December 6, 2024/CSL Research

The recently released GDP report for Q3 2024 reveals that the mining and quarrying sector contributed 7.72% to the overall GDP, reflecting a slight decline of 0.6% from its 8.32% contribution in Q3 2023. However, this marks a notable increase of 3.00% compared to the sector’s 5.62% contribution in Q2 2024. This sector comprises key sub-sectors, including crude petroleum and natural gas, coal mining, metal ores, quarrying, and other minerals.

In Q3 2024, the sector recorded real GDP of ₦1.13 trillion, surpassing the ₦1.10 trillion reported in Q3 2023 by 0.6% and the ₦1.07 trillion recorded in Q2 2024 by 2.12%. Among the sub-sectors, metal ores demonstrated exceptional growth, with a 55.37% year-on-year (y/y) increase to ₦625.7 billion. This was followed by crude petroleum and natural gas, which grew by 14.87% y/y to ₦168.0 billion. Notably, crude oil and natural gas remained dominant, contributing 98% of the sector’s total weight in Q3 2024 underscoring the need for diversification.

Nigeria is richly endowed with an abundance of mineral resources. The country boasts of more than 40 valuable mineral deposits with significant reserves of minerals like iron ore, baryte and bitumen. These reserves represent an untapped opportunity for the nation to enrich its mining portfolio.

However, Nigeria’s mining sector has historically been underdeveloped due to inconsistent regulatory frameworks and inadequate enforcement of mining laws. Insecurity in mining regions and the prevalence of illegal mining operations also undermine efforts to scale up production (80% of mining in north Nigeria is illegal).

While Nigeria has more gold reserves than Burkina Faso and the DRC, gold production has been the lowest in Sub-Saharan Africa (SSA), underscoring the dearth of large-scale production facilities in the country.

The Federal Government of Nigeria (FGN) has taken several initiatives previously to monetise its solid mineral reserves. To increase the mining sector’s contribution to GDP, it developed a road map such as improving the quality and availability of geoscientific data and facilitating access to funds. The FGN also set up a US$500m Solid Mineral Development Fund (SMDF) to promote private-sector-led investments in the sector and established a US$72m Intervention Fund (N30bn) to promote exploration and research, as most projects in Nigeria are greenfield projects, in which not many investors are keen to invest. The government also proposed amendments to the Nigerian Minerals and Metals Act (2007) to curb illegal mining and improve the implementation of the law.

In our view, the FGN needs to intensify efforts to establish transparent, stable, and investor-friendly mining policies to attract both local and international investments. Simplifying the licensing process through digital platforms would enhance efficiency and transparency. Investing in comprehensive geological surveys and making reliable data publicly accessible is critical for attracting investment, especially in greenfield projects where uncertainty often deters interest. Integrating artisanal and small-scale miners into the formal economy by offering them access to financing, technology, and structured markets would improve productivity and reduce informal sector losses. Lastly, collaboration with relevant agencies to enforce stricter measures against illegal mining is also essential.