Nigeria is richly endowed with a variety of solid minerals of various categories ranging from precious metals to various stones and also industrial minerals. Much of these resources are yet to be exploited. Statistically, the level of exploitation of these minerals is very low in relation to the extent of deposits found in the country. One of the objectives of the new National Policy on Solid Minerals is to ensure the orderly development of the mineral resources of the country.
In Nigeria, where over 34 industrial minerals have been discovered in commercial quantity. Mining and other activities around it holds the potential of helping the country achieve fast and steady infrastructural development which it desperately requires, hence the desire of government to develop the sector in Nigeria. Some of the mineral resources that are present in Nigeria but not yet fully exploited include coal and tin. Other natural resources in the country include iron ore, limestone, niobium, lead and zinc.
However, every entity, either domestic or foreign, that chooses to invest in the Nigeria mining sector must do so by obtaining a requisite mining lease in Nigeria, or mining license in Nigeria or export permit. Mining sector, just like oil & gas sector, has various categories of leases and licenses applicable to it. The type of mining license or lease or permit to be obtained depends on the types of activity a company intends to carry out. The federal Ministry of Mines and Steel Development (MMSD) is the government agency responsible for all the activities in the mining sector and issues all licenses. Although, an individual company seeking any license can approach the MMSD for issuance of such license, a lawyer can also be engaged to handle such processing on behalf of a company or client.
By and large, there are six major types of mining leases or licenses or permit in Nigeria, which are commonly applicable in the Nigerian mining sector that are as follows:
- Exploration License
- Mining Lease
- Small Scale Mining Lease
- Possess or Purchase License
- Mineral Buying Centre License and
- Export permit.
The functions and requirements for all of the above listed licenses can be summarized as follows:
- Exploration License: Exploration license is granted to any individual company that intends to prospect for mineral resources in Nigeria. This type of license allows the licensee to search for the required mineral resources deposited in the areas covered by the license.
- Mining Lease: A mining lease in Nigeria is granted to any company that intends to start mining of mineral resources in commercial quantity in Nigeria. This type of license proceeded by an exploration license. A company seeking to obtain a mining lease must have found or located mineral resources satisfactory quantities making application for the lease. The major requirements for obtainment or grant of mining lease are as follows:
- Exploration License
- Certified true copy of Incorporation documents
- Completed application forms
- Pre-Feasibility Report
- Prospecting plan
- Payment of processing fee
- Evidence of financial capability or banker reference letter
- Evidence of technical competence or COMEG accredited geologist
- Irrevocable consent from land owner(s) and/or occupier(s) to the applicant
- Attestation of non-conviction of criminal offences under the Act by a Lawyer
The requirements and procedure on how to obtain a mining lease in Nigeria, as stated above may appear little complex, but they can be easily navigated if handled by an experienced professional.
Under the Nigeria’s Minerals and Mining Act, 2007, only corporations can obtain a mining lease in Nigeria. And when a mining lease is issued, the duration is for a period of 25 years.
- Small Scale Mining Lease: The Small Scale Mining Lease, as the name appears, is a smaller version of mining license. The procedure for obtainment of the SSML is a little bit similar to that of Mining Lease, with some distinctions. When SSML is issued, the duration is for 5 years. However, an SSML can be converted to proper Mining License if the scale of production or usage of it exceeds the criteria stipulated for SSML.
- Possess or Purchase License: The Possess or purchase license is a mining license in Nigeria, which is required from any entity seeking to trade in mineral resources. Under the Nigerian Mineral laws and regulations, it is an offence to possess or to be moving mineral resources from one place to another without the requisite license. Possess and Purchase creates an avenue for any corporation that does not own or possess a mining lease to directly engage in mineral trading or exporting.
Some of the requirements to obtain a Possess and Purchase License are as follows:
- Certificate of Incorporation of the Company, including CAC Form 1.1
- Application letter
- Tax Clearance
- Attestation of non-conviction for a criminal offence by a Legal Practitioner
- Banker’s Reference Letter
- Letter of consent from a Mineral title holder
- Evidence of technically competent person (credentials of Mining Engineer)
- Payment of prescribed fee
The duration of the license is one-year subject renewal.
- Mineral Buying Centre License(MBC): Mineral Buying Centre License is useful or applicable where a company seeks to open a center to warehouse to trade in mineral resources. There are different safety standard required from every mineral center. The safety requirement is subject to the types of minerals to be stored in such warehouse. Some of the other documents required for an application for MBC license are similar to the ones required for the Possess or Purchase License.
- Export permit: Export permit is required for any export of Nigerian mineral resources to overseas, either in commercial quantity or for ordinary laboratory test. The condition precedent to obtain such permit include the following:
- Valid Possess or Purchase license
- Application letter describing the quantities, destination and type of the minerals to be exported.
- Payment of royalties to the federal government
Incentives for participating in the Nigerian Mining Sectors
In order to encourage investment in the solid minerals industry in Nigeria, Government is offering the following incentives
- 3-5 years Tax Holiday
- Deferred royalty payments
- Possible capitalization of expenditure on exploration and surveys
- Extension of infrastructure such as roads and electricity to mining sites, and provision of 100% foreign ownership of mining concerns.
The Nigerian Minerals and Mining Act of 2007, National Minerals and Metals Policy 2008 and Nigerian Minerals and Mining Regulations 2011 regulate the mining industry in Nigeria.
In conclusion, prospective investors who are willing to invest in the Nigerian mining sectors will be required to fulfill all requirements and condition precedents before a mining Licence can be issued. Some of the conditions that must be fulfilled would include incorporation of company in Nigeria, registration with the Nigerian Investment and Promotion Commission, obtainment of Business permit among others.
Written by Business Law Department at Resolution Law Firm, Nigeria.