Monday, July 12, 2021 / 11:40
AM / by CSL Research / Header Image Credit: Zinoimpex
Last week, the Minister of Mines and Steel Development, Olamilekan Adegbite, noted that the country will unveil its locally made barite for domestic consumption and exports activities. We believe that this is part of the continued efforts by the government to diversify the country's revenue from oil through exploiting its identified seven strategic minerals (coal, iron ore, bitumen, gold, limestone, lead/zinc and barite).
Despite the abundance of mineral resources in Nigeria, the solid minerals sector has significantly underperformed with a meagre contribution of less than 1% to the nation's GDP over the years (currently at 0.6%). However, the current statistics do not capture the informal sector (artisanal and small-scale mining activities), which constitute over 80% of the entire mining activities in the country. In 2019, the government launched the Presidential Artisanal Gold Mining Development Initiative (PAGMI) to integrate artisanal gold mining activities in the country and boost foreign reserves accretion, but the current reality seems far from the intended plans.
While we recognize the country's perennial overdependence on crude oil and negligence of all other minerals, there are several issues affecting the entire value chain. These include huge funding requirements, insecurity in major regions known to have some of the country's major mineral resources, decrepit infrastructure, limited technical know-how, and unreliable information on the quantity & quality of mineral deposits in the country due to limited geoscience data and information. Consequently, this has contributed to the low investments in the sector as investors remain concerned about its bankability with many mining operations, which are still in the exploratory phase.
In our opinion, the move by the government to stimulate local refining of barite is commendable. The mineral resource is used as a weighting agent in drilling fluids in the oil and gas industry. Over US$300mn is spent annually on the importation of barite. According to the Nigeria Extractive Industries Transparency Initiative (NEITI), revenue generated from solid minerals stood at N79.96bn in 2019 relative to N13.9tn from oil and gas. This implies huge untapped opportunities.