Fayemi: Indigenisation Policy of 1970s Destroyed Nigeria’s Mining Industry
Why has Nigeria allowed its once vibrant mining industry to collapse and what is the government doing to revive this potentially huge revenue earner. The Minister of Mines and Steel Development, Dr. Kayode Fayemi provided answers to these questions and mo
Is it fair to say that oil has done little good for Nigeria?
I don’t think it’s completely true to say that oil has done little good for Nigeria. Oil has done some significantly good for Nigeria but oil has also affected our multiple fold of revenue generation.
…Not to interrupt but much of the revenue has been squandered by various military and civilian regimes because the oil was used as a basis for massive borrowing in the 70s, which itself was also squandered, leaving ordinary Nigerians with a declining standard of living?
To that extent I will say it’s correct. Oil has not always been a source for good but that is also the challenge we must confront … you can’t continue to explain away the challenges of the past. It is how we get out of this poverty trap for all. That is where most of the revenue generation for all the natural resources is coming from for now. But much more importantly, is that even when we develop mining to its fullest potentials, the true wealth of Nigeria is the human capital, not even generation from the mineral resources.
We still will talk about the mineral resources but what lessons has Nigeria learnt and what can we conclude about the future prospects for the country, given the tantalizing prospects, which oil offered for breaking out of the poverty and fueling industrial development seems to be diminishing by the day?
Clearly, I think the first lesson that Nigeria has learnt from the neglect of its mineral resources is that private sector works and market must be leveraged. We started facing this problem; the minute nationalisation came into the mining sector. Of course, there are varieties of positive reasons why Nigeria embarked on the indigenisation decree of 1972, but it has had a very deflectory effect on the mineral sector. At a time in this country, power was only generated by tin mining companies in Jos that you mentioned. The railway connecting Enugu to Port Harcourt was largely to service the coal industry and these sorts of things that were fettered. But Nigeria is still like a green-field as far as mining concerned. That is why opportunities are legion if we focus our energy on geological prospectivities, on organising the informal sector in mining, on putting enough access to finance in the hands of those embarking in the sector. And generally, ensuring that business environment is conducive.
There have been a lot of talks in the past about diversifying away from oil. Basically, a fall in the oil price is what became the wakeup call for the areas the country has neglected for a long time such as agriculture, mining industry and are now getting the attention of the government?
Correct. I think it’s a fair to say that President Muhammadu Buhari has always been passionate about agriculture and mining. It is not a later day fad for him. He has always believed in these sectors, having worked in the oil sector himself as a minister that we needed to broaden these sectors…
…I mean the fall in the oil sector…?
Yes, that has always been the trigger, when oil falls, what sector offers him an opportunity for substitution? Mineral resources. Look at what we have done with cement. The limestone has helped us to produce the largest cement industry in Africa to the extent we are now a net exporter of cement. It’s the same limestone we have always had and yet we are importing almost 80 percent of the product...
Well you said last year that before the end of the first quarter of 2017, you would have clear direction as whether the government is taking over the mining sector and running it yourself or not. What have you decided now what is the current situation?
The roadmap is out and endorsed by the Federal Executive Council (FEC), and thrust of the roadmap is that government is going to be the enabler. We are not going to be an operator. We are going to provide the conducive environment for players to come into the industry and we will support them with a variety of incentives, backed with predictable legal and regulatory environment, access to finance, access to tools for the small scale players, and a very clearly defined licensing regime. Those are the things I believe we should do, while we let the players in the private sector drive the industry.
What is the current yield financially that you are getting from the mining and solid mineral sector. What is the current share of the GDP per year?
Well, the current share of the GDP (Gross Domestic Product) is still at least very low. It is at 0.34 percent of GDP but what is interesting about that is that if you look at the National Bureau of Statistics (NBS) last two quarter reports, its only mining and agriculture that has grown in this period of recession. So the clear direction is on the upswing. So what is the potential growth that you envisage from that as we shift away from dependence on oil as our main source fund?
The whole of the emphasis at our disposal and all the fact that we have is that by the year 2025, that is 15 years from now, which is enough time for mineral resources to develop; we should be hitting 70 percent of GDP and that’s quite a chunk. We used to be at 5 percent. That period you referred to, used to be at 5 percent of the GDP up till the early 1970s when oil and gas took over. I believe we could return to that if we provide the entire regulatory and legal environment to support the sector.
Mining as you noted is of course, long term and some Nigerians have questioned whether that is urgent remedy Nigeria needs to mitigate its cash crunch?
Well, if you look at our Economic Recovery and Growth Plan, we have said that the trigger for inclusive growth is ensuring that once we guarantee macroeconomic stability; aligning our trade policy with our monetary policy, with our fiscal policy. Two, is to increase expenditure in infrastructure, transportation infrastructure, road infrastructure, attain sufficiency in energy and power sector. Those for us are the immediate triggers but those triggers will not become possible if we don’t guarantee a sustainable industrialisation. That’s where mining comes in, that’s where Ajaokuta plants comes in, that’s where all the elements that makes mining thrives in other countries becomes relevant. It may not be the short term remedy that will be required but it’s one of the longer terms sustainable remedy is that we will build an industrial society.
Obviously to do all these things you need a lot of money. You have set for yourself ambitious targets. You talked about the percentage. I heard that the government plans to increase mining contribution to GDP up to 30 percent by 2020. I mean obviously, you are the Minister and can give us the accurate figures. Some have said all of that is unrealistic given that even the money that was meant to come from the World Bank to help develop the mining sector is now apparently being shifted towards plugging the huge budget deficit?
That is not correct. Actually, the World Bank announced on Friday that $150million is still being approved by its board for the mining sector.
…But that’s a pittance?
Yes that’s a pittance but we are not seeking perfection. We are seeking progress. We won’t get to perfection but let us at least begin the journey of a thousand years.
So what are you going to do with that roadmap?
One, two we are going to start a process of strengthening the cooperatives in the small scale sector. 80 percent of the miners in Nigeria are small scale. They are artisanal. We are not going to get rid of them by simply saying they are illegal. We are going to do something by