A major objective of the current administration is to diversify Nigeria’s economy and the Federal Ministry of Mines and Steel Development (“FMMSD”) has been a key driver of this initiative.
One of the major challenges to development of the mining sector in Nigeria has been limited access to finance, particularly by Artisanal and Small Scale Miners (“ASM”) who typically are not structured and therefore do not have the capacity to raise the nature of finance required to conduct proper mining activities. Statistics provided by the ASM Department of the Federal Ministry of Mines and Steel show that majority of miners in Nigeria, fall within the Artisanal and Small-Scale Miners bracket, which therefore made it imperative to fund this segment, to ensure the desired growth in the mining sector is achieved.
THE ASMFS FUND:
In a bid to ameliorate this issue, the FMMSD in collaboration with the Bank of Industry (“BOI”) on August 29, 2017 launched a N5 billion Nigerian Artisanal and Small-Scale Miners Financing Support Fund (“ASMFS Fund” or “Fund”) which is the first tranche of the N30 billion (approximately $100 million) mining sector component of the Natural Resources Development Fund approved by the Federal Government of Nigeria.
Under this arrangement, the FMMSD and BOI are both expected to equally contribute to the ASMFS Fund, whilst the BOI will be the Custodian and Manager of the ASMFS Fund. The ASMFS Fund has been set up, primarily to finance artisanal and small-scale mining projects involving industrial minerals, precious stones, precious metals (Gold), dimension stones, as well as such other strategic minerals as approved by the FMMSD and BOI.
The ASMFS Fund will be made available in the form of Term Loans or Working Capital for the purchase of plants and machinery, payment for drilling and geological and other services related to mining business as may be required, working capital for the purchase of materials and other expenses. The single obligor limit of loans to be granted under the ASMFS Fund shall be between N100,000 to N10 million for artisanal scale miners and between N10 million to N100 million for small scale miners, at a single digit interest rate of 5% per annum.
Only persons duly registered with the Artisal and Small Scale Miners Department of the FMMSD, or registered as an Artisal with the ministry of commerce of a State in Nigeria, will be have access to the Fund. It appears this criteria has been put in place to ensure accountability and make certain that only persons with cut out mining objectives have access to the Fund. This will also serve as an incentive for the registration of small scale miners, thus enabling the Ministry grow its data bank, as the dearth of data in the industry, remains a key industry issue.
A Project Management Committee (the “Committee”) which will be headed by the Minister of State for Mines and Steel Development and include BOI officials with expertise in Mining Finance and Project Supervision, is to be established to ensure sustainability of the Fund. The Committee will be responsible for appraising, recommending, disbursing, implementing and monitoring the projects as well as recovering the loans and interests from the approved projects. It may be necessary to have the Committee represented in the various States with solid mineral deposits, so as to enable the target small scale miners have access to the Funds, thereby ensuring its proper utilization.
We believe that the setting up of this Fund can serve as a catalyst to spur growth in the Nigerian mining sector. It is also hoped that other initiatives such as the Solid Minerals Development Fund which seeks to assemble a US$600 million investment fund, will be expedited.
We anticipate that the Fund will drive the growth of capacity in the solid mineral industry, as the small scale miners are provided with a platform to properly engage in mining activities, leading to a more robust industry capable of attracting higher volumes of foreign, as well as local direct investment.