Wading through troubled waters in Nigeria (March 27, 2006)

Chronic corruption, religious conflict and kidnappings of oil executives. You can forgive the average mining investor for overlooking Nigeria when scoping the globe for prospective land.

With such an infamous reputation, Nigeria’s minister of Solid Minerals Development, Oby Ezekwesili, set upon conventioneers at the recent Prospectors and Developers Association of Canada (PDAC) convention in Toronto with a tough mission: convincing them that Nigeria is ready and willing to take in foreign dollars and exploit its minerals.

“It’s a challenge,” Ezekwesili said of the negative perceptions her nation is up against. “People are locked into the idea of the old Nigeria. We need to update them on the fact that Nigeria is a cleaner environment to do business in than it used to be.”

Part of the effort to turn international skepticism into optimism is a new mining code, which should be passed by Nigeria’s government sometime in April. Ezekwesili said the code is based on global best practices.

In addition, with the help of funding from the World Bank, the country is pushing to complete an airborne geophysical survey of its land. To date, 44% of the land has been mapped, and finishing off the remainder is a priority, Ezekwesili said. Given the current unclear picture of the country’s true mineral potential, such mapping is essential to the country’s mining future.

But even if investors believe the minerals are present in economic quantities and manage to look past the more sensational, headline-grabbing recent events in Nigeria, there is still the undercurrent of corruption that has plagued the country for years.

Ezekwesili acknowledged that reputation, but said that the government is making progress.

“Unlike other countries around us, we confront our demons,” Ezekwesili said. “We are not the ostrich with the head in the sand.”

Ezekwesili is a self-described “policy person.” She has garnered international awards for her work on transparency issues in government during her career, including previous work at the respected non-governmental organization, Transparency International.

As a trained chartered accountant, she was involved in the government’s recent cleanup of its procurement program — a reform that saved the government US$1.3 billion over two years.

Beyond such fiscal tidying-up in high government offices, Ezekwesili pointed to Nigeria’s renewed willingness to get tough on corruption lower down the ladder. She offered the recent arrest of a corrupt police chief as evidence of the new approach.

Still, according to the U.S. State Department, while Nigeria’s establishment of the Corrupt Practices Act and the Economic and Financial Crimes Commission (EFCC) signify progress, the execution of such initiatives is still lacking.

The State Department says that although the EFCC has 500 individuals in custody, it has only achieved one conviction.

In Transparency International’s 2006 survey of most corrupt countries, Nigeria tied for the third-worst ranking with two other countries. However, the organization did include the country in a group of 10 noted for strong improvement in the “perception of corruption.”

Regionalism

Intense regionalism in Nigeria — Africa’s largest country by population with some 140 million people — is often cited as one of the biggest obstacles in dealing with corruption. Ezekwesili said it can only be dealt with by sorting out the legitimate concerns of a given region.

She cited the notorious oil-rich Niger Delta region as an example. There, community frustration and a criminal element have conspired to periodically shut down oil operations.

“There is genuine agitation on the part of the Delta people and that level has been addressed,” she said. “But there are criminals who’d love to masquerade as genuine protestors. They are petty criminal gangs and they are wrongly labelled as rebels.”

But should prospective miners fear similar resistance from communities in other parts of the country?

Ezekwesili insisted that communities are eager to avoid the type of acrimonious relationship that has defined their dealings with oil companies in any new relationships with mining companies.

“The communities are saying they will play a good host to mining, provided companies behave well,” she said.

But any attempt to enshrine such good behaviour would not involve Black Economic Empowerment (BEE), Ezekwesili said. As Nigeria struggles desperately to get a handle on its own corruption, it wants no association with a policy marred by accusations of cronyism — as BEE has been in South Africa.

Instead, Ezekwesili said, the Nigerian government will foster fair and sustainable corporate governance by encouraging — but not legislating — the participation of local companies, while legislating a dialogue between company and community.

“The company must share its development agreements with the community,” she explained. “It’s about being very proactive to stem the tide of disharmony.”

While Nigeria has never been admired for the state of its infrastructure, Ezekwesili also brought promising news on that front from the capital Abuja.

Recent government initiatives to privatize seaports have resulted in improved efficiencies, she said, and the collapsed rail system is in “the final stages of repair.”

Currently, the country produces all the energy it uses, but the minister conceded its production capacity is not sufficient for the promotion of a new mining industry.

Oil companies generate their own power, and until the government can secure more stable sources, prospective miners should count on bringing in diesel.

Minerals potential

The country’s push for improved transparency and infrastructure will count for little — from a mining perspective — if there are no minerals underfoot.

According to Nigeria’s bureau of public enterprises, the exploitation of solid minerals accounts for just 0.3% of the country’s gross domestic product, in spite of the presence of precious, base and industrial mineral deposits. That anemic figure is the result of an industry that has been in a state of collapse for many years.

If the country is to build its mining industry, it will look to coal, iron ore, lead, zinc and possibly gold, as well as other metals and precious stones to do so.

The Nigerian government says coal in the country is one of the most bituminous in the world, owing to low sulphur and ash content — which makes it more environmentally friendly. There are nearly 3 billion tonnes of indicated reserves in 17 identified coal fields and over 600 million tonnes of proven reserves.

As for lead and zinc, an estimated 10 million tonnes of lead and zinc veins are spread over eight states. However, as with many of the known deposits in the nation, grades are unknown.

With over 3 billion tonnes of iron ore and an operational iron ore mine, the mineral is high on Nigeria’s priority list. Iron is being mined at Itakpe, in Kogi state — the centre of a region of crystalline iron deposits. But the iron ores of Kogi and Enugu states have yet to be fully explored.

There are also some indications of alluvial and hardrock gold deposits in the country.

A schist belt covering the western half of Nigeria is the most prospective gold area. In addition, artisanal mining of alluvial deposits occurs in a few places in the country. The government says primary deposits have been identified in the northwest and southwest, but little staking has been done.

Ezekwesili is aware that the potential richness of such deposits will only be uncovered if the fears of foreign investors are dealt with — allowing their much-needed investment to flow in.

The minister’s visit to the PDAC was a first step in what looks to be an arduous mission — to win Western capital over to West Africa’s biggest and most economically important nation.