Nigeria to Privatize State-backed Initiative for Mineral Extraction

Nigeria is in the process of launching a state-backed solid minerals company, which will feature a unique characteristic – allowing private investors and the public to own the majority of the company’s stock, accounting for at least three-quarters of its total shareholding.

Minister Dele Alake disclosed this development at a conference organized by BusinessDay in Abuja, revealing that the government will retain a 25 per cent stake in the company, while the remainder will be equally distributed between the public and private investors. This strategic move is aimed at attracting significant multinational investment in Nigeria’s stagnant mining sector.

The newly created entity, known as the Nigerian Solid Minerals Corporation, will boast a share capital of N1 billion and will be dedicated to the development of various metals such as gold, baryte, lead iron ore, bitumen, limestone, and coal. As part of the plan, the corporation will merge two existing mining enterprises, the National Iron-Ore Company and Bitumen Concessioning Programme.

Given Nigeria’s historical reliance on oil and gas for revenue, the country is now striving to diversify its economy and reduce its unwavering dependence on the oil sector. With more than 65 per cent of the government’s revenue and over 85 per cent of exports stemming from oil and gas, Nigeria has been classified as a mono-economy.

In response to the formidable challenges facing the mining sector, the government is initiating a series of comprehensive reforms. These reform measures include the establishment of a mining police force to counter illegal mining activities and bolster security, as well as the digitalization of mining application procedures to enhance the ease of conducting business in the sector.

Additionally, the government is committed to enforcing updated Community Development Agreements (CDAs) for mining companies, with the primary objective of ensuring that companies reciprocate to the communities that host them. The focus on effective implementation and compliance aims to address long-standing issues that have impeded the development of the Nigerian extractive industry.

Historically, Nigeria’s lack of attention to its mineral resources has led to missed opportunities. According to consultancy firm Pricewaterhouse Coopers, the contribution of solid minerals to the country’s GDP dwindled to a mere 0.17 per cent between 2018 and 2022, a marked decrease from previous levels. This negligence has also deprived Nigeria of crucial revenue needed to drive development and fund essential infrastructure.

In contrast to neighbouring countries such as South Africa and Ghana, which have leveraged their mineral resources to transform their economies, Nigeria is now striving to harness its abundant mineral wealth to propel economic growth. The privatization of the Nigerian Solid Minerals Corporation and the various reforms that are being introduced signify a reinvigorated commitment to developing the country’s mining sector.

As Nigeria embarks on this new phase in its mining industry, it remains to be seen how these initiatives will reshape the sector and contribute to the country’s overall economic development.