Wednesday, May 4, 2016 8:52AM/ FBNQuest Research
The FGN has pinned its hopes for growth generation and job creation in good part on mining and agriculture. In November the monetary policy committee named the same sectors, as well as infrastructure and industry, as critical to job generation.
Kayode Fayemi, the federal minister for solid minerals, said in a university lecture over the holiday weekend that mining could earn up to N5trn annually (US$25bn) if the FGN reformed the sector. The target appears ambitious when we note from the national accounts for 2015 that the output of mining and quarrying (excluding petroleum and gas) amounted to just N110bn (US$550m).
Nigeria has an abundance of mineral resources. Its record for development, however, has been very poor because control over subsoil resources (including the collection of taxes and royalties) is vested in the federal government. Existing mining is predominantly artisanal, and so outside the tax net.
The states can make land available but cannot tax the enterprise. They therefore have very little incentive in promoting mineral development. A change in the Nigerian Minerals and Mining Act 2007 and related legislation would support internal revenue generation in many states.
This has become highly topical with the slide in the oil price and the accumulation of salary arrears in the majority of states.
Another arm of FGN policy is the rehabilitation of the steel industry including Ajaokuta, a case study in mismanagement, not least because it is a large user of iron ore. The overhaul would include the skewed tariff policy and non-tariffs barriers, notably counterfeit goods. Nigeria’s reserves of the ore are estimated at two billion tonnes, the second largest in Africa after Guinea (Conakry).
The FGN estimates that a fully integrated steel industry on a scale to meet domestic demand would save US$4.5bn in imports of processed steel, aluminium products and derivatives. Some new plants are on the drawing board, one example being a US$1.2bn project for which the BUA Group is negotiating Chinese financing and technical support.
The FGN is also pushing for investment in the coal industry and the development of reserves of 2.8 billion tonnes over 19 states of the federation, which, it forecasts, could generate 1,000 megawatts of electricity by 2020.
Some external partners such as the World Bank will no longer finance new coal-fired power plants, however clean environmentally they are packaged.