Guide on How to Acquire a Mining License in Nigeria

Introduction

The mining industry in Nigeria is a significant contributor to the country’s GDP, with various players operating in this space. To engage in any mineral resource activities, companies or individuals must obtain the proper licenses and permits from the government. 

Meaning of Mining License

A mining license is an official document or certificate granted by a government agency that allows a company or individual to engage in mining activities such as extracting, processing, and trading mineral resources.

The mining license specifies the minerals, geographic area, and duration for which the holder is permitted to perform mining operations.

Legal and Regulatory Framework of Mining in Nigeria

The primary legislation regulating mining in Nigeria include the Nigerian Minerals and Mining Act 2007, National Minerals and Metals Policy 2008, and Nigerian Minerals and Mining Regulations 2011.

Other legislations that are important in the regulation of the mineral mining industry include the Nigerian Investment Promotion Commission (NIPC) Act1, the Companies and Allied Matters Act, 2020, the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, and tax laws.

The regulatory bodies are the Ministry of Mines and Steel Development (MMSD) and the Mining Cadastre Office (MCO). Engaging in any mineral resource activities without the proper licenses is considered an offense in Nigeria.

Types of mining licenses

There are various types of mining licenses, such as Exploration License, Mining Lease, Small Scale Mining Lease, Possess or Purchase License, Mineral Buying Center License, and Mineral Export Permit, each with their own set of requirements.

Exploration License

The Exploration License is the first step in the process of obtaining mining rights in Nigeria. It grants the holder the right to explore and assess the viability of mineral deposits within a specified area. It is valid for an initial period and can be renewed based on performance.

Once the exploration phase is successful and the presence of commercially viable mineral deposits is established, the holder of the Exploration License can then apply for an Exclusive Prospecting License (EPL) and eventually a Mining Lease.

The key requirements for obtaining an Exploration License in Nigeria are:

Certified true copy of company certificate and other incorporation documents

• Completed application forms
• Pre-Feasibility Report
• Prospecting plan
• Payment of processing fee
• Evidence of financial capability
• Evidence of technical competence or COMEG accredited geologist
• Irrevocable consent from the landowner(s) and/or occupier(s) to the applicant
• Attestation of non-conviction of criminal offences under the Act by a Lawyer

Mining Lease

A mining lease is awarded for a surface area without a prior exploration license or small-scale mining lease, unless the applicant already has one over the same region. The lease is for a maximum of 50km². The mining lease grants the holder the exclusive right to use and extract minerals within the lease area. The mining lease holder has the right to market, sell, export, and dispose of mineral products produced during mining activities. Mining leases are awarded for 25 years and renewed every 24 years, provided certain conditions are met.

The key requirements for obtaining a Mining Lease in Nigeria:

1. The applicant must be a holder of a valid Exploration License, which allows them to explore and assess the viability of mineral deposits within a stated area.

2. The following documents must be submitted by the applicant:

• Certified true copy of company incorporation documents
• Completed application forms
• Pre-Feasibility Report
• Prospecting plan
• Payment of processing fee
• Evidence of financial capability
• Evidence of technical competence or COMEG accredited geologist
• Irrevocable consent from the landowner(s) and/or occupier(s)
• Attestation of non-conviction of criminal offences under the Act by a Lawyer

3. The applicant must show that a commercial quantity of mineral resources exists in the region for which the lease is requested.

4. The applicant must have met all of the conditions of the Exploration License for the area in question.

5. The applicant must give proof of sufficient operating capital for the proposed mining operations and demonstrate technical competence in carrying out the proposed mining activities.

Small Scale Mining Lease

The small-scale mining lease has a smaller geographic area and is intended for artisanal, alluvial, and other small-scale mining operations. The license is valid for 5 years and can be renewed for up to 5 more years.

The key requirements for obtaining a Small-Scale Mining Lease (SSML) in Nigeria are:

1. The applicant must be a Nigerian citizen or a company incorporated in Nigeria.

2. The proposed mining area must not exceed 3 km2 (15 cadastral units).

3. The applicant must submit the following documents:

• Completed application forms
• Certificate of incorporation and other company documents
• Evidence of technical competence, such as a COMEG accredited geologist
• Evidence of financial capability to carry out the proposed mining operations
• Irrevocable consent from the landowner(s) and/or occupier(s)
• Attestation of non-conviction for criminal offenses under the Act

4. The applicant must demonstrate that the proposed mining operations will be conducted using low-level technology and methods that do not require substantial capital expenditure.

5. The applicant must pay the prescribed application and processing fees.

Possess or Purchase License

The Possess or Purchase License is required for companies seeking to deal in mineral resources. This license enables an entity that does not own or possess a mining lease to operate directly in mineral trading or exporting. The license is valid for one year and can be renewed.

The key requirements for obtaining Possess or Purchase License include:

• Certificate of incorporation and other company documents
• Application letter stating the minerals to be possessed or purchased
• Evidence of a technically competent person like a geologist with COMEG accreditation
• Tax clearance certificate
• Attestation of non-conviction for a criminal offense by a Legal Practitioner
• Banker’s reference letter
• Letter of consent from a mineral title holder
• Payment of the prescribed fees

Mineral Buying Centre License

The Mineral Buying Centre License is specifically authorises the holder to operate a facility for processing, warehousing, and trading of mineral resources. 

The key requirements for obtaining a Mineral Buying Centre License (MBC) in Nigeria are:

1. The applicant must be a company incorporated in Nigeria. Foreign companies must incorporate a local Nigerian subsidiary to be eligible.

2. The applicant must have an established warehouse facility that will be used to process, store, or trade mineral resources. This warehouse facility will be inspected as part of the application process.

3. The applicant must submit similar documents as required for the Possess or Purchase License, including:

• Certificate of incorporation and other company documents
• Application letter stating the minerals to be traded
• Tax clearance certificate
• Attestation of non-conviction for a criminal offense
• Banker’s reference letter
• Letter of consent from a mineral title holder

4. The applicant must demonstrate technical competence, such as having a geologist with COMEG accreditation on staff.

5. The applicant must pay the prescribed application fees for the Mineral Buying Centre License.

Mineral Export Permit

The Mineral Export Permit is issued by the Ministry of Mines and Steel Development and is required each time mineral resources are to be exported out of Nigeria. This permit ensures compliance with export regulations and facilitates the legal exportation of minerals.

The key requirements for obtaining a Mineral Export Permit in Nigeria are:

1. Possess or Purchase License:

• The applicant must already hold a valid Possess or Purchase License, which allows them to deal in the specific mineral resources they want to export.

2. Export Certificate:

• The applicant must obtain an Export Certificate from the Ministry of Mines and Steel Development, which certifies the mineral resources are legally sourced and ready for export.

3. Evidence of Royalty Payment:

• The applicant must provide proof that the required royalties have been paid to the government for the mineral resources being exported.

4. Prescribed Fees:

• The applicant must pay the prescribed fees set by the government for the Mineral Export Permit.

Incentives available for participants in the Nigerian Mining Industry

The incentives provided by the Nigerian government to support the mining industry include:

• Allow for a 75% depreciation or capital allowance on verified true capital expenditure in the first year of investment and 50% in subsequent years.
• There is a 5% investment allowance and the ability to capitalize any prospecting expenses.
• Approved plant, machinery, equipment, and accessories imported for mining activities are exempt from customs and import charges.
•  Approved expatriate personnel of the operation are exempt from expat quotas and residency permits.
• Expatriate personnel have a personal remittance quota and are not subject to any taxation for transferring foreign currency out of Nigeria.
• Tax exemption for the first three years of operation. The minister might extend the period for another two years if the operator meets certain conditions.
• Foreign investors are protected from nationalization and expropriation of their mining titles, unless the acquisition was conducted in the national interest or for public purpose and under a legislation that includes compensation and access to court.

Conclusion

In Nigeria, it is illegal to engage in any mineral resource operations without the required license. It is strongly encouraged to consult with a legal professional to ensure that the application procedure is completed correctly and that all regulatory criteria are met. This is important in order to prevent any legal concerns or penalties for operating without the proper licenses in Nigeria’s mining industry.

By Adeola Oyinlade & Co.

Adeola Oyinlade & Co.; a leading full-service law firm in Nigeria provides help and offers advisory to both local and foreign clients in the Nigerian mining sector. 

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