An ambitious programme by the Federal Government to make Nigeria a sub-regional hub for gold production is a right step that has been too long delayed. The plan, as unfolded by the Minister of Mines and Steel Development, Olamilekan Adegbite, includes extraction and refining of the precious metal at various sites, streamlining of artisanal mining and increased utilisation of gold as reserves by the Central Bank of Nigeria. A combination of artisanal mines of precious and base metals, and scientific small-scale farming could boost the economy. The high-risk, high-reward business should be vigorously pursued alongside the development of other identified mineral types to diversify revenue sources, propel industrialisation and create jobs along the value chain.
This move is timely as gold prices have not only rebounded in the international market in the face of the global recession that has seen investors become wary of currencies, but also have for decades defied predictions of free fall like oil and other commodity prices. Apart from two recently licensed gold refineries scheduled to refine to the London Bullion Market Association standard, another firm is billed to start production in Osun State next year, creating 400 direct and 1,000 indirect jobs in the process. Alongside mining operations in other parts of the country, Adegbite is optimistic that the “gold economy” when fully up and running, would stimulate other industries such as manufacturing, equipment leasing, logistics and transport, security and insurance.
Like other countries, Nigeria should pursue wealth creation, diversify its economy and create jobs by creatively exploiting its natural and human resources.
Tragically, the fixation with oil and gas as revenue earner has made the country miss the current global gold price boom, prevented industrial growth and narrowed the jobs market. Gold prices rose in June to a level not seen since 2012. The President, Major General Muhammadu Buhari (retd.), and Adegbite should doggedly oversee the gold rebound, partner the private sector to revitalise the entire solid minerals sector to resuscitate and reshape the economy.
The fate of gold is symptomatic of how Nigeria has neglected its natural endowments to fixate on oil. Gold has since antiquity been a highly valued commodity. Due to its rarity, it has been used as currency as far back as 6,000 years ago. Until the 1930s, the gold standard was used to set the price of the world’s currencies. Apart from its financial value, 52 per cent of global production is used for jewellery. It is used in dentistry, in mobile phones and computers, in manufacturing, buildings, in space and in printing. Its value in investment is also rebounding, according to the United Kingdom-based consultancy, Physical Gold, with gold bullion bars, coins, digitised trading and unfolding new technologies opening new vistas.
While mining was a major activity in Nigeria since 1913, with gold production, according to a Reuters report, peaking by the 1930s and up to the 1960s, there are hardly large-scale gold mining operations today. Illegal operators and artisans have since filled the vacuum. Gold occurs in at least nine states and particularly in Zamfara, but due to state negligence in organising the sector, projected earnings of up to $1 billion annually are lost. Artisans, illegal miners and bandits thus collaborate with syndicates to exploit the gold and smuggle it abroad. Anti-graft agents smashed a ring alleged to be spiriting about N1 billion worth of gold to the United Arab Emirates yearly where Nigerian gold reportedly dominates the informal market. Some $3 billion was lost from 2012 to 2018 through gold smuggling, Buhari said. Not even a global outcry over lead poisoning and the deaths of children arising from illegal mining spurred the state government to assume a leading role in the business.
Yet, global gold export reached $295.4 billion in 2019, the World Gold Council disclosed and is expected to spike this year due to renewed investor interest. Ghana moved to No.7 spot among the top global gold producers with 142.4 tonnes per annum, earning $6.23 billion from gold exports in 2019 after overtaking South Africa (118.2T) as Africa’s largest gold exporter in 2018. Of the total $90.2 billion worth of goods South Africa exported in 2019, said the World Top Exports portal, gems and precious metals accounted $15.3 billion or 17 percent; ores, slag and ash fetched $13.1 billion or 14.5 per cent.
In contrast, of the $53.6 billion goods Nigeria shipped abroad in 2019, 87.1 per cent amounting to $46.7 billion was oil and gas. Other base goods accounted for 3.9 per cent or $2.1 billion. No other product reached one per cent. Raising the country’s annual official output dramatically from the 14T is however deemed doable by the ministry that aims to raise the share of mining from its miserable 0.3 per cent contribution to Gross Domestic Product to five per cent as outlined in the National Minerals and Metals Policy. This should be a shared priority by the Federal Government, which has exclusive legislative control over minerals, and state governments that should be desperate for industries and job creation.
The country has to leverage the principles of comparative advantage, location of industry, multiplier effect and self-reliance. Some 44 mineral types have now been identified in 500 locations as ready for exploitation: state governments should take advantage of existing federal incentives to team up and compete to attract competent foreign and local investors into mining in their respective states. Every state is endowed with solid minerals. Mining is labour-intensive and therefore creates jobs, provides raw materials and impetus for the establishment of industries. Steel, cement, electricity, fertilisers and coal are dependent on mining. Under its 12th Five-Year Development Plan, India envisages that for every one per cent in growth, the mining sector will create 13 times more employment than agriculture and six times more than manufacturing. Australia’s parliament recalls how the country became one of the top five producers of the world’s key minerals through vigorous exploitation and investment by its six states and three territories, which like Nigeria’s 36 states, all have mineral types.
Success in transforming the solid minerals sector will depend on overcoming identified problems, chief of which are lack of infrastructure support such as access roads, reliable electricity and rail services, policy uncertainty, poor legal framework, overlapping jurisdictions and taxation and insecurity. PwC recommends a transport master plan by the federal, state and local governments linking mining sites by road and rail and mandatory utilisation of available raw materials for public infrastructure projects.
All efforts should be taken to lure reputable foreign investors and the private sector primarily through improving on its 131 out of 190 countries ranking on the Ease of Doing Business report 2019 and taming insecurity. Most gold deposits are in the North where banditry, kidnapping, terrorism and communal strife have conflated; investors will not plunge into such a cauldron. Drawing from the sad experience of the oil hosting areas, from the outset, UNCTAD recommends robust community buy-in in mining areas, including state, LG and community equity participation in the ownership of mining operations and environmental remediation to preserve traditional means of livelihood.
The federal and state authorities should have the political will to ensure the urgent reactivation of the mining sector to change the dynamics of the country’s distorted economy.
