September 15, 2023/Coronation Research
The mining sector is a crucial component of the industrial value chain, providing essential raw materials for the manufacturing and construction sectors. Similar to the oil and gas sector, Nigeria possesses substantial reserves of metallic minerals, offering the potential for significant economic diversification. However, Nigeria is yet to fully exploit this potential for industrial growth. Challenges confronting the sector include inadequate infrastructure for mineral extraction, processing and transportation, illegal mining activities, regulatory hurdles, and limited access to finance.
Almost a decade ago (in 2016), the FGN introduced a roadmap for the mining industry, to stimulate its growth and by extension, boost its contribution to total GDP to at least 3%. Over the past five years, growth in this sector has averaged just 13.2% y/y. A positive surprise was the 25.5% y/y growth recorded in FY2022.
The latest national accounts for Q2 ’23 show that the mining and quarrying sector grew by 31.9% y/y in Q2’ 23 vs 20.9% y/y recorded in the corresponding period of 2022. On a q/q basis, it expanded by an impressive 342.2% but from a low base.
Despite growing global demand for select minerals driven by clean energy initiatives, the contribution of mining to total GDP in Nigeria is significantly low relative to other African counterparts. Increased investments (foreign and domestic) into the mining sector, better regulation and structure will improve mining output and positively impact GDP figures.
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