- April 3, 2020
- Posted by: Meka Olowola
- Category: Oil & Gas
According to the Ministry of Mines and Steel, gold is the most valuable resource in Nigeria apart from oil and gas. Yet Nigeria’s gold potential has been largely underrated, underexplored and underutilised. Strangely, whilst oil proceeds make up to 90 per cent of government revenues and around 10 per cent of the Gross Domestic Product (GDP), mining, the mainstay of several other less endowed economises, constitutes just 0.3 per cent of ours.
With deposits of over 44 minerals that includes gold, iron ore, coal, tin and zinc, in more than 500 locations, Nigeria could easily be the envy of the whole world. In fact, every time it is mentioned that my native Kogi-State alone has enough resources to transform the whole of Africa and its 1.3 billion people for good, I am not sure how exactly to react.
With existential stagflation, a persistently high inflation combined with high unemployment and stagnant demand in the country’s economy, Nigeria is currently facing the most challenging recession that a majority of the readers of this article, if not all, has ever witnessed. As the Nigerian government seeks alternative means of income in the wake of this crisis, gold, once again, presented itself as a huge potential to take centre stage and liberate the nation from economic strangulation.
Nigeria’s gold deposits are concentrated in the North-West and South-West, with large proven reserves spread across several parts of these two regions and a number of smaller occurrences beyond. The most notable states for gold production are Zamfara and Kebbi in the North-West and Osun in the South-West. Kogi, Ogun and Ondo states are also considered to have sizeable deposits of the mineral.
A little bit of history. We were taught that Gold mining started in Nigeria as far back as 1913 with the colonial government supervising mines in the old northern and Southern protectorates. Gold mining activities waned in the late 1930s as colonists abandoned mines in the wake of World War 1. After Nigeria’s political independence in 1960, the leaders fell on agriculture and mining to deliver economic emancipation. But that dream was very lived again as another war, this time around civil, sent mining again to the doldrums. If wars are what led to the demise of mining in Nigeria, crude oil boom was what buried it. You know the story; in the 1970s, the allure of easy petrodollars completely eclipsed the promises held by Nigeria’s gold potential and the sector became hampered by government impassivity. Nigeria’s economy became focussed on oil while gold mining activities began its steady decline alongside the entire solid minerals mining industry.
The leprosy infection has set in, albeit insidiously. Leprosy, according the WHO is an infectious disease caused by bacteria that multiple so slowly that it may take up to between five to 20 years or even more for symptoms to appear. That was exactly what happened in Nigeria. No one saw what was going on until the leprosy hand started to whittle with the severe austerity that hit Nigeria in the 1980s and resulted in the infamous SAP. A story for another day. For now, let’s get back to gold.
Enter Midas, the famous king remembered in Greek mythology for his ability to turn everything he touched into gold. A gift he supposedly received from a god in return for a personal favour. The only problem was that this was very short-lived. Midas reveled at first with pride at his ability to transform everything he touched to gold; but when he beheld his food grow rigid then he understood that this gift was actually a curse. A version of the story said he died of starvation.
Whilst some gold mining activities continued in Nigeria, they have been largely small scale and artisanal in nature, with several pockets of non-corporate actors and illegal miners strewn across the country. This impassivity of the government to its gold value chain has led to the proliferation of illegal, unregulated mining in parts of the country with attendant consequences.
One of these consequences is exposure to hazardous materials including Lead and Mercury. One of the most notable instances is the incident in Bagega, Zamfara State in 2008. Unknown to many, the mines in this area contained Lead which is not typical in most gold mining areas. Thousands of people became exposed to the hazardous metal and over 460 children died in the tragedy.
Another consequence of the illegal mining is that it fuels local conflicts across Northern Nigeria. According to a report by the United Nation’s Office for the Coordination of Humanitarian Affairs (OCHA), an estimated 80 per cent of mining in the North West region is carried out illegally and on an artisanal basis by local populations. This has led to the appropriation of gold mines by criminal groups to fund violent conflicts in states like Zamfara and Katsina where bandits have killed thousands of people. There is also the heavy involvement of foreigners, including Chinese citizens in the illegal exploration of gold in Nigeria.
“Illegal miners often front for politically connected individuals who collaborate with foreign nationals and corporations to sell gold. The mineral is routinely smuggled to Dubai through neighbouring Niger and Togo,” the OCHA said in its report.
Nevertheless, in the past three years, there has been a renewed interest by the government in gold prospecting and mining as the Muhammadu Buhari administration seeks more avenues to earn income amidst a cash crunch occasioned by increased volatility in the oil and gas industry. One of the areas being explored is the maximisation of the entire gold value chain, including the refining of gold and the adoption of local gold into Nigeria’s external reserves. Nigeria’ first gold refining licence was issued in 2018 to local firm Kian Smith Trade & Co and the company has said it expects to begin operations in 2020, having failed to start last year.
In February 2020, The Minister for Mines and Steel, Olamilekan Adegbite, said Nigeria expects its mining sector to grow to 3 per cent of GDP within the next five years from just 0.3 per cent currently as the government seeks to diversify Africa’s largest economy away from its reliance on crude oil sales. Seven strategic minerals have been identified for investment with gold at the forefront.
At the core of Nigeria’s new gold strategy is the Presidential Artisanal Gold Mining Initiative (PAGMI), designed to formalise the industry by incorporating artisanal gold miners into Nigeria’s gold value chain via the purchase of artisanally-mined gold bars by the Central Bank of Nigeria (CBN). It also involves registering, regulating, and linking the artisanal miners to the formal markets through corporate players like Kian Smith and Dukia Gold Limited. With these initiatives, the government can provide technical and financial support to the local gold mining industry which is said to employ over 600,000 people.
The results of PAGMI began to materialise in June 2020 when the president unveiled the first batch of artisanal gold bars to be incorporated as a reserve instrument by the CBN. The 12.5kg bar of gold is worth N268 million.
According to President Muhammadu Buhari, the changes that have been made to gold mining regulations will earn the government $500 million a year in royalties and taxes, create 250,000 jobs and help fast track the diversification of Nigeria’s revenue base. Moving this beyond mere government rhetoric to inclusive national prosperity is what everyone is waiting to happen.
To be continued