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Shady practices by registered mining companies cost Nigeria billions of Naira

The Nigerian government may have lost about N4 billion in three years, owing to illegal practices and corrupt activities of companies operating in the mining sector in Nigeria, two separate solid minerals audit reports by the Nigeria Extractive Industries Transparency Initiative have revealed.

The many schemes through which these companies have defrauded the Nigerian government include non-remittance of revenues, unlicensed mining and evasion of taxes, illegal practices, and incessant smuggling of solid minerals out of the country.


Analysis of the NEITI solid minerals audit reports done by the Premium Times Centre for Investigative Journalism, showed contradictions between the reconciled data of many extractive companies and those of government agencies.

The review of NEITI’s 2015 and 2016 Solid Minerals Audit Reports showed that the export data of some mining companies were not captured by regulatory agencies of government.

For example, export figures declared by companies like Coltan Mineral Resources and Astro Mineral Resources were missing in the report by Nigeria Custom Service.

The 2015 audit report revealed unreconciled differences of about N4.74 billion (N4,736,884,784.3) in the data of the mining companies when compared with the declared figures by government agencies.

Previous reports also showed that the 13 per cent derivation payments to solid-mineral producing states were not paid.

In addition, the Ministry of Mines and Steel Development did not put in place a framework for separating solid mineral revenues. Also, the indices for sharing accrued revenue from the sector were also not available to the RMAFC.


In 2014, exports figures reported by companies were different from those declared by government agencies.

For example, Tongyi Allied Mining Ltd exported 35,939.4 tons of lead zinc in the year 2014, according to records from the Nigerian Customs Service, but the company was reported to have paid royalties for 10, 870 tons of lead zinc by Mines Inspectorate Department.

Accordingly, NEITI lamented it was unable to reconcile data between any of the government agencies and those reported by companies.  A worrisome trend that suggests shady practice and loss of revenue to the Nigerian government.

In the 2016 audit report, it was revealed that the total royalty payment declared by UNICEM, a mining company, was N71.6 million (N71,635,522.11) in 2016 as per Ministry of Mines and Steels Development’s records.

The company denied the audit team access to its documents during the validation visit.  However, at the tripartite reconciliation meeting which the company attended, the audit discovered an irregular issuance of receipt for the sum of N28,813,021.20. While the receipt with number Z009454299 was issued on May 24, 2016, three other receipts nos: Z009449771-3 were issued for the same amount on August 11, 2016.

It was further confirmed that the payment of N28,813,021.20 with receipt number Z009454299 issued on May 24, 2016, was not included in the sum declared by the Ministry of Mines and Steels Development. In addition, the audit team was not provided with evidence of bank lodgment to confirm the receipt by the government.

The reconciliation discovered a difference between the Free on Board (FOB) value of the quantity of minerals exported by Tongyi Allied Mining Ltd and export records submitted by NCS. Based on Nigeria Customs Service’s records, the company exported 5,521 tons {5,521,520 net mass (kg)} of lead/zinc concentrate and/or lead ore in 2016. However, Tongyi declared 3,100 tons and paid the sum of N7,425,000 as royalty as against N12,847,455.75; thus leaving a difference of N5,422,455.75, which represents payment for the undeclared 2,421 tons.

The report also discovered a case of underpayment of royalty, where withholding tax (10 per cent) was wrongly deducted on the royalty payable but not remitted to the government, thus making the government lose even more revenue due to it.

Specifically, Dangote Cement Plc underpaid royalty at its Obajana Plant by such deductions, to the tune of N40 million (N40,023,670.56).

The report revealed that multiple business activities of some operators limit the extent to which some statutory payments (e.g. taxes) in respect of their extractive activities can be identified and reconciled. This practice is mostly found among the companies in the construction and cement manufacturing sectors.

In the report for 2016 solid minerals activities, three companies denied the audit team access to their records during data validation and failed to attend reconciliation meeting. The companies are BUA International Limited (Okpella site, Edo State), Hajaig Construction Company Limited and Pioneer Sinochino Investment Ventures Limited.

The revenue contributed by these companies was N44 million as per government declared revenue or 0.1 per cent of the reconciled figure; hence not material to affect the outcome of the report.

It was also revealed that some expatriate companies do not have a trackable record of tax payment in Nigeria as they do not keep their accounts within the country, and they prepare their accounts in a language other than English.

This was the case for Mercury Mining Investment, owned by the Chinese and is situated on the Benin-Ore road, Ofusu, Ondo State. According to the report, the company has not kept its activities records and books in its Nigerian premise. Instead, they are in China, and they have no evidence of tax payment.

Consequently, this made it impossible to verify, validate and reconcile their Company Income Tax (CIT), Value Added Tax (VAT), Education Tax (EDT) and Withholding Tax (WHT), royalty and other fee payments to the relevant government agencies.


The NEITI report states that activities of unlicensed miners are prevalent within the industry, leading to even more loss of government revenue.

According to Abubakar Bwari, the Minister of State, Ministry of Mines and Steel Development, more than two million people in Nigeria profit off illegal mining in the country.

Moreover, the NEITI reports have shown that Nigeria’s vast landmass may pose a serious challenge to enforcing the laws and regulations relating to the mining sector. Some of these laws have not been designed to achieve effective monitoring and compliance, measurable to global standards and best practices.

Although the Mining Police and the Mines Inspectorate was established to monitor and enforce compliance by all industry operators, illegal miners, including Asian and African immigrants, currently populate the industry with unapproved mining sites in different locations across the country.

According to NEITI, six states in Nigeria have been identified as the top destinations for the illegal mining of solid minerals in the country.

Of the six states, Niger State leads with 10 illegal mining sites where minerals such as gold, lead, zinc and tantalite are consistently extracted, illegally.

Plateau State is next on the list with seven illegal mining sites yielding tin, columbite, barite and zinc. Ebonyi and Imo States have five illegal mining sites each, while Enugu and Zamfara states have four sites from where minerals, which include lateritic soil, lead, zinc, and gold are mined illegally.

The audit of the operational processes and financial payments to Nigeria from companies that mine Nigeria’s mineral ores have shown that a lot of Nigeria’s minerals were exported from Nigeria’s shores without legal permits and with no benefits to the country.

The statutory requirement is that mining companies must obtain permits from the country’s Ministry of Trade, regularly, before they can export solid minerals. Unfortunately, most of these mining companies have continually violated Nigerian laws by exporting minerals without beneficiation, an action that has come at a huge cost to Nigeria and has affected the country’s revenue base significantly.

The Nigerian Minerals and Mining Act 2007 require that any exporter of solid minerals must request for a permit to export – evidence of a request for a permit to export minerals by the exporters are not provided according to the report.

According to the former Minister of Solid Minerals Development and Chair of NEITI Board, Kayode Fayemi, the continuous presence of foreign nationals, who are the major patronisers of mined products from artisanal and small miners, have led to reduced value addition, revenue leakages and inaccurate transaction records.


According to the NEITI’s occasional paper on Improving Transparency and Governance for Value Optimisation in Nigeria’s Mining Sector, Nigeria is enriched with over 34 commercially viable solid minerals deposits across the country.

From 1903, the country had modest exploration and exploitation with intermittent growth, up to 1960. Tin, columbite, coal, and so on, were the early solid minerals that contributed significantly to Nigeria’s economy but declined due to the oil boom that started in 1970 till date.

The recent return and attention to solid minerals was necessitated mainly by international oil politics, and the need to diversify Nigeria’s economy.

In comparison with other countries with similar potential, Nigeria’s mining sector is still largely underdeveloped. This is in spite of the sector’s promising performance a few decades ago, and despite huge proven deposits of valuable minerals across the country, the potential of which is comparable to other moderately to highly endowed nations.

Until recently, when there was a slight improvement, the sector’s contribution to Nigeria’s Gross Domestic Product (GDP) was not more than 0.5 per cent. This contribution is a reversal from the historically higher percentages of about 4-5 per cent in the 1960s and ‘70s.

Though Nigeria’s economy is highly dependent on oil as the main source of revenue, the country has over 34 natural resources cut across the thirty-six states of the federation and the Federal Capital Territory.

These resources include limestone, gold, coal, gypsum, kaolin, sapphire, granite, copper, iron ore, sand, clay, laterite, bitumen amongst others.

According to a report, the natural resources sector of Nigeria loses N50 trillion annually to untapped resources.

With the obvious challenge of the Nigerian government to meet its financial obligations and achieve its long term economic diversification plan, the long-forgotten minerals and mining sector is now thought to be the new frontier of salvation, with its potential, according to government records, to generate N8 trillion naira annually.

Nigeria’s federal officials estimate that the current commercial value of seven of the country’s solid minerals [iron ore, coal, lead/zinc, bitumen, gold, limestone and barite] run into hundreds of trillions of dollars. Indeed, Nigeria’s office of export promotions claims that the country loses about $40 billion annually in unexploited gold alone (168.29 per cent of Nigeria’s 2017 budget of N7.28 trillion); higher than oil revenue in 2015 ($37billion), and far higher than the 2016 oil revenue of $26 billion.


With the many differences identified in the reports examined, PTCIJ made a Freedom of Information (FOI) request to the Nigerian Customs Service for details of exports by the identified mining companies.

The organisation, however, declined to provide any response to several Freedom of Information (FoI) requests made by PREMIUM TIMES asking for actual data on remittances by Coltan Minerals.

These companies are responsible for the extraction of valuable minerals such as gold, ore or other geological materials from the earth in Nigerian land without direct benefit to the government of Nigeria or its citizens.

Meanwhile, the Federal Inland Revenue Service (FIRS), responsible for tax collection on behalf of the federal government, has failed to deliver on this duty and also refused to release the details of tax remittances by mining companies to PREMIUM TIMES.

Efforts to acquire the details of tax remittances were unsuccessful as the content of the reply received from the FIRS on this, reads: “On the basis of section 50(1-3) of FIRS (Establishment) Act, 2007, it is an offence for an officer of FIRS to divulge any information that relates to the taxes paid by any company as staff are mandated by the act to regard all documents, information, returns, assessments lists relating to the profits (and by extension, the tax paid) of any company as secret and confidential.”

The FIRS further argued that the nature of the request, which is the tax remittance figures of Mercury Mining Investment for 2015, cannot be divulged because it contravenes section 14 (1) (d) of the FOI Act, 2011.


The culture of opacity around government financials has been a major concern for Nigerians and policymakers, especially in the extractive sector.

For ages, issues of transparency have dogged Nigeria’s extractive industry. The Nigeria Extractive Industries Transparency Initiative (NEITI) was set up in 2004 to ensure due process, transparency and accountability in payments by the companies and revenue receipts by the federal government.

A development activist with Connected Development, Busayo Morakinyo, said opacity in the extractive sector is no longer a new thing. “Look at what’s happening in Zamfara State where illegal mining is on the rise and the resultant conflict that follows,” he said. “Look at Plateau State, we have a whole lot of illegal mining going unabated and the government seems unbothered. When you relate to data, we should focus more on other sectors.”

“As much as the extractive industry is key to our development as a nation, deliberative secrecy in the operation of this sector is a bad omen for our nation to attain developmental heights. Right now, we have no idea of fuel usage in Nigeria not to talk of barrels of oil, It’s not new again that NNPC has been declaring loss in the past years. It’s now a must for citizens to be deliberate about holding government accountable if not Nigeria may never get better.”


Recent years have seen intense debates between the government, the National Assembly and companies around issues like fiscal obligations and environmental liabilities.

Contract transparency in the extractive sector would establish an even playing field of information and encourage better-informed debates.

Disclosing contracts, which to date remain shrouded, could be another way to demonstrate the new way of doing business. Contract transparency could have deterred some of the poor oil. Establishing this practise now, would deter future lopsided deals, creating a strong anti-corruption legacy.

Also, a number of recommendations have been made by the NEITI in its previous edition of solid minerals audit reports. For example, its 2016 report recommended that for the purpose of recovery of unpaid royalties by mining companies, the government should review the year 2015 export documents to ensure that royalty payments on solid minerals are adequately confirmed at the export point.

It also recommended that the state mines officers and surveillance team of the Ministry of Mines and Steel Development should remain active and equipped with knowledge on measurement machines (and methods) for quarries and mines for effective quantity determination and royalty calculation.