Nigeria is endowed with an enormous variety of natural resources, including solid minerals such as gold, coal, limestone, bitumen, and more. To unlock and explore the vast opportunities afforded by mining operations, the Federal Government enacted the Nigerian Minerals and Mining Act, 2007 alongside other regulations and guidelines to regulate all aspects of exploration and mining in the country. This article gives a comprehensive guide on how to start a mining business in Nigeria, with special focus on the legal considerations for establishing one.
HOW TO START A MINING BUSINESS IN NIGERIA
A. Understand Ownership and Legal Control
Under the Act, all mineral resources in Nigeria are owned by the Federal Government and held in trust for the people.[1] This implies that no individual or company can mine without authorization. To participate legally, you must obtain a mining title. Applications to obtain mining title are submitted to the Mining Cadastre Office (MCO), which operates a transparent first-come, first-served priority system.[2] It is worth noting that the MCOs are restricted from granting mining titles for the exploration of certain lands.[3] Some of which include[4];
- Land set apart for military purposes, except those with the approval of the President
- Lands that are within 50 meters of an area having an oil pipeline license granted in accordance with the Oil Pipeline Act.
- Land occupied by villages, towns, markets, burial grounds, cemeteries, archaeological sites, etc
- Land appropriated for railways or situated within 50 meters of a railway
- Land that is the site or situated within 50 meters of a government or public building, reservoir, or dam.
- Any land where a mining license has already been granted by the MCO and such license is still subsisting.
B. Determine the Type of Mining License to Obtain
The Mining Cadastre Office is saddled with the responsibility of considering and disposing of applications for obtaining licenses and permits, also known as mineral titles.[5] Hence, it behooves the interested party or applicant to first determine the mining activity, which will then inform the decision on what license to apply for. The mineral titles issued by the Mining Cadastre Office for the purpose of carrying out any mining activity include: [6]
- Reconnaissance Permit
- Quarry lease
- Exploration licenses
- Mining leases
- Small-scale mining leases
- Water-use permits
C. Register Your Business with the Corporate Affairs Commission
To qualify for most mining titles, you must be a body corporate incorporated under the Companies and Allied Matters Act (CAMA). This ensures your business has legal standing to enter into contracts and hold mineral rights. [7]
D. Comply with the NIPC Act and Foreign Exchange (Monitoring and Miscellaneous Provisions) Act on Foreign Investments
Foreign investments in Nigeria’s mining sector are protected under two key laws: the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, which governs foreign currency investments; and the Nigerian Investment Promotion Commission (NIPC) Act, which safeguards and regulates foreign investments generally. The provisions of these laws must be complied with where there is any investment in foreign currency with regard to mining.[8] This means that any foreign investment tied to a mineral title enjoys the same legal protections and guarantees as other recognized foreign investments in Nigeria.
E. Apply for the Appropriate Mineral Title
The law provides for several categories of mining rights, depending on the scale and stage of operation:
- Reconnaissance Permit – for preliminary surveying.
- Exploration Licence (EL) – to search for minerals.
- Small-Scale Mining Lease (SSML) – for artisanal or medium operations.
- Mining Lease (ML) – for large-scale commercial mining (up to 25 years, renewable every 24 years).
- Quarry Lease (QL) – for construction and industrial minerals.
- Water Use Permit – where water is required for operations.
To qualify for any of the above-listed mineral titles, you must be one of the following:
- A Nigerian citizen with legal capacity who has not been convicted of any criminal offence
- A body corporate registered under the Companies and Allied Matters Act
- A mining cooperative
Other qualifications include:
- Quarry Lease: any person extracting construction materials for the construction of roads, railway lines, dams, and other engineering works or structures of public interest.[9]
- Water Use Permit: The applicant may be a holder of the Exploration Licence, Mining Lease, or Quarry Lease at the time that the water right granted will be used; or an applicant for a Mining Lease, Small-scale Mining Lease, or Quarry Lease for which the water right will be required to be used.[10]
- Mining Lease: A qualified applicant for a Mining Lease is a body corporate duly incorporated under the Companies and Allied Matters Act or other legal entity that- has demonstrated under conditions stated in the Regulations that a commercial quantity of mineral resources exists in the area in respect of which the application is made; and has fulfilled all the conditions attached to the Exploration Licence in respect of the area subject to the application.[11]
- Small-scale Mining Lease: The applicant may be a holder of an Exploration Licence granted in respect of the area subject to the application, provided that the applicant has fulfilled all the conditions attached to the Exploration Licence.[12]
- Exploration License: The applicant may be a holder of a Reconnaissance Permit granted in respect of the area subject to the application, provided that the applicant has fulfilled all the conditions attached to the Reconnaissance Permit.
General Requirements for the Grant of Mineral Title
Depending on the type of mineral title, there are requirements tailored to each mineral title you wish to obtain. However, the general requirements for obtaining a mineral title are highlighted as follows;[13]
- Submit a duly completed application form online along with the necessary documents (as specified in the application guideline/form) and processing fees to the MCO in line with the provisions of the relevant laws. Additionally, three hard copies of the application must be submitted to the MCO headquarters or any of the Nigeria Mining Cadastre Zonal Offices nationwide.
- The submitted application shall be assigned an identifying code and registered with the date, hour, and minute corresponding to the online priority register, duly signed. One hard copy of the submitted application shall be given to the applicant as acknowledgment of the receipt of the application.
- Upon the submission and receipt of an application for a Mineral Title, the MCO shall notify landowner(s)/occupier(s) and obtain an irrevocable consent to be submitted back to MCO within fourteen (14) days from the date of receipt of the application by the applicant.
- Pay the prescribed application fee depending on the type of mineral title. Payments made are non-refundable. Upon payment of the application fee, a receipt will be issued to the applicant by the MCO, evidencing all the documents and fees received from the applicant as well as the date and time of application.[14]After obtaining the license, the applicant is required to pay an annual service fee, which will be used for administrative and management purposes by the MCO.[15] An applicant who fails to pay the prescribed fee will be liable to the revocation of the license.[16]
- Where the application requires minor amendments (not coordinates), the applicant shall be duly informed to effect the necessary corrections within a period of 5 working days; and if no response is received from the applicant within the specified period, the application shall be rejected without any refund.
- A valid application received shall be further evaluated and recommended for Approval or Refusal, as the case may be.
- If a Licence/Lease/Permit is granted, the applicant shall be notified via registered email and be given 2 weeks within which to pay the Annual Service Fee, a prerequisite among other obligations, before collection of the Licence/Permit or Lease.
- If the applicant fails to pay the Annual Service Fees within fourteen (14) days after the grant is sent electronically, the grant shall automatically be withdrawn
F. Comply with Environmental and Social Obligations
Before commencing mining operations, you must satisfy strict conditions:[17]
- Environmental Impact Assessment (EIA): Submit and obtain approval from the Mines Environmental Compliance Department and the Federal Ministry of Environment.
- Community Development Agreement (CDA): Negotiate with host communities to provide social and economic benefits (e.g., scholarships, infrastructure, local employment).
- Land Compensation: Pay compensation to lawful land occupiers affected by mining activities.
- Reclamation & Rehabilitation: Restore mined-out land to safe and sustainable conditions.
G. Fulfill Operational Obligations
a. Commencement of Mining Operations within the Prescribed Timeframe
Once granted a Mining Lease, the law requires you to commence mine development within the prescribed timeline, depending on the type of mineral title obtained.
- For mining lease – within 36 calendar months
- For an exploration license – within 12 calendar months
- For quarry lease – within 6 calendar months
- For a small-scale mining lease, within 3 calendar months of issuance of the material title
b. Payment of Surface Rent and Compensation Obligations for Mineral Title Holders:
A mineral title holder must pay an annual surface rent to the landowner or lawful occupier of the land used for mining operations. The rent amount, payment method, and location are determined by the Minister. In addition, the title holder is required to pay reasonable compensation for:
- Surface rent under a state lease or right of occupancy
- Damage to land, crops, economic trees, buildings, or other works
- Any loss, disturbance, or harm suffered by landowners or occupiers due to mining activities.
Before granting a mining lease on public or state land, the Minister must notify the landowner or occupier and request their proposed annual rent. If deemed fair, the Minister will approve and impose it, subject to review every five years. Importantly, while failure to pay surface rent does not prevent mining development, it bars the title holder from surrendering the mineral title later, since all rents and fees must be settled before such surrender is approved.[18]
c. Payment of Annual Service Fee and Royalties:
Every mineral title holder except holders of reconnaissance permits must pay an annual service fee to the Mining Cadastre Office. This fee is based on the number of cadastral units within the title area multiplied by the official fee per unit for that type of title. All mineral title holders except those with reconnaissance licences or water use permits must also pay royalties on minerals extracted during exploration or mining. However, where minerals are mined or exported solely for research, testing, or as specimens, such minerals are exempt from royalty payments.[19]
H. Leverage Incentives for Investors and Titleholders
The fiscal incentives apply to companies and enterprises engaged in mining operations.[20]The incentives include;
- Capital Allowances[21]
Qualified licence holders are entitled, when calculating their total profits, to deduct a capital allowance equal to ninety-five percent (95%) of qualifying capital expenditure incurred in the year the investment is made. Qualifying expenditures include:
- All certified costs associated with exploration, mine development, and mineral processing. This covers feasibility studies, geological surveys, sample assaying, and related preparatory expenses.
- All infrastructure expenses necessary for mining operations, whether or not the licence holder owns the infrastructure, as well as costs incurred in replacing such infrastructure.
b. Exemption from Customs Duty on Mining Equipment[22]
Mining operators in Nigeria are entitled to certain incentives, including:
- Duty-free importation of approved machinery, equipment, and accessories for mining operations.
- Expatriate employment benefits, such as quotas for approved foreign staff and resident permits.
- Tax-free remittances for expatriate personnel when transferring earnings abroad.
These benefits are subject to approval by the Mines Inspectorate Department, which determines eligible equipment. However, if the imported items are later sold or disposed of, the operator must pay the applicable customs and import duties.[23]
c. Tax Relief Incentive
Companies involved in the exploitation of mineral resources are entitled to a tax relief period beginning from the date they commence mining operations. This relief is granted for an initial period of three (3) years.[24] At the expiration of this period, the Minister may, at his discretion, approve an extension of up to two (2) additional years. Furthermore, such companies are required to create a tax-deductible reserve fund specifically designated for environmental protection, mine rehabilitation, land reclamation, and eventual mine closure expenses.[25]
d. Permission to retain Foreign Exchange Earnings and Free Transferability of Funds for Loan Servicing and Repatriation of Capital.[26]
Holders of mineral titles in Nigeria may retain part of their foreign exchange earnings in a domiciliary account, with Central Bank approval, to cover essential mining inputs not easily available locally. They are also guaranteed free transfer of funds in convertible currency through the Central Bank for:
- Loan repayments on certified foreign loans obtained for mining operations.
- Repatriation of foreign capital in cases of sale, liquidation, or transfer of interests tied to foreign investment.
Conclusion
Starting a mining business in Nigeria is a regulated but highly rewarding venture. The laws provide the legal framework to ensure that investors, communities, and the environment all benefit. With the right licenses, compliance, and partnerships, you can establish a successful mining operation while contributing to Nigeria’s economic growth.
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[1] Section 1 Mining Act 2007, Section 44 (3) 1999 Constitution of the Federal Republic of Nigeria
[2] Section 8 Mining Act 2007
[3] Section 3 (1) Mining Act 2007
[4] Section 3 (1) Mining Act 2007
[5] Section 5 (5) (a) and (b) ibid
[6] Regulation 21 Mining Regulation 2011, Section 46 Mining Act 2007
[7] https://www.miningcadastre.gov.ng/img/downloads/202209201347Guidelines-on-Mineral-Title-Applications-with-inputs-of-directors-added.docx
[8] Section 29 Mining Act 2007
[9] Section 51 (d) Mining Act 2007
[10] Section 52 Mining Act 2007
[11] Section 50 ibid
[12] Section 49 Mining Act 2007
[13] https://www.miningcadastre.gov.ng/img/downloads/202209201347Guidelines-on-Mineral-Title-Applications-with-inputs-of-directors-added.docx
[14] Section 8(3) Mining Act 2007
[15] Section 10 Mining Act 2007
[16] Section 11 Mining Act 2007
[17] Section 71 Mining Act 2007, Regulation 118 Mining Regulation 2011
[18] Regulations 11 (3) (a), (b), (c), 11 (4), 22 (1) and 100 Mining Regulation 2011, Sections 102 (1), (2), 103 (c), 105 (2) (c) and 71 (d) Mining Act 2007
[19] Sections 10 and 33 Mining Act 2007, Regulations 98 and 99 Mining Regulation 2011
[20] Section 23 Mining Act 2007
[21] Section 24 Mining Act 2007
[22] Section 25 ibid
[23] Section 25(4) Mining Act 2007
[24] Section 28 Mining Act 2007
[25] Section 30 Mining Act 2007
[26] Section 26 and 27 Mining Act 2007
