NEITI raises alarm over illicit financial flows in solid minerals sector

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By Obas Esiedesa

The Nigeria Extractive Industries Transparency Initiative (NEITI) has raised concerns over rising illicit financial flows in Nigeria’s solid minerals sector, warning that weak regulation, illegal mining and opaque ownership structures are undermining the industry’s contribution to the economy.

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

The agency noted that despite Nigeria’s huge deposits of gold, lithium, limestone and gemstones, the mining sector contributed only N401 billion in revenue and accounted for 0.72 per cent of the country’s Gross Domestic Product in 2023.

According to NEITI, illicit financial flows have continued to fuel revenue leakages, tax evasion, illegal mining, smuggling, corruption and money laundering linked to organised criminal networks.

The policy brief stated that the challenges are “systemic rather than incidental,” stressing that regulatory oversight remains severely fragmented among agencies including the Ministry of Solid Minerals Development, Mining Cadastre Office, NEITI, Nigeria Customs Service and the Nigeria Financial Intelligence Unit.

“Each institution collects sector-relevant data in silos, with limited interoperability and no integrated sector-wide digital monitoring system,” the report stated.

NEITI also identified weak beneficial ownership disclosure as a major loophole aiding illicit activities in the sector.

According to the report, “Mining licenses are frequently held through special purpose vehicles, shell companies, and layered corporate structures that obscure the natural persons who ultimately own or control extractive assets.”

The agency warned that the opacity allows politically exposed persons, undisclosed foreign interests and criminal actors to conceal control over mining operations, thereby facilitating corruption, money laundering and trade misrepresentation.

The report further disclosed that over 70 per cent of mining activities in Nigeria are dominated by artisanal and small-scale miners, many of whom operate outside formal regulatory frameworks.

It added that an estimated 80 per cent of mining activities in North-West states such as Zamfara, Katsina and Kaduna are carried out illegally. 

According to the policy brief, minerals extracted from illegal mining pits are often mixed with legally sourced minerals, making traceability difficult and creating channels for laundering illicit mineral exports into formal supply chains.

The agency stressed that until artisanal mining is formalised through simplified licensing, cooperative structures, financing support and traceability systems, the sub-sector would remain highly vulnerable to illicit financial flows.

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