Nigeria’s mining sector is entering a new phase following the Covid-19 pandemic, with greater government support and a growing role as an important generator of export earnings amid post-pandemic economic recovery. Many of Nigeria’s mineral resources remain unexploited, with considerable potential in gold, precious and semi-precious stones, gemstones, iron ore, industrial minerals and – in a recent discovery – lithium.
Channelling fresh, sustainable investment to the sector is therefore a major policy goal for federal and local authorities alike, with new mining regulations expected to help reorganise, decentralise and localise production. At the same time, efforts to combat illegal mining and the environmental and social harm it causes are also progressing, along with a range of other initiatives to move the sector forwards. Some reforms are already bearing fruit, and as the government continues efforts to strengthen the mining sector as part of its overall diversification drive, there should be further progress in these areas in the years ahead.
Structure
Nigeria has a long history of mining activity, dating back thousands of years, though the modern mining industry began in the early 20th century. Following the country’s independence in 1960, three state enterprises were established to mine coal, iron ore and other minerals. These companies worked alongside the private sector and helped Nigeria become an early global leader in columbite and tin.
After a period of turbulence in the 1970s and 1980s – along with the discovery of significant oil reserves – the sector went into decline as investment was directed towards hydrocarbons. The mining industry became dominated by artisanal and small-scale miners (ASMs), which often operated without official authorisation and were responsible for a range of negative effects on local communities and the environment.
In the 1990s, however, the government began serious efforts to revive the sector in order to help diversify the economy away from oil and gas. These reforms have continued in the years since, with one of the most recent developments being the drafting of a new Nige-ria Minerals and Mining Act (NMMA) (see analysis).
Oversight
The Nigerian government is the owner of all mineral resources in the country, while the Ministry of Mines and Steel Development (MMSD) is responsible for overseeing the industry. The ministry is home to several important sector bodies, including the Nigerian Geological Survey Agency (NGSA), the Mining Inspectorate and the ASM Department.
The current iteration of the NMMA that governs the mining industry came into force in 2007. The law also established the Nigerian Mining Cadastre Office (NMCO), an autonomous agency within the MMSD that manages and administers mineral titles and licences and generally acts as the sector regulator.
The NMMA deregulated the sector and established the Solid Minerals Development Fund (SMDF), which aims to expand the sector’s capacity both at the formal, private sector level and at the ASM level, while also promoting the sustainable development of solid minerals mining across the country. In February 2022 the MMSD announced that plans were under way for a new Establishment Act for the agency, which would enable it to raise funding from the private sector.
Another key industry legislation is the National Minerals and Metals Policy, which was passed in 2008 and sets out the sector’s strategic goals. In 2011 a new set of regulations came into force, establishing clearer interpretations of the NMMA.
In 2019 the government began a major update of the NMMA, which had yet to be passed as of February 2023. The reforms are expected to result in the creation of a central mining authority that will take on responsibilities previously held by multiple federal agencies. At the same time, the draft act seeks to devolve many of NMCO’s powers to the state level in order to tackle issues such as informal mining and disagreements with local communities. New rules governing local content are expected to come into force if the act is passed, requiring mining companies to ensure local workforces benefits from their operations.
The government also launched the Presidential Artisanal Gold Mining Development Initiative in 2019. Working alongside the SMDF, the programme aims to integrate artisanal gold mining into the country’s legal, economic and institutional framework. In June 2020 the first gold bars were processed and refined under this initiative. The gold bars were then purchased by the Central Bank of Nigeria as part of the government’s National Gold Purchase Programme.
June 2020 also saw the launch of the Dukia Gold and Precious Metals Refinery Project, which operates through a system of buying centres in gold-producing regions, alongside a virtual platform that allows ASMs and mining cooperatives to sell their gold, which is then sent for refining at two licensed, in-country refineries.
Untapped Reserves
According to the most recent NMCO data, there were 6376 active mineral titles in the country as of the first quarter of 2022, comprising 2502 exploration licences, 2097 quarry leases, 1522 small-scale mining leases and 255 mining leases.
Under the National Development Plan 2021-25, the federal government aims to increase the GDP contribution of non-oil mining activity from 0.4% in 2020 to 3% by 2025. While this is an ambitious target, Nigeria has vast mineral resources distributed throughout the country, many of which are still untapped.
Key deposits include an estimated 40m tonnes of talc in Niger, Osun, Kogi and Ogun states; more than 3bn tonnes of iron ore in Kogi, Enugu, Niger and the Federal Capital Territory; around 1bn tonnes of gypsum across many states; some 10m tonnes of lead and zinc in the east and central areas; 700m tonnes of bentonite around the country; 42bn tonnes of bitumen; some 3bn tonnes of indicated coal reserves in 17 identified coal fields; roughly 1.5m tonnes of rock salt in Plateau, Ebonyi and Benue states; gemstones such as rubies, sapphires, aquamarine, topaz, fluorspar, emeralds, zircon and amethyst in Plateau, Kaduna and Bauchi states; and around 3bn tonnes of good kaolinitic clay.
Additionally, Nigeria has 600,000 tonnes of combined estimated reserves of alluvial and primary gold deposits. These deposits are generally among the highest quality in sub-Saharan Africa. There are large proven reserves of gold in the south-western schist belt, as well as in the north and centre of the country. However, some 80% of gold mining is conducted by ASMs at present. As of 2020 Thor Explorations was the only large-scale gold mining operator in the field, with an annual capacity of around 85,000 oz.
There have also been a number of major lithium discoveries in recent years, concentrated in the northern states of Kogi, Nasarawa, Kwara and Plateau, as well as in the south in Oyo, Ekiti and Cross River. The deposits are high-grade and hard rock, making these findings potentially attractive to investors.
Performance
The pandemic had a disruptive effect on the mining industry, with government-imposed restrictions on movement and social distancing making some operations impossible. Supply chain disruption also affected the availability of parts and equipment. At the same time, oil and gas prices plummeted, impacting government revenue and economic growth. “This was also a period when gold prices shot up,” Kwadwo Sarkodie, a partner in the construction and engineering team at law firm Mayer Brown, told OBG. “Mining thus demonstrated its importance for balancing the economy.” Indeed, gold prices started at $1820 per oz in January 2020, rising to a high of nearly $2260 in July and ending the year at around $2159 per oz.
Despite the challenges of the pandemic, minerals production grew from 54.5m tonnes in 2019 to 64.3m tonnes in 2020, according to National Bureau of Statistics (NBS) data. Kogi, Ogun and Cross River states were the top three producers, and limestone, sand and granite were the top-three minerals produced.
In 2021, as pandemic restrictions eased and economic activity started to recover, the sector’s performance continued to improve. Total minerals production rose by 39.2% to 89.5m tonnes, with the same three states holding the top output positions, while the top three minerals were limestone, granite and laterite.
Production of certain minerals varied greatly between 2019 and 2021, however. Some, including sand and laterite, reported smaller output in 2021 than in 2020, while non-industrial, solid mining tonnage jumped overall in 2021. This demonstrates the impact of unpredictable factors, such as the security situation, local mining stoppages and the effects of climate change on productivity.
Total reported gold output in 2019 was 0.17 tonnes, rising to 1.51 tonnes in 2020. No NBS data was available for 2021, however, and illegal mining and smuggling make it difficult to accurately gauge gold and gemstone production. Estimated annual losses from unreported illegal mining vary from $2bn-3bn to as much as $9bn.
Sector Contribution
The non-oil mining sector, which comprises coal, metal ore, quarrying and other minerals, generated N656.1bn ($1.6bn) in 2020, or 0.43% of total GDP. This rose to N1.1trn ($2.6bn) and 0.63% in 2021. As of 2022 the mining sector accounted for 1.5% of GDP. However, this information only takes into account the larger, formal mining sector and does not include ASM, unregistered and illegal mining activity, which would likely increase the sector’s economic contribution considerably.
At current basic prices, metal ore mining contributed N11.5bn ($27.4m) to GDP in 2020, a figure that rose to N17.5bn ($41.7m) in 2021 and reaching N23.7bn ($56.5m) the following year. This figure was at N26.9bn ($64.1m) in the first half of 2023 alone, suggesting strong growth for the full year. Quarrying and other minerals accounted for N1.1trn ($2.7bn) in 2021, N1.6trn ($3.8bn) in 2022 and N469.3bn ($1.1bn) in the first six months of 2023.
Coal mining activity has rapidly expanded, rising from N16.3bn ($38.8m) in 2021 to N22.2bn ($52.9m) in 2022 and N17.9bn ($42.6m) in the first half of 2023. According to NBS data, coal mining had the highest growth of any subsector for full year 2022, expanding by 35.9%, followed by metal ores (34.8%), and crude petroleum and natural gas (24.3%). The mining and quarrying sector as a whole saw growth of 27.1%
New Developments
In October 2021 the MMSD launched the Made in Nigeria barite facility in Port Harcourt. The new facility is able to refine barite to American Petroleum Institute standards, which should reduce the cost of importing this vital material used as a weighting agent by the oil and gas industry.
The same year, further efforts to regulate gold production were announced, with the inauguration of the Kano Gold Souq Trading Centre in May 2023. Located in Kano State, the facility will enable ASMs to bring their gold to the market and create added value by connecting them with jewellers and other artisans.
The souq project is one of six minerals clusters announced by the government, with each designed to focus on a particular area of mining production. The remaining five clusters are: kaolin in Bauchi; gold processing in Kogi; lead and zinc in Ebonyi; barite in Cross River; and a gemstone market in Oyo.
In 2022 there were also developments in lithium, with new discoveries made in June and the federal government reportedly rejecting a proposal from electric vehicle giant Tesla to mine these deposits. The MMSD said that instead, Tesla should open a battery plant in Nigeria. “Gone are the days when we would export raw materials,” Olamilekan Adegbite, minister of mines and development, told reporters after the bid in August 2022, underscoring the government’s commitment to developing the domestic value chain.
Another recent development has been the launch of a new electronic mining cadastre system (eMC+) by NMCO in November 2022. The platform aims to strengthen transparency around licensing and regula-tion, and simplify communication between government and industry players. The introduction of eMC+ helped NMCO win an award for best digital innovation agency within the federal government in 2022.
Outlook
The government estimates total revenue from the mining sector reached N2.9bn ($6.9m) in 2022, and is expected to increase by 25% to N3.6bn ($8.5m) the following year. This promising forecast is a reflection of the sector’s resilience and its continued support from federal and state governments.
The passing of an updated NMMA should further strengthen the mining industry, while addressing ongoing challenges in the illegal and unregistered spheres. It is hoped that these efforts will have a positive knock-on effect on relations between local communities and miners, as well as improve environmental controls, and combat smuggling and other illegal activities.
The expansion of gold and lithium could make the sector an increasingly valuable part of the Nigerian economy as it seeks to diversify away from hydrocarbons. However, re-investing new wealth into infrastructure development will be crucial given that mining is generally an electricity-intensive industry requiring modern equipment, and reliable transport and logistics.
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