Alake’s alarming SOE plan is self-defeating

Alake has demonstrated a passion for the sector, and by his own admission, he had actually requested President Bola Tinubu to assign the ministry to him. In his enthusiasm, however, he should avoid making a fatal mistake.

Setting up another conglomerate when the country is littered with the decaying carcasses of state-owned enterprises, is a wrong move. If he dares, all his rosy dreams of a vibrant mining sector contributing 50 per cent to GDP will crash.

While unveiling the ‘Agenda for the Transformation of the Solid Minerals for International Competitiveness and Domestic Prosperity,’ Alake spoke of setting up “a corporate body that plays in this field.” It would, he said, have subsidiaries “doing business in the seven priority areas that require immediate intervention, which include gold, coal, limestone, bitumen, lead, iron ore, and baryte.” Furthermore, the plan for the SOE to “seek and secure partnership investment agreements with big multinational firms,” sounds ominously like another Nigerian National Petroleum Company Limited in the making, with its opacity, corruption, loss-making and short-changing of the national treasury.

Nigerians should be worried. Nigeria’s solid minerals potential is huge, with 44 different mineral types identified and every state having some. It is among Africa’s top 10 mineral-rich countries.

But it would be a terrible mistake to plunge the state into directly running companies once more. Nigeria’s experience with SOEs has been one of monumental waste, losses, inefficiencies and massive corruption.

Unequivocally therefore, the mining sector should be private sector-led. The government should regulate and enforce contracts through a robust liberalised framework that accords maximum protection for Nigeria’s national interest and investors.

Alake and Tinubu should swiftly drop any plan to replicate SOEs in the minerals sector.

The 1999 Constitution lists mines and minerals, mining and oil and gas on the Exclusive Legislative List. It does not require it to directly run commercial enterprises. The government should not be a player in the market as well as regulator.  It stifles competition, innovation and efficiency. Most importantly, it drives away investment, especially foreign direct capital. Instead, it should have just a holding company, with a sole investment arm holding minority stakes in profit-making firms.

To maximise mining benefits, reforms should follow the telecommunications sector makeover, which is also on the Exclusive List. It needs strong regulation, support and accompanying investment in public infrastructure like access roads, rail systems and social services.

NEITI disclosed that Nigeria earned just N814 billion from solid minerals from 2007 to 2021. The Senate says Nigeria could generate $3 billion from solid minerals annually.

PwC said Nigeria’s mining sector contributed around 4.0 to 5.0 per cent to the country’s GDP in the 1960s until emphasis shifted to crude oil. Mining averaged 0.17 per cent 2018 to 2022. Growing this requires investment-friendly policies, and the active participation of the states, not self-defeating state capitalism.

Australia’s minerals contribute 21 per cent to GDP and provided 32 per cent or $41 billion of all company tax in 2022, said the Minerals Council of Australia. Its government does not run the companies!

Yes, there are countries that run commercial enterprises successfully, but Nigeria is not one.

Tinubu should stick to his promise to promote private sector expansion. His economic team led by Wale Edun, the Coordinating Minister for the Economy, should roll out a comprehensive national plan with solid minerals as one of its priorities.

Together, they should promptly shoot down the SOE proposal.