Nigeria aiming to grow mining’s GDP contribution to 15% by 2015

5th March 2010 By: Jade Davenport - Creamer Media Correspondent

The Nigerian government has adopted an ambitious strategy to grow the economic contribution of its mining sector to 15% of the national gross domestic product (GDP) by 2015.

The mining sector currently accounts for less than 1% of Nigeria’s total GDP largely owing to the dominance of the oil sector.

In an exclusive interview with Mining Weekly, director of Nigeria’s Mining Cadastre Office in the Ministry of Mines and Steel Development Goni Sheikh says that the ambitious growth target is achievable as Nigeria is “attractive virgin territory”.

In fact, Sheikh believes that Nigeria can be considered the new frontier of the West African mining sector.

Sheikh states that Nigeria has a distinct regional advantage in that, while mining may dominate the economies of many other West African countries, most notably neighbouring Ghana, the sector is maturing and some countries are saturated as far as mineral tenament licensing is concerned.

Nigeria offers ample unexplored territory for mining companies wanting to expand their West African operations.

Indeed, Nigeria is becoming increasingly popular with junior and midtier exploration and mining companies, and Sheikh adds that there are a number of reputable British, South African, Canadian and Australian companies currently active in the country.

The geological setting favours the occurrence of a wide variety of metals and minerals, including gold, iron-ores, bauxite, coal, tantalite, manganese, copper ores and some gem stones.

According to Sheikh, in 2009, the activities of mining and exploration companies focused predominantly on gold, iron-ores, coal and base metal deposits.

This year, it is expected that mining companies will pursue gold, iron-ores and coal deposits, with a resurgence of interest expected in tantalite, manganese and gem stones.

Sheikh adds that another reason to be optimistic that Nigeria will achieve its 15% target is that, historically, the country has had a thriving mining sector.

During the early part of the twentieth century, Nigeria had numerous mining operations and was an exporter of several minerals, most notably columbite, coal and tin. In addition, by the 1940s, Nigeria was producing about one-million ounces of gold a year.

In fact, Sheikh states that before the discovery of oil in 1958, the mining sector contributed 20% to the GDP but the discovery of oil largely shifted the focus from solid minerals to the petroleum industry.

“While the oil sector is a very valuable sector, it is also extremely high-tech and does not offer an opportunity to create more employment and generate wealth for the Nigerian people,” says Sheikh.

“Government realised that there is a lot of potential in the mining sector and the efficient exploitation of the minerals industry in Nigeria can rapidly contribute to national wealth.”

The Nigerian government believes that the expansion of the mining sector to 15% of GDP would result in the creation of five-million additional jobs for a population that numbers over 140-million.

“Not only will it substantially increase job opportunities in the country, but the growth of the sector would also have a multiplier effect, contributing to the growth of secondary industries needed to sustain a mining industry,” elaborates Sheikh.

It is well understood that international investors are risk averse when it comes to Africa and continually demand that African countries provide a more transparent and rigid regulatory framework to provide security of investments.

Consequently, for Nigeria to attract a meaningful number of investments into the mining industry, it will have to convince investors that their assets and businesses in the country are safe and will be for many years to come.

“Government is mindful of what para- meters investors want,” states Sheikh.

“The reality is that there is finite investment capital and Nigeria must compete with other countries to attract investment.”

Since the return to democracy in 1999, there has been a renewed commitment to attract private investment to the Nigerian mining sector as a means of stimulating economic growth.

As a result, the Nigerian government promulgated a new mining policy under the Mineral and Mining Act of 2007, aimed at allaying investors’ fears and restoring confidence in the mining industry, which has historically been plagued by corruption and excessive bureaucracy.

The Act introduced fresh incentives, institutional policy changes and a new enabling investment environment.

The main reforms included in the Act are liberal and transparent access to mining assets, the strengthening of geological data generation, and institutional and human capacity building.

There is also a reorientation of govern-ment’s role from owner-operator to administrator-regulator as government has opted to shift its policy from taking part in direct operations to a completely hands-off mining approach.

Mining titles and rights will be given on a ‘first come, first-serve’ basis and the security of tenure of mining rights is guaranteed in the Act.

In an effort to further promote an enabling environment to aid the growth of the mining sector, Sheikh says that an airborne geological survey of the country has been completed and the data has been released.

The $12-million Airborne Geological Survey Digital Data project was commissioned by the Nigerian government in March 2008.

The survey was undertaken by leading geotechnical, survey and geoscience com- pany Fugro.

Fugro had to acquire and process about one-million line kilometres of fixed-wing airborne magnetic and radiometric data over the Nigerian part of the Chad basin, central Nigeria, the Adamawa and Cross River basins, as well as the Sokoto and Niger Delta basins.

With the new mineral maps, a mining Act in place and a mining policy and regulations, it is anticipated that Nigeria will soon go into a mining renaissance.