(Updates with oil price, naira in eighth paragraph.)
Jan. 29 (Bloomberg) -- Nigeria, Africa’s top oil producer, is offering mining concessions to companies including Rio Tinto Plc and Ratel Group Ltd. to explore dormant reserves and boost non-crude revenue, Mines and Steel Development Minister Mohammed Sada said.
“What we want to do is to see that we have a large body of serious exploration companies” to use available mining data, Sada said in a Jan. 25 interview. “Our target by 2015 is to at least make a 3 percent contribution to the gross domestic product.”
Though commercial quantities of minerals, including gold, coal, tin and bitumen, have been found in Nigeria, they contributed only 0.36 percent to the country’s GDP in 2011, rising to 0.43 percent in the third quarter of last year, according to the National Bureau of Statistics. Four decades ago mining’s share was 10 percent, it said.
President Goodluck Jonathan will present a mining “road map” on Jan. 31 that will outline incentives to companies as the government tries to meet the target, according to Sada. Under the plan, investors will get capital allowances for as much as 95 percent of qualifying expenditures as well as waivers of custom and import duties for mining equipment. New investors will get tax holidays of three to five years along with other concessions, according to the minister.
“This is a good initiative and such a road map is probably even overdue,” Samir Gadio, an emerging-markets strategist at Standard Bank Group Ltd. in London, said today in an e-mailed response to questions. “That said, this is not the first time that the authorities announce high-level plans to increase the contribution of the mining sector, so the actual implementation of this blueprint and introduction of specific incentives will test the administration’s ability to deliver.”
While Rio Tinto is in talks with the government and has conducted studies, Ratel Group Ltd. and Savannah Gold Mines Ltd. are already operating mining leases in the West African country, Sada said. Illtud Harri, a London-based spokesman for Rio Tinto declined to comment when contacted by e-mail. Ron Clarke, interim chief executive officer for Ratel Group, didn’t immediately respond to a phone call and an e-mail seeking comment.
Oil has dominated the economy since the 1970s, now making up 95 percent of foreign-exchange income and 80 percent of government revenue. Mining and agriculture have shrunk by more than 40 percent, making Nigeria more vulnerable to oil price shocks.
Bonny Light crude, the country’s main export grade, rose less than 1 percent to $115.14 as of 9:21 a.m. in London. The naira declined 0.1 percent to 157.20 a dollar as of 12:24 p.m. in Lagos, the commercial capital, according to data compiled by Bloomberg.
Africa’s most-populous nation, with more than 160 million people, is seeking investors for 34 minerals found in commercial deposits at 450 sites across the country. These include 2.7 billion metric tons of iron ore, 3 billion tons of coal and 2.2 trillion tons of barite, a mineral used in drilling hydrocarbons, according to the Mines and Steel Development Ministry’s website.
Nigeria signed a memorandum of understanding with China on Jan. 23 that provides for a Chinese-built minerals laboratory by June and training of Nigerians in mining technology, according to Sada. The Mines and Steel Development Ministry will soon sign a deal with Iron Bull Mining Co. of Australia to take up some iron ore concessions, he said.
Nigeria’s mining revival is expected to benefit from the expansion of the country’s rail network, according to the minister. The government has approved feasibility studies for a 673-kilometer (418-mile) east-west coastal line and a 280- kilometer line connecting central Kogi State to Abuja that will help move everything from peanuts to coal from the northern Sahel belt to ports on the Atlantic coast.
“Without infrastructure you cannot do much with mining,” Sada said. “Even if you’re utilizing it within the country, you still need to move large volumes of minerals.”
--Editors: Dulue Mbachu, Ben Holland