Priority reform agenda for Nigeria’s new mines minister
June 11, 20181.2K views0 comments
By Oladiran Ola Bello
Nigeria’s erstwhile mines and steel minister, Kayode Fayemi, has recently resigned to pursue his gubernatorial ambition in his home state of Ekiti. In choosing a replacement, President Buhari could plump for Fayemi’s erstwhile deputy, minister for state Abubaka Bawa Bwari with whom Fayemi recorded significant achievements. Yet, for Bwari’s appointment to prove transformative, he must not only continue existing overhauls but also adopt a harder reformist edge.
Opportunities spurned
The pressure to diversify Nigeria’s economy presents opportunities. Yet, deeper reform in mining will be needed to realise Nigeria’s broader economic potential. If there is an African country that requires sustainable mining to drive manufacturing for its large internal market, that country is Nigeria. Getting mining right also holds out the promise of national self-redemption, with success potentially mitigating the legacy of the ‘oil curse’. A widely respected mining sector which supports Nigeria’s industrialisation ambitions could be within grasp. This though calls for new governance approaches and dynamic stakeholder learning on a scale never before seen in Nigeria.
Bold changes can help align Nigeria’s mining with global best practises. These include the fiscal, conflict-management, social inclusiveness, technical linkage and the human and gender rights dimensions of governance in the sector. Even as geological exploration lags, Nigeria’s known reserves – modestly estimated at 47 distinct minerals – could support the creation of 250,000 new jobs. The 7th Sustainability in the Extractive Industries (SITEI) conference took place recently in Abuja, with this author as the compere for the two days event. With its theme of ‘Managing Conflict and Security,’ the conference highlighted Nigeria’s sustainability challenge which hampers the sector.Fayemi kayode, Nigeria’s minister of mines and steel development
Adorning the walls of informal money-changers throughout Nigeria, an untrained eye may not recognise the value of ornaments created from Nigeria’s semi-precious stones. From upmarket hotels in Abuja and Zamfara, to merchants’ shops in Bayelsa, Lagos and Yola, these semi-precious stones are among the most sought after items by discerning foreign visitors to our shores. Expatriates can usually acquire these ornaments at a fraction of their cost in Asia, Europe and North America. With proper regulation, training and market support, Nigeria’s semi-precious stones, together with dimension stones could provide sustainable livelihood for millions of its citizens. The United Nations Development Programme has been working to increase awareness of the sector’s potential, most notably in its development minerals programme which convened a West Africa regional workshop in Accra in 2016 with this author in attendance.
Business as usual
As the Abuja sustainability conference unfolded, major national newspapers reported on multiple mining-related incidents in Ebonyi state. These point to worsening communal conflicts driven by illegal mining activities; alleged police brutality against host communities; intra-community rivalries with factions granting partial ‘consent’ to mine operators; and non-compliance of some licenced miners with state tax regulations. In addressing its extractive challenges, some observers complain that Nigeria copies foreign solutions that are ill-suited to our context. In mining, it seems that the key difficulty resides in our treatment of minerals with their distinctive value chains and high labour absorptiveness in the same way that we treat the more mature oil and gas sector.
Whereas states and local authorities are at the frontline, Nigeria’s 13% derivation formula offers paltry incentive to these grassroots governance actors to help reorganise the sector to drive job creation. Unless we give states an attractive stake, Nigeria’s dream of improved mineral sector governance will remain a pipe-dream. If so, we risk, in the longer-term, being saddled with stranded assets – mineral and energy resources that are no longer economically viable to extract – because we failed to capitalise on them before the world’s productive systems shift wholesale to renewables.
Tear up the rules book
To be sure, the most urgent changes an incoming mining minister needs to prioritise are those relating to the ground rules. More specifically, there is a need to recalibrate incentives for states as principal stakeholders now expected to play a lead regulatory role with the federal government. Any suggestion that Nigeria hands autonomy to states on mines, with a percentage of mineral revenues being created to be remitted to the federal government, is bound to prove controversial. Yet, successful mining countries with federal constitutions similar to ours, including Canada and Australia, allow state control over their mineral endowments. Such arrangement could help states to aggressively grow their internally generated revenues whilst rebuilding tax and royalty collection systems.
Nigeria under President Buhari has been receiving help from the African Mining Vision (AMV), a pan-African initiative for good governance in the mining sector with seven distinct principles on linkages, environmental protection and others. It was endorsed in 2009 by African Heads of State. As member of the African Union (AU) Technical Working Group (TWG) advising on AMV implementation, this author was selected by the AU and the UN Economic Commission for Africa (UNECA) as their in-country resource person for consultative missions to Nigeria’s mining ministry in February 2016.
In truth, the Fayemi-led mines and steel ministry has achieved much in terms of the process revamps that are needed, most notable in the endorsement of the mining roadmap by the Federal Executive Council in 2016. Among other measures, Nigeria now offers mining investors a three-year tax holiday and duty-free importation of equipment. Steps are being taken to establish the Nigerian Mining Commission as regulator in the sector and a ‘strategic partnership’ between the federal and state governments on mining is also on the card.
Nevertheless, much remains to be done, including striking the right regulatory and revenue-sharing balance between the federal and state governments. We should not pretend that we can impose same fiscal provisions in the embryonic mining sector as those in the well-established oil and gas industry. Adjusting mineral revenue-sharing may require changes to Nigeria’s constitution. Inclusive analysis of benefits, diligent sensitisation in mining communities, and proactive consultations among regulatory, corporate, communal and CSO stakeholders will help.
Gender rights angle
Nigeria’s mining reform also requires a more substantive gender focus. This will increase the prospects for pro-women, poverty-reduction strategies in the sector, particularly in artisanal and small scale mining. Beyond recalibrating the state-federal fiscal formula, legislative changes should provide for community mining trusts to forestall local strife. Amending gender-discriminatory clauses in the 2004 Labour Act – such as section 55 which excludes women from working at certain hours and section 56 which prohibits the employment of women for manual labour underground – is also key. We must allow women choice even whilst sensitising them on the hazards of working underground. This applies also to operations such as the sieving of ores. Women are preferred for sieving because of their painstakingness. This though disproportionately exposes them to harmful substances such as lead and mercury.
To maximise potential, Nigeria equally requires a reformed mining education curriculum covering mineral geology, engineering, monitoring Environmental and Strategic Impact Assessment (ESIA), and information technology to drive the mining cadastre. Industry and regulators must work together to identify skills gaps and design trainings specifically for the sector. Whilst approving concessions, we need beefed-up arrangements to monitor Free, Prior and Informed Consent (FPIC). If we fail to protect gender and community rights, we will endanger corporate sustainability and stoke conflicts such as the one in Ebonyi and elsewhere. That surely will put paid to the creation of shared value in Nigeria’s resurgent mines.
Recovering lost ground
The 2019 election campaign is already in full swing. Whoever Buhari appoints as Fayemi’s substantive replacement faces a herculean task in trying to push through a radical agenda for the overhaul of the fiscal terms and other pending reforms before the government completes its current tenure. This raises the spectre of policy stasis and unstable personnel. They are the very combination that mining executives cite in survey after survey as a key deterrent to making new mining investments in frontier jurisdictions. Avoiding this pitfall will require deft and bold moves on the part of the nominee.
Momentum has since been lost in the Nigeria-AU-UNECA consultations. Still, Nigeria remains one of the more promising contexts for actualising the AMV’s sustainability principles. Going forward, our policymakers must seek closer alignment with AMV principles. We should couple external learning with deeper introspection of our own experiences. We can leverage for example Nigeria’s successful local content approaches in the oil industry. That should make for richer exchanges with African peers and foster holistic national learning. With our large internal market suited to mineral beneficiation and minerals-based industrialisation, we could yet see several green-field mining projects rapidly emerge.
