Poor implementation of policies, a major problem of Nigeria’s mining industry -Director, PwC

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Habeeb Jayeola

Habeeb Jayeola, is the Director and Head of the Mining Industry, PricewaterhouseCoopers (PwC Nigeria. In this Interview with the Publisher, Nigerian NewsDirect, Dr. Samuel Ibiyemi, he speaks on the state of the mining industry in Nigeria, the effects of illegal mining on the Nigerian economy and the need for the government to pay critical attention to consciously implement existing policies to sanitise the industry

From your point of view, how do you perceive the mining Industry in Nigeria today?

Well, the Industry has come a long way. There is obviously progress made in a couple of years. We can see very significant interest from the federal government to diversify the revenue sources for Nigeria and there have been very strong attention on mining.  Probably mining is not a short 100 metres race, it is a slow and steady journey which can win  a marathon race. That brings to sight the fact that there has to be consistent input and investment backed with consistent government policies capable of allowing the mining ecosystem to spring forth. The current administration has actually done quite a lot in its first four years in trying to resuscitate the mining industry and the clear signal of the mining community both within and outside Nigeria is that the Federal Government is paying serious attention to the industry.

We are not where we ought to be yet, but we are definitely on the road to getting there. We hope the government will continue the drive and put in more effort considering some decisions that may have been made in the past which are yet to yield enough sanction to redeem what they intend to, so that in a couple of years we will see mining becoming a key source of revenue for  Nigerian economy.

It has been discovered from the hand-over note of the immediate Minister of Mines and Steel that Gold transaction has largely been an underground deal contributing nothing to the Federation account. As an expert, how do you think this can be addressed?  

Gold has not only been the mining resource subject to illegal activities without yielding the necessary revenue in terms of royalties and taxes. There are several other minerals that suffer the same fate. There are cases of smuggling activities. There has been the government policy action in terms of closing some borders recently to tackle this problem. Obviously, the porous state of the borders is a major channel by which the resources are carted away across the Nigerian borders. One of the key ways of addressing the problem is what the government is doing in trying to secure the borders to ensure that there are no free movement of goods across the borders without going through appropriate checks.

The other approach will be in terms of bringing all the small scale artisanal miners together in a way that they can be supported to enable them run their activities in terms of providing them with the appropriate funding, tools, and training that will enable them operate well at the artisanal level. Some people perceive artisanal mining as illegal, but it is not necessarily correct. There is what is called small scale and artisanal mining license. Therefore, a person can operate as an artisanal miner on a small scale, but he needs a license to do so. An illegal miner is someone who is operating without a license. An illegal miner can be someone who only has obtained an exploration license, but engaging in mining. With discovery of minerals after exploration, it is required that the explorer is supposed to obtain a mining license before he begins to mine. If he fails to obtain the license, he becomes an illegal miner.

Hence, it is not only the small miners who are involved in this. It could also take the form where the license an operator obtained is only to mine gold, but arriving the site, he may discover other minerals such as Zinc, and lead among others. If in any case the party involved refuses to go further to obtain for mining these particular minerals discovered, it also becomes illegal mining.  The category of illegal miners also covers those who scrap around for mineral resources. People misinterpret illegal mining to be activities of small scale mining alone which is not necessarily the case. Illegal mining is generally seen in the light of running mining activities without government approvals. The point here is that all these sources feed into the revenues going-out without the government been able to monitor their activities.  In the instance of a person who only has an exploratory license and is engaged in mining, he is not reporting to the government and the Monitor Inspectorate is not in the position to monitor him, collect his royalties, and the FIRS (Federal Inland Revenue Service) is not collecting taxes on his activities because he is not passing through the legal channel of operation.

All these activities are not making the revenues come on stream. Truly those illegal activities are going on and gold is key among them because of the high price of gold in the global market. To tackle this is part of what the government is doing in terms of licensing policies where an operator is expected to give returns on his mining activities. With the policy, an operator who refuses to give appropriate return over a period of time, will have his license revoked to be handed over to a serious operator.

We have what we call buying centres and lapidaries whereby we mop-up these minerals across a particular region. Sometimes because of the ready cash available from smuggling cartels, people are really fund of going into the sites to mine illegally. This is because there are cartels funding those activities. However lapidaries put a kind of value on that. The case we are talking about here has to do with buying the resource. Government have some approved buying centres, but in terms of their functionality, they may need to be beefed up appropriately. That can be the immediate source of buying the minerals such that people are not attracted to the smuggling cartels. The lapidaries will help mop-up the minerals so that people who are mining legitimately can easily sell to the lapidaries. It is therefore when they cannot easily sell that they can go to a cartel that wants to sell and give cash. The government has to ensure there is appropriate monitoring, strengthen the Mines Inspectorate and ensuring staff are adequately trained to be able to go to the sites, monitor activities, know the operator involved and the kind of mining activities going on there.

Also, the government needs to enforce corporate governance with companies that are short coming in terms of financial reporting, disclosure of financial statements and make all these mandatory. The efforts should not be limited only to monitoring activities on site, but also tendering auditing and financial reports.  This will bring a form of sanity into the entire system. The government should mandate presentation and scrutiny of audited financial statements before renewing licenses of operators. These are some of the measures the government needs to put in place. Policies need to continue evolving to see how the industry can be sanitized.

Are the current policies friendly enough to encourage investment in mining?

Definitely, Nigeria has one of the best policies globally in terms of supporting mining. However, the question is a matter of whether they are being enforced. The key thing is that when the Nigerian Mining Act is compared to some other Acts, it will be seen that we have policies that arguably if they are enforced with their provision, will move a lot of steps in the industry. For instance, in the area of obtaining licenses, there is information which need to be provided as well as conditions required to be met. These may have to do with information on financial backing, the kind of mining process, and the turn-around period of an intending operator, among others. If all these requirements are well scrutinized as expected, these will check against isolated plan of operators on site prior to granting them licenses. That will check against any of such plan.

It is part of the requirement that after obtaining the mining license, an operator is expected to report to the Inspectorate for monitoring. One would therefore need to ask why there has been a gap with regards to this. With serious implementation of the existing policies, the Industry can move very high. Where improvement is needed is in the effective implementation of the existing policies across board.  Before an operator can get a license, the company must have been in existence and registered with the Corporate Affairs Commission. Definitely, if all these standards are consciously put into effect, many of the lagging areas will be geared to high levels.

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