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NIGERIA EXTRACTIVE INDUSTRIES TRANSPARENCY NIGERIA EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE (NEITI) INITIATIVE (NEITI) EITI ++ REPORT

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NIGERIA EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE (NEITI) NIGERIA PHYSICAL EXTRACTIVE AND PROCESS INDUSTRIES FLOWS IN TRANSPARENCY NIGERIA SOLID MINERALS INITIATIVE INDUSTRY (NEITI) 2011 NIGERIA EXTRACTIVE
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NIGERIA EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE (NEITI) NIGERIA PHYSICAL EXTRACTIVE AND PROCESS INDUSTRIES FLOWS IN TRANSPARENCY NIGERIA SOLID MINERALS INITIATIVE INDUSTRY (NEITI) 2011 NIGERIA EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE (NEITI) EITI ++ REPORT Prepared by:. Ahmadu Bello House Shiroro Road, P.O. Box 2994, Minna, Niger State. Tel: , Website: This report and all related appendices are intended for the use of the NEITI National Stakeholder Working Group (NSWG) and only for its purpose. Any other reliance placed upon them by third parties shall be in accordance with the NEITI Act of i CONTENTS PAGES Table of Contents ii-v List of Acronyms and Abbreviations vi-vii 1.0 Executive Summary Introduction Overview Objectives Terms of Reference for Physical and Process Audit Scope of Work Nigeria Solid Minerals Industry Evolution and Historical Context Activities of Private Sector Participants in the Solid Minerals Industry Nigeria Solid Minerals Industry Evolution and Historical Context Legal and Regulatory Frame Work in Nigeria Solid Minerals Industry Types of Minerals Titles and Licences in Nigeria Solid Minerals Industry Taxes, Royalties & Fees in Nigeria Solid Minerals Industry Applicable Incentives in Nigeria Solid Minerals Industry Operation and impact of Artisanal/Informal Mining on the Environment in Nigeria Negative Socio-Economic Impacts of the artisanal and informal miners activities on the mining community Some Sites of Informal Mining Activities ii 7.3 How artisanal and informal miners can promote sustainable development in Nigeria Recent Developments in the Solid Minerals and Metals Sector in Nigeria Public Sector Participants that are responsible at the various stages of activities in the Solid Minerals Industry in Nigeria Public Sector Participants (Government Agencies) considered in the report Private Sector Participants (companies) considered in the report Private Sector Participants (companies) NOT considered in the report Report on volume/tonnage of solid minerals mined/quarried by the major companies Aggregate volume/tonnage of Solid Minerals types mined/quarried by the major companies Disaggregate volume/tonnage of Solid Minerals types mined/quarried by the major companies Report on the activities of entities in the Manufacturing and Construction Sectors that derive their primary raw materials from Mining/Quarrying Activities Summary of total production by sectors of Solid Minerals mined/quarried by Construction Sector Companies covered in the aggregation/reconciliation of Financial Flows in the Solid Minerals Industry in Summary of total production by sectors of Solid Minerals mined/quarried by Manufacturing Sector Companies covered in the aggregation/reconciliation of Financial Flows in the Solid Minerals Industry in Sectorial Analysis of total production of Solid Minerals mined/quarried by Private Sector Participants operating in the Construction and Manufacturing Sector Solid Minerals Exported during the period under review Total Tonnage of Solid Minerals Products Exported iii 15.2 Total Ore components of solid minerals products exported Applicable Incentives Available to Solid Minerals Exporters Report on the Disbursement made from Revenues received and their Conformity to Legislation Review of Systems and Procedures of financial flows for Improvements in the Management of Solid Minerals Industry Finances including the review of the National Policy and Disbursement Reports Existing Gap between Regional Exploratory Mapping and Detailed Exploration The Challenges facing the Solid Minerals Industry Uncompetitive Framework for Private Sector Participation Other Challenges in the Nigeria Solid Minerals Industry Report on the Review Feasibility Reports of the Private Sector Participants Report on the relevant Laws as it affects the Solid Minerals Industry, their lapses and proffered solutions Report on inconsistencies between Audited Financial Statements of Companies in the Solid Mineral Industry and Government Agencies Report on Non-Financial Flows Validation of Tax Payments Validation of Royalty and other Payments Report on Payments Made by major traditional institutions and Host Communities within their areas of operational Review of Licensing and Concessions in Nigeria Solid Minerals Industry Findings Recommendations for the Improvement in the Management of Solid Minerals Industry in Nigeria iv Appendices Pages 1. Volume/tonnage of Solid Minerals mined/quarried by the major Private Sector Participants in the Solid Minerals Industry Summary of Disaggregate Royalty Payments by the major Private Sector Participants on the volume/tonnage of Solid Minerals mined/quarried Data Collection Template for Physical and Process Audit Photograph of some sites visited by the audit teams v Abbreviations/Acronyms AFS ASMD C of O CAC CBN CGT CIT EDT EITI FCT FEC FGN FIRS FMO FMOE FOB ISA ISRE ISRS LGA MCO MDAs MECD MID MMSD MREMCO NCS NEITI NESS Audited Financial Statements Artisanal and Small Scale Mining Department Certificate of Occupancy Corporate Affairs Commission Central Bank of Nigeria Capital Gain Tax Company Income Tax Education Tax Extractive Industries Transparency Initiative Federal Capital Territory Federal Executive Council Federal Government of Nigeria Federal Inland Revenue Services Federal Mines Officer Federal Ministry of Environment Free on Board International Standards on Auditing International Standards on Review of Engagements International Standards on Related Services Local Government Authority Mining Cadastre Office Ministries, Departmental and Agencies Mines Environmental Compliance Department Mines Inspectorate Department Ministry of Mines and Steel Development Minerals Resources and Environmental Management Committee Nigeria Customs Service Nigeria Extractive Industries Transparency Initiative Nigerian Exports Supervision Scheme vi NGSA NIPC NIPEC NIWA OAGF P.A.Y.E Private SP Public SP RMAFG SBIR SMMRP T.C.C TETFUND TIN ToR VAT WHT Nigeria Geological Survey Agency Nigeria Investment Promotion Commission Nigeria Export Promotion Council National Inland Water Ways Agency Office of the Accountant General of the Federation Pay As You Earn Private Sector Participants (Companies/Entities) Public Sector Participants (Government/Entities) Revenue Mobilization Allocation and Fiscal Commission State Board of Internal Revenue Sustainable Management of Mineral Resources Project Tax Clearance Certificate Tertiary Education Trust Fund Taxpayer Identification Number Terms of Reference Value Added Tax Withholding Tax vii EXECUTIVE SUMMARY 1 1.0 EXECUTIVE SUMMARY 1.1 Overview of the Solid Minerals Industry in Nigeria Nigeria is endowed with vast reserves of solid minerals that cut across the entire landscape of the country. These minerals deposits including, but not limited to, precious metals, stones and industrial minerals. The country was a major exporter of tin, columbite and coal in the early 1970s, however the advent of oil resulted to the nose-diving of the sector as a major source of foreign exchange for the country. There are over 40 different types of minerals spread across the country, including gold, barite, bentonite, limestone, coal, bitumen, iron ore, tantalite / columbite, lead/zinc, barites, gemstones, granite, marble, gypsum, talc, iron ore, lead, lithium, silver, etc. these minerals have been identified for development. These activities (policy thrust, legislative framework, bureaucratic reforms and political will) have been able to drive a new wave of growth in the industry. In a bid by the Federal Government to attract foreign investors to the Nigerian Solid Minerals Sector there has been transformation process going on in the industry which has resulted in the following: Increase in mineral exploration activities arising from the creation of the NGSA which has successfully carried out a geophysical survey of the country. The creation of the MCO charged with the administration of mineral titles on a firstcome-first-serve and use-or-lose-it basis resulting in increase in mineral title acquisition by both local and international mining operators. Increasing the capacity of Ministry Staff to carry out designated functions as well as increasing the capacity of the ASM to carry out mining in a sustainable manner through the activities of the SMMRP. Enactment of relevant laws and regulations needed to regulate mineral exploration and exploitation activities in a transparent manner. These laws include: The Nigerian Minerals and Mining Act of 2007, National Minerals and Metals Policy 2008, Nigerian Minerals and Mining Regulations Furthermore, MMSD has identified thirty-four (34) minerals of economic importance in Nigeria across the six regional mining zones out of which seven (7) strategic minerals has been prioritized for development namely, Coal, Bitumen, Limestone, Iron Ore, Barites, Gold and Lead/Zinc. 2 The Government policy thrust is aimed at increasing mining's contribution to the economy to 5% by 2015, from its current level of 0.5% 1.2 Legal and Regulatory Frame Work in Nigeria Solid Minerals Industry The Nigeria Minerals and Mining Act, 2007 is the principal legislation that regulates the Nigerian mining sector. The Act vests the control, regulation and ownership of all mineral resources in the Federal Government of Nigeria (FGN). The provisions of the National Minerals and Metals Policy and the Minerals and Mining Regulations also regulate the sector. The Mining Regulations contain specific provisions with respect to royalties, fees and compensation payable by holders of mining rights. The administration of the mining industry is vested in the Ministry of Mines and Steel Development (MMSD), operating through the following departments and agency: Mines Inspectorate Department Mines Environment and Compliance Artisanal and small-scale Mining Department Mining Cadastre Office The provisions of the National Minerals and Metals Policy and the Minerals and Mining Regulations also regulate the sector. The Mining Regulations contain specific provisions with respect to royalties, fees and compensation payable by holders of mining rights. 3 Other Regulatory Bodies in Nigeria Solid Minerals Industry a. Nigerian Investment Promotion Commission (NIPC) b. Nigerian Export Promotion Council (NEPC) c. Corporate Affairs Commission (CAC) d. Federal Inland Revenue Service (FIRS) 1.3 Types of Minerals Titles and Licences in Nigeria Solid Minerals Industry A mining title can be granted to an individual, company or co-operative. The grant of exploration licence or mining lease could be by competitive bidding or on individual request. In competitive bidding, the government consolidates various mineral locations into blocks, and offer the blocks for sale to international and local investors with sufficient financial and technical capabilities to carry on mining operations. The types of licences and leases granted are as follows: a. Reconnaissance Permits (RP) b. Exploration Licence (EL) c. Small-Scale Mining Lease (SSML) d. Mining Lease (ML) e. Quarry Lease (QL) f. Water Use Permit (WUP) g. Transfer of Mineral Title 4 1.4 Type of Taxes/Fees payable by Private Sector Participants in Solid Minerals Industry a. Corporate Income Tax (CIT) b. Education Tax (EDT) c. Treatment of Losses d. Minimum Tax Provision e. Personal Income Tax (PIT) f. Valued Added Tax (VAT) g. Capital Gains Tax (CGT) h. Stamp Duties i. Withholding Tax (WHT) j. Royalty k. Annual Service Fees l. Annual Surface Rent m. Other Application and Licence Fees 1.5 Audit Objectives The main audit objectives are: To report on the revenue flows and investment among the major players in the solid minerals sectors and also with regards to the transactions made by the participants (both public and private) in the Nigeria Solid Minerals Industry. To report on the quantities of solid minerals mined, quarried, processed and exported in a manner which is insightful and of such integrity that could be reasonably relied upon by NEITI. To track solid minerals sector fund collected by the various Government Agencies to the Federations Account and how it is distributed, applied by Federal Agencies and also make recommendations on any issues arising in the course of the audit. 5 To reconcile payments by major companies and revenues received by Government Agencies in Solid Minerals Industry. The Federal Government of Nigeria through NEITI can utilize lessons learnt, from the audit to enhance transparency in companies payment and Government receipt of revenue, disbursement and utilization of this revenue by the relevant stakeholders. 1.6 Terms of Reference (TOR) Under the Terms of Reference (TOR) for Physical and Process audit include the following: Physical and Process Audit To assess the tonnage of mined industrial minerals, volume of quarried stones, volume of gem stones mined, ferrous and non ferrous metals mined, energy minerals mined and any other relevant minerals, by visiting mining/quarry sites to ascertain such claim. Report on the activities of the entities involved in the manufacturing and construction sectors that derive their primary raw material from mining/quarrying activities (e.g. cement manufacturing companies, construction companies etc.), or the processing of solid minerals that are within the scope of work. Analyse the historical documentation on production, export and payments of royalties for minerals production in Nigeria. Develop a template that would form the basic tool for data collection from Government Agencies and the extractive industries Major Players. Check the disbursements made from the revenues received and ascertain if they are in conformity with existing legislations. Ascertain and review the payments made to traditional institution/communities within the operational areas of the mines/quarries as it relates to the Mining Acts of Nigeria. Ascertain the appropriateness of payments made with regards to minerals royalties, ground rent, dividends and taxation on profits and for mineral rights. Review feasibility reports of the companies in order to compare the projected production with the actual production declared by the Major Companies. Examine the relevant Government Laws as it affects the mining industry and environmental issues associated with mining and proffering solutions to the observed lapses. 6 1.7 Scope of Work The scope of work is to report on the tonnage of mined minerals, volumes of quarried stones, germ stones mined, ferrous and non-ferrous metals mined, energy minerals mined and any other relevant minerals produced and exported by the companies during the period under review. We also undertook visitation to mining/quarry sites with a view to verifying physical process/extraction of Solid Minerals as required in the TOR. 1.8 Solid Minerals Industry Payments Streams considered. Royalty Ground Rents Annual Service Fee Taxation Levies 7 1.9 Activities and Number of Major Companies Considered. Table 1: Breakdown of companies by activities: Activities Aggregated Not Aggregated Total Buying Centers Dredging Exporter Medium Scale Mining Quarry :- for Commercial Quarry;- for Construction Quarry;- for Manufacturing TOTAL 1.10 List of Public Sector Participants Covered 1. Ministry of Mine and Steel Development (MMSD) a. Mining Inspectorate Department (MID) b. Artisanal and Small Scale Mining Department (ASMD) c. Mines Environmental Compliance Department (MECD) 2. Mining Cadastre Office (MCO) 3. Nigeria Geological Survey Agency (NGSA) 4. Nigeria Customs Service (NCS) 5. Federal Inland Revenue Services (FIRS) 6. Tertiary Education Trust Fund (TET Fund) 7. Office of the Accountant General of the Federation (OAGF) 8. Central Bank of Nigeria (CBN) 9. Revenue Mobilization Allocation and Fiscal Commission (RMAFC) 10. Corporate Affairs Commission (CAC). 11. Nigerian Customs Services 12. Central Bank of Nigeria 9 1.11 Production Output from Private Sector Participants Table 2: Disaggregate volume/tonnage Solid Minerals mined/quarried by the major companies Private Sector Participants in 2011 S/No. Solid Minerals Types Quantity (metric tonnnes) % Contribution 1 Granite 7,587, Laterite 2,304, Limestone 15,224, tourmaline 100, Sand 1,624, Coal 133, Columbite Shale 491, Red Alluvium 204, Tin Gypsum 20, Dolerite 61, Wolframite Kaolin 27, Total 27,781, The above table shows the disaggregate volume/tonnage of Solid Minerals types mined/quarried by the major private sector participants in Disaggregate volume/tonnage of Solid Minerals mined/quarried by the major companies. Diagram % 0% 0% 0.74% 1.77% 0.48% 5.85% 0.36% 0.07% 0.22% Granite 0% 0.1% Laterite 27.31% Limestone tourmaline Sand Coal Columbite Shale Red Alluvium 8.30% Tin Gypsum Dolerite Wolframite Kaolin 11 ( Chartered Accountants) 1.12 Summary of total production of Solid Minerals mined/quarrying by the companies covered in the aggregation/reconciliation of Financial Flows in the Solid Minerals Industry in Table 3: List of companies engaging in quarry for construction. S/No. Company Name/Operator Activities Type of minerals mined/quarried Total mined/quarried minerals in (Tonnes) 1 A.G. Vision Quarry: for Construction Granite 23, Alren Construction Nigeria Ltd Quarry: for Construction Granite, Laterite 28, Arab Construction Nig. Ltd Quarry: for Construction Granite 347, BiwaterNig Ltd Quarry: for Construction Granite Blackstone Crushing Company Limited Quarry: for Construction Granite 66, BoriniProno& constr. Nig. Ltd. Quarry: for Construction Granite, Laterite 253, Bulletine Construction Company Quarry: for Construction Granite, Laterite 178, Limited 8 C &.C. Construction Comp. Ltd. Quarry: for Construction Granite, Laterite 48, CCC Construction Nigeria Ltd Quarry: for Construction Granite, Laterite 313, CCECC Nig. Ltd Quarry: for Construction Granite, Laterite 144, CGC Nig. Ltd Quarry: for Construction Granite 101, CNC Engineering Company Quarry: for Construction Granite 121, Construction Surport Nig. Ltd Quarry: for Construction Sand 72, Crush Stones Industries Ltd Quarry: for Construction Granite, Dolorite 52, Dantata&Sawoe Construction Co. Quarry: for Construction Granite, Laterite 345, EnercoProrox Quarry: for Construction Granite, Laterite 13, Gitto Construction Company Quarry: for Construction Granite, Laterite 90, Habibu Engineering Nig. Ltd. Quarry: for Construction Granite, Laterite 60, Hajaig Const. Ltd Quarry: for Construction Granite 13, Hitec Construction Company Quarry: for Construction Granite 87, Julius Berger Nig. Plc. Quarry: for Construction Granite, Laterite 3,148, Kopek Nig. Limited Quarry: for Construction Granite, Laterite 203, Levant Construction Ltd Quarry: for Construction Granite, Laterite 43, MAC Engineering Const. Ltd. Quarry: for Construction Granite 7, Company Name/Operator Activities Type of minerals mined/quarried S/No. 25 Master Rock Nig Ltd Quarry: for Construction Granite, Dolorite 8, Total mined/quarried minerals in (Tonnes) 26 Moulds Nig. Limited Quarry: for Construction Granite 73, Mother CAT Ltd. Quarry: for Construction Granite, Laterite 167, NRC Ltd Quarry: for Construction Granite 9, P. W. Nigeria Limited Quarry: for Construction Granite, Laterite 234, Paul B Nigeria Plc Quarry: for Construction Granite 18, Piccolo Bruneill Eng. Ltd Quarry: for Construction Granite 12, Qumecs Nig. Ltd Quarry: for Construction Laterite 3, R.C.C (Nig) Ltd Quarry: for Construction Granite, laterite 1,484, Ratcon Construction Company Limited Quarry: for Construction Granite 440, Roads Nigeria Limited Quarry: for Construction Granite, laterite 31, Rockbridge Const. Co.Ltd Quarry: for Construction Granite 12, S.CC (Nig) Ltd Quarry: for Construction Granite, laterite 232, Salini Nig. Ltd Quarry: for Construction Granite, laterite 142, SetracoNig Limited Quarry: for Construction Granite, laterite 314, Soject Nigeria Ltd Quarry: for Construction Granite 7, Triacta Nigeria Ltd Quarry: for Construction Granite, laterite 165, Zenith Const. Ltd.

LTH-IEA-1026

Jul 23, 2017
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