Oil price slide makes case for diversification to mining

Nigeria must diversify urgently to the rich and untapped mining sector to take cover from sliding oil prices triggered by U.S President Donald Trump’s trade war, experts say.

For Africa’s biggest oil producer, a slump in oil prices strains the national budget and foreign exchange earnings, putting the country at a risk of economic meltdown and a renewed cost-of-living crisis.

“Heavy reliance on oil and gas makes diversification urgent. A resilient mining sector leads to national economic security,” said Tunde Fagbemi, chairman of Dukia Gold.

“Transparent, consistent regulatory framework, effective enforcement to ensure compliance, and protection for investor rights and local communities are policy reforms for a robust mining sector,” he added.

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The federal government projected oil production at over 2 million barrels a day and assumed a price of $75 per barrel in its 2025 budget. Crude is trading $10 below that level and Nigeria’s oil output slipped nine percent to about 1.4 million barrels daily in March compared with January.

But the mining sector presents a compelling opportunity to buffer Nigeria’s revenue base. With over 44 mineral types in commercial quantities, ranging from gold and lithium to iron ore and baryte, the country has long been recognised as a mineral-rich economy.

However, mining contributes less than 1 percent to the gross domestic product (GDP), primarily due to lack of strategic alignment, investment and policy clarity, a stark contrast to its potential.

Meanwhile, precious metals such as diamond and other minerals contribute at least 25 percent to the economy of Botswana, placing the world’s biggest diamond producer by value as the nation with the highest per capita income in mainland Africa at $7,280 in 2023. This dwarfs Nigeria’s $1,596 per capita income in the same period, according to the World Bank.

The Ministry of Solid Minerals Development projects that the sector could contribute as much as 3 percent to GDP by 2025 if current reforms are sustained.

Global demand is also shifting in Nigeria’s favour. Minerals like lithium and cobalt, used in batteries for electric vehicles and renewable energy storage, are expected to drive a global mining boom.

According to the International Energy Agency (IEA), demand for lithium could increase 40-fold by 2040, with critical minerals becoming more valuable than oil.

Dele Alake, minister of solid minerals development, said the country has sealed deals worth $1.2 billion with investors who will set up two lithium factories in Nigeria before the end of the second quarter (Q2) of 2025.

“This project will contribute about $1.2 billion of economic output annually and over $25 billion during the project’s life cycle. And of course, it will also contribute $8 billion in foreign exchange.

“This investment is an endorsement of our ministry’s ongoing reforms, and the SNDF and the AFC goals of catalysing private sector-led investments in the soil and minerals sector,” the minister said at an event organised by BusinessDay last week.

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Despite these gains, sector experts say more needs to be done.

“Regulatory overlaps and policy inconsistency, inadequate infrastructure and investment, insecurity, limited value addition and local refining are key barriers to building a resilient mining sector,” Fagbemi said in his address of welcome at the event powered by BusinessDay.

Other challenges include: poor data on mineral reserves, illegal mining, limited processing capacity, and a weak logistics network.

Nigeria still exports most of its raw minerals without beneficiation, losing significant value in the process.

Industry experts argue for decentralisation of mining licenses and stronger environmental regulation to attract responsible investors.

“Without refining infrastructure and clear policies for in-country value addition, jobs are exported, and we remain stuck at the bottom of the value chain. Countries like Rwanda and Ghana are already taking the lead in gold certification, gemstone polishing, and lithium processing — Nigeria must catch up,” Fagbemi added.