There are strong indications that Nigeria’s age-long dream of exploiting the potential in the mining sector to enhance the sector’s contribution to the gross domestic product (GDP) may soon become a reality.

Last week, the Minister of Mines and Steel Development, Mr. Olamilekan Adegbite, disclosed that Segilola Resource Operating Ltd,  a Canadian company mining gold in Nigeria’s Osun State is to start exporting the precious metal in June this year.

Adegbite who described the Segilola Gold Project as a strategic investment for Nigeria’s economic diversification, said the firm was supposed to have started gold exportation in the first quarter of 2021 but that the date was shifted due to the COVID-19 pandemic.

Describing the company as a ‘poster child’ and the first foreign investor that was doing genuine and serious business in Nigeria, Adegbite noted that the company was making a positive impact borne out of its desire to ensure compliance with the economic diversification agenda of the federal government

Nigeria has largely untapped deposits of 44 minerals including gold, iron ore, coal, tin and zinc, in more than 500 locations, but mining ironically makes up just 0.3% contribution to the nation’s GDP. But the ministry has a target of increasing the sector’s contribution to GDP, by 5% in 2025, a target that has seen the federal government granting five years tax holiday for miners who operate in the nation’s mining sector and waiver on imported mining equipment.

According to United States Geological Survey, Nigeria gold production was reported at 20.000 kg in Dec 2017, a decrease from the previous number of 23.000 kg for December 2016. The nation’s gold production data is updated yearly, averaging 30.000 kg from December 1993 to 2017, with 25 observations. The data reached an all-time high of 4,303.000 kg in 2012 and a record low of 0.000 kg in 2013.

Available statistics show that Nigerian gold valued at $1.3-billion has been illegally taken to Dubai in the last two years as informal exports indicate tremendous potential of $2.2 billion worth of gold, tin and lead illegally exported out of Nigeria from 2016 to 2018.

It is also on record that Nigeria’s artisanal gold production has almost doubled since 2015 without any major investment recorded during the period under review. Till date, the country only produces just two per cent of the total gold production volumes with an estimated 84 metric tonnes in Africa.

Calling for more investments in the mining sector, Adegbite said, “Mining is a bit capital intensive. So, we need to attract serious players, people who can put in the money and then of course, begin to make money after some investment because it has gestation period.

“Mining is not like trading where you put in your money today and then realise profit tomorrow. When you do exploration, it can take a year to three years then, you discover the mineral and then start the exploitation before money begins to roll in.”

SMDF to the rescue

Incidentally, efforts to revitalize the nation’s mining sector received a prominent boost late last year with a proposed investment of $500 million in the sector by the Solid Mineral Development Fund (SMDF).

Executive Secretary of the Fund, Hajia Fatima Shinkafi, who made this known during a presentation on financing operations in the mining sector, as part of the 2020 Nigeria Mining Week, assured that the Fund would also unlock $1.5 billion in the investment as it is poised to promote private sector-led investments.

In her presentation, Hajia Shinkafi said: “The SMDF has been structured and positioned and is ready to invest $500 million to unlock $1.5 billion in third party investments and financing in the mining sector.  We are here to promote private sector-led investments, although we do have a social investment angle to the fund.

She, however, acknowledged that a major challenge in the sector, which is funding mining operations and being perceived as high risk by financiers from various financial institutions.

She also explained that most financiers are cautious about this area of mining business in Nigeria, and asserted that private capital will remain a challenge, because many of the projects in the country are at stage 1 or 2, “which are the stages where exploration and the feasibility studies take place. We hope to move projects to further stages where financiers are more comfortable to get involved.”

She further stated: “The official mandate of the SMDF is to act as a catalyst to spur development of Nigeria’s mining sector by undertaking targeted sustainable, profit-oriented investments and interventions in key areas, in close coordination with stakeholders in the sector.

“We need to do things differently. Often implementation is the problem and an innovative approach is needed such as a combination of tools to solve the problems in the mining sector.”

However, she expressed optimism that, “now, with post-COVID, I am very hopeful, the human race is resilient. We need to be innovative with regards to finance.

“The Fund will address the financial gaps across the mining value chain, including geo-science activities, exploration, equipment financing, mine development, production, infrastructure and capacity building.” She made it clear that SMDF is “not a commercial bank, but a partner. We co-fund projects.”

According to her, the nation’s mining sector could annually generate $15 billion, which also has an estimated value of gold of 1 million ounces to 60 million ounces if scaled up based on an estimated ratio of inferred reserves to inferred resources.

“If we were to match the oil and gas production levels the sector would generate annual revenues of $15-billion. This is not something we can continue to ignore”, she said.

However, Segilola is spending $98 million to develop the project, which will have an annual average output of 80,000 ounces. The company was listed and quoted on the Toronto Stock Exchange in Canada, the eighth largest exchange in the world by market capitalisation, commanding some 3.1 trillion dollars.