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BEING A PAPER ON REGULATORY POLICY

DEVELOPMENT: REFORM PROCESS AND THE MINERALS

AND MINING ACT 2007Presented By

Okolo Benjamin OguLegal Adviser

Ministry of Mines & Steel Development, Abuja, Nigeria.

At a Two (2), day Workshop on Investment Opportunities in the Nigerian Mining Sector, January 30th 2012 at Shehu

Musa Yar’dua Conference Centre, Abuja.

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Before, I go into the main topic I will like to look at the constitution of the Federal Republic of Nigeria to see the Constitutional provisions as it relates to “Minerals”. This is important because as we all know the Constitution is the Supreme Law of the land and all Laws derive their strength from it:

Constitutional Provisionsa. The Constitution of the Federal Republic of Nigeria places total ownership and Control of all Minerals with the Federal Government.

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b. The mineral resources naturally occurring on and under the earth’s surface and in natural water courses in Nigeria are the property of the Federal Government. The Federal Government as the owner of Mineral Resources in Nigeria is vested with the power to grant exploration and Mining Licenses through the Ministry of Mines & Steel Development in accordance with the terms and conditions of the enabling law. The Combined provisions of Sections 4 and 44 (3) of 1999 Constitution are, that only the Federal Government of Nigeria is vested with jurisdiction to deal on Minerals.

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c. Section 4 of the Constitution of the Federal Republic of Nigeria, stipulates that the National Assembly shall have power to make law with respect to any matter included in the Exclusive Legislative List set out in part 1 of the 2nd Schedule to the Constitution and minerals is listed under item 39 on the Exclusive Legislative List.

d. Section 44 (3) of the 1999 constitution states:

“Notwithstanding the foregoing provisions of this section, the entire property in the control of all minerals, mineral oils and natural gas in, under or upon any land in Nigeria or in, under or upon the territorial waters and the Exclusive Economic zone of Nigeria shall vest in the government of the Federation and shall be managed in such manner as may be prescribed by the National Assembly”.

Furthermore, Section 1 (1) of the Nigerian Minerals and Mining Act, of 2007 which is the extant legislation on minerals and mining re-affirmed the above constitutional provisions thus:

“The entire property in and control of all minerals, in under or upon any land in Nigeria, its contiguous continental shelf and of all rivers, streams and watercourses throughout Nigeria, any area covered by territorial waters or constituency, the Exclusive Economic Zone is and shall be vested in the Government of the Federation for and on behalf of the people of Nigeria”.

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Period before the Reform Before, the reform there existed the Nigerian Minerals & Mining Act No. 34 of 1999. But the Act was regarded as in sufficient for the desired reform in the sector. The determination of Government to reform the sector came as a result of the national desire to find another source of revenue for the nation & diversification of the Nigerian Economy away from the monopolistic oil based economy, provide job opportunities, and reduce poverty Inter-alia. To do this, it became imperative to reform the sector in line with International best practices. To kick start the reform process, in 1995, a dedicated Ministry of Solid Minerals Development was established.

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As a matter of fact Solid Minerals Sector was identified in the National Economic Empowerment Development Strategy (NEEDS) document as one of the six priority sectors crucial for diversification of the economy away from oil dependence.

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Period of ReformThe reform in the Mineral Sector took place between 2005 – 2007. The reform Process constitute the regulatory policy development in the sector, and it was to ensure that the practice in our mining Industry conforms with the world’s best practices.

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Reform from 2005The reform embarked upon from 2005 include:• Transformation of role of government from ‘owner-operator’ to ‘administrator-regulator’ of the Mining sector;•Create a unique role for the Private Sector as operator/owner;• Development of a National Policy with clear direction for the sustainable growth of the industry;• Development of the competitive regulator and fiscal regime to attract investments;•Revitalization of mining institutions necessary to regulate the sector;• Establishment of the Nigerian Geological Survey Agency (NGSA) to generate geological data for investment decisions and national planning;

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•Establishment of the Mining Cadastre Office as the sole agency responsible for the administration of mineral titles in a transparent manner;•Stem informal mining activities and encourage small-scale mining to promote sustainable exploitation within artisanal mining communities;• Privatized government owned mining companies and corporations in cooperation with other relevant government agencies;• Promote and market investment opportunities in the mining sector;

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Elements of the ReformThe elements of the reforms are similar to the broad reforms categories adopted by countries that have experienced resurgence in mining activities in the 1990s. These include countries such as Tanzania, Mali, Bolivia, Peru, Madagascar etc.

The Minerals & Mining Act 2007 (Product of Reform)In 2007, the Minerals and Mining Act was enacted by the National Assembly and signed into law on 29th March, 2007. Key Concepts of the Acti) Access to minerals; title open to all investors; big or small, foreign or local on a level and equitable playing field; and on first come, first served basis;

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ii) Guaranteed security of mineral rights;iii) The application of “use it or lose it” principle in mineral title administration;iv) Provision for sound environmental controls and Community Development Agreement – Section 116 of NMMA, 2007;v) Involvement of other stakeholders through the creation of states minerals Resources and Environmental Management Committees to facilitate access to land;vi) Commitment of Government to clear and transparent principles which will regulate the sector;vii) Provide a legislation that meets global best practices and attract Foreign and Domestic investment capital serve as a risk management tool for the investor and a critical component of investment decisions;

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viii) Reformed Administrative/Institutional framework;ix) Minimum work obligations for exploration and mining phases;x) Security of tenure and free transferability of Title(s);xiv) Easy access to mining titles;xv) Recognition of Artisanal & Small Scale Miners;xvi) Diligent Environmental stewardship.

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Administrative/Institutional Framework and Roles- S.4, NMMA 2007The Minister

Minister’s Power:- Supervision of administration of the Act- Formulation and issuance of policies for orderly

Development of the sector.- Functions of Minister – Section 4 of the Act.

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State Mineral resources and Environmental Management Committee – S. 19, NMMA 2007 A peaceable sector is key to the orderly development of a vibrant mineral sector. Key component of the reform in administration and management of the sector. Vehicle of cooperation between all tiers of Government for effective governance of the sector. Central to resolution of conflicts.

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Compensation Issues – S. 107, NMMA 2007• Compensation issues are pertinent in land and

natural resources exploitation.• The right to receive just compensation for

expropriation of private rights is a constitutionally guaranteed right.• The Constitution provides for the payment of

prompt compensation to persons whose property are compulsorily acquired.• Law creates modalities of settling compensation

claims through negotiation, mediation.• Modalities and institutions for assessment of

compensation are provided for under the law.

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Community Development Agreement (CDA) – S. 116, NMMA 2007

- Provides for Community Development Agreement between host community and mining companies;

- Community Development Agreement is one of the international best practices provisions for addressing social issues in host communities;

- Addresses issues such as educational scholarship, infrastructural development, health, etc.;

- Agreement to be reviewed every 5 years;- Minister is to monitor compliance;- Failure in attempts to conclude Community

Development Agreement are referred to the Minister for resolution.

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Departments of the Ministry (Another product of the ReformTo give impetus to the reform agenda in the sector, the then Ministry of Solid Minerals Development was restructured bringing into existence three technical departments and two (2) service departments. These include; •Mines Inspectorate;•Artisanal and Small Scale Mining;•Mines Environmental Compliance; •Human Resources Management; and•Finance and Accounts.

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The National Minerals & Metal Act 2008Another, product of the reform after the enactment of the NMMA 2007 was National Minerals & Metal Policy which was the launched in January, 2008. The policy has the following objectives:•To take full advantage of the rising international commodity prices and the global resurgence of exploration activities with attendant huge investment in the sector achieving substantial increase in GDP contribution, Employment opportunities and poverty reduction.

•Private sector to be the engine of growth with Govern- ment playing the role of Regulator-Administrator.

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•Ensuring a transparent licensing regime.

•To ensure an efficient and effective management of the Nations Mineral Resources and promote technological growth in the metals sub-sector.

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The Minerals & Mining Regulations 2011Another product of the Reform based on Section 21 of the NMMA 2007.

The Section provides:“The Minister shall subject to the provisions of

this Act make Regulations in respect of any matter required to be prescribed by Regulations under this Act and generally for giving full effect to the provisions of this Act, including prescribing, amending or withdrawing any form that may be required under this Act”.

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Going by the provision of S. 21 of the Act, the Honourable Minister of Mines and Steel Development, Arch. Musa Mohammed Sada, fnia, on 13th day of May, 2011 signed into law the Nigerian Minerals and Mining Regulations (NMMA) 2011 which is fully operational. The Regulations is to give full effect to the NMMA, 2007.

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What Should Interest Investors:The following sections of the NMMA 2007 should interest investors:Exceptions from customs duty & other benefits: - S. 25, NMMA 2007Provides that all operators in the mining industry shall be granted the following benefits:(a)Exemption from payment of customs and import

duties in respect of plant, machinery, equipment and accessories imported specifically and exclusively for mining operations;

(b) Expatriate quota and resident permit in respect of the approved expatriate personnel; and

(c) Personal remittance quota for expatriate personnel, free from any tax imposed by any enactment for the transfer of external currency out of Nigeria.

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Free Transferability of Funds: - S. 27, NMMA 2007 The section provides as follows: a holder of a mineral title shall be guaranteed free transferability through the Central Bank in convertible currency of:

(a) Payments in respect of loan servicing where a certified foreign loan has been obtained by the holder for his mining operations; and

(b)The remittance of foreign capital in the event of sale or liquidation of the mining operations or any interest therein attributable to foreign investments.

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NMMA Tax Relief: S. 28, NMMA 2007 The tax relief period of a company granted mineral title under this Act shall commence on the date of operation and subject to the provisions of this Act or any other relevant financial enactment, the relief shall continue for three years.

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In summary, the Legislative and Regulatory framework for the mineral sector, Key governance of the sector are: a.

- Nigerian Minerals and Mining Act (2007)

- National Minerals and Metals Policy (2008) - Nigerian Minerals & Mining Regulations (2011)

b. Related Laws that have impact on mining and environment include:

- The Constitution of the Federal Republic of Nigeria (1999)

- Land Use Act (1978)

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c. Environmental Laws and regulations – National and International e.g. E.I.A Act and Multilateral Environment Agreements.

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Conclusion:With Government regulatory policy Developments resulting in the reform, I want to conclude as follows:•The sector is already transformed with strong economic activities coupled with Institutional, regulatory and enforcement capacity;•There is progress on diversification of the economy and contribution to GDP.•Legal and regulatory framework in the sector has put Nigeria on the global minerals map for wealth creation for the nation.

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Thank you