Despite the mining sector’s growing contribution to the country’s economy, stakeholders are calling for greater transparency in the Solid Minerals Development Ministry’s emphasis on value addition. They are demanding a policy framework that promotes a comprehensive value chain in the sector,
The policy direction of the Solid Minerals Development Ministry to entrench value addition into the exploration and unearthing of critical raw solid minerals has boosted the sector’s gross domestic product contribution to N1.56tn in one year.
The contribution to the country’s GDP growth between the third quarter of 2023 and the second quarter of 2024, however, fell short by 16 per cent compared to the N1.87 trillion contributed in the previous period of 2023.
According to the latest GDP report released by the National Bureau of Statistics, the sector recorded an increase but remained an insignificant contributor to the 3.19 per cent growth recorded in the second quarter of 2023, driven by expansion in the services sector.
A breakdown showed that the sector consisting of coal mining, metal ore and quarrying and other minerals sub-activities contributed N364.49bn to GDP in Q3, 2023. The figure increased by N513.94bn to N878.43bn in the fourth quarter of 2023. In Q1, 2024, the sector recorded an increase of 136.6 per cent to N71.63bn from N30.27bn year-on-year. At the same time, its contribution increased to N249.27bn in Q2, 2024.
The NBS said, “This sector grew nominally by -0.37 per cent (year-on-year) in Q2 2024. Metal Ores exhibited the highest growth rate of all the sub-activities at 62.37 per cent, followed by crude petroleum and natural gas activity at 7.64 per cent. Crude petroleum and natural gas were the main contributors to the sector with a weight of 92.70 per cent in Q2 2024.
“Comparing Q2 2024’s rate of growth relative to Q2 2023 and Q1 2024 growth rates, there was an increase of 6.74 per cent points and a decrease of 34.51 per cent points respectively. The Mining & Quarrying sector contributed 5.60 per cent to the overall GDP in the second quarter of 2024, lower than the contributions recorded in 2023 second quarter at 6.58 per cent and lower than the previous quarter at 7.86 per cent.”
To reduce the government’s reliance on crude oil, the Ministry of Solid Minerals Development led by Dr Dele Alake, introduced a seven-point agenda aimed at increasing foreign direct investment in the sector and enhancing its revenue contribution to the Nigerian economy by 50 per cent.
The plan includes the establishment of the Nigerian Solid Minerals Corporation, forming joint ventures with mining multinationals, compiling big data on seven priority minerals and their deposits, creating a Mines Surveillance Task Force and Mine Police, conducting a comprehensive review of all mining licenses, and setting up six Mineral Processing Centres to focus on value-added products.
Unveiling the agenda shortly after assuming office, the minister declared value addition as the new essential standard for mining operations in the country and stressed that compliance with this value-addition requirement would be necessary before granting permission to investors. Already, the minister has revoked 2,557 mining licences for various offences.
The new rule came against the backdrop of renewed interest from foreign investors and the government’s engagement in local and international platforms to attract foreign investments, encouraging them to establish long-term businesses in the country.
Alake also stated that the government’s new stance prohibited the exportation of mineral resources such as lithium, gold, and similar commodities.
According to the minister, these minerals must undergo processing within Nigeria, fostering increased value and local benefit for the communities where they are sourced and curb losses incurred during the export of mineral resources.
Alake said, “We are no longer going to allow anybody or license any company that wants to go into the mineral sector without giving us a plan for local value addition like processing, and refining and this has a multiplier effect on the economy.
“It instantly generates employment rather than a few people carting away lithium, gold, and the like to other countries to sell. These minerals must now be processed in Nigeria, creating more value and beneficiation for local communities where they are sourced.”
Value addition in the context of mining raw minerals refers to the process of enhancing the value of extracted resources through various means such as processing, refining, and manufacturing.
Nigeria is known to have a diverse range of mineral resources, with over 40 different types identified. These include significant deposits of coal, limestone, tin, gold, iron ore, zinc, and others. The exact number can vary depending on the source and the classification of mineral resources. Most of these are now being explored in large quantities and exported in raw materials by foreign investors.
However, experts observe that such deals should not deprive Nigeria of its rightful earnings from its mineral resources. Instead, they should be mutually beneficial for all parties involved ensuring that its mineral resources receive their deserved value in the international markets.
For instance, a kilogramme of raw tin ore may go for N2,500, but when it is processed into cassiterite, columbite and others, the price may triple. The simple reason is that value has been added to the ore.
Industry experts added that value addition to mining brings about industrialisation, employment generation, urbanisation, infrastructural and economic development.
Also, value addition often requires the adoption and development of new technologies and processes. This drives innovation within the mining sector and other industries, fostering technological advancements that can benefit the broader economy.
At a press briefing earlier this year, Alake told our correspondent that investors and producers had imbibed the culture of value addition in line with the government’s policy.
The minister, however, cleared doubts about its efficiency, stating that the programme did not halt the export of the nation’s raw materials but aimed to increase the value of those exports.
He said, “We have announced a local value-addition policy, and we are complying. If they were not, you would have seen me announce another set of license revocations.
“The data doesn’t contradict the fact of complaints because if exports increased and we are saying don’t export raw minerals but when you have added value, you have added trust. So, there is no detraction from what we have said and what reality is.”
According to the minister, where the local value addition comes in is that in the purpose of the process, you have brought in more machinery, and employed more people rather than just extracting and exporting.
“The local value addition doesn’t stop exportation but put more value on what we export as raw materials,” he added.
Checks by our correspondent using the NBS foreign trade statistics showed that the export of mineral raw materials in the first six months of 2024 increased by 102.9 per cent or N61.86bn to N121.97bn from N60.11bn recorded in the preceding period of 2023.
In Q1, an analysis showed that N63.41bn was paid to government coffers for solid mineral export with N17.51tn or 91.36 per cent contributed to the nation’s GDP.
While in Q2, solid mineral exports in Q2 2024 were valued at N58.56bn. The sector had a N17.596tn, or 90.62 per cent of the total export value.
The NBS data supports the minister’s position that mining companies were extracting a larger quantity of solid minerals. However, the data did not specify whether those minerals were being exported in their raw form or if there had been an increase in efforts to add value to them before export.
This uncertainty made concerned stakeholders within the mining sector request greater clarity regarding the value addition policy, as they seek a more detailed understanding of how minerals are processed and upgraded before export to ensure alignment with industry standards and regulatory expectations.
The associations, which included the Nigerian Mining and Geosciences Society, Miners Association of Nigeria; Women In Mining In Nigeria; Nigeria Society of Mining Engineers; National Association of Chambers of Commerce, Industries, Mines and Agriculture; Gemstones Miners and Marketers Association of Nigeria; ECOWAS Federation of Chambers of Mines; Association of Miners and Processors of Barite and Lagos Chamber of Commerce and Industry, argued that despite the policy’s commendable intentions, it undermined Nigerian mineral production due to its lack of precise specifications.
The President of the Nigerian Mining and Geosciences Society, Prof Akinade Olatunji, in a chat with journalists, said, “The stakeholders appreciate your (Alake’s) vision for the value-addition component in the mineral value-chain, as this will cascade into wealth creation through massive direct and indirect employment opportunities. However, the introduction of the value addition policy without precise specifications as to the type and level of processing required is de-marketing Nigerian mineral production.
He advised that the ministry should accelerate efforts to establish mineral processing centres and upgrade the mineral buying centres established in the geopolitical zones to accommodate processing facilities.
He alleged that value addition was not mentioned in the current regulatory legal framework and was ignorantly enforced on miners in the country.
Olatunji continued, “As stakeholders, we are of the view that the ministry should as a matter of urgency, accelerate efforts at the establishment of the envisaged mineral processing centres and possibly upgrade the mineral buying centres established in the geopolitical zones to accommodate processing facilities.
“It should also be noted that, even within a licensed area, different rock formations may birth different mineral commodities with divergent methods for recovery, and one method may just not suffice for the entire process.”
According to Olatunji, the policy requires careful planning and input from professionals to achieve the desired outcomes.
“It is the vision of all in the sector that Nigeria derives maximum benefit from its mineral endowment and creates value and jobs for the citizenry but there is much work to be done to achieve that milestone.
“We observe that besides the fact that the value addition is not prescribed in the current regulatory legal framework, there is a clear ignorance in the way it’s perceived and intention to enforce on miners in Nigeria. No permitted (licensed) miner doesn’t submit its mining and processing/beneficiation plan to the government.
“So, if there is any anomaly, it can be detected and corrected at the point of permitting concerning mining and processing methods. It should also be understood that it is not likely for any miner to be producing (profitably) crude ore without some upgrading to acceptable market standards,” he asserted.
The miners advised the government to align with manufacturing industries across the value chain, emphasising the need to promote and attract investment in this sector, as seen in the cement industry.
“The ultimate value addition of minerals lies with manufacturing industries along the value chain, which should be promoted and attracted to the sector. It is just like the way cement companies mine and use limestone to produce cement as against a (most unlikely) miner mining and exporting limestone,” Olatunji mentioned.
On his part, the Director-General of the Nigerian Institute of Advanced Legal Studies, Prof. Mohammed Ladan, stressed the need for a framework that explains the intricate details of the value chain industry to create wealth and boost the growth of the sector.
“There is also one element from the point of view of economics in the mining sector and that is the weak value chain addition. We need to ensure that our new policy framework essentially articulates this extensively.
“The value chain in the mining sector and how can you integrate Nigerians with the necessary skills to be able to partake in the value chain in the mining sector. It is not enough to have the data. It is also important to engage Nigerians in the value chain industry so that we can create wealth among ourselves,” he averred.
SOURCE: PUNCH
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