Posted Fri, Feb 21, 2025 1:44 PM

Towards Effective Resources Federalism in Nigeria's Mining Sector

Nigeria's mining sector, endowed with over 40 valuable mineral deposits, holds significant potential for economic diversification, job creation, investment attraction/retention, and broad-based development. Over several decades, a centralized governance structure has led to regulatory uncertainties, deterring investment and causing dissatisfaction among state governments relegated to mere revenue-sharing roles. It has prompted states to enact regulations to control mineral development and mitigate mining's adverse effects within their jurisdictions.

The current framework structure, where the federal government only leads without interacting with states, presents several challenges. For example, the regulatory overlap between federal and state authorities creates a complex environment, discouraging potential investors due to inconsistent policies and unclear land tenures. States seek more involvement in the mining value chain to manage environmental impacts better and benefit more directly from their resources. In response to perceived marginalization, several states have introduced their mining regulations, resulting in a fragmented regulatory landscape that further complicates compliance for mining companies.

This policy brief presents the findings and recommendations from the NESG mining industry diagnostic study on the resource federalism structure in the Nigerian mining sector. Nigeria’s investment climate for mining has declined partly due to the reactions of subnational governments to their exclusion from mineral resource governance and development. To strengthen the investment climate for mining, the NESG recommends that Nigeria adopt a mixed system of resource federalism to create a better investment climate for mining. Under this system, the federal government may centrally control or regulate certain resources or aspects of mineral resource management and delegate others to state governments based on several factors.

Reforming Nigeria's mineral resource federalism could yield several advantages. Empowering local authorities can lead to more effective oversight of mining activities, ensuring that operations adhere to environmental and safety standards, thereby protecting local communities. Clarifying the roles and responsibilities of federal and state governments can minimize conflicts, creating a more stable environment conducive to investment. Decentralizing certain functions can lead to better coordination and quicker responses to issues affecting stakeholders in the sector. A clear and consistent regulatory framework would enhance Nigeria's attractiveness as a destination for domestic and international mining investors.