• Unlocking Opportunities in Nigeria’s Gold Market

As the federal and state governments continue to seek ways to diversify their revenues, experts believe that opportunities in the gold value chain should be unlocked, writes Nume Ekeghe

Gold remains one of the world’s most coveted commodities, based on its rarity and malleability. In 2001, the precious commodity’s average price was $US 271 and by 2017 it had jumped to almost $US 1,257.

Countries with largest estimated reserves are Australia, South Africa, and Russia. Currently, China is the world’s leading producer of gold, followed by Australia and Russia.

Also, Nigeria isn’t lacking of gold. Actually, the country has a thriving underground gold economy that if regulated, could unlock the as the gold market Centre of Africa. Despite the mostly informal structure of the gold market, Nigeria has one of the largest economies, the largest population in Africa, and is a top contender for the largest emerging market for luxury goods in Africa.

The lustre and luxury items visualised at the mention of gold is part of a long value chain that Nigeria does not participate in. Maru gold (gold from Maru Zamfara) is identified on sight by gold merchants in the gold souks of Dubai. Mumbai, Valenza and Arezzo Gold districts feel the groan of the Nigerian Foreign currency crunch when their Nigerian customers spend less.

Cotonou smuggling paths continue to thrive and create an undocumented supply of gold to Dubai and Asia.
But the emergence of the Nigerian gold purchase scheme and the development plan for an internationally certified gold refinery in Nigeria creates an opportunity for an intervention in a critical sector that would promote economic growth and reduce unemployment. According to experts, harnessing opportunities in the gold sector would boost Nigeria’s Gross Domestic Product (GDP) and promote non-oil exports.

Therefore, to sustain this development, Nigeria would need to reconsider its view on gold – the issues and ownership of gold as a commodity mined, recycled, and imported as a financial instrument, scientific product and as a potential instrument for economic warfare make it a matter of national security and importance.

Furthermore, experts stressed that developing the gold value chain would drive innovation, stimulate the economy, and generate income for government coffers.

Also, they pointed out that Nigeria could become a gold economy irrespective of whether it mines gold or not. India, UAE, Singapore, Italy, Switzerland, Turkey and London are renowned world gold markets without the classification of gold mining countries.

West African Value Chain

While world gold mine production has been declining, West African gold production has been growing. In 2011, West Africa became the hub of African gold mining when the total production of gold from West Africa overtook South Africa’s gold production. Out of the 15 ECOWAS countries, Cape Verde, Benin and Togo are the only countries without notable gold reserves. However, Benin and Togo are notable for gold trade.

All other ECOWAS countries have either significant documented gold reserves, internationally listed gold mining companies or significant footprint of artisanal gold mining. The recently released World Bank 2018 figures now have Ghana as the leading producer of gold in Africa. West Africa is becoming synonymous for gold.

At a June 2019 stakeholders’ session in Lagos between the private sector and the Governor, Central Bank of Nigeria (CBN), Godwin Emefiele, Aliko Dangote iterated that activities of smuggling from the Benin Republic route is killing manufacturing in Nigeria and that it would be difficult for a country to survive with Benin Republic as a neighbour.

A recent World Bank report on smuggling showed that about N1.45 trillion worth of goods is smuggled into Nigeria annually through Benin Republic. With Benin and Togo having 0% royalty on gold, neighbouring countries will find it almost impossible to prevent major royalty revenue leakages and counteract gold smuggling.

Dangote’s warning coupled with Ghana’s new status echoes the major premise for the solution towards the development of the gold value chain in West Africa – issues of different trade and monetary policies across the ECOWAS region must consistently support the development of the gold sector.

A report by Reuters titled: ‘Gold worth billions smuggled out of Africa,’ had revealed that most of the gold traded out was not recorded in the exports of African states.

Backed with confirmation from several trade economists that large amounts of gold are leaving Africa with no taxes being paid to the states that produce them, evidence points to this being a higher concern in countries and areas with large artisanal mining.

Although artisanal mining organisation and formalisation is part of the process needed towards regulating and developing the gold economy of the region, fiscal trade and monetary policy harmonisation are vital for the development of a gold market in West Africa.

Ghana, which has become Africa’s biggest gold producer, shares borders with Togo, one of the top gold exporting countries of Africa with abysmal records of production.

It is true that Ghana wears the cap for gold production, Cote D’Ivoire is the present favourite destination for gold mining investment and Nigeria pulls the strings for trade volumes, but as far as developing the gold value chain, no West African country can succeed on its own as it would take a regional effort to build a sustainable gold economy and make West Africa a gold market.

According to the Managing Director of Kain Smith Trade & Co Limited, Mrs. Nere Teriba, the Nigerian narrative on gold is advancing from “gold exploration and mining to gold market and economy.”

She said the planned Gold West Africa conference was focused on developing the gold value chain in the region towards establishing West Africa as a gold market centre.

The development of the gold value chain in Nigeria has strong dependencies on gold, trade and monetary policies across ECOWAS and the geographical region of Sub-Saharan Africa, she added.

“Economic and sustainable solutions towards artisanal gold mining, trading, refining and creating gold products and markets can only be achieved when public and private stakeholders in the gold sector of West Africa jointly create the eco-system for the gold economy to thrive above ground,” she added.

The co-host, of the conference, Mr. Kolade Apata, said: “For the folks who are fortunate enough to attend the conference, they will quickly realise the investment opportunities available with the launch of the Gold Refinery. For example, Nigeria could easily become the jewellery and gold trading hub in West Africa.”