Wading through troubled waters in Nigeria (March 09, 2006)

Bird flu, religious conflict and kidnappings of oil executives. You can forgive the average mining investor for overlooking Nigeria when scoping the globe for prospective land.

Under such an infamous reputation, Nigeria’s minister of solid minerals development, Oby Ezekwesili, set upon conventioners at the Prospectors and Developers Association of Canada convention (PDAC) in Toronto with a tough mission: convincing them that Nigeria is ready and willing to take in foreign dollars and exploit its minerals.

“It’s a challenge,” Ezekwesili said of the negative perceptions her nation is up against. “People are locked into the idea of the old Nigeria. We need to update them on the fact that Nigeria is a cleaner environment to do business in than it use to be.”

Part of the effort to turn international skepticism more positive is a new mining code. The code should be passed some time in April and Ezekwesili says it is based on global best practices.

In addition — and with the help of funding from the World Bank — the country is pushing to complete an airborne geophysical survey of its land. To date 44% of the land has been mapped, and finishing off the remainder is a priority, Ezekwesili says. Given the current unclear picture of the country’s true mineral potential, such mapping is essential to the country’s mining future.

But even if investors believe the minerals are present in economical quantities, and manage to look past the more sensational headline grabbing affairs, there is the undercurrent of corruption that has plagued the country for years to contend with.

Ezekwesili acknowledges that reputation, but assures that the government is making progress.

“Unlike other countries around us, we confront our demons,” Ezekwesili says. “We are not the ostrich with the head in the sand.”

Ezekwesili is a self described “policy-person”. Her career in government and formerly at the much respected non-governmental organization, Transparency International, has garnered her international awards for her work on transparency issues in government.

As a trained chartered accountant she was active in the government’s recent clean-up of its procurement program a reform which saved the government US$1.3 billion over roughly two years.

Beyond such fiscal tidying up in government offices, Ezekwesili points to Nigeria’s renewed willingness to get tough on corruption as a key development. She indicates the recent arrest of a corrupt police chief as evidence of the new approach.

Still, according to the U.S. state department, while Nigeria’s establishment of the Corrupt Practices Act and the Economic and Financial Crimes Commission (EFCC) point towards progress, the execution of such initiatives is still lacking.

The State Department web-site claims that although the EFCC has 500 individuals in custody it has only achieved one conviction.

In Transparency Internationals 2006 survey of most corrupt countries, Nigeria finished in a group of three tied for the third worst ranking. However, the organization did include the country in a group of 10 nations noted for strong improvement in the “perception of corruption.”

Regionalism fuels corruption

Intense regionalism in Nigeria which is Africa’s largest country by population with some 140 million people is often sited as one of the biggest obstacles in dealing with corruption. Ezekwesili says such bifurcation can only be dealt with by sorting out the legitimate concerns of a given region.

She cites the notorious oil-rich Niger Delta region as an example. There, community frustration and a criminal elements have conspired to periodically shutdown oil operations.

“There is genuine agitation on the part of the Delta people and that level has been addressed,” she says. “But there are criminals who’d love to masquerade as genuine protestors. They are petty criminal gangs and they are wrongly labeled as rebels.”

But should prospective miners fear similar resistance from communities in other parts of the country? Only if they behave inappropriately, Ezekwesili insists.

She says communities are eager not to have the same acrimonious relationship — which has defined dealings with oil companies — with mining companies.

“The communities are saying they will play a good host to mining,” she says, “provided companies behave well.”

But Ezekwesili made clear that any attempt to enshrine such good behaviour would not involve Black Economic Empowerment (BEE). As Nigeria struggles desperately to get a handle on its own corruption, it wants no association with a policy marred by accusations of cronyism — as BEE has been in South Africa.

Instead, Ezekwesili says, the Nigerian government will foster fair and sustainable corporate governance by encouraging — but not legislating — the participation of local companies, while legislating a dialogue between company and community.

“The company must share its development agreements with the community,” she explains. “It’s about being very pro-active to stem the tide of dis-harmony.”

Getting business done

While Nigeria has never been admired for the state of its infrastructure, Ezekwesili also brought promising news on that front from the capital of Abuja.

She says recent government initiatives to privatize seaports have resulted in improved efficiencies, and that the collapsed rail system is in “the final stages of repair.”

Currently the country produces all the energy it uses, but the minister conceded it is not sufficient for the promotion of a new mining industry.

Oil companies presently generate their own power and until the government can secure more stable sources, prospective miners should count on bringing in diesel.

What’s in the ground?

The countries massive push for improved transparency and infrastructure will count for little — from a mining perspective — if there are no minerals under foot.

According to Nigeria’s bureau of public enterprises, the exploitation of solid minerals accounts for just 0.3% of the countries gross domestic product in spite of the presence of precious, semi-precious and industrial mineral deposits. That anemic figure is the result of an industry that has been in a state of collapse for many years.

If the country is to build its mining industry it will look to coal, iron-ore, lead/zinc and possibly gold among other metals and precious stones to do so.

The Nigerian governments says coal in the country is one of the most bituminous in the world owing to a low sulphur and ash content which makes it more environment friendly. There are nearly 3 billion tonnes of indicated reserves in 17 identified coalfields and over 600 million tonnes of proven reserves.

As for lead and zinc, an estimated 10 million tonnes of lead and zinc veins are spread over eight states. However, as with many of the known deposits in the nation, grades are unknown.

With over 3 billion tonnes of iron and an operational iron-ore mine, the mineral is high on Nigeria’s priority list. Iron is being mined at Itakpe, in the Kogi State — the centre of the region of crystalline iron deposits. But the iron ores of the Kogi and the Enugu states have yet to be fully explored.

The country also has some indications of gold deposits with proven reserves of both alluvial and primary deposits.

The schist belt covering the western half of Nigeria is its most prospective gold area. In addition artisanal mining of alluvial deposits occurs in a few places in the country. The government says primary deposits have been identified in the northwest and southwest parts of the country but little staking has been done.

Ezekwesili is aware that the possible richness of such deposits will only be uncovered if foreign investor’s fears are dealt with — allowing their much needed investment to flow in.

Her visit to the PDAC is a first step, in what looks to be an arduous mission, to win western capital over to Western Africa’s biggest and most economically important nation.