By Bassey Udo
Reforms are needed urgently to curb the menace of illicit financial flows in Nigeria’s solid minerals sector, the Nigeria Extractive Industries Transparency Initiative (NEITI), has said.
In a Policy Brief released on Thursday in Abuja, NEITI highlighted weak regulatory capacity, fragmented institutional coordination, opaque ownership structures, informal artisanal mining, foreign buyers’ dominance and criminal infiltration of mining zones in the country as key factors enabling Illicit Financial Flows (IFFs) in the sector.
The Policy Brief titled: “Stemming the Scourge of Illicit Financial Flows in Nigeria’s Mining Sector” noted that Nigeria’s mining sector was widely regarded as a cornerstone for economic diversification if factors that enable illicit financial flows were removed.
With commercially viable deposits such as gold, lithium, limestone, and gemstones, the publication said the mining sector should be a major revenue driver for the country if properly managed.
Despite its huge endowment, the NEITI 2023 industry audit report disclosed that the sector contributed only N401 billion in revenue and accounted for only 0.72% of the country’s gross domestic product (GDP).
The Policy Brief explained that the stark underperformance of the sector was driven by illicit financial flows (IFFs) that continue to erode the sector’s potential by facilitating revenue leakages and tax evasion, Illegal mining and smuggling activities, corruption and weak institutional oversight, and money laundering linked to organized criminal networks.
The findings from the study established that IFF enablers in Nigeria’s mining sector were systemic rather than incidental, embedded across institutional arrangements, market structures, data systems, and security environments.
The Brief emphasised severe fragmentation of regulatory oversight across institutions, including the Ministry of Solid Minerals Development (MSMD), the Mining Cadastre Office (MCO), NEITI, Nigeria Customs Service, Nigeria Financial Intelligence Unit (NFIU), and relevant state agencies.
Each institution, the Brief said, would collect sector-relevant data in silos, with limited interoperability and no integrated sector-wide digital monitoring system.
Also, the publication identified weak data governance and insufficient enforcement of beneficial ownership (BO) disclosure as a structural enabler of IFFs that makes most other illicit pathways possible and, critically, undetectable.
Besides, the Brief identified persistent reliance on manual record-keeping, non-verifiable production reporting, and incomplete export documentation as significantly reducing transparency across the mining value chain.
“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.
“Verification of beneficial ownership information across the MSMD, MCO, and the Corporate Affairs Commission (CAC) remains limited, fragmented, and largely reliant on self-declaration.
“This opacity allows Politically Exposed Persons (PEPs), undisclosed foreign interests, and criminal actors to conceal control over mining operations, thereby facilitating corruption, money laundering, trade misrepresentation, and regulatory capture. Until beneficial ownership transparency is enforced and data systems are reconciled across agencies, accountability in the sector will remain structurally compromised”.
Over 70% of mining activity in Nigeria, the publication said, was dominated by artisanal and small-scale mining (ASM), with many artisanal miners and cooperatives operating without licenses, receipts, digital records, or traceability documentation.
Besides, the Brief said an estimated 80% of mining in North-West Nigeria, particularly in Zamfara, Katsina, and Kaduna States, was carried out illegally.
Out of that figure, the Brief said those minerals extracted from illegal or informal pits were routinely blended with legally sourced minerals, making verification extremely difficult and creating a direct channel for laundering illicit mineral flows into formal supply chains and export markets.
The informality of small-scale mining, the report said, also complicates monitoring, taxation, and enforcement across the value chain, entrenching parallel mineral economies that operate effectively beyond state control.
Until small-scale mining is brought within a formalised regulatory framework through simplified licensing, cooperative structures, access to finance, and traceability systems, the sector would remain the widest single vulnerability to IFFs.
To address the challenges, the Policy Brief proffered seven actionable reform recommendations, spanning inter-agency coordination, Anti Money Laundering/Counter Terrorism Financing integration into mining governance, formalisation of small-scale mining activities to enhance traceability, mandatory beneficial ownership disclosure, legal and institutional reforms, enhanced community engagement, and sustained civil society and development partner involvement.
These recommendations are explicitly aligned with Nigeria’s existing policy frameworks, including FATF standards, AML/CFT obligations under 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).
Reiterating that tackling illicit financial flows was central to Nigeria’s economic stability and long-term development, NEITI said stemming the scourge of IFFs in Nigeria’s mining sector required coordinated institutional reform, better data systems, stronger transparency mechanisms and inclusive engagement of the communities.
NEITI calls on government institutions, industry stakeholders, and civil society to prioritize implementation of the recommendations outlined in the brief.
By addressing governance failures and closing systemic loopholes, NEITI said Nigeria could reposition its mining sector as a credible, transparent, and revenue-generating pillar of the economy.
The Policy Brief is published by NEITI in collaboration with the Federal Ministry of Solid Minerals Development (MSMD) and Africa Network for Environment and Economic Justice (ANEEJ), with support from the Foreign, Commonwealth and Development Office (FCDO).
The publication is part of NEITI’s policy and advocacy instruments used to raise awareness and educate the public on extractive issues requiring urgent attention pursuant to its mandate of promoting transparency, accountability, and good governance in the management of Nigeria’s natural resources.
Policy Brief reflects NEITI’s commitment to providing evidence-based policy guidance that supports national economic diversification goals.
