Solid minerals: Last frontier in Nigeria’s search for capital
Tayo Oke, [email protected]
Nigeria, says the Minister for Solid Minerals, Dr. Kayode Fayemi, is “sitting on an abundance of natural wealth” yet to be tapped and commercialised. This is a truism that is at once energising and perplexing in equal measure. It is axiomatic of our own inertia in an economy operating in a technological vacuum. Japan, South Korea, Malaysia, and Singapore among others are smaller countries by comparison to us, yet, these countries have risen from the dust to take their places in the modern technological super highways without sitting on any natural or supernatural wealth, within the period of our birth as an independent entity. As a matter of public policy, therefore, if there is any conversation we need to have about the future direction of our economy, it is and ought to be one revolving around this so-called natural wealth and how it can be converted into real wealth engendering a rise in the standard of living of ordinary citizens in this country and in the sub-region.
As things stand though, it is hard to engage the public in a conversation about such an esoteric ministry as that of the solid minerals. Though vital, its work sounds so obscure with little relevance to the lives of ordinary citizens. It is even doubtful how many well-meaning, well-educated Nigerians can freely relate to the ministry and its work. It feels very much like the “Siberia” for the policy wonk and the super assiduous permanent secretaries. To compound this, the minister has, at various times, been described as the minister for solid minerals, and minister for mines and steel development. The minister does not need the distraction of this schizophrenic identity. He ought to initiate a change of name for the ministry that reflects its mission and the core task of diversifying the economy from oil in order to drum up more public support for its work. Now, back to the “conversation”. The Federal Government has earmarked no less than seven solid minerals it considered “strategic” to its diversification efforts (gold, coal, bitumen, limestone, iron ore, lead/zinc and barytes), out of the 44 officially identified mineral items across the nation.
As of the year 2014, contribution of the solid mineral sector to the Gross Domestic Product was a paltry one per cent with the potential for this to go up by as much as five per cent in another couple of years, which could create hundreds of thousands of jobs across the country, wiping off youth unemployment in one fell swoop. A number of legislative and regulatory tools have been deployed to help unlock this potential, notable amongst which is the Nigerian Minerals and Mining Regulation 2011, mainly targeted at attracting foreign investors into the area. The facts are all too glaring even for the blind investor: Nigeria has the 12th largest ore reserves in the world; we have over three billion tonnes of iron ore in Kogi, Enugu, Niger, Zamfara and Kaduna for possible manufacturing of iron and steel. We have proven reserves of gold in commercial quantity, 42 billion tonnes of bitumen, almost double the amount of existing petroleum crude reserves, 10 million tonnes of lead/zinc, etc. The question, therefore, is why would any smart investor not take the plunger right off? The answer is, Nigeria is not the only one with such abundance of natural wealth in need of (foreign) investors. I put the word, foreign, in brackets because while all investors are welcome, it’s the foreign investors that mostly have the technological muscle to work in the area of solid minerals. There lies the trap; the capital trap, from which nearly all African states suffer. The solution has been, for all of them, the entering of the race to outdo each other in the area of incentives to offer to foreign investors. For us in Nigeria, this started with the repeal of the Nigerian Enterprises Promotion Act 1977, Nigerian Investment Promotion Communication Act, 1995, 2004, all designed to “liberalise” ownership structure of business in the country. Nigeria used to be in the position to dictate to foreign investors the percentage of their shares that must be owned by Nigerians (60 per cent – 40 per cent) split was the norm. Now, foreign investors can basically come in and establish dominance in any industry, and freely repatriate all their profits away from the shores of this country. There are other juicy incentives: 30 per cent companies income tax, pioneer status, Industrial Development (Income Tax Relief), up to seven years’ tax holiday, tax relief for research and development, the list goes on.
What all this is saying is that foreign investment is not a free lunch. It is not often the panacea people deem it to be. Foreign investors do not give a hoot whether the economy of their host country diversifies or stagnates; they only care about maximising their profits. Take for instance, the Ajaokuta steel project initiated over 30 years ago by President Shehu Shagari. It was an initiative that has gulped billions of dollars over three decades – for nothing, literally. It was given to an Indian consortium in 2008, in a desperate search for foreign capital. Soon after, the steel complex was ripped of its vital components and left to rot.
Negotiations to re-acquire the complex have also dragged on for years. Fayemi, a convinced pan-Africanist, was quick to nip this in the bud by insisting on a quick resolution in order to reclaim and recast the country’s steel production as Nigeria’s pre-eminent industrial power engine. He needs to go further. He needs to open up the entire industry to capital markets with full participation of Nigerians. This can be done by establishing an energy bank to guarantee investments. Foreign investors will become strategic partners instead of simply being industrial mercenaries and vulture capitalists. The last frontier in the nation’s search for capital can be brought down with the potent combination of indigenous capital and foreign expertise. Is anyone listening?
- Dr. Oke, a lawyer and an expert in financial and economic law, wrote in from Abuja via [email protected]
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