Mining Mergers And Acquisitions In Nigeria: Key Legal Considerations For Foreign Investors

The Nigerian Ministry of Mines and Steel Development (MMSD) revoked over 4,000 dormant or underutilized mining licences, within the last 3 years, citing reasons including failure to pay annual service fees, hoarding of high-potential titles, and lack of active development.

This pattern of dormant and inactive mineral titles suggests that many existing promoters may be constrained by limited access to capital, technical expertise, or strategic partnerships necessary to advance projects beyond the licensing stage.

For foreign strategic and already operational investors, this development presents a unique mergers and acquisitions (M&A) opportunity to acquire existing mineral titles through transfers or assignments, potentially gaining immediate access to high-value deposits without the delays inherent in new licence applications. In this update, we highlight some of the legal and strategic considerations for the transfer of mining titles and licenses in Nigeria.

Regulatory Framework for Mineral Title Transfers in Nigeria

The Nigerian Minerals and Mining Act 2007 governs the transfer of mining rights and mineral titles in Nigeria. Based on Section 147 of the Nigerian Minerals and Mining Act 2007, a mineral titleholder cannot transfer, sell, or assign a mining lease, quarry lease, exploration licence, or retention licence without prior written consent from the Minister of Mines and Steel Development. The Minister has discretion to approve, reject, or impose conditions on transfers, taking into account certain factors, some of which we discuss below.

Key Strategic and Regulatory Considerations for Foreign Buyers

1. Unlocking Dormant Assets

The revocation of dormant and underutilized mineral titles creates a dual advantage for investors. By targeting these high-potential assets, foreign buyers can access licences that were previously underdeveloped while also accelerating market entry, bypassing the often lengthy and complex process of applying for new licences. This combination presents a compelling opportunity to acquire operationally and commercially viable mineral assets more efficiently.

2. Ministerial Consent is Mandatory

Based on the provision of Section 147, transfers or assignments of mineral titles that are completed without Ministerial consent are invalid, exposes buyers to significant regulatory risk. It's useful to note that the consent requirement applies to all types of mining licensees except for reconnaissance licenses.

3. Local Presence and Incorporation
Foreign investors seeking to acquire mineral titles in Nigeria are generally required to operate through a Nigerian-incorporated entity, such as a subsidiary or representative office. This ensures regulatory oversight, legal enforceability, and operational accountability, while demonstrating the capacity and commitment necessary for MMSD approval.

4. Technical and Financial Capacity

As a matter of law, the MMSD evaluates whether the prospective buyer possesses the financial resources and technical expertise to develop and operate the licence effectively. Investors should be prepared to demonstrate both the capital depth and the operational capability necessary to meet development commitments, including staffing, equipment, and project management capacity.

5. Enhanced Legal Due Diligence

For foreign investors, legal due diligence is a non-negotiable prerequisite when acquiring existing mineral titles in Nigeria. This process goes beyond standard verification of title and corporate ownership and should involve a comprehensive review of the licence's legal and regulatory status, including:

1. Substantive Validity of Title Registration: Confirming that the title is properly registered with the Mining Cadastre Office and that it has not lapsed, expired, or been revoked.
2. Encumbrances and disputes: Identifying any liens, charges, or pending litigation that could impair the investor's rights. Investors should also consider potential legal or regulatory challenges, including environmental compliance, export restrictions, or disputes over local community obligations, which could impact the economic value or transferability of the licence.
3. Historical compliance: Assessing whether the current holder has met all obligations under the Minerals and Mining Act, including reporting requirements, development milestones, and payment of service fees.
4. Existence of tax incentives and other legal entitlements:  Reviewing whether the licence benefits from any government-approved tax incentives, fiscal concessions, or local content obligations, and verifying that all conditions for such incentives have been met.

Conclusion

Foreign investors can legitimately acquire mineral titles in Nigeria by following the proper legal and regulatory process. Acquisition success requires careful due diligence, a local presence, and compliance with government requirements.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.