Nigeria wants to grow the contribution of mining to 3% of GDP by 2025
“Some of the exploration opportunities I saw in Nigeria are comparable to the rest of West Africa, and had those licenses been in Ghana, those deposits would have been realized by now. However, it may take a little longer for investors to gain confidence and overcome the perceived investment risk.”
Simon Meadows Smith, Managing Director, SEMS Exploration Services
Nigeria’s Fiscal Framework
The fiscal framework for mining in Nigeria is relatively attractive:
-The corporate tax rate in Nigeria is 30%. Companies with a turnover of less than N25 million are exempted from tax and those with an annual turnover of between N25 million and N100 million are liable to corporate tax at 20%.
-Incentives to promote investment in mining include 0% import duty on equipment and machinery imported for mining activities. A new company going into mining generally shall be exempted from tax for the first three years. Mining and processing of various minerals including gold, iron ore, zinc, lead and barite as well as manufacture of machinery for mining and quarrying qualify for tax holidays of three years at first instance and renewable for another two years.
-There is also a capital allowance of 95% for qualifying mining expenditure, which can be claimed in the frat year of operations.
-Royalty rates for minerals in Nigeria range between 3% to 5% of the market value of the mineral.
Lolade Ososami, Partner, Udo Udoma & Belo-Osagie
Thoughts from the ground
“Two years ago, we obtained a small-scale mining lease from the federal government for the alluvial deposits and the primary rock deposit. The area covers a highly mineralised part of one of the exploration licensed areas.
The Kabba Bunu project is the lowest-hanging fruit and a great cash opportunity. We are working with a Ghanaian company to conduct the delineation exercise and come up with a mining program to extract the alluvial gold. We want to begin mining by the end of 2021.
The Kabba Bunu lease is about 3.5 km2 but this is part of a larger exploration license and we will be making more mining applications once we unravel more deposits. Our growth strategy is linear; we are starting small and forming a solid basis from where we can grow. Concomitantly with the alluvial mining, we are doing geochemical studies, mapping, and trenching in preparation for resource definition drilling for the primary rock.
While acknowledging the significant work done by the Ministry of Mines and Steel Development to support the industry, the mining industry is still facing many challenges. The main one is funding. Nigerian banks and creditors do not yet understand mining, so many private companies, including TMG, have had to rely on private funds for many years. Currently, miners can access capital from two key institutions, but these do not take capital requests directly, so we have to go to the commercial banks. Commercial banks treat mining projects like they would in other industries, whereas mining has a very particular lifecycle and risk profile. Also collateral requirements are insurmountable or difficult to provide.
TMG is looking at different funding options, and we are in dialogue with private investors who have shown interest in our project. We hope to be able to announce final agreements in the next couple of months. In the long-term, we will move for an IPO.
Nigeria is a promising mining destination and I would invite foreign investors to tap into the country’s many minerals that remain locked in the ground.”
Anthony A. Madagua, CEO, Tree Mines Global (TMG)