Rising Debt of Miners to Banks Amidst State Bans
The mining and quarrying sector has experienced a marked increase in bank loans in the third quarter of 2023, amounting to approximately N12.76 billion, as detailed in the Central Bank of Nigeria’s (CBN) latest quarterly statistical bulletin. This represents a substantial 296% surge from the N3.22 billion recorded in the previous quarter, indicating a strong demand for capital in spite of broader economic challenges. As of September 2023, the collective debt burden of firms within this sector has grown by 43% to N42.35 billion, up from N29.59 billion at the end of June 2023.
These figures are particularly noteworthy given that certain Nigerian states implemented bans on mining activities during the same period. This regulatory landscape saw no fewer than five states—Taraba, Niger, Zamfara, Kebbi, and Enugu—impose restrictions, primarily targeting illegal mining operations amidst concerns over environmental degradation and insecurity.
This period of state-level interventions coincided with broader national security concerns related to mining activities. In 2022, the former Minister of Justice, Abubakar Malami, proposed a nationwide mining ban as a means to disrupt the financial support for terrorist activities. However, the recent state-imposed bans have been met with criticism from the Miners Association of Nigeria (MAN), who assert that such actions encroach upon federal jurisdiction over mining and mineral resources.
The federal government, under the leadership of Minister of Solid Minerals Development, Dele Alake, has clarified the legal landscape, unequivocally stating that state governments lack the authority to regulate mining activities within their territories. Alake has underscored the centralised nature of mining regulation, emphasizing the federal government’s intention to maintain a unified regulatory framework for the mining sector.
The Solid Minerals Development Fund (SMDF), guided by Executive Secretary and CEO Fatima Shinkafi, is concentrating on greenfield exploration to address the dearth of data that inhibits investment in Nigeria’s mining sector. Shinkafi has highlighted that the costly and risky nature of exploration has historically deterred banks from financing ventures in the sector. Despite these challenges, recent reforms spearheaded by Minister of Solid Minerals Development, Dele Alake, have gradually led to an upsurge in financing from the banking sector, reflecting a shift in the financial landscape.
Nigeria’s mining and quarrying sector is undergoing transformation, driven by governmental efforts to mitigate risk and create an environment conducive to investment. The focus on greenfield exploration and the willingness of banks to reconsider their stance on lending to the sector reflect a broader reassessment of the industry’s potential as a viable and lucrative investment destination.
