We are helping people who can process bitumen here rather than crude -Fayemi

Nigeria is blessed with the third largest reserves of bitumen in the world but imports 80 percent of its bitumen used in road construction from outside the country. In this interview with BusinessDay, Kayode Fayemi, the minister of mines and steel development, told JOHN OSADOLOR and YANGE IKYAA that the mining road map developed by his ministry and approved by President Muhammadu Buhari, aims to incentivise local production of bitumen and other minerals, save foreign exchange, reduce construction cost, increase job creation, and enhance Nigeria’s overall economic prosperity. Excerpts:

We were here earlier around February this year; can you talk us through what has happened since then on policy issues, investments inflow and sanitisation of the mining sector?

Thank you very much. Our last engagement focused more on our vision for the sector; what we found when we came in, how we planned to change the sector, and what challenges we encountered at the time. I think that ten months into office, we can now say that the vision statement is now a plan; a road map that has successfully been approved by the federal executive council and, as I indicated at the time, we had that encounter with areas that we focused on- where we saw gaps. These were the areas we addressed in the road map; geological prospectivity in terms of data, as mining is about data, you must have investment grade data that will attract people to come into the sector.

The second is the legal aspect. There is a law widely regarded as a good law but how come it has not translated into a visible successful sector, and what do we need to do to make that law a lot more effective than it is?

The third is that, at the time we had our initial exchange with BusinessDay, was the relationship between the federal government and the states, where these resources are located. How do we begin to address fundamentally that gap that everybody identified and which everybody believes if we don’t tackle, we are not going to make any headway?

The fourth relates to the huge army of informal, artisanal miners and safer mining practices; the environmental dimension of that. You must have heard of our encounter in Shekira village in Kagara Local Government of Niger State, where we had this challenge of unsafe mining practices leading to a lot of unfortunate loss of lives.

The the fifth for us was, this is a hugely capital intensive sector, and government must step up to the plate and provide an intervention fund of some sort in order to incentivise those who want to play seriously in the sector.

Exploration is expensive and when we compare ourselves with countries even in our own sub-region, Burkina Fasso, Mali, Cote D’Ivoire, not to talk of long running Ghana that has had extensive experience in this sector, the resources that they expend on exploration, ours is a tiny drop in that ocean in comparison with our neighbours. So we need significant access to finance in order to fund exploration, production, and investment in the sector generally.

What were the issues addressed in the road map, and how did you address them?

In terms of geological prospectivity, we decided clearly that we needed to put more money into the sector at our level but the exploration, really and frankly, is also a private sector driven activity in the mining industry, so we need to look for ways to engage private sector operators and one of the things that we are doing is to pair our geological survey agency mining exploration companies that are interested in our green field.

Nigeria is largely untouched and there are many people who have shown an interest in exploring here but they cannot just come and do that, so we have used the better half of the last six months developing a structure; how do we put a mining exploration company in collaboration with our own geological survey agency and ensure that whatever is found that is of investment grade is also mutually beneficial to such a private sector company that has put in resources and ourselves? Do we give them first right of refusal to the mineral that is found in commercial quantity or do we work out equity participation with them, and much more?

So there are multiple arrangements that we have put in place, and as I speak with you today, the company that made the huge find in Kaduna State of nickel was with the Kaduna State governor just yesterday. The leadership of the company from Australia has come to see me; they went to Kaduna to see the governor and work out precisely the arrangement I have been talking about that you cannot micromanage mining from Abuja. Yes, federal has a critical role and, yes, mining is exclusive to it in our constitution, but when it comes to practical implementation of that exclusivity, those who have ownership of the land must play a critical role. How you define that, of course, would be on a case-by-case basis and that is what we are beginning to work out.

We are also, as part of the new road map, addressing another fundamental gap that we have noticed. Yes the law talks about right of the host community and we have consent from the host community as a critical component of the license award. You cannot get a mining license if there is no consent from the host community, but we have also noticed that consent from the host community is abused because sometimes you cannot technically determine who the host community is, especially for minerals that stride those communities, and it creates problems.

The only arbiter that we believe is of right, and in a position to ratify or confirm that these are the people who are truly the owners of the land- is the state government who signs off on certificates of occupancy. So, we have introduced a clause now that you cannot just bring consent from the host community without ratification from the state. And this is a part of the partnership that we are talking about in order to achieve a fully-fledged arrangement that is beneficial to all, the host community, states and the federal government.

This is because the sates also complain to us that you just give people license and some people just show up at our doorstep and say they are mining. We do not even know them and this is our land, this is our state. Shouldn’t they come to us to say we have this paper from the federal government and we are coming, we would like to work with the state, we need the support of the state? Now, without telling any serious miners, inevitably they have to do that because of the ratification clause or arrangement we have put in. These are administrative measures they are not legislative measures yet. Ultimately, we are taking the law back to the legislature to address these lacunas.

If you move from that, that is partnership with states, geological prospectivity, we are also now saying that in terms of support for artisanal and informal miners, we need the states to step up to the plate because we cannot micromanage artisanal miners from the federal level, so the enumeration and registration of artisanal miners must now take place at local level, at the state. We could support the states with finance to undertake that exercise and take the results from there in order to determine where we at the federal level could come in. Where we are coming in, in terms of financial or mining equipment support to local cooperatives beyond their diggers and shovels, or even provision of training on small scale technology for them to be able to perform safer mining practices, which is lacking at the moment.

This is because there is no need telling them not to mine when they know what they can get if they hit the jackpot. Even if it is a tiny gem and some Chinese come to collect it from them and, even though they will be cheated, what they make is what they make on their farm. So we are not going down that rout of saying it is illegal, do not do it; it is a carrot and stick approach that we are using.

While we are encouraging states to do that, we are also establishing a surveillance mechanism as federal, working with the ministries of defence, interior, the department of state security to ensure that the heavy hand of law is applied to those who are consciously heavy illegal miners (many of whom are foreigners) to serve as a deterrent to others who want to engage in this sort of industry.

When you leave all of what I have said, you now look at the strategy that we have put in the road map on the short term, the medium term, the legal and regulatory framework. We mustn’t forget that we now have a super regulatory agency that pulls all of our mines inspectorate directorates, our mining cadastral office- issuing the license, our mines environmental compliance unit and NCC type independent agency with an alms length relationship with the ministry, even though I do like to make comparisons; that is now in the law and our expectation. Our vision is that once you have the regulatory agency where there is limited room for maneuvering, because there are still a lot of gaps in what we do now, and the penalty is also there, as you have to find the money yourself. This is not government subvention.

If you look at NCC, it generates its own money to fund its own activities, and part of challenges we have in government is that when you are too dependent on subventions and allocations, it also stifles your innovation. This is a sector that requires a lot of innovation, that is the essence behind the agency and it is aimed at strengthening the current law, not distorting it, by pulling these agencies together, taking them out of the ministry and letting the ministry focus on investments rather than on this micromanaging because we cannot make headway.

People are still coming to me with fake letters purportedly signed by my officers to collect royalties from sand dredgers and all manner of things; I have no capacity here to monitor every single officer, so we must decentralise and also take out some of these activities. Someone may say am I writing myself off and writing my ministry out of the job? No, we would be able to concentrate on investment, high-level investment into the sector if we succeed with what the road map has outlined.

The road map focuses on three steps, which are industrialisation of Nigeria, particularly through small and medium scale processing and beneficiation and discouraging raw exportation. Right now, people take out minerals from Nigeria without let or hindrance. What they take out is to the disadvantage of the country because it is often not processed and they will call it one name, we are taking out lead but anyone who is familiar with the sector will know that when you say that you are probably taking out silver, copper or some other things along with it because there has been no separation or refining. It is at that time that you take it out of the country that you separate it and you make more money than what we the owners of the mineral resource are making.

So we are privileging industrial production and beneficiation, for example, our bitumen, which has two primary products, one is crude oil and the other is asphalt. For us, based on our strategy, we are not averse to people who want to produce crude oil from bitumen but our immediate challenge is that we are importing 80 percent of the bitumen that we use in road construction in Nigeria from outside and we have the third largest reserve of bitumen in the world, which means that logically, we are looking more for people who can process bitumen for road construction here rather than crude. I am not discounting crude but our own strategy in the road map privileges that, and if you can produce that, our assumption is that it will reduce the cost of road construction, which is critical to infrastructural development in our economy. And we have seen the example of cement from limestone, so there is no reason why that cannot be replicated as we also plan to do in iron ore, in lead/zinc, in barites, in coal and then, of course, in bitumen products.   

Then, on investment access, how are we tackling that? The first is that, because of the commitment that Mr President has shown to the sector, he has also approved for us access funds from the Natural Resource Fund. Many Nigerians d not know what the Natural Resource Fund is; they do not know that it is an equivalent of the ecological fund and that it is 1.6 percent of the federation accounts, and only three sectors essentially are supposed to access the fund. These are agric, mining and water resources; and the president has approved that we can access that fund in order to utilise it as an intervention for serious minded companies who want to do exploration and for those who are already almost at the point of production but are facing challenges in mining.

So, these are essentially going to be for transactions, evidence based transactions rather than just general purpose funds, and you know we have in the law what we call solid minerals fund but that solid minerals fund has never really been put to use and this is more like an implementation. We are not relying on what we can get from government alone and we have been in conversations with our own sovereign wealth fund. We are also working on a fund for the mining sector now that would also provide something in the region of $500 million also for exploration, and some interest is already being expressed from the team from Sovereign Investment Authority reassuring us.

We are also looking at other funds from the World Bank and other global environmental facilities, the GEF on the climate fund side and such other funds that people can access. Not to mention current discussions with our own development financial institutions- Bank of Industry, NEXIM Bank- they are already doing a bit of small scale funding in the mining sector, which is not huge but we are scaling up and that is why we are talking to all these other institutions.

And on the law itself and its implementation, when I became minister, we reviewed all the licenses and those who were not following strictly the conditions for the award of licenses; we gave them a window, what we called at the time amnesty, to revalidate or lose the license on a use or lose basis, which is a condition in the law. And at the end of the exercise, I believe, we had about 700 licenses that were taken out but we also had about 1000 licenses that were re-validated because those who had defaulted on their annual reports and payments all stepped up to the plate and re-validated their processes. We are now ensuring that this is something that is consistently followed such that once your license is due, we let you have a notice and then give you the necessary period in law to re-validate or lose it.

What is actually more important is not just re-validation but what you are doing with the license in order to transit from and exploration license to a mining lease, there are conditions that are attached. If you find something, you ought to report back to us, if you do not find, you have to also let us know that you could not locate any mineral after years of effort and we will take it back from you. But in addition to that, there are conflicts that arise in the management of licenses over various cadastral that we are also streamlining our own operations in-house to reduce the number of such conflicts so that when we give you a license, you don’t have to worry whether somebody will conflict with you on it or not. It will be accurately determined, as we have indicated to you.

These are the elements in the road map and, of course, there is a little thing about changing the name of the ministry from solid minerals ministry to mines and steel, which is more about what we are doing; you can be mineral rich and not be a mining nation, so being the ministry of solid minerals really is not a big deal. What are we doing? That is more important to us.    

On the issue around the super regulatory agency, how far have you gone with it in terms of enacting the enabling law backing its establishment, and in laying the manpower structure for its take off?

Well, all of that would be comprehensively worked on. Part of what the road map, in terms of growth and sustainability of the sector, recommends is that we have a Mining Implementation Strategy Team (MIST). So the MIST has just been constituted and it is going to work on the bill and there are several examples to draw from, such as the Minerals Commission in a number of African countries that is much more comprehensive than our own experience here, and elsewhere in the world. I have just come back from Australia and I looked at what they have in Western Australia, which is akin to what we were thinking of, and the examples drawn from the operationalisation of regulatory agencies that we also have, such as NCC, NERC, DPR, PENCOM, etc. So we need to look at our own local experience and fashion out what we are going to do in terms of the law, the structure, the operations, the funding for the regulatory agency, and that is ongoing now.

Looking at the players, from what you’ve said on the fund that you are likely going to access, are there any big players talking to you across the globe?

Yea, there are big players talking. I just spoke to you about the Comet Mineral Resources, which is the company that found the nickel in Dangoma village in Kaduna State. And this has generated a lot of interest in the mining world. It is one of the items that have really attracted a lot of attention because it is an unusual find. Yes, we mentioned nickel in Nigeria as one of the 44 main minerals in the past but we never thought that it was a major mineral. If you look at the road map, we talked about seven major minerals that we are focusing on and nickel is not there, so that is why you cannot be too definitive about something being minor or major until you do that geological prospectivity comprehensively in the manner that I highlighted earlier.

So you cannot jump into mining like that, the juniors have to come in and that is how it works in mining. Juniors go to do the dirty work, they find what is there, and then, the majors come to take over from the juniors and that is what essentially is going to happen, but we are also pushing for our own local mining companies to step up to the plate. Dangote is the highest revenue generator for our sector, for example, by way of royalties and taxes. We get more money from Dangote than from any other company in the solid minerals sector and we want to also encourage others to come into the sector and play actively.

We have Kogi Iron Mines; they are almost getting to production now in their own case. Segilola has just been bought by a bigger company, Thor Mines, so you keep having this; the more people discover the potential, the more the majors will rush to the mines. It is a logical consequence of expansion in the sector.

Let’s look at the last part of the three questions that I have from the discussion, the nickel, what is it actually used for and what does it mean for the solid minerals sector, as many Nigerians do not know?

Nickel is a very important alloy metal and is used in the production of stainless steel and we all know what stainless steel does. Almost every item that we carry has an element of stainless steel, from an aeroplane to spoon, power turbines and, even though the price has gone down, I think it is about $11,000 to $12,000 per tonne now. And what is in Dangoma village and there has been no core drilling yet, is mostly surface examination.  We have approximately 40 to 50 million tonnes in that surface, if you look at what that is, it is really huge, but it could even be more by the time we go deeper and find out what is in the place.

There have been some talk of your ministry needing to open up water ways within West Africa so that what we produce gets a larger market to supply, are there any projects that your ministry is working on in collaboration with development partners to open up the ports?

Yes, you would recall that even Ajaokuta particularly, part of the vision behind Ajaokuta is a multipurpose infrastructural development facility, ports, rail, airport facility are all attached to it, and one of the things we are discussing with some of the institutions that are beginning to show interest is infrastructural gateways, opening up of the corridors. We have, for example, the central corridor, which is a mining corridor in Nigeria; Kaduna, Abuja, Ajaokuta down to Warri or down to Onne as the case may be. If you check the ministry of transportation budget plan, you will find this there, so we are into partnership with them. The central corridor links up with Lagos-Calabar, Lagos-Kano and it’s going to help bulk transportation of whatever is discovered in that corridor as well. So, it is not just opening up the corridor, it also opens up opportunities that we are not even aware of for now.

In terms of the waterways, we are also working with the Inland Waterways Authority particularly. There has been some difference of opinions in the past between Inland Waterways and us about who owns what. We own the sand that is the waterways, they own the access to the waterways, so how do we distribute responsibilities and generate resources without conflicting each other? These are the issues that are being resolved, some legally, but more importantly, administratively in order to take advantage of opportunities that are in the sector.

We were told sometime ago that some finance from the World Bank is being worked out to be disbursed among credible players in the industry, how much are we talking about here?

We invited those who are currently operating for a session with the World Bank about two months ago, and if you remember, I spoke earlier about those who are almost getting to production but because of the capital intensive nature of the industry, the money they spend on exploration and development of mines, they are being weighed down and these are tough economic times, so if we can assist them cross the tough line, it would of course be very critical.

What we are negotiating and the borrowing plan with the World Bank is $150 million for the sector. That is not a lot of money in mining but at least it will go some way in incentivising those who are really serious in the sector.

Let’s look at Ajaokuta again, the government has taken it back technically. Are there serious technical partners now or is the government going to sell it as part of the proposed asset sales?

For us, we have been involving in a known debate quite frankly about asset sales, etc. In the law, if you check the privatisation law, it is clear that commercialisation, concession, sale of OMLs (oil mining licenses), sale of OPLs (oil prospecting licenses), sale of mining leases, it is privatization, it is asset sale, so it’s not just abandoned assets, but I think sometimes we just love to engage in this verbal gymnastics in Nigeria in order to either put government down or dismiss what government is doing, or to gain credibility that we are ideologically progressive.

We have a gap in our finances, we need to find money; a huge deficit in our reserves and the more it goes down, the more they will continue to speculate with our currency. Everybody knows that Nigerian currency is not N400 to one dollar, for goodness sake; it is a victim of speculation, but it is a victim of speculation because we have depleted our reserves and there is a run on our currency; that is just that.

Coming down to your real issue, there are conditions precedent to the agreements we signed on the 1st of August with Global Infrastructure. The most critical is that we have a 150-day implementation plan and it is upon satisfactory agreement between both parties at the end of that period. Currently, the audit is going on; audit of the finances, audit of the assets, and in the course of that, we will also get a business plan from Global Infrastructure oh how they are going to run the company, and we must approve that business plan.

We also need to meet our own obligations as federal government on a number of outstanding issues; severance pay to workers, refurbishment of the place, etc; we need to do that. It is upon completion of that, that we will now get the release of the Ajaokuta steel plant, but the release is technically a release to do whatever we want; it is with us now, it is ours as a country but the arbitration in London puts a lien on it, we cannot do anything on it until the issues are resolved, so once this process that is ongoing is completed, then we can put Ajaokuta to whichever direction we want it to go.

And, of course, we will not do that alone as a ministry; we are involving Infrastructural Concession Regulatory Commission, Bureau of Public Enterprise, we still have the ministry of justice who were part of our negotiation process up till now, and of course, we have our boss, the Vice President, who is the chairman of the National Council on Privatisation. Whether it is going to be commercialisation or concession or outright sale or PPP or unbundling, we will get to that.

How far has the government gone in attracting interest from various players?

What I can say is that as at today, we have received many interests unsolicited; we haven’t even placed an advert in any medium, we haven’t appointed a transaction adviser, we haven’t done any of that but we are receiving unsolicited interests from private companies, from state owned enterprises from other countries, China, Russia, Ukraine, Belarus, Nigeria. We have interest being shown from all of these places, so we will get to a point where we will now formalise this process. The transaction advisers will do the job and they will give us a quick report, but as I said to you the very last time I spoke to you about six or seven months ago, there are three or four issues for us: technical capacity, financial capability, track record in the industry- that is what will determine who gets it, and money in the bank that we will see.

What are we doing about marble, we have so much of it; are we at a point where we can say we have enough marble?

We are not but we will have to get to that point. We will have to incentivise those who are producing it locally and what we are likely to do is ensure that it is only those producing locally who can also import and bring it in; that is what we are likely to do because we need to privilege those who are creating jobs locally. The industry players came to see me, the Association of Dimension Stone Producers, and it is growing, many more are people moving into the sector and producing really qualitative stuff.

This was brought to me from Katsina (pointing to high grade marble tiles on a desk in his office), what you have on top of that desk; those were produced in Katsina, high-grade marble and granite. So it is only proper to encourage that person to say OK, how much are you selling, how much are you producing, what do you need by way of support, how do we incentivise you? Those are the kind of people that we want to use the transaction fund, the intervention fund to scale up their activities because it is no use shutting down importation if we are not producing enough locally.

And as I indicated the last time we discussed this, we have a market of about 4 million square feet and we barely produce 500 thousand square feet; the gap is huge so people are ready to bring in from China, from Italy, from Spain, everywhere. Yet, some of the stuff that is produced locally is really good but the quantity is limited and there are so many factors responsible for that, as we know.

JOHN OSADOLOR and YANGE IKYAA