Gold, insecurity, food scarcity and fiscal federalism 

August 23, 2021
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As a result of untamed insecurity especially in the North-West and north central parts of the country, food inflation has been escalating. Since 2009, the north east has been under Islamists lockdown. While there were pockets of violence in the remaining parts of the country, they were relatively peaceful. By 2016 however, economic terrorists, otherwise known as bandits took over the North-West. Since then, farmers have been recounting their ordeals following the increasing rate of banditry, cattle rustling and kidnapping. They lament that terrorists have been taxing them before they can access their farms. As a result, most of them have been forced to abandon their farms. By June 2021, food inflation had risen to 22.28 per cent. Analysts have attributed violence and insecurity in the region to activities of an international syndicate of illegal gold miners who deliberately escalate the situation so as to make the area ungovernable in order to ply their trade unhindered.

Latest audit report by Nigeria Extractive Industries Transparency Initiative (NEITI) indicated that between 2007 and 2019, Nigeria realised a paltry N496 billion from solid minerals despite the country’s huge deposits according to. Yet, data from UN Global Trading Data (Comtrade) reveals that between 2012 and 2018, about 97 tonnes of gold worth over $3 billion was illegally smuggled out of Nigeria. As at August 22, 2021, an ounce of gold was $1,789. It is regularly smuggled across the border to Niger and Togo from where private aircraft allegedly fly it to international trade centres. Kaduna, Kebbi, Katsina, Zamfara and Osun states jointly hold probably the world’s largest deposit of gold. At a Kaduna Economic and Investment Forum, Governor Nasir el-Rufai said gold deposit in Birnin-Gwari local government alone is more than the entire reserve the Republic of South Africa.

According to the Institute of Security Studies (ISS), about 80 per cent of mining in the North-west region is carried out illegally and on an artisanal basis by local populations. Also, about 500 kilograms of gold is smuggled to neighbouring countries every month. The Federal Ministry of Mines and Steel Development had said that illegal mining accounts for about 80 per cent loss of revenue that would have accrued to the federal government from the solid minerals sector. It was estimated that in 2017 alone, Nigeria lost about $9 billion potential revenue to illegal mining.

And with increasing exploitation of gold in the North West and south west by artisanal miners is also a growing orgy of violence. The violence is a distraction and ploy by the powerful elements to prevent government access to mine sites. Whole communities have been displaced, thousands of people have died, cattle have been rustled while the region emerged kidnap the hotspot. Birnin Gwari is currently a no-go area because of activities of bandit kidnappers. Mining of solid minerals in the country is characterised by artisanal activities with links to powerful international smuggling syndicates. According to the International Crisis Group, the north west’s “gold-tinged cash windfall has established new centres of power beyond the state’s control—a retired military officer told the ICC that artisanal gold mining (ASGM) activities had created “a fiefdom of deadly gangs”— leading to a destabilizing wave of rural banditry and criminality. The governments of Zamfara State—the epicentre of ASGM-related violence—and Katsina State cautioning that proceeds from the illegal sale of gold are funding weapons purchases by armed groups.

Sometimes ago, some illegal miners were arrested in Zamfara and Osun states including 17 Chinese nationals. Very powerful Nigerians mounted pressure on government to release them even though they were illegal immigrants. Sponsors of Illegal miners in the region fight over control of the mining fields, thus creating violent conflicts. A senior researcher with the Centre for Peace and Security Studies, MAUTECH, Yola, Dr Chris Kwaja explained that sponsors of illegal mining act as if they’re above the law because they enjoy the support and protection of some state governments.

The violence in the North-West has reportedly killed over 8,000 and displaced over 200,000 persons. To be sure, climate change-related environmental degradation and high population growth also contribute to insecurity in the area. Amid a boom in the trade of small arms and light weapons in the region, organised gangs operating from ungoverned forests have proliferated, engaging in cattle rustling, kidnapping for ransom and armed robbery, including of miners and traders in the largely unregulated gold mining sector.

In March this year, federal government declared Zamfara State a ‘no-fly zone’ to halt the swap of gold for arms by armed bandits, other criminals and illegal gold miners in the state. It also banned gold mining in the state. It won’t be the first time Federal Government would announce a ban on gold mining in the state. On April 7, 2019, a similar announcement was made outlawing gold mining activities in the state. On March 2, this year, National Security Adviser (NSA), retired Major General Babagana Monguno disclosed that ban on all mining activities in Zamfara State was with immediate effect and until further notice. A Presidential spokesman, Garba Shehu told correspondents that the ban was because of strong suspicions that gold was being swapped for arms by criminal elements operating in the state. “Even in Zamfara, there is a strong suspicion that some of those choppers are being used to ferry arms for bandits and also to evacuate gold and illegally smuggled out of the country, so the country loses everything in the mining. As you are aware, Nigerian gold market is a big business and the government wants to do two things at the same time by doing this; end banditry and economic sabotage through the smuggling of gold.” He said that a big market in Dubai in the United Arab Emirates is called ‘Nigerian gold market’. Rural folks had reported seeing a crashed helicopter in Niger State allegedly belonging former Head of State, General Abdulsalami Alhaji Abubakar (Rtd) even though this was denied by both the general and the state government.

In 2019, Federal Government launched Presidential Artisanal Gold Mining Development Initiative (PAGMDI) to integrate and formalise artisanal gold mining activities into Nigeria’s legal, economic and institutional framework. It should also address structural and institutional factors such as rural poverty, lack of alternative livelihoods and difficulties in meeting legal and regulatory requirements. According to CSL Stockbrokers, “mining sector in Nigeria is one of several sectors which the Federal Government can explore to diversify its revenue sources. However, attempts to revive this sector has been plagued by bureaucracy, policy inconsistency, incoherent work plans, poor funding and more importantly, lack of will on the part of political leaders. Nigeria’s gold reserves estimated at about 200 million ounces presents a huge potential for expanding government revenue.

In 2020, President Buhari officially presented locally mined gold bars to the CBN for which the apex bank paid N268 million for 12.5kg. At the event, the President announced that the PAGMDI scheme which was inaugurated in 2019 will create 500,000 new jobs in the mining sector; generate $500 million per annum in royalties and taxes to the Federal Government; and set up of accredited gold buying centres across key mining areas.

A Senior Research Consultant at ISS, Maurice Ogbonnaya attributed the absolute chaos and the resultant violence associated with gold mining to Section 1(1) of the Nigerian Minerals and Mining Act, 2007, which empowers the federal government to exercise ownership and absolute control over all mineral resources in the country, including the mining process. “What’s happening in the North West and across other regions of the country including the Niger Delta is the deliberate refusal of state governments to exercise security control over mineral resources because they consider them federal resources.

“The situation clearly shows the deep-rooted structural crisis that characterises the lopsided nature of Nigeria’s fiscal federal system in favour of the central government. To address the challenge, Nigeria’s National Assembly should amend the mining act to place ownership and control of mineral resources on state governments rather than on the federal government.”

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