…Says N401bn revenue too meager, unacceptable
By Uche Usim
The Nigeria Extractive Industries Transparency Initiative (NEITI) has lifted the lid on the scale of illicit financial flows ravaging Nigeria’s mining sector and warned that weak regulation, opaque ownership structures, illegal mining and criminal infiltration were undermining the country’s economic diversification drive.
In a new policy brief released Thursday in Abuja, NEITI described illicit financial flows (IFFs) in the solid minerals sector as systemic and deeply entrenched, stressing that the problem has continued to deprive the nation of critical revenues despite Nigeria’s vast deposits of gold, lithium, limestone and gemstones.
The report, titled “Stemming the Scourge of Illicit Financial Flows in Nigeria’s Mining Sector,” revealed that the sector generated just N401 billion in revenue and contributed only 0.72 per cent to Nigeria’s Gross Domestic Product in 2023, a performance NEITI said falls far below the sector’s enormous potential.
According to the agency, the underperformance is being driven by revenue leakages, tax evasion, illegal mining, smuggling, corruption, weak institutional oversight and money laundering linked to organised criminal networks.
NEITI stated that the enablers of illicit financial flows are “systemic rather than incidental,” noting that they are embedded across institutional arrangements, market structures, data systems and security environments.
The policy brief highlighted what it described as “severe fragmentation of regulatory oversight” among agencies including the Federal Ministry of Solid Minerals Development, Mining Cadastre Office, NEITI, Nigeria Customs Service, Nigeria Financial Intelligence Unit and several state agencies.
According to the report, “Each institution collects sector-relevant data in siloes, with limited interoperability and no integrated sector-wide digital monitoring system.”
The agency also identified weak data governance and poor enforcement of beneficial ownership disclosure as major loopholes aiding corruption and illicit financial activities in the industry.
“Mining licenses are frequently held through special purpose vehicles, shell companies, and layered corporate structures that obscure the natural persons who ultimately own or control extractive assets,” the report stated.
It added that verification of beneficial ownership information across relevant government agencies remains fragmented and largely dependent on self-declaration, a development that allows politically exposed persons, foreign interests and criminal actors to conceal their involvement in mining operations.
“This opacity allows politically exposed persons (PEPs), undisclosed foreign interests, and criminal actors to conceal control over mining operations thereby facilitating corruption, money laundering, trade misrepresentation, and regulatory capture,” the brief noted.
The report further disclosed that more than 70 per cent of mining activities in Nigeria are dominated by artisanal and small-scale miners, many of whom operate outside formal regulatory structures.
It estimated that about 80 per cent of mining activities in parts of North-West Nigeria, particularly Zamfara, Katsina and Kaduna states, are carried out illegally.
NEITI warned that minerals extracted from illegal mining sites are often mixed with legally sourced minerals, making detection difficult and creating channels for laundering illicit mineral flows into formal export markets.
The agency noted that the informality surrounding artisanal mining has complicated monitoring, taxation and enforcement efforts, thereby creating parallel mineral economies operating beyond government control.
“Until ASM is brought within a formalised regulatory framework through simplified licensing, cooperative structures, access to finance, and traceability systems, it will remain the sector’s widest single vulnerability to illicit financial flows,” the report stated.
To address the challenge, NEITI proposed seven key reforms, including stronger inter-agency coordination, stricter anti-money laundering and counter-terrorism financing measures, mandatory beneficial ownership disclosure, legal and institutional reforms, enhanced community engagement and increased civil society participation.
The recommendations, according to the agency, align with existing national and international frameworks such as the Proceeds of Crime Act, Companies and Allied Matters Act reforms, Financial Action Task Force standards and Nigeria’s Medium-Term National Development Plan.
NEITI stressed that tackling illicit financial flows is critical to Nigeria’s economic stability and long-term development aspirations.
The agency called on government institutions, industry operators and civil society organisations to urgently implement the recommendations contained in the policy brief to reposition the mining sector as a transparent and revenue-generating pillar of the economy.
The policy brief was developed by NEITI in collaboration with the Federal Ministry of Solid Minerals Development and the Africa Network for Environment and Economic Justice, with support from the Foreign, Commonwealth and Development Office.
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