August 11, 2020
The outbreak of the COVID-19 Pandemic has dealt a severe blow to most economies in the world due to the lockdown and other containment measures adopted to mitigate the spread of the virus. The Nigerian economy has also been adversely impacted due to the contraction in the level of economic activities, despite the implementation of the eased lockdown measures by the government. Furthermore, the Nigerian Government’s revenue has seen a significant dip, due to the fall in global oil prices and the widening budget deficit has once again exposed the country to potential dire economic consequences arising from its undue reliance on revenue from oil sources to finance its annual budget.
Consequently, the Nigerian Government is currently focused on generating and increasing revenues by exploring the potentials in non-oil sectors, to mitigate the oil price shocks and to diversify the economy.
One sector that has often been neglected is the mining sector, despite the huge potentials in providing alternative revenue sources for the country. In this article, we will examine the contribution of the mining sector to the economy, the challenges that have historically stunted the growth of the sector, current government efforts to revive the sector and other key imperatives to ensure sustainable growth of the mining sector in the long run.
Contribution of the Mining Sector to the Nigerian Economy
According to the Ministry of Mines and Steel Development (MMSD), Nigeria has over 44 known types of minerals of varying mixes and proven quantities. However, despite the abundance of mineral resources and the enormous revenue generation potentials, the contribution of mining to the gross domestic product (GDP) has historically remained abysmally low at less than 1%, in comparison with other African countries with similar mineral endowment such as South Africa and Democratic Republic of Congo.
Based on the Nigeria Extractive Industry Transparency Initiative (NEITI) audited report for 2018, Nigeria earned only ₦69.5 billion from the solid minerals sector in 2018 mainly from taxes, royalties, licence application fees and penalties. The graph below shows the combined level of contribution of mining and quarrying of coal, metal ores and other minerals to the GDP (at constant market price) between 2018 and 2019.