NIGERIA MINING REGULATION
Nigeria is located in West Africa; the country is comprised of 36 states and the Federal Capital Territory where the country’s capital city, Abuja is located. It is bordered by Benin, Chad, Cameroon and Niger. Nigeria became independent from Great Britain in 1960 and retains English as its functional and commercial language. Nigeria is the most populous country in Africa and, in 2014, its economy became the largest in Africa. The country has successfully navigated through more than one democratically induced change of government, reflecting well on the country and its relative political stability. The country features a highly educated middle and upper class, many of whom have been educated outside of Nigeria in the UK, America, or elsewhere. Whilst this political class is not large, it is influential and a major stabilising force within the country.
Nigeria has a wide range of unexploited mineral resources, however, not all minerals are available in commercial quantities and little modern exploration has taken place; this is largely due to the dominance of the oil sector in attracting available risk capital, as well as government policy focus. According to the World Bank the mining of minerals in Nigeria currently accounts for just 0.3% of the country’s GDP. That said, the government revamped its mining law in 2007 and, again in 2011, with the aim of diversifying its economic and the Ministry of Mines and Steel Development has designated seven strategic minerals for priority development, namely, coal, bitumen, limestone, iron ore, barites, gold and lead/zinc.
PRINCIPAL REGULATION AND LEGISLATION
The Mineral and Mining Act (2007) (Mining Act) is the principal legislation that regulates the Nigerian mining sector. Article 1 of the Mining Act states that “The entire property and control of all Mineral Resources […] is and shall be vested in the Government of the Federation for and on behalf the people of Nigeria”. In 2011, the Minerals and Mining Regulation was enacted in order to complete the regulatory framework for governing the sector. The Ministry of Mines and Steel Development (MMSD) is responsible for the administration of the mining industry. The Ministry is composed for the Mines Inspectorate Department, the Mines Environment and Compliance Department, the Mining Cadastre Office and the Artisanal and Small-scale Mining Department. The Mining Cadastre Office is competent for issuing, suspending and revoking mining rights.
MINING TITLE AND GRANT FORMS
According to Sections 8 and 9, the principle of first come / first served applies, save for reserved areas where tendering is contemplated (e.g., known resources). Individuals, co-operatives and Nigerian legal entities may obtain the right to explore for mineral resources, while only Nigerian companies may obtain mining leases (see ss. 47 et seq.). The Mineral and Mining Act provides for the following mineral rights:
- Reconnaissance Permit: This grants a non-exclusive right over the area for a period of one year, and may be renewed annually (s. 57). The permit is non-transferrable.
- Exploration Licence: This licence is exclusive and may not be granted over an area where another licence, lease or permit already exists (s. 59(2)). The permit grants an exclusive right over an area that shall not exceed 200 km2 for an initial period of three years; the licence may be renewed for two further terms of two years each, provided the title holder has complied with legal requirements of the MMA (ss. 59, 60 and 62). The duration of the licence including all renewals may not exceed seven years (Art. 37, Reg.). The licensee shall give notice to the landowner prior the start of the activities (Art. 61(1)(c)). The holder of the exploration licence has the exclusive right to apply for a mining lease, as well as a small-scale mining lease and a quarry lease.
- Mining Lease (ML): May be acquired by a body corporate that has demonstrated that minerals in commercial quantities exist within the area subject to the application. Applications for mining leases must include the details of the exploration licence, the desired mining lease area, the mineral resources to be developed and a “pre-feasibility” study (s. 57(3)(h)(iii), Reg.; note that the MMA, itself, refers to a “feasibility” study in s. 67). A ML grants the holder an exclusive right to mine and has a duration of 25 years; it is readily renewable if the holder has complied with work obligations and the requirements stated by law.
- Small-scale Mining Lease: An individual, entity or co-operative may acquire a small-scale ML. The area shall not be less than 5 acres and shall not exceed 3 km2. The products recovered under a small scale mining lease shall be sold to a licensed Mineral Procurement Centre. The licence is granted for a period of five years, and may be renewed for further periods that shall not exceed 5 years each (s. 50, Reg.).
A mineral title (except for reconnaissance permits) may be transferred with the prior consent of the Minister, except for transfers to affiliates (which do not require such consent), and should be registered with the Mining Cadastre Office. Mineral rights may be wholly or partially assigned, sub leased, pledged, mortgaged, charged or subject to any security interest (s. 147, MMA).
The MMA requires a ML holder to commence mine development within 18 months, and mine production within 36 months, "from the date the requirements of the Act have been met" (ss. 70(1)(a) and (b)). The 'requirements of the Act" include the need to obtain (a) environmental impact assessment (EIA) approval, (b) approval for its work programme by the Mines Inspectorate Department, (c) a Community Development Agreement and (d) a settlement on compensation for other land users and owners. (See also s. 118(2), Reg.) With respect to the concept of a Community Development Agreement, section 116 of the MMA simply states that prior to the commencement of any development activity, a lessee must conclude with the 'host community where the operations are to be conducted an agreement.... that will ensure the transfer of social and economic benefits to the community."
The Community Development Agreement must, inter alia, provide for educational, fiscal, commercial development, agricultural and environmental, socio-economic management and local government enhancement (s. 116, MMA). Since a failure to reach such an agreement would lead to a breach of the act, it is inevitable, we believe, that all such agreements on major investment projects will be referred to the minister for resolution, as provided in section 116(4) and the time required for this will seriously erode the remaining development time permitted. (See also s. 130, MMA; Reg. s. 193.) The Community Development Agreement shall be reviewed every five years.
When an application for a mineral title is made in respect of an occupied area under a state lease or right of occupancy, the applicant shall inform the landowner and obtain the consent prior the procurement of the licence. The holder of a mining lease shall pay a rent to the landowner determined by the Minister (s. 102, MMA). The rate of the surface rent shall be reviewed by the Minister every five years. Furthermore, a holder of a mineral title may pay to the landowner a fair compensation for any disturbance of the surface rights and any damages to the surface of the land (s. 107, MMA). This compensation is determined by the Mining Cadastre Office upon consultation of the State Minerals Resource, the Environmental Management Committee and a licensed appraiser. The non-payment of the compensation results in suspension of the mineral title, which also may be revoked if the payment is not made within 30 days after the suspension.
The Environmental Impact Assessment Act, Cap E12, LFN (2004) (hereinafter EIA Decree) outlines the procedures to be applied in respect of an EIA approval. It provides fairly clear tests as to what projects will and will not be permitted. For exploration activities, the holder of an exploration licence must "maintain and restore the land that is the subject of the licence to a safe state from any disturbance resulting from exploration activities, including but not limited to filling up any shafts, wells, holes or trenches made..." (s. 61(1)(d)). The holder of a mining, small-scale or quarry lease who intends to abandon or permanently cease the production shall submit a written notice to the relevant departments together with the reasons thereof and an abandonment plan.
A Water Use Permit may be required by a developer of a mine. Such a permit is necessary when altering the course of water, consuming water for mining operations or otherwise affecting its supply. It is responsibility of the holder of a water permit to reach an agreement with any affected water users (s. 130, MMA). When an agreement is not reached, the matter may be referred to the Minister, and ultimately, to Arbitration (s. 130, MMA). The permit shall be valid as long as the small-scale, mining lease, quarry lease or exploration licence remains in force. The holder of a mineral title shall submit a half yearly report of all exploration and or mining operations, a half-year report based on the progress of the Community Development Agreement, and an annual expenditure report on mining operations to the Mines Inspectorate Department (s. 18, Reg).
See Nigeria Environmental Overview Commentary.