Why Invest in the Nigerian Gold Rush?

Investment Outlook in Nigeria: Why Invest in the Nigerian Gold Rush?

Nigeria mining sector represents untapped investment opportunity in Africa. The mining sector in the largest economy in Africa accounts for only 0.3% of GDP.

This is despite the fact that the country is blessed with large mineral resources, which according the Nigerian Minister of Mines and Steel Development, amounts to 400.

Of these only about 34 have been identified with only 13 being actually mined, processed, and marketed. These include coal (export potential of 15 million tons annually valued at US$1 billion), kaolin, baryte, glass sand, dolomite, limestone, iron ore, ganstones, feldspar, gold, lead-zinc, tin, and recently gypsum. The remaining minerals, although in great demand, are still untapped.

The new government in Nigeria is now focusing on developing the non-oil sector to boost its contribution to GDP and also to create employment through mining, agriculture, and associated infrastructure facilities.

Indeed almost the entire mining sector in the country represents great opportunity for both local and foreign investors. In this section, however, we will focus on the gold investment outlook in Nigeria.

Gold Investment Outlook: Why Invest in Nigeria?

Gold has been one of the most sought after naturally occurring minerals since antiquity. The shiny yellow metal is represented by the symbol AU for aurum with atomic number 79. It is a soft, shiny, ductile, and malleable metal. Pure gold is considered the most attractive mineral that maintains it luster without oxidizing in presence of water or air.

Mining industry of Nigeria. (2015, March 19). In Wikipedia, The Free Encyclopedia. Retrieved 13:03, August 3, 2015, from https://en.wikipedia.org/w/index.php?title=Mining_industry_of_Nigeria&oldid=652043736

Nigeria has over 400 mineral resources -Minister. (2014). Retrieved on August 3, 2015 from http://www.punchng.com/news/nigeria-has-over-400-mineral-resources-minister/

National Bureau of Statistics. (2014). Retrieved on August 3, 2015 from

http://www.nigerianstat.gov.ng/sectorstat/sectors/Minning and Quarrying (Solid Minerals)

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In Nigeria, gold is present in different shapes and forms, namely gold dust, gold bar, gold dore and gold rocks. Proven reserves of primary and alluvial gold are present in the schist belt that is located in the southwestern part of the country. The shiny metal is found in the selected states that include Kaduna, Kebbi, Niger, Kwara, Osun, Zamfara, Kano, Katsina, and Abuja, which is a Federal Capital Territory.

Gold deposits in Nigeria are mostly alluvial and are being processed in a small scale at the moment. They have to be further processed in order to turn into gold bar. The ROI (return on investment) in Nigeria is between 10% – 15%, depending on the quantity of gold mined from the rocks[1].

The price of gold is low at the moment. This presents the perfect opportunity for savvy investors to go into export and trade of gold with minimum investment. The demand for gold will always remain stable due to its demand in medical, industrial, and dentistry. These sectors account for about 12% demand of the shiny metal. Other uses of gold include jewelry and accessory among the growing middle class around the world that wants to show off their newly acquired wealth.

ForaMiniFera. (2012). Gold Rock Export in Nigeria. Retrieved on August 3, 2015 from http://www.foramfera.com/index.php/investment-opportunities-in-nigeria/item/100-gold-rock-export-in-nigeria-non-oil-export-opportunity-in-nigeria

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How to Invest in Gold in Nigeria?

Individual investors or companies that want to invest in gold have two options to enter into the gold mining sector. The first option involves purchasing an existing mine from the original owner. For this, an approval needs to be obtained from the Ministry of Solid Minerals Development.

The other option requires making an application for mining lease right from EPL (Exclusive Prospecting License), PR (Prospecting Right), or SEPL (Special Exclusive Prospecting License). The prospective investor needs to show technical and financial capability for entry into the gold mining sector.

The Government of Nigeria also provides various incentives to encourage and attract investors to put their money on development of mining minerals in the country. Some of the tax incentives provided by the Government include 3-5 years tax holiday, capitalization of expenses on surveys and exploration,

ForaMiniFera. (2012). Gold Rock Export in Nigeria. Retrieved on August 3, 2015 from http://www.foramfera.com/index.php/investment-opportunities-in-nigeria/item/100-gold-rock-export-in-nigeria-non-oil-export-opportunity-in-nigeria

deferred loyalty payments, 100% foreign ownership of mining site, and provision of infrastructure facilities such as road, railway, and electricity to the mining site.

Note that the mining sector in the country is regulated by the NMMA (Nigerian Minerals and Mining Act) of 2007, the NMMP (Natural Minerals and Metal Policy) of 2008, and the NMMR (Nigerian Minerals and Mining Regulations) of 2011. Investors are required to pay a royalty of around 3% – 5% to the government.