Awakening a Dead Horse
With the recent passing into law of new guidelines for the mining sector, foreign investors throng the country for investment opportunities
By Oji Odu
The recent passage of the Nigerian mining laws by the Senate is seen as the tonic to opening up the comatose mining sector and a critical factor towards creating robust activities in the sector.
Despite having an abundance of minerals in a country is instructively not enough for the development of the sector; indeed, the right legislation which guarantees the confidence of investors, analysts posit, is the appropriate take-off point. This realisation probably made the Federal Government to embark on reforms aimed at repositioning the country’s mining industry, such that would attract global capital financing.
According to The Source’s investigations, Nigeria is the world’s sixth largest oil producer, sitting on 34 different minerals that are untapped and occurs in not less than 450 locations with gold, coal, bitumen, tantalite and iron ore being some of the major solid mineral deposits that are yet under-tapped.
With the global rise in the prices of commodities and amid increasing demand from many Asian and European countries, the possibilities of exploration and exploitation of new minefields in Africa are high especially in Nigeria due in large parts to the country’s new mining laws.
The Source gathered that companies such as AngloGold Ashanti Limited, BHP Billiton and Norinther Financial Advisors have shown significant interest in prospecting, exploration and exploitation of solid mineral potentials in the country. Others include Barclays Capital, J.P Morgan, Rio Narcca Gold Mines Limited and Gold Fields Limited.
Gold deposits in Nigeria have continued to attract high investor attention– the highest level in about 25 years coming in January, 2006 at the peak price to $567 an ounce. This commodity (gold) has maintained its firm position at about $550/oz level which industry watchers believe would rise higher with the international expectations of continued increase in the price of crude oil.
Little doubt why the new legislation in the mining sector was described as one of the best in the world which can compete favourably with mining laws in different parts of the world.
Former solid Minerals Minister, Oby Ezekwesili, while reflecting on this said, “some provisions in our legislation that stand us out include 100 per cent ownership structure by investors and reparation of profits.” Ezekwesili was optimistic that due to the nation’s enabling environment– the World Bank’s endorsement of the fight against corruption, BB – rating by Fitch, $18billion debt relief from the Paris Club which would create an enabling macro-economic environment for investors to have better returns on their investments, there would be a big rush for investment in Nigerias solid minerals sector.”
The Source’s findings reveal that the new legislation apart from guaranteeing a security of tenure to investments, also offers such incentives as tax holidays, tax concessions and the reduction of government roles from administrator to regulator as the private sector takes over control. It also aims at creating harmony between host communities and the companies, while making provisions for the establishment of a States Mineral Resources and Environmental Management Committee.”
Ezekwesili had earlier revealed that the new legislation would not re-enact the Niger Delta episode whereby oil companies do not appear interested in taking care of the environment they operate in terms of according hazards priority attention. This revelation was made by the minister’s Personal Assistant, Chalya Miri Gazhi, during a three-day Inter Africa Group Conference in Lagos in March, 2006.
The “litmus test” of the new legislation was, however, made when the Bureau for Public Enterprise (BPE) called for expressions of interest for the take-over of the Nigerian Mining Corporation (NMC) and the Nigerian Coal Corporation (NCC), which attracted over 100 applications in the history of the sector.
Ibrahim Garba, Director-General of the Mining Cadastre Office revealed that apart from the short-listed companies, about 300 other applications have been recorded for mining titles which he said would be on first come, first served basis. According to the Minister, “We need the big players because mining is capital-intensive business, it is beyond merely acquiring the lease and letting it remain dormant.
“Like the bitumen project which requires billions of dollars, you have to go out and shop for such funds to execute it,” she said.
Notably, praises have continued to pour in from diverse sectors of the economy on the new mining legislation. For instance, Peter Leon, a famous South African lawyer said that, “the new mining law is not only perfect, it compares favourably with the legislations of Peru and Chile that are regarded as the best in the world.” Leon believes that the new law will not only transform the mining sector in Nigeria but would propel the country into an irresistible haven for investment.
Professor Thompson Badejoko, president, Nigerian Mining and Geosciences Society, said on his part that the passage of the law was a critical factor that would create robust activities in the mining sector, while some other analysts believe that the law was the instrument that gave boost to Nigeria when she went shopping for investors in South Africa during the INDABA mining conference, and Canada.
With investments of over $12billion expected to come into the country in the not-too- distant future, the mining industry is expected to provide lots of employment opportunities to the citizenry –and to boot, a boom in foreign exchange.