Mining Sector Contributes Only 0.72% To GDP As Illicit Financial Flows Drain Gains – NEITI

Nigeria’s solid minerals sector contributed just 0.72 per cent to the country’s gross domestic product (GDP) in 2023, with revenue totaling N401 billion, as illicit financial flows (IFFs) significantly undermined its potential, the Nigeria Extractive Industries Transparency Initiative (NEITI) reported in a policy brief released Thursday.

The document, titled “Stemming the Scourge of Illicit Financial Flows in Nigeria’s Mining Sector,” described the sector as a cornerstone for economic diversification due to its deposits of gold, lithium, limestone, and gemstones.

However, NEITI stated that IFFs have eroded this potential through revenue leakages, tax evasion, illegal mining, smuggling, corruption, weak oversight, and money laundering tied to criminal networks.

NEITI noted that these issues were systemic, rooted in institutional fragmentation, market structures, data gaps, and security challenges.

The brief highlighted “severe fragmentation of regulatory oversight” across agencies including the Ministry of Solid Minerals Development (MSMD), Mining Cadastre Office (MCO), NEITI, Nigeria Customs Service, Nigeria Financial Intelligence Unit (NFIU), and state bodies, which collected data in silos without integrated digital monitoring.

According to the brief, weak data governance and insufficient beneficial ownership (BO) disclosure were flagged as key enablers.

It pointed out that mining licenses were often held via special purpose vehicles, shell companies, or layered structures obscuring true owners, with verification relying on self-declaration across MSMD, MCO, and the Corporate Affairs Commission (CAC).

This opacity enabled politically exposed persons (PEPs), foreign interests, and criminals to hide control, facilitating corruption and trade misrepresentation, NEITI emphasised.

Artisanal and small-scale mining (ASM), which dominated over 70 per cent of activity, compounded vulnerabilities, according to the brief.

An estimated 80 per cent of mining in North-West states like Zamfara, Katsina, and Kaduna occurred illegally, without licenses or traceability.

NEITI reported that illicit minerals were blended with legal ones, laundering them into formal chains and evading taxes, while informality hindered monitoring and enforcement.

To address these challenges, NEITI proffered seven actionable recommendations. These included inter-agency coordination, integrating anti-money laundering and counter-terrorism financing into mining governance, formalising ASM via simplified licensing and finance access, mandating BO disclosure, legal reforms, community engagement, and civil society involvement.

The brief aligned these with frameworks like FATF standards, the Proceeds of Crime Act (POCA), Companies and Allied Matters Act (CAMA), Open Government Partnership commitments, and the Medium-Term National Development Plan (MTNDP).

NEITI reiterated that tackling IFFs was essential for economic stability, calling on government, industry, and stakeholders to implement the reforms for better data systems, transparency, and ASM inclusion. The agency described the sector’s repositioning as a “credible, transparent, and revenue-generating pillar” once governance gaps closed.

Published in collaboration with the Federal Ministry of Solid Minerals Development (MSMD) and Africa Network for Environment and Economic Justice (ANEEJ), with UK Foreign, Commonwealth and Development Office (FCDO) support, the brief forms part of NEITI’s advocacy for transparency in extractives.