Shifting face of global mineral wealth: Any hope for Nigeria?

As the search for clean energy gathers steam, demand for minerals to support the transition will usher the world into a new phase of wealth arising from the increased price of solid minerals. It will, however, be a case of wealth flowing along lines defined by ownerships: those who own the resources, and those who […]

As the search for clean energy gathers steam, demand for minerals to support the transition will usher the world into a new phase of wealth arising from the increased price of solid minerals. It will, however, be a case of wealth flowing along lines defined by ownerships: those who own the resources, and those who own the technology and finance to mine, refine and polish the minerals.

Besides, it is also possible that the wealth that will come out of these new sources could go the way of oil wealth. In most countries that have produced oil, their wealth has been cornered by a few privileged individuals or groups, while the rest of the people wallow in poverty. A good example of this is Nigeria.

Already, the dividing lines are becoming clear, which raises a pertinent question: any hope for Nigeria? No doubt, countries endowed with the relevant materials stand a chance to earn some measure of royalty from the deposits under their soil. Yet, the current realities point to the fact that the bulk of the benefits could flow to those who will bring the technology into the value chain.

This is clearly the case with the Electric Vehicle (EV) market, solar power generation, wind power, among others. Minerals will play significant roles in the realisation of the march towards green energy.  

The introduction of EVs has led to increased demand for a group of minerals that I choose to call The Big Five: cobalt, graphite, lithium, manganese and nickel. These are the key minerals used in the manufacture of EV batteries.

Four IMF economists estimate that a typical EV battery pack would need about 8kg (18 pounds) of lithium, 35kg of nickel, 20kg of manganese and 14kg of cobalt. 

The economists, Nico Valckx, Martin Stuermer, Dulani Seneviratne and Ananthakrishnan Prasad, wrote on the topic: “Metals Demand from Energy Transition May top Current Global Supply”, in the December 8, 2021, edition of IMFBlog.

For now, the batteries produced with these elements account for between 40 per cent and 50 per cent of the total cost of the EVs. Charging stations for the EVs require substantial amounts of copper, according to the IMF writers.

While there are projections that the proportion of the cost of the new vehicles accounted for by the batteries will decline as more research is undertaken into their production, the reality is that they could still influence the cost of electric vehicles for a reasonable time to come.

Other minerals for which demand will spike in the years ahead include silicon, silver, and zinc, for use in solar panels, and iron ore, copper, and aluminum for use in wind turbines, according to IMF economists. Interestingly, these are among the 34 solid minerals that Nigeria has in commercial quantities. These include marble, coal, iron ore, gold, silica, lead, zinc, tin ore, manganese, granite, laterite, limestone, barite, among others.

 Nearly 20 years after the existence of these minerals was documented in Nigeria, progress towards their production has been slow, uncoordinated, and largely unorganised. Consequently, this industry has been dominated by artisanal miners.

Just last week the National Bureau of Statistics (NBS) announced an 18 per cent rise in mineral production in the country to 64.3 million tons in 2020 from 54.5 million tons in 2019. But the catch here is, according to the NBS, the three most-mined (or officially recorded) minerals within the period were limestone, sand and granite. 

In other words, Nigeria is still far from playing in the green energy minerals market.

The global distribution of these green energy minerals is highly skewed, a factor that adds to the uncertainty surrounding their outlook.  A study done by Bloomberg New Energy Finance indicated that out of the 25 leading producers of the minerals, China ranked as the number one in terms of the supply of cobalt. The ranking was not based on the volume of deposits that China has. If the ranking were based on the volume of deposits held by a country, then the first position should have gone to the Democratic Republic of Congo.

The DRC holds about 68 per cent of the world’s total cobalt deposits but was ranked 8th by the BloombergNEF study, with a projection that it would actually slide from this position to the 10th by year 2025. By that year, China will still retain its first position, according to the study.

There are concerns among the consumers of these minerals over DRC’s dominant position, given the political, social, and more importantly, economic situations in that country.

“The role is so dominant that the energy transition could become more difficult if the country can’t expand mining operations,” Valckx et al wrote in reference to DRC’s position as a potentially dominant player in the emerging mineral wealth boom.

“Similar risks apply to China, Chile and South Africa which are all top producers of some of the metals most crucial to the energy transition. Breakdowns or disruptions in their institutions, regulations or policies could complicate supply growth,” they noted.

Indeed, a peep into DRC reveals the bleak future facing resource-rich countries that are hamstrung by politics, lack of vision, and poor leadership.

The DRC is known to have more mineral deposits than any other. Among others, it is home to gold, petroleum, cobalt, diamond, coal, tin, manganese, tantalum, zinc, uranium, tantalum, etc.  The country’s over 1,100 minerals and precious metals constitute its potential for economic growth and development, but that is what they have remained. Illegal mining of the minerals by armed groups and war contribute to the DRC’s inability to utilize its vast resources for development.

This scenario is not far from the chaotic agglomerations that characterise Nigeria’s mining regions in parts of the North, Middle Belt, and perhaps South West. There, armed groups are in a tussle over gold, zinc, and other minerals, and this has become an integral part of the war in these places.

This is an unfortunate nature of mineral wealth. Precious metals are often stained by blood because their exploitation often involves bloody conflicts among interest groups. Armed gangs see these minerals as free sources of funds to prosecute their wars. Therefore, such conflicts are likely to intensify as demand for the minerals grows to close the widening supply gaps.

DRC’s resource endowment has had practically no positive impact on the lives of its over 92 million people. More than 73 per cent of the populace lived on less than $1.90 /day in 2018, according to one source. This is a tragic example of the concept of the Paradox of Plenty, where the people are thirsty at the riverside.

That’s a big contrast with China. The Asian giant was ranked as the number one supplier on the basis of its installed capacity to refine cobalt. The world’s second biggest economy is aggressively exploiting these resources; its companies are buying up cobalt and lithium deposits in DRC, mining and having them shipped back home to be refined.

Across the globe and particularly in Africa and Australia, Chinese companies are buying up rural land, ostensibly for agriculture, and potentially for other purposes as time evolves.

According to the Bloomberg study, China leads the world in the refining of cobalt, with an installed capacity of 150,000 metric tons in 2019. The nearest refiner that year, Finland, came a distant second with nearly a tenth of that at 16,500 metric tons. The other major refiners as of then were Zambia 9,600 tons, and Canada, which capacity to refine 8,020 tons.