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Revamping Nigeria’s gold sector

Revamping Nigeria’s gold sector

Revamping Nigeria’s gold sector

We heartily welcome the Federal Government’s new policy to reorganise the country’s gold sector. The initiative, developed by the Ministry of Solid Minerals, is part of government’s initiative to check illegal gold mining across the country. The plan came on the heels of reports that Nigeria lost about N353billion in gold smuggled out of the country between 2016 and 2018.

Figures from the Nigeria Extractive Industries Transparency Initiative (NEITI) audits and reports from international sources reveal that about six tonnes of Nigeria’s gold are traded on the international market annually since 2016, with no impact on the economy or the nation’s Gross Domestic Product (GDP). This means that within three years, 18 tonnes of gold were smuggled out of the country. Just recently, security agencies at the airports made huge seizures of gold worth millions of naira. According to the new draft policy, the Central Bank of Nigeria (CBN) will be in charge of buying gold produced in the country. The measure is aimed at encouraging local production and transparency in the sector. It will also ensure that government gets its revenue in taxes.                                                    

This is a good idea because in many countries in the world, large gold reserves are usually held by apex banks on behalf of the countries. In the past, currencies issued by the Central Banks were backed by gold reserves. It is heartening that this new policy has been approved for implementation by the Solid Minerals Development Fund, which is a major plank of government’s Economic Recovery and Growth Plan (ERGP). The plan will also be integrated into the National Gold Purchase Scheme through the public and private sector window. The CBN is expected to be the anchor and final clearing house of the certified London Bullion Market Association gold bars produced through the scheme.                             

While the reorganisation of the Nigeria’s gold value chain has become expedient, it is equally appropriate to tackle headlong the problem of illegal mining. It will be recalled that NEITI, had recently identified six states in the country as leading destinations of illegal mining. The activities if illegal miners resulted in the dwindling fortunes of the sector to the GDP from about five per cent in the 1960s and 1970s, to a mere 0.5 per cent at the moment. In terms of revenue generation, the solid minerals sector provided $1.777billion between 2007 and 2017, while the oil and gas sector provided over $474billion.                    

We believe that the new mining roadmap will revamp the sector if it diligently implemented. Besides, government should create a conducive business environment that will make investment in the sector attractive. There is no doubt that the mining sector will flourish if properly harnessed.

Although the Petroleum Act 1969 and Section 39 of the Second Schedule of the 1999 Constitution (as amended), vest all minerals in the Federal Government, the government has not exerted much control in the solid minerals sector, thereby making it possible for illegal miners to thrive. However, now that government has shown renewed interest in the sector, it is only proper that it sets the right policy for the operators. It should also have appropriate sanctions for illegal miners.                     

Unfortunately, some miners obtain licenses from federal authorities but they are not properly supervised. Some of them do not renew their licenses when they expire. They do not pay appropriate taxes on their leases. Three years ago, the Federal Government announced that states were free to explore and exploit mineral resources in their domains, but Section 39 of the Constitution, and the Petroleum Act 1969 forbid states to do so until they are amended.     

However, there is no better time than now to reorganise and develop the solid minerals sector. The prevailing economic reality indicates that Nigeria should diversify the economy, away from the present reliance on oil revenue. Conservative estimates show that with over 34 solid minerals across the country, the sector can yield to the government a revenue of about $1billion annually, far from the present estimate of N22billon a year. Therefore, we urge the government to hasten the implementation of the new policy on the gold sector.

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