Nigeria’s mining and quarrying sector, which has the ability to engage hordes of the nation’s unemployed and diversify the economy away from over-reliance on crude oil revenue, received a beating in Q1 2017 as aggregate sectoral loans and advances fell by 61 percent, compared with loans granted to the sector in Q4 2016.
In addition, Q1 2017 loans and advances, which stood at N8.23 billion, also fell by 27 percent year-on-year, as against N11.34 billion granted to players in the sector in Q1 2016.
The sector was the worst hit when measured by growth in sectoral loans and advances, compared with other sectors, some of which recorded just single digit reduction in credit received from banks.
Meanwhile, economic activities in the mining industry witnessed an upward trend, with a 94.4 percent growth in mining and quarrying GDP in Q1 2017. This is in contrast to the negative 0.52 percent growth in the nation’s GDP, which was the fifth consecutive quarter Nigeria would be experiencing such, since Q1 2016.
The Central Bank of Nigeria (CBN) through its monthly economic reports for January and February 2017 indicated that exporters of solid minerals earned $265.13 million and that translated to N98.1 billion in the first two months of this year.
In January 2017, exporters of solid minerals realised $130 million revenue, and that was 38.8 percent higher than revenue in December 2016 while by the end of February 2017, revenue from the sale of solid minerals overseas was $135.13 million, bringing the export revenue to $265.13 million in the first two months of the year.
That was similar to $266.74 million foreign earnings in January and February 2016. As such, with increasing economic activities and steady export sales, it beats the imagination of analysts that aggregate loans and advances to miners could fall as much as 61 percent in Q1 alone.
Shehu Sani, president, Miners Association of Nigeria, attributed this decline to banks’ reluctance to lend to the investors in the mining sector. “Commercial banks in Nigeria have been shying away from the mining sector. And this is the sector that has the capacity to contribute to the growth of the economy, as data from the National Bureau of Statistics shows significant improvement in the sector.
“I’m using this opportunity to appeal to the Acting President to ask the institution concerned to release the N30 billion mining intervention funds to miners in the country”, he said.
In October 2016, the Federal Executive Council (FEC) approved the release of N30 billion intervention funds to the mining sector. According to the Minister of Mines and Steel Development, Kayode Fayemi, the funds are meant to fast track the development of the mining sector, to support small scale miners, enhance research, as well as improve the surveillance of the sector.
And just recently, the World Bank also approved $150 million loans to the nation’s mining sector. “In line with the Nigerian government’s priority to diversify the economy to a broader range of non-oil productive sectors, one of the key objectives of this project is to support the government in the realisation of the full mineral endowment for sector policy, promotion, conducive business environment and integrated long-range resources and investment planning, the World Bank states on its official website.
“The World Bank’s intervention is meant to address areas impeding growth of the mining industry,” Shehu Sani said.
However, a senior manager with one of the leading banks, who pleaded anonymity, attributed this to the high risk of the business. “The mining industry is similar to the oil and gas industry which has very high non-performing loans presently. Apart from that, Nigerian miners lack the technologies that can boost their success rate during exploration. This explains why banks are very cautious nowadays”, he said.
“The Nigerian government should come in as the lender of last resort, by giving miners intervention funds through an open process,” he said.
At the current basic price, the nation’s mining sector accounted for a paltry 0.2 percent of the Q1 2017 GDP. Notable solid minerals include iron ore, gold, bitumen, lead/zinc, baryte and bentonite, limestone and rock salt. Others are gypsum, gemstones, kaolin and tantalite in different commercial quantities across the 36 states and FCT Abuja.
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