- in South America
- with readers working within the Law Firm industries
- within Consumer Protection, Privacy and Employment and HR topic(s)
Nigeria is rapidly emerging as a key destination for investors in the global minerals market. With rich deposits of lithium, gold, tin, and other critical minerals, the country offers significant opportunities for international buyers. However, navigating Nigeria's mining regulations requires careful planning and compliance with legal and operational requirements. This guide provides a practical overview for foreign companies looking to buy minerals in Nigeria.
Legal Framework for Mineral Purchases in Nigeria
The primary legal instrument governing mining operations in Nigeria is the Nigerian Minerals and Mining Act, 2007 and the Minerals and Mining Regulations, 2011. Section 94 of the Act prohibits anyone from purchasing any mineral without a valid license to possess and purchase minerals issued by the Ministry of Mines and Steel Development (MMSD). The regulatory objective of this license is to ensure that the MMSD can monitor the origin, quality, and legality of mineral transactions, prevent smuggling, and enforce reporting rules. Additionally, a compulsory registration of mineral buying centres is required for entities engaging in the collection or trading of minerals. These provisions apply to all transactions, whether the buyer intends to process the minerals locally or export them abroad.
Recent Policy Updates for Mineral Purchases & Mining Operations in Nigeria
A number of regulatory developments are useful for a buyer's consideration. For instance, the MMSD has recently stepped up enforcement and recently revoked dormant mining titles to encourage active development. Thus, foreign buyers must verify that the seller's mining title is valid and active. The Nigerian government is increasingly prioritizing licences for entities that demonstrate a plan for domestic processing or beneficiation of minerals rather than exporting raw ore.
Steps for Foreign Companies to Buy Minerals Legally
Step 1: Incorporate a Nigerian Entity: Foreign buyers must register a subsidiary or representative office with the Corporate Affairs Commission (CAC). Typically, the local entity will be the applicant for the MMSD license and will manage compliance on the ground.
Step 2: Obtain a License to Purchase Minerals
Foreign buyers must apply to MMSD for a "License to Purchase Minerals". Some of required documents include: (A) Proof of Nigerian company registration (B) A Bank Guarantee (C) An attestation of non-conviction for a criminal offence (D) Tax Clearance Certificates (E) Source of supply.
Step 3: Conduct Due Diligence on Mineral Title of Seller
It is often critical to verify the seller's mining title via MMSD's Mining Cadastre Office (MCO) and to confirm that the mining lease is active, legally compliant, and free from disputes. This is often important in view of the recent revolution of licenses as well as the widespread incidence of illegal mining. A review of corporate ownership of seller is often necessary. Additionally, it's important to note that the entire mining value chain is regulated. Thus, it's often important to verify that other counterparties are licensed and to ensure supply chain verification.
4. Risks and Practical Considerations
Foreign companies must be aware of some potential counterparty and regulatory risks as follows:
(A) Purchasing minerals from unlicensed miners can lead to legal penalties or seizure of minerals.
(B) The MMSD may revoke license if minerals are not actively purchased, processed, or if compliance is lacking.
(C) Additional licenses or registrations may be required. For instance, buyers looking to export minerals may still require export permits. Also, foreign buyers who have obtained a license to possess and purchase minerals are often required to apply to formally register their agents to formally move or transport minerals within Nigeria.
(D) Buyers that have obtained a license to possess and purchase minerals have continuing legal obligations. For instance, buyers are required to keep books and registers of sale and purchase transactions.
Conclusion
For foreign companies, Nigeria's mineral sector offers lucrative opportunities but operates within a tightly regulated framework. Obtaining a license to possess and purchase minerals, incorporating locally, conducting due diligence, and aligning with local processing requirements are mandatory steps for legally and successfully purchasing minerals in Nigeria.
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.
