ECONOMY-NIGERIA: Minerals to Overtake Oil as Major Foreign Currency Earner

By Toye Olori Reprint | | Print |

Toye Olori

LAGOS, Sep 10 2003 (IPS) - Nigeria’s new Minister for Solid Minerals, Odion Ugbesia is hoping that minerals will soon overtake oil as the country’s major source of foreign currency.

Oil accounts for 90 percent of Nigeria’s foreign currency earnings.

Documented studies of mineral deposits in Nigeria put the number of commercially exploitable minerals at over 25. They include substantial deposits of coal, gold, tantalite, lead, iron ore, zinc which have remained largely unexplored.

Several attempts have been made since independence in 1960 to develop the country’s mineral sector. The Nigerian Mining Corporation was established in the 1970s, the Ministry of Solid Mineral Development in 1995 and the mineral and mining laws revised in 1948 with attractive incentives for potential foreign investors. But nothing happened.

As a result, the mining sector still contributes less than one percent to the Gross Domestic Product (GDP). Mining exploitation lags far behind oil and gas, which account for 40 percent of GDP.

GDP growth rate moved up to 3.9 percent in 2002 against 3.7 percent in 2001. But the 3.9 percent growth rate was below the five percent projected for 2002, according to official statistics, made available to IPS this week.

Oil, which was discovered in the late 1950s, has remained Nigeria’s main source of foreign exchange, while gas, a by-product of oil exploitation, recently joined petroleum when Nigeria begun exporting Liquefied Natural Gas to Europe and North America.

The government is now seeking to change this trend, according to the Minister of Solid Minerals Ugbesia, as he embarks on a tour of mineral sites nation-wide. Western Nigeria, where a large deposit of bitumen has been discovered, was the first port of call by the minister.

While inspecting bitumen projects in Ode-Irele, Ondo state, Western Nigeria, Ugbesia expressed happiness that the federal government’s dream of bitumen exploitation is gradually being realised. About 80 wells have been sunk in the area and samples collected and analysed.

With the takeoff of the project, bitumen has now joined coal and tin as alternative revenue earners. Nigeria has a proven reserve of 42 billion barrels of bitumen spread along the 120-kilometre-bitumen belt running from the mid-west to the west of the country, ranking the West African country high on the table of 15 countries that have significant deposits.

Bitumen exploration in Nigeria started as far back as 1900, but, for lack of political will, the project could not takeoff.

President Olusegun Obasanjo’s administration set up a Bitumen Project Implementation Committee in 2000.

On Mar. 17 Obasanjo performed the flagging-off ceremony for the commercial exploitation of the mineral in Ode-Irele. Bitumen is also found in large deposits in Edo, Ogun and Lagos states.

Bitumen is a group of solid and semi-solid hydrocarbons that can be converted into liquid form by heating. It can also be refined to produce commercial products such as gasoline, fuel oil and asphalt.

Economic returns from bitumen exploitation include capital gains and contribution to road maintenance. According to a document made available to IPS, Nigeria’s bitumen is of higher content, lower impurities like heavy metals and clay, devoid of gas and water saturation and smaller volume of basal gas that dissipates through boreholes.

Presently, Nigeria, which has 59,892 kms of paved roads with an additional 1,194 kms of dual carriageway, the longest in Africa, spends an estimated two billion Naira (about 20 million U.S. dollars) annually on importation of asphalt, a bitumen derivative.

Apart from bitumen, the government also has inaugurated two technical committees to prepare the ground for the local production of bentonite and gypsum.

Garba Buwai, permanent secretary at the Ministry of Solid Minerals, says the cost of importing those minerals would be forestalled if they were produced locally.

The objective is to develop the minerals as a viable alternative to the petroleum sector.

”We have come with the mandate to ensure that the solid minerals sector is pulled out of the woods. We want the sector to surpass the oil sector because oil has created a lot of distortions in our economy. We will make the sector a new frontier in the Nigerian economy,” said Ugsebia, who was appointed to his new job in June.

President Obasanjo is expected to sign the Nigerian Bitumen Development Authority bill into law soon.