Nigeria's Solid Minerals Sector: Alternative Investment Opportunities

FEDERAL REPUBLIC OF NIGERIA
MINISTRY OF SOLID MINERALS DEVELOPMENT
OFFICE OF THE MINISTER
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NIGERIA’S SOLID MINERALS SECTOR:
ALTERNATIVE INVESTMENT OPPORTUNITIES
Being the text of the keynote address by
H.E. Dr. Kayode Fayemi
Minister of Solid Minerals Development
Federal Republic of Nigeria
at the session organized by the
ALL-PARTY PARLIAMENTARY GROUP (APPG) ON NIGERIA
UNITED KINGDOM PARLIAMENT
London, United Kingdom | Thursday, May 19, 2016
Protocols and Introduction
It gives me great pleasure to be here today to address this August audience that I
consider important partners in the progress of Anglo-Nigerian relations. I must say that
this trip is something of a homecoming for me. More than two decades ago, I sojourned
here as a student and an academic. I lived in London for over a decade during which
time I honed my political consciousness, actively participating in politics at the
municipal level. This city was also my refuge in exile during the 1990s, when I and
many other democracy activists rallied friends of freedom at home and abroad against a
brutal dictatorship that had seized power in my home country. To me, London stands as
a shining city upon a hill and a bastion of liberal values. Indeed, much has changed in
Nigeria since my days here in exile, same as here in the United Kingdom, and my return
here at this time as a representative of my country is significant of how far we have
come from those days when I was officially declared a persona non grata by the then
military administration.
Competition or Cooperation
One of your esteemed poets, John Donne, famously said, “No man is an island, entire of
itself; every man is a piece of the continent, a part of the main.” This short statement
may well be the definitive verse for the age of globalization. We recognize that the

www.solidminerals.gov.ng
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imperative of cooperation has never been more urgent as we pursue maximal growth.
The economic fortunes and aspirations of sovereign countries in the world are now so
interconnected as to be virtually inseparable. In Nigeria, we consider it imperative to go
beyond our borders to engage ever more intensely with the matrix of global commerce.
In an interconnected world, no nation can pursue its economic interests as an island.
It is true that the spread of markets erodes cultural, political and economic boundaries
and seeds a competitive and disruptive dynamic into local economies. However in a
globalized world, the pursuit of national prosperity is not the zero-sum game that it
once was. When properly harnessed the forces of globalization not only unleash the
positive dynamics of competition; they also unleash higher dimensions of cooperation.
The expansion of markets spreads innovation and creativity; it not only erodes borders,
it also builds bridges instead of walls. Our mutual prosperity is predicated on our ability
and willingness to create economic and allied synergies. Globalization therefore enables
the cross-pollination of ideas, wealth and opportunities on a scale unprecedented in the
annals of human civilization.
It is in this context of the global village that we are seeking to write a new chapter in the
history of the relations between our two nations. Nigeria and Britain have a
longstanding history of commercial, cultural and diplomatic links built up over the
course of two centuries. British investments bestride the Nigerian economic landscape
while Britain remains a top destination for Nigerian students that want to further their
academic pursuits. Many people of Nigerian descent are doing well in various facets of
British public life ranging from governance and public service to sports and popular
culture. The United Kingdom is also a favourite holiday destination for many Nigerians.
The health of Anglo-Nigerian relations is evident not just in our active membership of
the commonwealth but also in the numerous instances of high-level cooperation on
issues of regional, global and geostrategic significance.
At present, Nigeria is the United Kingdom’s second largest trading partner in Africa
after South Africa. In 2015, the volume of trade between Nigeria and Britain hit the 6
billion pound mark. As the United Kingdom’s Under Secretary of State for International
Development Nick Hurd once pointed out, this is an important relationship and the
potential remains huge. A testament to the huge potential inherent in Anglo-Nigerian
trade relations are the efforts of organizations such as the Nigerian London Business
Forum and the Nigerian-British Chamber of Commerce. From our perspective in
Nigeria, we want to deepen this relationship and we perceive new possibilities and
frontiers of opportunity for doing so particularly in the form of emerging investment
opportunities.
Brand Nigeria and Challenges of Perception
In advertizing our wares in the global marketplace however, brand Nigeria faces certain
challenges. She is not favourably positioned on the international perception index.
Systemic frailties and individual lapses have over the years contributed to eroding our
reputational equity. Admittedly, this is an area we have not managed as deftly as we
should. Our administration has candidly acknowledged these deficits. However, we

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must also acknowledge that perception has often been skewed in favour of convenient
negative stereotypes and diverges considerably from the reality on the ground.
What we have sought to do in recent months is to turn the tide of popular but
exaggerated (and sometimes inaccurate) narratives and shine a light on the other
positive facts that are seldom taken into account. For example, last year, Nigeria
accomplished an epochal alternation of power with a ruling party acquiescing to an
opposition party. This signaled the deepening of our democratic experience. Democracy
is a journey, not a destination and Nigeria continues to make significant progress on
her journey. As we continue to strengthen our democratic institutions, we are also
enhancing accountability, transparency and the rule of law. We are now taking steps to
create and strengthen the institutional frameworks that will, for example, improve the
ease of doing business, address corruption and graft especially in the public sector,
foster a culture of free enterprise, and boost the capacity of security institutions. We
recognize that a liberal socio-political environment is often a precursor to a world class
business environment.
Our president has particularly been at the forefront of vigorous strategic diplomatic
engagements around the world to give Nigeria a new image and demonstrate that we
are open for investments. Our administration is actively leveraging the treasure trove of
goodwill and good reputation we enjoy, which borrows largely from the widely
acknowledged personal integrity of Mr. President himself, to project Nigeria in a more
positive light as a worthwhile investment destination.
British Legacy in Nigerian Mining
Incidentally, the trajectory of the Nigerian mining sector bears the pioneering stamp of
Britain’s colonial economic legacy dating back to 1902. The city of Jos in central Nigeria
became a centre of tin-mining under British rule. By the 1930s, a world map showing
the distribution of tin production would have basically highlighted six regions –
Malaya, Bolivia, Dutch East Indies, Nigeria, Siam and China. Nigeria, China and Siam
accounted for 15 to 25 percent of global tin production.1 Up till 1960, Jos was the sixth
largest producer of tin in the world. Similarly, the eastern Nigerian city of Enugu
became known as coal city due to robust mining activities introduced under British
rule. From these early operations led by the then British colonial government, we went
on to a more private sector-focused model and then moved to the era of government-
controlled companies with heavy investments in steel and coal. During this period,
mining was a major contributor to Nigeria’s revenue base and was a leading employer
of skilled and unskilled labour until it was progressively eclipsed by the discovery of oil
starting about fifty years ago.
In addition, part of Britain’s legacy in the Nigerian mining sector is a veritable wealth of
data in the form of geological surveys which we are now updating. It seems only fitting
that on the cusp of a revolution in this sector, we should be inviting British concerns to
participate in what we believe is a renaissance of mining in Nigeria.
1
“World of Tin,” Time, May 7, 1934

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The State of the Nigerian Mining Sector
In Nigeria today, the Muhammadu Buhari administration has as one of our strategic
priorities the diversification of the Nigerian economy’s revenue base from
overdependence on Crude oil which historically has been her mainstay. We are now
looking to grow other promising sectors such as the mining and agriculture sectors. As
the federal minister in charge of the former, I am pleased to share insights into what I
believe to be Nigeria’s next frontier of opportunity.
Our decades-long fixation on hydrocarbon resources has obscured the immense scale of
riches we have in the solid minerals sector and its potential to power a new age of
economic growth. Nigeria’s minerals and mining sector is still largely underdeveloped
despite its glorious past and abundance of mineral resources for development. These
minerals can be broadly categorized according to use, into five groups:
 Industrial minerals (such as barite, kaolin, gypsum, feldspar, limestone)
 Energy minerals (such as bitumen, lignite, uranium)
 Metallic ore minerals (such as gold, cassiterite, columbite, iron ore, lead-zinc,
copper)
 Construction minerals (such as granite, gravel, laterite, sand)
 Precious stones (such as sapphire, tourmaline, emerald, topaz, amethyst, garnet,
etc.)
These mineral assets are available across the federation in varying mixes and proven
reserves. No corner of Nigeria today is lacking in solid mineral assets. It is significant to
note that among the minerals which occur in significant commercial quantities in
different parts of the country are Limestone - for which annual national demand is 18
million metric tons and which has driven the growth of Nigeria’s cement industry; Talc
- Over 40 million metric tonnes of talc deposits have been identified; Gypsum - over a
billion metric tonnes of gypsum are spread across the country; Bitumen - Nigeria has
the second largest deposit of Bitumen in the world; Coal - there are over 1 trillion metric
tons of coal resources on our soil. There are also significant quantities of several other
minerals in Nigeria’s natural resource portfolio of at least 44 known mineral assets.
Our most promising mineral assets however are gold, iron ore, barite, bitumen, lead,
zinc, tin, coal and limestone.
Challenges and Possibilities
Today, the Nigerian mining industry faces external and internal challenges. The sector
has underperformed since the 1970s, initially as a result of poor policy choices which
subsequently became compounded by deterioration in the fiscal regime, infrastructure,
and the shortage of investment quality geosciences data. Stretched over two decades,
these challenges have since become a growth limiting constraint on the sector’s full
potential.

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We can categorize the sector’s challenges broadly into Internal and External challenges.
Our internal challenges can be further categorized into 5 groups, as follows:
Internal Challenges
 Geosciences data and information: We still have weak mechanisms for
gathering, disseminating and archiving critical geological data required by investors
and policy makers. Insufficient data has created certain opaqueness about Nigerian
mining which needs to be addressed. We are not generating sufficient data, nor are
we making it readily available to the market and operators.
 Industry Participants: Operators across the mining value chain have historically
faced a range of challenges from insufficient infrastructure to policy uncertainty
that together constrain investment confidence. Whether artisanal or large global
miners like Vale or BHP, or Nigerians like Dangote or Ibeto, we need to create
conditions that encourage various investors to commit to the market.
 Stakeholders: Decline of industry reduced the focus and leverage of key
stakeholders, hence flows into the sector e.g. resources, talent and partnerships
have declined. Key institutions such as the Mining School Jos will need support to
become fit for purpose again and train the next generation of mining specialists,
innovators and entrepreneurs.
 Institutions & Governance: Our ministry’s organizational design needs to be
refined to ensure clear enforcement of its own rules. We will be focused on creating
a true career path for mining specialists and regulators to ensure the required
knowledge and priorities are on the table.
 Key Enablers: Ancillary requirements for the proper functioning of the minerals
and mining ecosystem such as infrastructure – e.g. railroad, competitive financing
systems, mine and asset security, and related support services – are missing. We
need changes in legislation – e.g. the passage of an amendment to the Nigeria
Railways Corporation Act to break NRC’s monopoly and enable miners to set up
private transport networks to move bulk minerals around the country for
processing.
External Challenges
Chief among the external challenges we face, asides the negative perceptions about the
Nigerian investment environment, is the turmoil besetting the global commodities
market as key sources of demand that supported decent prices over the past two
decades have steadily declined. This has put mines and mining houses under immense
pressure which is reflected in the sharp decline in the share prices of major industry
players such as Glencore, Anglo-American and Rio Tinto. Naturally, as the prices of
metals and their assets plunge, many of the top mining houses are pulling back from

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investment planning, shutting down mines and optimizing current operations. All
mining now has to be cost and process efficient.
In spite of the abovementioned challenges, we have resolved to overcome them and
fulfill our mandate. As things currently stand, in 2015, the sector contributed
approximately 0.33% to the gross domestic product of the country. This contribution is
a reversal from historically higher percentages (about 4-5% in the 1960s-70s). Our
policy goal is to return to a contribution level of 5% - 7% over the next 10 – 15 years, and
the recently approved Medium Term Expenditure Framework (MTEF) and the Fiscal
Strategy Paper (FSP) is very supportive of this aspiration.
Our mandate at the Ministry of Solid Minerals Development is to deterministically
scale-up the capacities of this sector by transforming it into a strategic catalyst for
domestic growth, in terms of the creation of jobs and increased revenue, while
achieving a high level of global relevance.
The foregoing challenges provide unique opportunities in the Nigerian mining space.
Consider Nigeria’s iron ore and steel sector for example, steel is the world’s most
important engineering material and is indispensable to any country’s industrialization.
Nigeria is the 12th richest country in the world in terms of iron-ore deposits – with over
2 billion metric tonnes – and yet she imports an estimated $3.3 billion worth of
processed steel and associated derivatives. Despite the country’s relatively robust iron
ore reserves, only 18 of the paltry 30 steel rolling mills are actually operational,
producing 2.8 million metric tons per annum using 100 percent scrap metal. These
figures represent a gross under-utilization of our iron ore resources, and are vastly
inadequate to sustain our industrial ambitions. In addition, there is the opportunity for
import substitution as the $3.3 billion of much needed foreign exchange spent on steel
imports annually could be judiciously deployed.
The steel sector is weak due to factors such as poor infrastructure for extracting,
processing, and transporting bulk material e.g. freight rail transport, access roads to
mines, electrical power. That said, we believe that the Nigerian steel industry can be
attractive to investors due to the large untapped demand potential similar to what
obtained for cement in the 1990s. The current market size of $3.3 billion per annum
has the potential to grow to $15 billion per annum with increased industrialization
driven by our domestic feedstock which as indicated earlier constitutes the second
largest iron ore reserves in Africa.
We are cognizant of the worldwide slump in commodity prices occasioned by the
slowdown in economic growth of resource-hungry giants like China and India, the two
biggest markets for commodities over the past ten years. We are also conscious of the
economies of scale that shape the dynamics of the global commodity markets, just as
exemplified by Tata Steel’s recent experience in the UK. We appreciate that this trend
makes attracting the large houses in the current time frame quite challenging. We have
therefore crafted a strategy to reflect a need to jumpstart market growth using a blend
of domestic mining houses, mining companies and junior global miners.

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We project a steady increase in demand for steel in Nigeria in the coming decade,
driven by increased industrialization that will ignite a surge in building construction,
power, automotive construction, agriculture, road and bridge building, military
technology and infrastructure development, refinery investments, and other heavy duty
machinery. This ever-widening vortex of hunger for steel and iron ore is an opportunity
for local and international investors to participate in the consolidation and expansion of
Africa’s largest economy. Our optimism is also informed by the fact that current local
producers are meeting less than 25 percent of demand.
The Proposed Growth Strategy to Unlock Our Full Potential
Before now, the sector has witnessed some positive developments since 1999.
Successive administrations have conducted reforms based on an important
philosophical principle: government as an administrator-regulator, and the
recognition of the private sector as owner-operator. Key elements of the reformist
platform include but are not limited to the following:
 Development of the Nigerian Minerals and Mining Act, 2007
 Development of the National Minerals and Metals Policy, 2008
 Development of the Nigerian Minerals and Mining Regulations, 2011
 Establishment of the Mining Cadastre Office (MCO) for mineral rights
management
 Establishment of the Nigerian Institute of Mining and Geosciences (NIMG)
 Enhanced geoscience data collection across Nigeria
 Establishment of control departments for Mines Environmental Compliance
(MEC) and Artisanal and Small Scale Mining (ASM)
The Act and the supporting body of regulation have been designed to give Nigeria a
competitive legal and regulatory framework for the sector. For example, in the design
and set-up of the Mining Cadastre Office as the sole issuer of mineral titles today, a
great deal of effort went into understanding the best practices globally. The Cadastre’s
predecessor had overseen a cumbersome process fraught with unclear licenses, limited
control, inefficiency, opacity and long delays. For this reason, the reformed Mining
Cadastre office adopted a “first-come-first-served” and non-discretionary granting of
mineral titles rule. Today, the MCO issues 6 types of licenses and permits to cover all
activities from exploration to mineral production. Licenses can be granted in 30 – 45
days using transparent rules and regulations.
To build on the progress made so far and position the sector to unlock its full potential,
the Ministry is pursuing a focused strategic agenda. That agenda was recently
articulated in a draft roadmap that will guide how we grow the industry over the next 2
decades. The draft document is currently undergoing a feedback process from key
stakeholders before being finalized and ratified by the Cabinet. We will provide an
electronic copy of the draft roadmap for the APPG secretariat, which can be shared with
anyone interested in getting more information. I will however briefly share highlights as
follows:

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 Aspiration: Our aspiration is to build a world class minerals and mining ecosystem
designed to serve a targeted domestic and export market for minerals and ores.
 Where to Play: We will achieve this by focusing on Nigeria’s minerals, mining and
related processing industry over a 3 phase period:
 Phase 1: Nigeria will seek to rebuild market confidence in its minerals and mining
sector and win over domestic users of industrial minerals that are currently
imported. During this Phase, Nigeria will also seek to expand use of its energy
minerals. This phase will likely last about 2 – 3 years.
 Phase 2: Nigeria will focus on expanding our domestic ore and mineral asset
processing industry. This phase will last about 5 to 10 years.
 Phase 3: Nigeria should seek to return to global ore and mineral markets at a
market competitive price point. We expect this to coincide with the next
commodity upswing.
 How to Win: We intend to win by building a minerals and mining sector initially
focused on using its industrial mineral endowment to support its industrialization.
Government policy should seek to support private industry by building overall
competitiveness (e.g. quality, price, loss ratios) and improving the ease of doing
business. Nigeria should seek to create domestic demand by competing to replace
ores and minerals currently imported. Over time, with an expansion in domestic
processing, Nigeria should seek to build a cost led sector, as well as production
expertise in select non-industrial minerals.
 Key Enablers: Finally, strategy without the appropriate set of enablers will remain
just a plan. Working alongside the private sector, other MDAs and in partnership
with the legislative branch, we will facilitate investment in a range of enablers
including bulk handling terminals, railroad and rolling stock capacity, technical and
engineering capacity, regulatory reform, reorganization of the Ministry itself, and
expansion of access to financing to drive sector transformation.
Key Success Factors and Implementation Plan
Rebuilding Nigeria’s mining sectors is a function of success on 6 key dimensions. These
are:
1. Clear Minerals & Steel Focus: We need to ensure that our industrial and energy
minerals strategy prioritizes domestic utilization of our assets, including getting our
steel sector to provide a solid backbone for the manufacturing and industrial
economy. The recent comments by the Vice President in Kwara State regarding the
revival of our steel sector is an example of this. We are working assiduously to
resolve once and for all the Ajaokuta situation.

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2. Institutions and Governance: We are rebuilding the organizational and
functional capabilities of the supervising Ministry, and ensure the regulatory
framework is enforced. That means for example that we revive and use the Mining
Police to protect mine sites and our reserves.
3. Stakeholder Engagement: We need to improve the engagement of states with
the minerals and mining sector, particularly around financial participation, revenue
sharing, and recognizing the oversight of the federal government. We also will work
hard to ensure that all parties recognize their social responsibilities so we avoid
issues similar to the oil sector.
4. Industry participants: We are working to attract a diverse portfolio of
participants from artisanal miners to junior explorers to mining majors into the
industry. Our goal is to build a sector that is competitive and supportive of our
overall job creation aspirations for Nigerians.
5. Geosciences data and information: Improving our collection and
dissemination of geosciences data is also a critical enabler of success. Nigeria needs
to know what it has and in what grades and quantities in order to plan more
effectively.
6. Access to Finance: We have commenced a systematic effort to build knowledge
and confidence among Nigerian financial institutions to support mining projects. In
addition, we are establishing the Nigerian Solid Minerals Investment Fund,
structured as a private sector oriented investment outfit to provide financing to
private sector-led projects in the mining sector.
7. Enabling environment: Finally, we must also create the appropriate
environment to support enterprise. That will require building technical and
managerial skills, and capabilities locally to ensure the steady supply of talent
required by the sector in the future, as well as investing in infrastructure, gender
equity, and improved access to finance.
We now have a Mining Investment Strategy Team (MIST) in the Ministry to oversee the
work required to deliver success. The team is drawn from a mix of the Ministry and
outside talent to ensure we stay focused on execution and results without distracting
from the core regulatory role of government. We will be providing quarterly updates on
our successes and challenges, with an initial focus on getting domestic industrial
demand on track again.
Should Nigeria successfully implement the proposed recommendations, growth is
expected to return to the sector in the form of new exploration activity, operations and
production from active mining, functional (and expanded) processing and refining
capacity, and higher value-addition in exports. The net outcome will be the creation of
thousands of direct jobs and potentially hundreds of thousands of indirect jobs. We
anticipate contribution to mining GDP to exceed $25 billion by 2026 as industries are
better able to use the output of the sector, substituting for imports. Analysis conducted

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by major stakeholders in the solid minerals sector, the Association of Metal Exporters
of Nigeria, also indicates that we can generate at least N5 trillion annually from mining
and exporting of its vast solid mineral deposits.
Towards a New Paradigm in Natural Resource Management
We are open for business but it is no longer business as usual. More than half a century
of oil exploration activities in Nigeria has yielded painful and costly lessons on the
necessity of sustainable resource management and ecologically-friendly, socially-
responsible extractive endeavours. We are determined not to repeat the tragic errors of
the past.
This is why ecological justice is one of the major planks of our approach to the
repositioning of the solid minerals sector. We will ensure that investors comply with
global best practices in resource extraction by integrating all relevant protocols on
environmental conservation in the conduct of mining and all related business. This
approach is informed by our belief that the environment itself is a resource and has to
be safeguarded even as we unearth its more obvious treasures. Our goal is to provide a
better deal for the local communities where these minerals are located, ensuring
communal buy-in and benefit.
Transparency is also a key consideration in how the mining industry will be run. We
intend to foster a culture of openness which will, in turn, engender trust between all
stakeholders. For me as the Chairperson of the Nigerian Extractives Industries
Transparency Initiative (NEITI), this is an obligation and not a favour to stakeholders.
As you may all be aware, only last week, President Muhammadu Buhari joined Prime
Minister David Cameron, and other leaders to commit to Open Governance and
Transparency principles - transparency in the extractives industry is particularly key to
that commitment.
We do invite and certainly expect British investors to come in to take advantage of this
new frontier of opportunity. However there is also room for cooperation in other areas.
For instance, our parliaments could work together on frameworks of regulation and
oversight for extractive activities. Civil society organizations in Britain and Nigeria
could work together to enhance transparency and accountability in the sector.
Our ambition goes beyond just extraction and exportation. We aim to create a globally
competitive sector capable of contributing to wealth creation, jobs creation and the
advancement of our social and human security. It is also to create a new culture of
sustainable natural resource management that results in a win-win situation for all of
us – communities, partners and investors at home and abroad.
Thank you for listening.
Dr. Kayode Fayemi
Minister of Solid Minerals Development
London, United Kingdom | Thursday, May 19, 2016

Nigeria's Solid Minerals Sector: Alternative Investment Opportunities

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Nigeria's Solid Minerals Sector: Alternative Investment Opportunities