As Africa’s top oil producer, Nigeria has long endeavored to diversify its economy to include its mining sector, which boasts promising deposits of gold, zinc, lithium, and iron ore. The implementation of a new mining law in 2007 was an important step in this diversification drive, introducing a modern framework that requires no free-carry interest for the state. This insight contains a snapshot of the framework that governs mining in Nigeria.
Framework – The Nigerian Minerals and Mining Act, 2007[1] establishes the legal framework for mining activities in Nigeria. Under the Act, mining activities are governed by the Ministry of Mines and Steel Development, and the Mining Cadastre Office which administers mineral titles and acts as a sector regulator. The Act provides that mining shall have a priority for land use as an ‘overriding public interest’.
Mining Rights – The Act provides for several mining rights and licenses. Of most interest to international investors will be (i) an Exploration License, granted for 3 years renewable for further two periods of 2 years each, granted over land areas not exceeding 200 Km2; and (ii) a Mining Lease, granted over an area not exceeding 50 Km2 for 25 years renewable, conferring the right to use, occupy and carry out mineral exploitation, and to sell and export mineral products.
Fiscal – License holders pay royalties and fees based on the type of mineral and scale of mining. Royalties include (i) 3% for precious metals, (ii) 4% for metallic minerals, and (iii) 5% for industrial minerals. Mining companies are subject to regular corporate income tax at 30%, as well as Value Added Tax at 7.5%, Capital Gains Tax at 10%, and a 2% Education Tax on profits to fund educational development. Tax incentives will apply to certain projects and minerals.
Ownership – Exploration licenses and mining leases must be held by a Nigerian-registered company. Indigenous people and local communities must be included in mining activities, ensuring they benefit from resource exploitation. There are no restrictions on international investment, however, the Act provides for restrictions on exports to encourage domestic beneficiation.
Why Nigeria? Due to a heavy reliance on hydrocarbons and a reputation for instability, Nigeria’s mining sector is long underdeveloped, contributing only 0.5% to Nigeria’s gross domestic product. Nevertheless, it has seen progressive growth in recent years, including revenue generation and accountability. The government aims to increase the GDP contribution of mining activity to 3% by 2025, and has invested heavily in mineral data and a new electronic cadastre. The re-concession of the Ajaokuta Steel Mill and investment in rail infrastructure will encourage investment in Nigeria and the region. It is also hoped that rumored amendments to the Mining Act will only further strengthen the industry.
Why Serus Legal? At Serus our team is experienced in working in Nigeria. We advise on company structuring, project acquisitions and due diligence, and prepare all forms of mining agreements. Serus is an international law firm that uses technology and lower overheads to provide legal services at a significantly better value. Please contact our team or email felix@seruslegal.com.
The content of this insight does not constitute legal advice and is subject to input from a lawyer.
[1] In 2011, the Act was complemented by new regulations. The National Minerals and Metals Policy 2008 also sets out the sector’s strategic goals.