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How Regulatory Failure, Smuggling Plague Nigeria’s Mining Sector

L-R; Faith Nwadishi, Executive Director, Centre for Transparency Advocacy, Bilqis Audu, Miners Association of Nigeria, Monday Osasah, Executive Director, Centre LSD unveiling the Report in Abuja

While several reports exists about gaps in the management of Nigeria’s Solid Minerals sector which has impeded its contributions to the economy, a recent research commissioned by the African Centre for Leadership Strategy and Development  (Centre LSD) has further revealed the magnitude of anomalies confronting the sector and measures government can adopt to reverse the trend. Juliet Ukanwosu who attended the Report launch for extractive 360 in Abuja recently, writes  

With the end of the oil age projected for the next 40 to 50 years, the solid minerals sector has been acknowledged as a reliable alternative for Nigeria’s revenue generation and foreign exchange earnings. This is rightly so, given the richness of the nation’s mineral endowment.

Nigeria has over 44 solid minerals distributed across the 36 states of the federation, which include gold, Sapphire, gemstone, limestone, granite, quartz, barite, tourmaline, columbite, zinc ore, bauxite, kaolin to mention a few. It is worthy to note that some countries turn their economies around with only one of these minerlas.

Sadly, the research report entitled; Solid Minerals Development in Nigeria: Evidence from Ebonyi, Ekiti and Taraba States, revealed a plethora of challenges facing the sector and preventing it from adequately contributing to the economy. These range from regulatory failures, to massive smuggling of minerals, lack of adequate exploration data, inadequate solid minerals buying centres, and the menace of artisanal mining. Unless these issues are resolved urgently, the country cannot look to the solid minerals sector as an economic mainstay post oil age.

Issues

The study, which was conducted with grants from Open Society Initiative for West Africa (OSIWA), found severe regulatory failures regarding adherence to environmental policies and regulations. The survey found that regulations around mineral sales were largely unobserved as miners tend to sell minerals outside of the official minerals market’s institutional framework.

The research which highlighted substantial gaps in implementation of policies related to mining activities in the three pilot states of Ekiti, Taraba and Ebonyi, particularly in area of revenue collection, observed avoidable loses to the value chain due to the fragmented nature of mining operations. It also revealed that difficulty by government officials to access mining sites makes it most challenging to track revenue streams.

Unveiling the Reports 

“Government have remained largely unable to address the weakness with revenue collection which is increasingly hindering the realization of projections for national economy diversification. Some of the reasons for these challenges include smuggling of minerals, inaccessibility to mining sites, informal organizations of artisanal miners, which makes it difficult for government to appropriately tax the sector,” the report noted.

Presenting the Report, Dr Ben Nwosu, said, the issue of revenue leakage is further worsened by inadequate solid minerals buying centres, which invariably intensifies sales and distribution of minerals through unofficial channels as well as the lack of adequate exploration data which makes it difficult for the government to track mining activities. “These challenges do not only plague revenue collection but also the benefits derivable from the value chain for all players,” he pointed out.

The research found that most artisanal miners in two of the three pilot states (Taraba and Ebonyi) operate without a mining license, while those in Ekiti state either possess a license or operate through a cooperative permit. It was also discovered that the artisanal miners do not process the minerals before selling and they sell to anyone willing to buy at the best price offered.

Furthermore, the study found persistent human rights violations in the sector, with women and children involved in mining activities across the three pilot states, although in varying degrees. For example, the study found that in Taraba state, women and children are involved in every activity and stage of mining. But in Ebonyi, and Ekiti states, mining activities by underage children are limited, while the roles of women are equally limited to the processing stage, which includes crushing, grinding, washing among others.

On the effectiveness and quality of Community Development Agreements (CDAs), the survey found that mining communities in Taraba do not have CDAs, while in Ekiti and Ebonyi states where CDAs exist, community leaders expressed dissatisfaction with the extent of their implementation. “The communities feel largely powerless in confronting mining investors in cases where commitments to project implementation have been weak. The sense of powerlessness also affects other outcomes of mining activities in the communities including the condition of the environment,” the report noted.

Also the survey found wide spread dissatisfaction in mining communities with practice of minor engagement in mining activities.

Way Forward: Right Policies 

To reverse the identified issues and set the sector on a growth path, the study recommended that the Nigerian government take steps to emplace policies such as the streamlining of mining fees in states to improve confidence in supervisory institutions, and use returns from mining fees to improve operational environment to enable industry development.

Government is also advised to tax more and provide more, as the principle of fiscal exchange is that of a take and give. This is as the study established that government’s inability to provide public good for mining communities has led to tax evasion

Artisanal mining

To check the menace of artisanal mining, government is urged to formalize artisanal and small scale miners through cooperatives unions and provide them with micro credit to enable them transition from simple tools to more technical machines, as well as promote simpler regulations free of unnecessary bureaucracy. This the study suggest will encourage the registration of more operators and reduce illegal mining.

Data availability

The study also suggested that improved documentation and geoscience data is crucial to boosting the fortunes of the industry. It found that inadequate geoscience data makes it difficult for potential investors to reliably assess the quality and quantity of mineral deposits in the States. It also makes it difficult for the State governments to ascertain the actual dept of the solid minerals industry in their various States.

Public-Private Partnerships

Given the risks and huge financial requirements in mining operations and how the lack of it can cause a major constraint to the development of the industry, the study noted that partnerships between state-sponsored companies and private sector in the form of joint venture arrangements can improve the risk perception of mining firms and make finance more accessible.

The Reports on display

Although the survey found that in Ekiti and Taraba states, such partnerships exist to some extent; it however, observed that the activities are not deep enough as many industry players are either unaware of such opportunities or unable to benefit from it. According to the report, such partnerships could be in the form of equipment leases that reduce the technological constraints faced by miners in the states.

Community development agreements

It is recommended that the NMMA 2007 be amended to define a clear approach for managing grievances that may arise from the implementation of CDAs. “The amendment should be expanded to include appropriate sanctions in the event that mining firms fail to fulfill their obligations as contained in the CDA and should ensure inclusive and participatory process in the development of the agreement,” the study noted.

It also recommended that the CDAs should provide appropriate protection for women and children, in sync with the Nigerian labour law.

Furthermore, the study recommended the establishment of one-stop-shops in the different states with possible sub-stations in mining-intensive local governments. These shops it suggested should be licensed buying centres and a meeting point for miners and mineral buyers. This is against findings that due to the distance of existing buying centres from mining intensive local governments, the minerals are usually sold to any willing buyer, in most cases below market value, a development that encourages smuggling.

Improved enforcement capacity by federal and state agencies, capacity building to strengthen miner’s ability to relate with investors and mineral buyers as well as provision of extension services and technical support will increase value from the sector, the study further pointed out.

The Executive Director of Centre LSD, Mr Monday Osasah, who commended the researchers for a detailed study, lamented the challenges facing the sector and called on both federal and state government to tackle these issues appropriately if the government economic diversification agenda is to be achieved.

While expressing the Centres appreciation to OSIWA for the support to conduct the research, Mr Osasah disclosed efforts are on by the Centre to commission a study on the intersection of gender in the extractive sector using the three pilot states.

He further called on civil society organizations and the media to pick up issues revealed by the study for further advocacy with a view to ensuring that the desired mining industry is achieved in Nigeria for the benefit of all Nigerians.

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