The Nigeria Mining Roadmap: Relaunching the Nigerian Mining Sector

In September 2016, the Nigerian government through its Federal Executive Council (FEC) finally adopted the 103 paged “Roadmap for the Development of the Solid Minerals Sector.” This concluded a process which commenced on March 1, 2016 when a 16 man Committee on the Roadmap for the Development of the Solid Minerals Sector was empaneled by the Minister of Solid Minerals, Dr. Kayode Fayemi to formulate a course to stimulate the rapid growth of the sector. The Ministerial Committee concluded its deliberations on March 31 2016 and its recommendations were subjected to review by other stakeholders and equally circulated for input to all Governors of the 36 states in Nigeria including the FCT.

The 2016 Roadmap represents the latest mining sector initiative, since the 2012 Roadmap and the passage of the Nigerian Minerals and Mining Act (2007) and Nigerian Mineral and Metals Policy (2008), which amongst other things, created a modern Mining Cadastral Office, refined the tax code and expanded the airborne mapping of the country to sharpen knowledge of the mineral endowments.

The 2016 Roadmap is based on the identification of the current status and hindrances to the development of the mineral resources of Nigeria and proposes solutions to overcome such barriers. It prioritises activities for implementation and provides the time frame for all activities. It creates scenarios and models for successful implementation and monitoring of activities, while also developing a consensus strategy for the buy-in of all stakeholders.

The 2016 Roadmap by providing policy certainty, addresses several sector challenges, which are of major concern to industry participants, stakeholders, institutions and other enablers in the sector, It address challenges such as infrastructure, governance, fiscal incentives and geoscience, particularly the weak mechanisms for gathering, disseminating and archiving critical geological data required by investors and policy makers.

The 2016 Roadmap recommends a set of 8 critical levers for success that the government can put in place to improve the ecosystem for the minerals and mining sector were recommended. These are: i) Integrated Strategy, Proactively Communicated ii) Investor Friendly Regulatory Environment iii) Coordinated Infrastructure Investments iv) Community Partnership v) Investment Funding vi) Institutional Reform: vii) Geoscientific Value Add viii) Mining as Development Catalyst.

The Committee also reviewed how other countries such as Guinea Democratic Republic of Congo (DRC) and Cameroon have used similar levers to improve the competitiveness of their mining sector. It therefore incorporated into the 2016 Roadmap, competitive investor incentives in Nigeria when compared with several other major mining countries, in Africa including a more favourable tax regime and royalties.

A major distinguishing feature between the 2016 Roadmap and its predecessor, the 2012 Roadmap, is the determination of the government to set up an independent regulatory agency, different from the ministry, which has been serving mainly as a facilitator for the mining industry. To date, the Ministry has doubled as both facilitor for business opportunities in the industry and regulator, giving rise to conflicts of regulatory functions.

The new regulatory agency is to be made up of the Inspectorate and Environmental Compliance departments of the ministry. The Artisans and Small Scale units of the ministry would also form part of the regulatory agency.

The 2016 Roadmap also emphasises partnership between the Federal and State governments together with the overlapping of functions between the Federal Ministry of Mines and Steel Development and the various state Ministries for Mines.

A copy of the Roadmap is available via the following link:

Nigerian Infrastructure: The Chinese Are Coming!

In the wake of Nigeria’s economic recession and the need to provide energy and infrastructure for its teeming population, the Nigerian Government has decided to look past its traditional Western trading partners and look East, more specifically China for trade and investment. This also coincides with China’s commitment to establish a strong trade and economic presence in Africa and invest heavily in the continent.

Nigeria is reported to require US$166 billion to provide energy and infrastructure for its growing population. According to the African Development Bank, Nigeria has an infrastructure deficit of US$300 billion. In fact, overall infrastructure spending (and in turn demand for financing) in Nigeria is expected to grow from US$23 billion in 2013 to US$77 billion in 2025.

With this is view, and the reluctance of Nigeria to increase its’ debt profile to Western Institutions like the International Monetary Fund (IMF) and the World Bank, economic, technical, trade and investment partnerships with other economic giants like China have become imperative. Infrastructure funding from China is hoped will bridge the funding gap (caused by dwindling oil prices and dollar scarcity) and support businesses which now need competitive, cheaper and longer term financing to fund infrastructure and other related projects in Nigeria.

Chinese Infrastructure Investments

Nigeria has secured a US$6 billion loan commitment from China to fund infrastructure projects in Nigeria. The Nigerian government can access this credit facility by identifying and putting forward the relevant projects to the Chinese presumably through a series of tranches in respect of each identified project.

Furthermore, it was reported in April this year that Nigeria and China have entered a currency swap deal. The swap deal is designed to facilitate the settlement of Nigeria-China trade by removing the dollar from transactions and trading instead in yuan, whilst also boosting imports from China, whose exports represent some 80 per cent of the total bilateral trade volume. This deal will also enable Nigeria to diversify its foreign reserves It is hoped that this in turn should reduce the demand for dollars on the Central Bank of Nigeria and improve the value of the Naira.

There have also been various agreements on infrastructure agreements between Nigeria and China. They include:

a. North South Power Company Limited and Sino Hydro Corporation Limited (“SCL”) signing an agreement valued at US$478 million dollars for the construction of a 300MW solar power in Niger State;

b. Granite and Marble Nigeria Limited and Shanghai Shibang signing an agreement valued at US$55 million for the construction and equipping of a granite mining plant;

c. Infrastructure Bank of Nigeria and SCL signing an agreement for the construction of a greenfield expressway for Abuja-Ibadan-Lagos valued at US$1 billion;

d. the signing of a US$2.5 billion agreement for the development of the Lagos Metro Rail Transit Red Line project in Lagos State;

e. the signing of a US$1 billion facility for the establishment of a hi-tech industrial park in Ogun-Guangdong Free Trade Zone in Ogun State.

There are also significant investments in the energy sector as well. In June 2016, the Nigerian National Petroleum Corporation (NNPC) arranged a road show in China to source for investments in the Oil and Gas sector resulting in the signing of a Memorandum of Understanding between NNPC and several Chinese counterparties worth approximately US$80 billion.

Chinese Infrastructure Investment is being driven by “cheaper financing models”. The Chinese through their financial institutions such as the ICBC export credit agencies (like China Exim Bank) and development finance institutions like China Development Bank and China-Africa Development Fund part finance these specified infrastructural projects on the condition that the contractor services are Chinese (mostly state-owned companies). The contract binding the Chinese Contractor and the borrower government is the Engineering, Procurement and Construction Contract (EPC Contract). These loans like most other external loans are guaranteed by a Sovereign Guarantee provided by the Nigerian Ministry of Finance and security is taken, where applicable, over the commodity offtake arrangements.

The implication of this arrangement is that the Nigerian government is bound to execute the contract to which the loan was obtained for. This will go a long way to curb “white elephant” projects and corruption which has long plagued Nigeria. However, the Chinese government benefits massively as Chinese labour, machinery and expertise is exported to other developing countries thereby improving their Gross Domestic Product(GDP).