Federal Government announced that it had chosen the Simang Group of South Africa to work along with the Enugu State Government to revive the coal industry for the benefit of the South East geopolitical zone. The investors, led by Dr Odilim Enwegbara of the Pan Africa Group and Stephen Paddy, chair of the Simang Group, explained that the principal objective of the investment drive was to use coal to generate electricity and then spin a chain of allied business activities for the benefit of the economy and Nigerians.

Enugu State Governor Ifeanyi Ugwuanyi, who received the investors at the Government House in Enugu, said he has always believed that coal would be a major catalyst that would kick-start the economic development of the south-east in particular and the country in general. Nigeria could be a world-class mining destination in the long term, but a plethora of challenges need to be overcome before international investors will flock to the country.


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Home Features Mining in Africa Country in focus - Nigeria: rumours, reluctance, and risks