Executive Summary

The Board of NEITI – the NSWG – decided at the meeting of 20 May 2011 to carry out "The comprehensive audit of the solid minerals sector to cover the period 2007-2010." The present Scoping Study will provide guidance on the "materiality points/levels" and through this the companies to be involved in this audit. The methodology adopted includes both desk study of the various literature obtained from various government offices in Nigeria and some web-based information/site visit undertaken to some se-lected mining operations cut across minerals types and their location in Nigeria. Further experience from other EITI countries has been collected as well as discussions with the International EITI secretariat in Oslo in Norway.

Further a number of meetings and interviews with key stakeholders were carried out. The objective of these interviews and meetings was partly to inform the stakeholders about NEITI and partly to discuss a number of issues relating to the solid mineral sector in the EITI programme in Nigeria.

Finally, a number of key government entities were requested to provide data on the flow of revenue from the solid mineral sector and the companies were requested to provide information on the fees and duties involved in present activities.

It is important to understand that the solid mineral sector in Nigeria is dominated by Artisanal and Small-scale Mining (ASM) and that no Large-Scale Mining (LSD) is operating at the moment. Large-scale operators, such as cement manufacturers and construction companies, whose primary activity is not mining, are observed to be operating quarries for the production of mainly limestone, stone aggregates mostly for their own production.

In terms of volume of royalties, VAT and CIT paid, the large-scale construction companies operating quarries (granite and sand) and cement companies having mining operations for limestone, laterite and clay were observed to be paying the most.Only a few mining operators in metalliferous minerals (gold, lead, zinc and tantalite), industrial minerals (gypsum, barite, diatomite and bentonite) and gemstones were observed to be of a size comparable to the two sectors above.Based on interviews with stakeholders, it is clear that there is a broad consensus among stake-holders about the inclusion of the solid mineral sector in the NEITI work. Many stakeholders observed that the success of NEITI in the petroleum sector is a clear indication as to why the solid mineral sector should now be included in the EITI process in Nigeria.

That said, there is a lack of knowledge as to what an EITI programme would specifically entail among the mining operators as well as the "new" government entities and CSOs. If the NEITI wishes to commit to implementing an EITI programme, one of the most immediate tasks would be to bring a broad group of stakeholders together in order to sensitize them to what EITI implementation requires.

Based on the outcome of this study the Consultant would like to make the following recommendations:

  • That NEITI considers the expansion of the NSWG and the three Committees based on the findings in this report and the recommendations from the Stakeholder Workshop.
  • Based on the findings in this scoping study it is suggested also to use the amount of royalty paid as materiality point and it is recommended that NEITI use 5,000,000.00 Naira paid in 2010 as a threshold (materiality level) for companies to be included in the audit of the solid mineral sector. The lessons learnt from the first audit of the solid mineral sector will provide NEITI with a good background to consider a possible expansion of the number of companies involved. The materiality level suggested will be 19 companies in the construction sector and the cement industry. It will not include any companies extracting metalliferous minerals (gold, lead, zinc and tantalite). It is important to emphasise that "solid mineral sector" covers all minerals and rocks extracted and not only "traditional mining" of metalliferous minerals.
  • That NEITI finalises the selection process for the announced "Financial audit of the solid mineral sector" and prepares the necessary review of the ToR based on the findings in this report.
  • That NEITI should consider establishing a dialogue with the MMSD to discuss modalities of ensuring that the number of collectable fees and duties from the solid mineral sector do not stifle operations in general.A final draft of this report was presented at a Stakeholder Workshop in Kaduna.

A large number of the key stakeholders in the solid mineral sector in Nigeria participated in the workshop and the presentations were followed by a very lively and constructive discussion among the participants.The conclusions and recommendations in the draft report were supported by the participants. In general the participants observed that the success of NEITI in the petroleum sector is a clear indication as to why the solid mineral sector should now be included in the EITI process in Nigeria.

 

Where to find us?

Address
4th Floor, Murjanatu House,
1, Zambezi Crescent, Off Aguiyi Ironsi Street, Maitama, Abuja.
Phone Number
+234 9 2905984
+234 9 2906623