Mining and Agriculture Sectors are Key Drivers to Improved Export Earnings

Proshare

Thursday, August 18, 2016 11:02am /FBNQuest Research

The FGN’s plans to diversify Nigeria’s revenue base is largely driven by improved export earnings and has identified the mining and agriculture sectors as the key drivers towards achieving this.

Bolstering solid mineral mining will also have a positive impact on the government’s import substitution strategy. Bauxite, for example, is the key component used in the production of aluminum sheets which was mentioned in the CBN’s list of items ineligible to access fx in the interbank market.

We understand that the process of gaining a mining licence is a bit simpler as the timeframe allocated to awarding mining licenses is now within 40 days.

The reduction in the timeframe for acquiring a licence should encourage increased participation from mining focused SMEs. As at last year, the ministry of solid minerals had registered 600 mining cooperatives and about 16% accessed small scale mining licences from the Mining Cadastral Office.

Recent data released by the National Bureau of Statistics (NBS) show that 144,800 million metric tonnes (mmt) of coal was mined in 2015. Gombe state was predominant in coal mining as it accounted for over 90% of the total.

As for metal ore, the data showed 22,639 mmt was mined last year with Plateau state, Ebonyi state and Abuja representing 35%, 36% and 16% respectively.

There are statements from the solid minerals ministry which point towards Zamfara state losing about US$500m per year due to gold smuggling.

A boost in iron ore mining is expected to revamp Nigeria’s steel manufacturing segment. The country’s annual steel demand is estimated at 6.8 mmt. However, only 2.3 mmt is produced domestically and primarily from scarp iron

For local vehicle assembly manufacturers, steel is a major component. If sourced locally, it will reduce production costs. The FGN estimates that a fully integrated steel industry which meets domestic demand would save US$4.5bn in imports of processed steel, aluminium products and derivatives.

The minister of solid minerals development, Dr. Kayode Fayemi, recently revealed that US$5bn is required to jumpstart the mining sector. In addition to being an additional source of revenue for the country, there are other benefits such as job generation and the diffusion of transferable skills to local technicians.

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