Absence of Finance, Bane of Mining Sector’s Growth, Says FG

Kasim Sumaina in Abuja

The federal government has attributed the absence of finance to mining sector as the major challenge hampering the contribution of the sector to the country’s Gross Domestic Product (GDP)
The Minister of Mines and Steel Development, Alhaji Abubakar Bawa Bwari, said this while speaking recently at a dialogue meeting with chief executives of Nigerian banks and UNDP Country Director in Lagos.

He stressed that access to credit either from banks or capital markets had been low to meet the sector’s financing needs, adding that, institutional investors were also wary of investing in projects along the life cycle.

According to him, “Without the financial sector, we simply cannot develop the sector to meet its true potential as the small and artisanal miners of development minerals who are looking to expand their operations do not have access to financing for capital equipment and operations.

“We need a shift in mind set among the financial institutions about the mining sector in general. Since we are here to unlock opportunities in the development minerals sub-sector, the first challenge we must tackle is for the financial institutions to recognise the value chain potentials of the development minerals sub-sector.”

He explained that a key constraint identified in the roadmap was the underdeveloped financing and business environment for mining, which he said had made it difficult to catalyse investments into the sector.

“Financing for other stages of the life cycle particularly exploration and production are limited. This is due to lack of bankable data for exploration and the lack of systematic understanding of mining’s potential.
“As a result, few banks have dedicated minerals and mining desks and teams.”
He lamented that the absence of a formal financing system was affecting the sector’s potential to contribute to national development.

He added: “Against this background, my ministry is keen to see the financing environment transformed to support the growth and development of the mining sector.
“This is in line with the ministry’s objective for mining to have a multiplier effect on the economy beyond direct royalty and tax receipts.

“This will be through the facilitation of mineral economic linkages, investment, and diversification. Promotion of side stream linkages such as the stock market and financial services to finance business development is central to this objective.”

Continuing, Bwari revealed that the challenges required creativity and innovation to encourage participation along the value chain, starting with the upstream, which provides the anchor investment for the emergence of the value chain and where the financing bottleneck is.

“Collectively we must address access to finance constraints faced by miners of development minerals and other minerals in general. We are extremely pleased with the ACP-EU development minerals intervention
“I understand participants from the financial institutions that attended the Nigerian workshop on Inclusive Finance of Development Minerals, appreciated the exposure provided through the workshop.

“We are prepared to build on the ACP-EU/UNDP/African Guarantee Fund program to operationalize the N5 billion fund that the Ministry established in collaboration with the Bank of Industry to support small and medium scale miners.

“Unfortunately, this scheme is not performing as expected due to the miners’ inability to provide the necessary collateral and inadequate business plans to support their applications and other technical reasons. We must find a middle way to solve this problem,” he added.