Joint Venture Agreements as a Tool for Revitalizing Nigeria’s Solid Minerals Sub Sector
CHAPTER ONE
OBJECTIVES AND AIMS OF THE RESEARCH
The major aims and objectives of this study are as follows:
- To examine the historical development of solid minerals exploitation in Nigeria identifying its high points and trace the reasons for the steady decline of the sector giving place to petroleum
- Conduct a review of the different mineral contract regimes in force globally and in Nigeria and how they have aided in the development of the
- To examine the effectiveness or otherwise of clauses in Joint Venture Agreements, as a vehicle for revitalizing the solid minerals sub sector towards the economic development of the country.
- To consider ways and means of improving on the preparation, drafting and implementation or management of solid minerals development agreements in Nigeria within the context of global economic development.
- To consider the challenges facing the solid minerals sector, including but not limited to institutional reforms and legal framework.
- To proffer suitable strategic options for re-invigorating the solid minerals industry in Nigeria.
CHAPTER TWO
LEGAL FRAMEWORK AND DEVELOPMENT OF SOLID
MINERALS IN NIGERIA
INTRODUCTORY OVERVIEW
Prior to independence in 1960 and a decade afterwards a thriving mining industry existed in Nigeria with solid minerals accounting for a second place after agriculture in the export earnings and revenue profile of the colonial government and the newly independent nation. Nigeria was a major world producer and exporter of tin ore. Mining began in 1908 with the pioneering work of the Nigerian Bitumen company. Simultaneously with this was the commencement of tin mining in the Plateau which peaked to an all time high of 17000 tons per annum in 1945 from a humble beginning yield of about 18 tons per annum. Coal also occupied a strategic place as a main source of power running the rail system and providing the energy needs of the colonial government. Solid minerals were the second highest employer of labour after agriculture. The development of the sub sector was essentially private sector driven.
However, after independence the importance of solid minerals and its strategic relevance to the nation’s economic fabric began to lessen with the discovery of petroleum resources. In addition, the civil war that the country went through between 1967 – 1970 contributed in no small way in halting the development of the sub sector as it was predominately private sector driven by foreign companies and individuals who had to leave Nigeria on the out break of the war.
Furthermore, the depression in the price of the major minerals Nigeria was producing, principally tin, following the end of the Second World War made mining less attractive and uneconomical.
In addition, the coming into effect of the indigenization era of the 1970s had a negative effect of uprooting foreign concerns and individuals who had been engaged in mining to allow local entrepreneurs to enter the sub sector. This led to massive flight of investment and manpower thus further depressing the sector.
To cap it all, discovery of alternative (but necessarily cheaper) sources of energy to replace coal such as natural gas, solar energy, and fossil fuels helped in no small way to diminish the importance of solid minerals.
However, by the turn of the 1990s due to a combination of several factors including the realisation by Government that the total reliance on petroleum resources earnings as the main stay of the economy was creating distortions in the nation’s growth, concerted efforts began to be evolved for a diversification of the revenue base of the nation towards the development of solid minerals.
Government began to take steps to reposition the sub sector. These included the creation of separate ministry charged with the sole responsibility for the development of the sector i.e. the Ministry of Solid Minerals Development in 1995, the publication of a National Solid Minerals Policy in 1999, the revision and enactment of modern Minerals and Mining Law in 1999 and the institution of an incentive regime to attract investors.
CHAPTER THREE
FORMS OF MINERAL DEVELOPMENT AGREEMENTS
EARLY MINERAL AGREEMENTS
The Creator has endowed nation states with mineral reserves in a radically uneven distribution. More than half of mineral occurrences are located in developing countries; and as if by deliberate arrangement, no one nation state is self -sustaining in relation to mineral endowments.
This has therefore foisted on humanit y an interdependent regime; from nation states seeking to have access to mineral resources they need but have not been endowed with to nation states that have been endowed with the mineral in q uestion. Thus the internationality of the usage of natural resources has made its ownership, control and exploitation a matter of international interest.
To have access to these mineral resources, different arrangements, relationships and understanding s have been evolved over time between nation states and private entities to allow for their exploitation.
These arrangements, albeit agreements, due to the peculiar evolution of the mineral resources development have differed in nature from one to another , being different in one period from the next.
A global appreciation of mineral resources exploitation shows that for the long period that they became known to man, their ownership and control has been in the hands of different authorities depending on the period and location of the mineral. Largely , apart from United States of America and South Africa 57 natural resources have always been under the exclusive control of sovereign entities who hold same in trust for its peoples.
CHAPTER FOUR
JOINT VENTURE AGREEMENTS
CHOICE OF AGREEMENT
A choice of the “most suitable” agreement for the development of solid minerals in Nigeria would be a misnomer on the onset. Each of the contractual relationships discussed in chapter three possess individual strengths and weaknesses. They are products of particular and peculiar emerging circumstances and prevailing conditions in the environments they took root.
Thus while concession agreements were most popular and in practice at the advent of and early stages of the development of the industry due to underdevelopment and colonialism, the injustices inherent in them attracted developing countries to “newer contractual forms that are more acceptable to and are considered “psychologically more acceptable than the concession. While accepting the fact that concession agreements are less technical and complex of all the other forms of agreements, “ which makes it easier to administer particularly for a stat e that is not too knowledgeable ” 100 it is on the other hand considered the most rigid and the least amendable to indigenous technological development as all the aspects of exploration, mining and development are undertaken by the foreign multi -national companies.
A comprehensive critique 101 of the various forms of agreements shows that while the Production Sharing Agreement allows the company an agreed percentage of the minerals products on completion of each mining programme, the Risk, Pure Service and Technical Assistance Agreements all give the multinational company no share in the proceeds save their agreed professional fees.
CHAPTER FIVE
CHALLENGES FACING THE SOLID MINERALS SECTOR
INTRODUCTION
The preceding four chapters have painted a picture of the historical development of solid minerals exploitation in Nigeria, the different modes of ownership, the nature and kinds of early and modern mining agreements, the mineral endowments in Nigeria and their dispersal map, zeroing in on a detailed consideration of Joint Venture Agreement as a suitable vehicle for the effectual exploitation of the nation’s solid minerals endowments.
It is clear from the foregoing that there are enormous economic and technological benefits derivable from the full and effective exploitation of our solid mineral endowments which far outstrips that of oil. This thesis has thrown up certain critical challenges that the solid minerals sector faces that need to be identified and considered for any meaningful benefit to accrue to the nation.
No matter the strengths and merits of Joint Venture Agreements as a tool for revitalising the solid minerals sector, it will remain just that -a tool, unexploited and lying fallow unless and until these challenges are faced and surmounted.
This chapter therefore, intends to highlight those challenges facing the sector, carefully seeking to underline how they negatively impact on it, thereby creating a natural platform to proffer means and ways of overcoming them. These challenges which have been gleaned from a close study of the history of the development of the solid minerals can be discussed under the following subheads:
- Geological map
- Legislative and Regulatory Framework
- Political Factors
- Infrastructural Development
- Funding
- Fiscal Regime
- Community Relations
- Skilled Manpower
CONCLUSION
These challenges though daunting are surmountable. Countries that attracted and continue to attract substantial investment in the mining industry are those that over time invested time, energy, resources and have not been lacking in the will to see through far reaching reforms that seek to make the mining climate investor friendly.
RECOMMENDATIONS
The recommendations relating to this work has been divided into two main sub-heads for the purpose of emphasis. They are recommendations in respect of the option of Joint Venture Agreement as a viable option for reordering and revitalising the solid minerals sector and recommendations relating to a desirable investment climate.
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