Nigeria is blessed with significant deposits of solid minerals and precious metals, which largely remain unexploited. Recent research has shown that Nigerian solid mineral reserves are one of the largest in sub Saharan Africa. Accordingly, the solid minerals sector rightfully deserves the attention of the Nigerian government in its current quest to diversify the Nigerian economy. Over the years, one major factor militating against the solid minerals sector is access to funding required to support its development. It is on this basis that the Nigerian Minerals and Mining Act, 2007 (“Mining Act”) as supported by the Nigerian Minerals and Mining Regulations, 2011 sought to bridge the funding gap by introducing the Solid Minerals Development Fund (“SMDF” or the “Fund”). This article seeks to consider the essence of the SMDF and its impact on the Nigerian solid minerals sector.
The Solid Minerals Development Fund
The Fund is a statutory creation and has been established principally to support the development of capacity in the solid minerals sector, as well as enable funding for geo scientific data gathering, storage and retrieval to meet the needs of private sector led mining industry. It is also meant to equip mining institutions to enable them perform their statutory functions, enable funding for certain extension services to be rendered by government to small scale and artisanal mining operators, as well as enhance the provision of infrastructure in areas where mining activities are conducted.
The Fund is required to inter-alia consist of the following:
- sums appropriated for solid minerals development under any Federal Law;
- sums appropriated for solid minerals development under the Small and Medium Industries Equity Investment Scheme (SMIEIS);
- funds received as grants, donations, foreign loans, bonds and long term swaps; and
- sums appropriated to it by the Federal Government’s budgetary allocation.
The SMDF is managed by a board whose chairman is appointed by the president on the recommendation of the Minister of Solid Minerals Development (the “Minister”) whilst an executive secretary appointed by the Minister shall be responsible for the day to day administration of the Fund under the direction of the board. Furthermore, the CBN is expected to act as custodian of the Fund. Ultimately, it is expected that the SMDF provide funding for long term exploration and exploitation and thereby culminating in the development of the Nigerian solid minerals sector at large. As the Mining Act did not clearly state the procedure and modalities for accessing the Fund, it is expected that the Minister will issue guidelines in this regard.
Whilst the Mining Act, which introduced the Fund was enacted in 2007, the management board of the Fund was not inaugurated until the year 2013. Notwithstanding the inauguration of the Fund’s board, the Nigerian mining community is yet to boast of any significant benefit derived directly from having the Fund in place, as the plethora of issues which the Fund sought to mitigate, such as lack of infrastructural development in the sector, detailed and dependable geo-science data gathering, funding of mining institutions and investors et al, are still evident at date. A major deficiency in this regard has been the dearth of requisite funding to enable the board achieve its mandate. Accordingly, the lack of governmental support and commitment has been the major bane militating against the successful implementation of the Fund.
However, in order to reposition the solid minerals sector, the Nigerian government in the first quarter of 2016, announced certain steps being taken to revamp the sector. It undertook a review of its existing mining licences with a view to revoking dormant titles. It is also reported that the Fund will be revitalised with an injection of about $1 billion Dollars (circa N200 billion), to further encourage investments by credible investors in the mining sector.
However, a key issue remains the need for clear directions on how this Fund will be accessed. As lack of information and guidelines in this regard, negates the vision of the Fund. It is also imperative that the government clearly shows how it intends to inject monies into the Fund, as merely stating that it intends to inject monies without stating how these funds will be raised and timelines, may be detrimental to investor confidence.
The solid minerals sector indeed has potential to generate significant revenue for the Nigerian government and ultimately benefit Nigeria at large. Considering the enormous local market, the solid minerals sector could play an important part in the recent drive to “buy Nigerian”, which is being driven by the present administration and also potentially boost the nations export reserves.
Consequently, it is pertinent that active steps be taken to make the sector more investor attractive and less challenging. This can only be achieved by substantial development of this sector, which is what the Fund is expected to drive.
We therefore align with the stance of the present Nigerian government to encourage investments in the sector by making the Fund active. It is our view that the Fund is positioned to play a significant role in bridging infrastructural, geophysical data, human capacity and investment gaps presently plaguing the sector. Nevertheless, the government’s total and unreserved commitment is key to effectively bringing the current proposals to fruition. We hope this will serve as a foundation on which other developmental initiatives for the solid minerals sector may be built and particularly hope the government lives up to its obligation in this regard.