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Nigeria is betting on a grant program to spur the discovery of new commercial mining and processing opportunities as part of a broader strategy to secure a larger share of African mining investment, a government official told Semafor.
The Solid Minerals Development Fund, a government agency, will issue grants that provide up to 70% of the cost of exploration projects by mining license holders in Nigeria. “We’re looking for junior mining companies at this stage,” Fatima Umaru Shinkafi, Executive Secretary and CEO of SMDF, told Semafor. “We’re not at the same place as the oil and gas sector where the Chevrons and Shells can come in.”
Government officials say it is an effort to identify untapped reserves of more than 44 minerals — especially for those used for batteries and digital infrastructure, like lithium, nickel, cobalt and rare earths — across 500 locations in the country, and fund research into processing technologies. The latter goal is in line with the growing African movement to reduce raw minerals exports in favor of local value addition. Africa’s top crude oil producer is also trying to diversify government revenues away from export receipts.
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Unlike oil which accounts for 95% of foreign exchange earnings, solid minerals have long accounted for barely 1% of Nigeria’s economy. Despite doubling mining revenues last year, President Bola Tinubu’s administration still falls short of meeting a 3% target for minerals’ GDP contribution that was set six years ago.
Shinkafi said the new focus on grants builds on a government partnership with Africa Finance Corporation, a Lagos-headquartered multilateral lender that aims to de-risk mining projects and crowd in private capital into the sector. The high point of their partnership is a plan to build an alumina refinery that would add $1.2 billion annually to the economy when operating. That refinery “is not built yet but we are moving fast towards a final investment decision next year, and we are investing quickly alongside the AFC to get there,” Shinkafi said.
Step Back
A global boom in electric vehicles adoption and data center construction for artificial intelligence services is driving up demand for critical minerals. In Africa, that has meant increased attention on countries such as DR Congo and Zambia, due to their endowments of cobalt and copper. Zimbabwe’s unrivalled reserves of lithium have invited more than $2 billion in Chinese investment since 2021.
Nigeria values its untapped mineral deposits at more than $700 billion, and some recent milestones this year speak to the sector’s promise. A $250 million Chinese-built lithium processing plant was opened to much fanfare in the northern Nasarawa state in July, a month after new copper, lithium and rare earths discoveries were announced by the government.
But Nigeria remains in competition with the rest of the continent for the largest mining deals. US-backed Orion CMC, which agreed to acquire Glencore’s DR Congo assets worth $9B, plans to invest in a $940 million Tanzanian project that will produce nickel concentrate, copper and cobalt. Zimbabwe’s lithium miner Mutapa Resources raised $300 million to build a mine and processing facility. Kenya recently found a rare earths stockpile.
Shinkafi believes a combination of tax holidays, full repatriation of earnings and a non-insistence on part ownership in mining projects makes Nigeria’s mining laws friendly to investors. “We’re not nationalistic in the way of saying we must own part of what you’re doing.”
For the grants program, however, the government may take a stake in ventures that it invests in, but with a structure that allows for an exit whereby other investors can buy the government out later, Shinkafi said. Her fund has received “hundreds of applications” since floating the grants in June, and is currently appraising multiple projects for funding, she said.
Notable
- Africa’s critical minerals can spur prosperity for the continent, but “without strong coordination across government agencies, the full potential of mining cannot be achieved,” the Brookings Institution in Washington, D.C. wrote in an analysis.