Published On: Thu, Nov 26th, 2015

Calls deepen to diversify Nigeria economy from oil

oiled handsLAGOS, (CAJ News) – THE falling oil prices in the international markets have made it imperative for Nigeria, Africa ’s biggest producer of the product, to explore untapped industries to revive the economy.

This is the view of international market watcher, First Bank of Nigeria Capital (FBN Capital), an entity of one of the country’s leading financial institutions.

It recommended a major focus on the mining sector.

“The slide in the oil price and the exposure of Nigeria’s Achilles heel has reinforced the need for economic diversification. For economic development in many emerging markets, mineral resources are the bedrock for industrialization,” FBN Capital stated on Thursday.

The firm pointed out the President Muhammadu Buhari-led administration had listed solid minerals as one of its priority sectors.

Based on data from the Nigerian Extractive Industries and Transparency  Initiative (NEITI) there are over 40 different solid mineral deposits across Nigeria, which are hugely untapped, prompting the private sector to urge the government to invest more in geoscience data gathering, as bankable data was a key driver for investors.

As part of the strategy to reform the sector, the Federal Ministry of Mines and Steel Development has identified seven strategic minerals (coal, bitumen, limestone, iron ore, barites, gold and lead) for priority development.

The estimated national reserves of coal are 2,7 billion metric tonnes (mt) while those of iron ore, limestone and lead are 10 billion mt, 3 trillion mt and 5 million mt respectively.

“Nigeria needs to leverage on its diverse sources of energy to ensure an efficient fuel mix for power generation to achieve the medium-term goal of stable power supply. Last year, the government reinforced its encouragement of private-sector participation in the energy sector and targeted 30 percent electricity generation from coal,” according to FBN Capital.

Attractive investment incentives currently in place include: waivers of customs and import duty for machinery and equipment for mining operations; tax holidays for the first three years of operations; carryover of losses for four years; and deferred royalty payments subject to approval from the

However, the firm raised concern operational costs are high, particularly for small scale mining operators. At a mining conference hosted in Abuja last week, it was gathered that in Cross River State there were currently only six operational quarries.

Five years ago more than 30 were fully operational.

While the solid minerals sector grew by 8 percent year-on-year in the third quarter of the year, it nonetheless contributed less than 1 percent to gross domestic product during the period.

Oil’s contribution has fallen to about 9 percent.

CAJ News

Featured Video