By Ambrose Nnaji

The Nigeria Extractive Industries Transparency Initiative (NEITI) has called for urgent institutional and regulatory reforms to tackle illicit financial flows (IFFs) undermining Nigeria’s solid minerals sector, warning that weak oversight, illegal mining, and opaque ownership structures are costing the country billions in lost revenue.

In a new policy brief titled “Stemming the Scourge of Illicit Financial Flows in Nigeria’s Mining Sector,” released at the NEITI House, the agency identified weak regulatory capacity, fragmented institutional coordination, informal artisanal mining, foreign buyers’ dominance, and criminal infiltration of mining communities as major enablers of illicit financial activities in the sector.

NEITI noted that despite Nigeria’s vast deposits of commercially viable minerals such as gold, lithium, limestone, and gemstones, the mining sector continues to underperform. According to the agency’s 2023 industry audit report, the sector generated only N401 billion in revenue and contributed just 0.72 per cent to the country’s Gross Domestic Product (GDP).

The policy brief stated that the sector’s poor performance is largely driven by illicit financial flows that fuel revenue leakages, tax evasion, illegal mining, mineral smuggling, corruption, and money laundering linked to organised criminal networks.

According to NEITI, the challenges are systemic and deeply rooted across institutional arrangements, market structures, security architecture, and data management systems.

The report highlighted severe fragmentation among regulatory institutions, including the Federal Ministry of Solid Minerals Development, Mining Cadastre Office (MCO), NEITI, Nigeria Customs Service, Nigeria Financial Intelligence Unit, and state agencies, noting that most institutions operate isolated data systems with limited interoperability and no integrated digital monitoring framework for the sector.

NEITI further identified weak data governance and poor enforcement of beneficial ownership disclosure requirements as major structural loopholes enabling illicit financial flows. It noted that many mining licences are held through shell companies, special purpose vehicles, and layered corporate structures that conceal the real owners of extractive assets.

The agency warned that inadequate verification of beneficial ownership information among the Ministry of Solid Minerals Development, MCO, and the Corporate Affairs Commission allows politically exposed persons, undisclosed foreign interests, and criminal actors to hide control of mining operations, thereby facilitating corruption, money laundering, trade misrepresentation, and regulatory capture.

“Until beneficial ownership transparency is fully enforced and data systems are harmonised across agencies, accountability in the sector will remain structurally compromised,” the report stated.

NEITI also raised concerns over the dominance of artisanal and small-scale mining (ASM), which accounts for more than 70 per cent of mining activities in Nigeria. It noted that many artisanal miners operate without licences, receipts, digital records, or traceability systems.

The report estimated that about 80 per cent of mining activities in parts of North-West Nigeria, particularly in Zamfara, Katsina, and Kaduna states, are conducted illegally.

According to the brief, minerals extracted from illegal mining sites are often mixed with legally sourced minerals, making verification difficult and creating channels for laundering illicit mineral flows into formal supply chains and export markets.

The agency warned that the continued informality of ASM operations complicates taxation, monitoring, and enforcement efforts, while sustaining parallel mineral economies beyond government control.

To address the challenges, NEITI proposed seven key reforms, including stronger inter-agency collaboration, integration of Anti-Money Laundering and Counter-Terrorism Financing (AML/CFT) measures into mining governance, formalisation of artisanal mining activities, mandatory beneficial ownership disclosure, legal and institutional reforms, improved community engagement, and sustained civil society participation.

The recommendations, according to the agency, align with Nigeria’s existing policy frameworks, including FATF standards, the Proceeds of Crime Act (POCA), beneficial ownership reforms under the Companies and Allied Matters Act (CAMA), Open Government Partnership commitments, and the Medium-Term National Development Plan (MTNDP).

NEITI stressed that tackling illicit financial flows is critical to Nigeria’s economic stability and long-term development, adding that coordinated institutional reforms, improved transparency mechanisms, stronger data systems, and inclusive engagement with artisanal mining communities are necessary to reposition the mining sector as a credible and sustainable revenue source for the country.

The policy brief was produced by NEITI in collaboration with the Federal Ministry of Solid Minerals Development and the Africa Network for Environment and Economic Justice, with support from the Foreign, Commonwealth and Development Office.