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Will calls for diversification help solid minerals sector?

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May 22, 2015 : Anna Okon

Minister of Mines and Steel Development, Mr. Musa Sada
Minister of Mines and Steel Development, Mr. Musa Sada
As Nigeria seeks to diversify its revenue sources, analysts say the solid mineral sector holds a lot of opportunities but remains untapped, Anna Okon writes
Nigeria has ignored the solid mineral sector for decades, right from the period of the oil boom to the present time when the price of crude dropped from N110 to below N60 per barrel.
Even as the government reiterates its commitment to diversify from oil into non-oil areas, the solid mineral sector lies neglected while mining activities have grounded to a halt a long time ago.
According to the National Bureau of Statistics, solid minerals contributes less than one per cent to the nation’s Gross Domestic Product.
But the sector is one that operators in the steel business believe can earn more foreign exchange for the country than oil.
Many of them recalled that before the discovery of oil, Nigeria’s economy was largely sustained by agriculture and solid minerals noting that the country could still earn a lot of foreign exchange from that sector.
According to a professor of economics, Sheriffdeen Tella, just like South Africa where a lot of foreign exchange is earned from gold, Nigeria’s solid mineral sector has a lot of potential.
In the Nigerian Industrial Revolution Plan drawn up by the Federal Government, the solid mineral sector is listed as an area of strength to focus on in the process of diversifying the economy.
According to the document, Nigeria has about 44 solid minerals in commercial quantity.
They include iron ore, tin, columbite, lead, zinc, gold, coal, petroleum, and uranium as well as industrial minerals such as clays, limestone, dolomite, barites and glass-sand.
“Nigeria currently has the 12th largest iron ore reserves in the world, which can provide feedstock to a thriving steel industry,” the NIRP document notes.
Ironically however, the sector has remained ignored at a time when government seeks to devote resources to growing the non-oil sector.
In a phone-in interview with our correspondent, the Managing Director, Nigerian Gas and Steel, Hasib Moukarim, said manufacturing steel pipes from iron ore presented a lot of challenges for the company.
Moukarim’s company has been operating in Nigeria for the past 38 years and thus the oldest steel pipe manufacturing plant in the country.
The company has been engaged since 1976 in the production of steel pipes for the furniture industry and metal fabricators.
But Nigeria has not been mining in decades and Moukarim has to import iron ore for his steel factory.
He said, “We are still importing raw materials to make steel pipes. That involves a lot of foreign exchange and the Central Bank of Nigeria is no longer selling foreign exchange so it becomes more challenging.”
Sourcing foreign exchange without the help of the apex bank is for Moukarim like passing the proverbial camel through the eye of a needle. “It is a very slow and expensive process,” he remarked.
In addition to challenges associated with importation, the government’s policies regarding importation in this sector have also affected the manufacturer adversely.
The government frequently spends billions of naira on import waivers for finished goods and this practice, according to the NGSL MD, has dealt a big blow to his business.
Moukarim said, “Waivers and concessions are given to importers of steel pipes which are brought into the country duty free.
The result is that government is losing a lot of money and local goods are left   to compete with imported finished goods.
“By giving waivers to aid the importation of foreign goods, locally produced ones become more expensive and demand for them shrinks. This has affected the survival of local industries in the country.”
Another manufacturer, the Chief Executive officer, Aarti Steel, Sohann Baghla, corroborated Moukarim’s opinions on the industry.
Baghla observed that the country is blessed with enough solid minerals but that mining iron ore to provide raw materials for manufacturers is a capital-intensive project running into billions of dollars.
He said, “Such a project can only be handled by the government, not a private investor. But it is a project that is possible if there is enough political will to carry it out.
He added that for him, importing raw materials for the manufacture of roofing sheets ran into millions of dollars but stated also that his company was about to embark on backward integration which would enable it to source most of the raw materials locally.
Baghla admitted, like Moukarim, that government’s policies affected the local manufacturing industry.
He said, “When concessions are given to manufacturers who are based in China and other parts of Asia, they bring in their products here and rubbish the local manufacturing industry.”
He expressed hope that the incoming administration would sanitise the industry so the incidence of multiple taxation and other policies inimical to investment could be curtailed.
The Executive Director, Large Enterprises, Bank of Industry, Mr. Mohammed Alkali, also believes that there is a huge resource in the solid mineral sector, albeit untapped.
He said, “There are a lot of opportunities in the sector which are untapped. “The recent decline in the price of oil should be a moment to seek an alternative and solid minerals sector is a good area we should focus on.”
In line with the Nigerian Industrial Revolution Plan, the bank included solid minerals and metals processing among the items on its priority list for 2015.
Alkali said the bank’s emphasis was in growing the sector.
He added, “The bank has 17 projects in the sector worth N25bn.
“The projects include metal processing which involves the processing of iron, steel and copper.”
Since the quest for diversification started, the major investment of government in the non-oil sector has been in agriculture with raw agricultural produce driving export in the sector.
But mining in the solid mineral sector has grounded to a halt and there have been no efforts to revive it.
Tella attributed the lack of investment in the solid mineral sector to the fact that the sector was very capital-intensive.
He observed that investment in oil for the country required minimal resources, hence the concentration.
Tella said at the time the country was making huge revenue from oil, the government should have used the money to develop the solid mineral industry.
Many have argued that the government’s concentration on raw agriculture export as a means of generating foreign exchange will not achieve the desired result.
A local manufacturer, Kunle Abdulahi, who deals in export of finished goods says the local finished goods manufacturing industry has completely collapsed due to the practice of sending raw agricultural produce abroad and having them returned as finished goods to be sold at cheaper prices than the locally manufactured ones.
He said, “The reason why most local manufacturers relocate their factories to other countries is because there is a lot of government encouragement to importation of finished goods.
Raw agricultural export that the government is emphasising as non-oil revenue source does not add value to the economy; it is finished goods that add value.”
The managing director of the Bank of Industry during his presentation at a recent media interactive session to celebrate one year of the bank’s impact in the industrial and SME sectors noted that it was necessary for the country’s exports to have value addition.
He noted that the country had risen to the top of the world economic ladder in 2014 and was now reckoned among the top 20 economies of the world.
He said, ‘there are some developed countries whose GDPs are lower than Nigeria. They are not resting on their oars. It is time for us to start thinking globally and doing things according to global best practices.
Let us start by finding ways of adding value to exports by   refining our raw materials locally before exporting them.”
Copyright PUNCH.
All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express written permission from PUNCH.
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Friday 22 May 2015

Will calls for diversification help solid minerals sector?

May 22, 2015 : Anna Okon

Minister of Mines and Steel Development, Mr. Musa Sada
Minister of Mines and Steel Development, Mr. Musa Sada
As Nigeria seeks to diversify its revenue sources, analysts say the solid mineral sector holds a lot of opportunities but remains untapped, Anna Okon writes
Nigeria has ignored the solid mineral sector for decades, right from the period of the oil boom to the present time when the price of crude dropped from N110 to below N60 per barrel.
Even as the government reiterates its commitment to diversify from oil into non-oil areas, the solid mineral sector lies neglected while mining activities have grounded to a halt a long time ago.
According to the National Bureau of Statistics, solid minerals contributes less than one per cent to the nation’s Gross Domestic Product.
But the sector is one that operators in the steel business believe can earn more foreign exchange for the country than oil.
Many of them recalled that before the discovery of oil, Nigeria’s economy was largely sustained by agriculture and solid minerals noting that the country could still earn a lot of foreign exchange from that sector.
According to a professor of economics, Sheriffdeen Tella, just like South Africa where a lot of foreign exchange is earned from gold, Nigeria’s solid mineral sector has a lot of potential.
In the Nigerian Industrial Revolution Plan drawn up by the Federal Government, the solid mineral sector is listed as an area of strength to focus on in the process of diversifying the economy.
According to the document, Nigeria has about 44 solid minerals in commercial quantity.
They include iron ore, tin, columbite, lead, zinc, gold, coal, petroleum, and uranium as well as industrial minerals such as clays, limestone, dolomite, barites and glass-sand.
“Nigeria currently has the 12th largest iron ore reserves in the world, which can provide feedstock to a thriving steel industry,” the NIRP document notes.
Ironically however, the sector has remained ignored at a time when government seeks to devote resources to growing the non-oil sector.
In a phone-in interview with our correspondent, the Managing Director, Nigerian Gas and Steel, Hasib Moukarim, said manufacturing steel pipes from iron ore presented a lot of challenges for the company.
Moukarim’s company has been operating in Nigeria for the past 38 years and thus the oldest steel pipe manufacturing plant in the country.
The company has been engaged since 1976 in the production of steel pipes for the furniture industry and metal fabricators.
But Nigeria has not been mining in decades and Moukarim has to import iron ore for his steel factory.
He said, “We are still importing raw materials to make steel pipes. That involves a lot of foreign exchange and the Central Bank of Nigeria is no longer selling foreign exchange so it becomes more challenging.”
Sourcing foreign exchange without the help of the apex bank is for Moukarim like passing the proverbial camel through the eye of a needle. “It is a very slow and expensive process,” he remarked.
In addition to challenges associated with importation, the government’s policies regarding importation in this sector have also affected the manufacturer adversely.
The government frequently spends billions of naira on import waivers for finished goods and this practice, according to the NGSL MD, has dealt a big blow to his business.
Moukarim said, “Waivers and concessions are given to importers of steel pipes which are brought into the country duty free.
The result is that government is losing a lot of money and local goods are left   to compete with imported finished goods.
“By giving waivers to aid the importation of foreign goods, locally produced ones become more expensive and demand for them shrinks. This has affected the survival of local industries in the country.”
Another manufacturer, the Chief Executive officer, Aarti Steel, Sohann Baghla, corroborated Moukarim’s opinions on the industry.
Baghla observed that the country is blessed with enough solid minerals but that mining iron ore to provide raw materials for manufacturers is a capital-intensive project running into billions of dollars.
He said, “Such a project can only be handled by the government, not a private investor. But it is a project that is possible if there is enough political will to carry it out.
He added that for him, importing raw materials for the manufacture of roofing sheets ran into millions of dollars but stated also that his company was about to embark on backward integration which would enable it to source most of the raw materials locally.
Baghla admitted, like Moukarim, that government’s policies affected the local manufacturing industry.
He said, “When concessions are given to manufacturers who are based in China and other parts of Asia, they bring in their products here and rubbish the local manufacturing industry.”
He expressed hope that the incoming administration would sanitise the industry so the incidence of multiple taxation and other policies inimical to investment could be curtailed.
The Executive Director, Large Enterprises, Bank of Industry, Mr. Mohammed Alkali, also believes that there is a huge resource in the solid mineral sector, albeit untapped.
He said, “There are a lot of opportunities in the sector which are untapped. “The recent decline in the price of oil should be a moment to seek an alternative and solid minerals sector is a good area we should focus on.”
In line with the Nigerian Industrial Revolution Plan, the bank included solid minerals and metals processing among the items on its priority list for 2015.
Alkali said the bank’s emphasis was in growing the sector.
He added, “The bank has 17 projects in the sector worth N25bn.
“The projects include metal processing which involves the processing of iron, steel and copper.”
Since the quest for diversification started, the major investment of government in the non-oil sector has been in agriculture with raw agricultural produce driving export in the sector.
But mining in the solid mineral sector has grounded to a halt and there have been no efforts to revive it.
Tella attributed the lack of investment in the solid mineral sector to the fact that the sector was very capital-intensive.
He observed that investment in oil for the country required minimal resources, hence the concentration.
Tella said at the time the country was making huge revenue from oil, the government should have used the money to develop the solid mineral industry.
Many have argued that the government’s concentration on raw agriculture export as a means of generating foreign exchange will not achieve the desired result.
A local manufacturer, Kunle Abdulahi, who deals in export of finished goods says the local finished goods manufacturing industry has completely collapsed due to the practice of sending raw agricultural produce abroad and having them returned as finished goods to be sold at cheaper prices than the locally manufactured ones.
He said, “The reason why most local manufacturers relocate their factories to other countries is because there is a lot of government encouragement to importation of finished goods.
Raw agricultural export that the government is emphasising as non-oil revenue source does not add value to the economy; it is finished goods that add value.”
The managing director of the Bank of Industry during his presentation at a recent media interactive session to celebrate one year of the bank’s impact in the industrial and SME sectors noted that it was necessary for the country’s exports to have value addition.
He noted that the country had risen to the top of the world economic ladder in 2014 and was now reckoned among the top 20 economies of the world.
He said, ‘there are some developed countries whose GDPs are lower than Nigeria. They are not resting on their oars. It is time for us to start thinking globally and doing things according to global best practices.
Let us start by finding ways of adding value to exports by   refining our raw materials locally before exporting them.”
Copyright PUNCH.
All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express written permission from PUNCH.
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