Nigerian Mining Industry: Opportunities for Foreign Investors

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By NGOZI OKAFOR

 

Nigeria is endowed with numerous mineral resources such as talc, iron ore, bitumen, gold, rock salt, gypsum, lead/zinc, coal, gemstones, kaolin, tantalite, bentonite and baryte located in different parts of the country in commercial quantity

The ownership of the mineral resources is vested in the Federal Government of Nigeria as custodian on behalf of the citizens of the country. The Nigerian government has recognized that the successful exploration and exploitation of its mineral resources require both technical expertise and financial strength to a large extent, which  can be provided by foreign investors.

The government grants mineral titles to allow suitable investors to explore for mine and market mineral resources. Thus the role of the government has transformed from that of ‘owner-operator’ to ‘administrator-regulator’.

Applications for mineral titles and licenses are considered on a first –come, first-served basis and may be made by any investor, at any time, over any area not covered by an existing title or not otherwise reserved by the government.

An investor may enter into the mining industry in Nigeria through the acquisition of an existing mining property from the original owner however an approval must be obtained from the Ministry of Solid Minerals Development for such acquisition or by obtaining an application either for a Prospecting Right (PR), an Exclusive Prospecting Licence (EPL), or a Special Exclusive Prospecting Licence (SEPL). The application shall state the financial and technical capability qualifying the applicant for an entry into the mining sector.

In order to encourage foreign investment in the mining industry, the government has put in place incentives such as grant of a three-year tax holiday to new mining companies which may be extended for one further period of two years. Mining operators are granted exemption from payment of customs and import duties in respect of plant, machinery, equipment and accessories imported specifically and exclusively for mining operations.

In addition, every holder of a mineral title is guaranteed free transferability of funds through the Central Bank of Nigeria and also permission to retain a portion of their foreign exchange in a foreign exchange domiciliary account for use in acquiring spare parts and other inputs required for the mining operation which would otherwise not be readily available without the use of such earning.

Apart from mining operations an investor may in engage in the business of importation and local marketing of modern mining equipment, modern mineral testing and quality control technologies and reagents or engage in local sales and export of crude or processed solid minerals.

Foreign investors set to boost Nigeria’s mining sector with $3.32 billion

In 2018, at a  mining conference in London, foreign investors expressed their readiness to commit about $3.32 billion to fund some projects in the mining sector.

This was made known by the Minister in charge of mining and solid minerals, Abubakar Bwari,  at the Third Nigeria Mining Week in Abuja last year.

According to Bwari, the fund will be used to finance gold mining and refining, foundry works, lead/zinc exploration and production, tin, tantalite and columbite mining and processing.

The minister said that the ministry was making effort to focus on tackling challenges hindering the formal exploitation of gold, tin and lead-zinc as well stop indiscriminate exports of these mineral commodities to foreign smelters.

He further stated that Nigeria without crude can survive, given her huge potential in non-oil sector. Agriculture, mines and steel among others, are lucrative areas capable of putting the economy on a prosperous path.

How investors can take advantage of the sector Nigeria is no doubt blessed with multiple mineral resources aside crude. The solid minerals potential, if given its deserved attention, could bolster economic growth.

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Mineral resources’ contribution to the nation’s Gross Domestic Product (GDP) was abysmally low, hovering within the region of N103 billion in 2014 despite the country being blessed with over 44 types of solid minerals in varying quantities across the 36 states and Federal Capital Territory ( FCT) of the country.

In view of this, it would not be erroneous to say Nigeria’s mining sector has been dormant and abandoned for illegal miners to profit from, while genuine investors have been made to look on.

The scenario endured in the sector until crude oil prices crashed. Consequently, the Federal Government decided to diversify the economy, making mining and agriculture the priority.

Nigeria’s solid minerals sector had no clear-cut structure for discerning investors to invest. In view of the pending challenge, it may be a good time for anyone intending to invest in the mining sector.

 

Why should I invest in Nigeria?

Nigeria may be better suited for experienced exporters rather than early-stage start-ups since it requires significant time and resources. However, despite challenges, not least of which is the possibility of carrying a loss for a few years, there are certainly rewards to be made for the experienced and intrepid investor.

Since 2005 Nigeria has been considered to be among the “Next Eleven”: the countries identified by Goldman Sachs investment bank as having a high potential of becoming, along with the BRICS, the world’s largest economies. The growth is driven by a population of 193.4 million (2016 National Bureau of Statistics estimate) – growing at over 3% per annum – and by an affluent and an increasing middle class. The “cosmopolitans” (higher middle class) and the affluent, together 10% of the population or 17 million people, account for 40% of total consumption. Another 21% of the population, or 36m people, could be considered “rising strivers!” and are therefore of interest to multinationals. About 65% of the Nigerian population is younger than 25 years.

Nigeria has consistently been ranked as one of the top three destinations for foreign direct investment (FDI) in Africa over the past decade until 2014, with Nigeria’s FDI stock reaching 98.73 billion in 2016, a 3% increase from 2015. While most of the investment is directed at the oil & gas sector, FDI flows are diversifying.

Nigeria has introduced a number of incentives to assist foreign investors. The Nigerian Investment Promotion Commission Act ensures that investors can repatriate 100% of profits and dividends, and that 100% ownership of companies is allowed in all sectors apart from oil & gas. (While there are no restrictions on repatriating money for foreign entities, there are restrictions if all directors are Nigerian). Other incentives include a favourable Companies Income Tax, Pioneer Status Grants, Free Trade Zones and tax relief for research and development. A full list of government incentives can be found on the NIPC website.

INVESTMENTS

There are over 2000 industrial establishments in the country. Among these are a giant oil industry, Iron complexes, steel rolling, pharmaceutical industries, food processing, car assembling and the up-coming Export Processing Zone (EPZ).

Government economic policy favors and places priority on greater investment in agricultural production and manufacturing and exports of production, abundantly skilled and versatile human resources and access to a vast local market of over 100 million people and beyond in the sub-region. Sectoral highlights are addressed in the following sections:

Priority Areas of Investments

Oil & Gas Sector

Steel Sector

Telecommunications

There are four Industrial Sectors which are considered priority areas of development because of their linkage effects on the other sectors and potential catalytic role in the overall growth of the industrial sectors. These priority areas which are most favored in the administration of government industrial incentives are:

 Metallurgical/Engineering Industries

Metallurgical/Engineering Industries

chemical/Petrochemical Sector

Construction Sector

 

Specifically the industrial projects desired from these sectors are:

Foundries and Forges;

Metal Fabrication/Machine Tools;

Pharmaceuticals;

Rubber and Plastic;

Leather and Leather products;

Cement;

Other non-metallic material building materials; bricks, ceramic glass;

Food Processing;

Sugar, confectionaries and Beverages

Cereal and Grain Milling;  Fruits, Vegetables, Vegetable Oils, Oil Seeds, Roots and Tubers.

Others

In addition to the twelve identified priority areas mentioned above, investors are welcome to also take part wholly or jointly with Nigerians in the following specific projects:

Gemstones cutting and polishing;

Gold processing;

Mini-sugar production plants;

Multi-mineral plant for gypsum, talc, kaolin, marble/dolornite, baryte etc;

Cement production (700- 1000 metric tonne per day) 6) Lead and zinc project

Processing of salt from sea water;

Sodium triphosphate production

Small medium scale plant for sheet metal reduction

Mining of industrial minerals; bitumen etc;

Stone cutting/polishing;

Fabrication of spare parts;

Exploitation of coal with known reserve of 293 140 000 tonnes in Enugu, Kogi and Adamawa States  timber/wood processing

 

The agricultural potential of Nigeria is barely being tapped and this explains the inability of the country to meet the ever-increasing demand for agricultural produce.

Although the agricultural sector remains a dominant employer of labour, serious investment is needed across the board to enhance production and increase the contribution of the sector to GDP. Investment is required in the following priority activities:

 

Crop production to achieve food security and to provide industrial raw materials. Potentials exist for the following crops:

Cereals:

Maize, rice, sorghum, corn, millet, wheat.

Root crops:

Cassava, yam, ginger, potato, coco yam.

Legumes:

Soya beans, groundnuts, cowpeas.

Fruits:

Mango, banana, oranges, guava, papaw, pineapple.

Vegetables:

 Cabbage, green pepper, carrots, lettuce, spice, onions, melons.

Tree crops:

Oil palm, cocoa, rubber, coconut, kola nut, coffee, she nuts, beniseed, cotton, cashew nut, sugar cane.

Others: apples, grape vines and pears have been successfully established in the high plateau regions.

Food processing and preservation involving industries that will use agricultural produce as raw materials.

Livestock and Fisheries production which have great potentials for development. Grazing lands are abundant, facilities for animal feed production are plentiful, and the in-land rivers, lakes and coastal creeks are enough to augment ocean fishery resources.

Agricultural inputs supplies and machinery, water resources development especially for flood control infrastructure and irrigation.

Commodity trading and transportation.

Development and fabrication of right small-scale mechanized technologies for on-farm processing and secondary processing of agricultural produce.

Exploitation of timber and wood processing activities. A wide range of wood resources abound.

Aluminum Sector

The aluminum Smelter Company of Nigeria, ALSCON, is a joint venture project in which Nigeria owns 70% of the equity shares, while the remaining 30% is shared between AG Ferrostaal of Germany with 20% shares and Reynolds Inc. Of US with 10% shares.

The present administration is making efforts to ensure that the aluminum smelter plant is properly funded. It has given invitation to private investors to invest in the company and /or take part of Nigeria¡¯s 70% shares.

The plant is one of the best and biggest in the world with the most modern technology. A number of countries have signed or are negotiating trade and economic cooperation agreements with Nigeria.

Since the essence of these bilateral agreements is to foster unity: boost economic growth and technological co-operation, foreign investors should take advantage of existing bilateral ties and harken to the call to invest in the ALSCON project as in other projects in the power and steel sectors.

Communications Sector

The deregulation of the telecommunications sector in 1992 through Decree 75 was to allow for private sector participation in the sector and expand the nation’s communication facilities. The Nigeria Communications Commission (NCC) was established so to regulate the performance of the sector.

The liberalization thrust was further strengthened by the Nigeria Communications Commission (Amendment) Decree No. 30 of 1998 which deleted those provisions in the first decree that inhibited competition in the sector thus enhancing the expected role of private sector enterprises.

The functions of Nigerian Communications Commission include:

Regulating the privatized sector of the telecommunications industry.

Facilitating entry into the telecommunications market by private entrepreneurs.

Creating a regulatory environment for the supply of telecommunications equipment and facilities.

Issuing of telecommunications licenses.

Promoting fair competition and efficient market conduct among all players in the telecommunications industry.

Arbitrating disputes between participants in the telecommunications industry and protecting consumers against unfair practices.

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