Why govt is losing revenue in mining sector – NEITI

A new report by the Nigeria Extractive Industries Transparency Initiative has revealed that weak governance structures, illegal mining activities, and poor transparency are driving illicit financial flows in the country’s mining sector, leading to massive revenue leakages.

According to the report sighted by Sunday PUNCH, Nigeria’s mining ecosystem is plagued by deep-rooted governance, transparency, and enforcement failures, which continue to enable widespread financial losses.

The report, titled “Stemming the Scourge of Illicit Financial Flows in Nigeria’s Mining Sector,” identified key drivers of illicit financial flows to include illegal extraction, under-reporting of production, trade mispricing, smuggling, and laundering of proceeds.

“IFF enablers in Nigeria’s mining sector are systemic rather than incidental,” the report stated, noting that the problem is embedded across institutions, markets, and security structures.

It attributed the persistence of the challenge to weak regulatory capacity, political interference, and poor coordination among government agencies, which it said had created loopholes for exploitation.

The report also highlighted the dominance of foreign buyers in the mineral market, warning that such control encourages under-valuation of minerals, capital flight, and concealment of actual transaction values.

According to the findings, data and transparency gaps remain a major concern, with inconsistencies in datasets across agencies, incomplete production reporting, and weak verification of beneficial ownership hindering effective tracking of revenues and ownership structures.

The report further noted that the high level of informality in artisanal and small-scale mining operations was complicating monitoring, taxation, and enforcement, as many operators were functioning outside regulatory frameworks.

It added that corruption and criminal activities are widespread in mining communities, with illegal levies, extortion, and the involvement of armed groups facilitating smuggling and weakening state authority.

The report warned that these challenges were fuelling organised crime, undermining legitimate operators and depriving the country of critical revenue needed for development.

It also pointed to institutional capacity constraints and fragmented governance as key barriers to effective regulation, noting that agencies such as the Ministry of Solid Minerals Development, Mining Cadastre Office, NEITI, Customs and relevant state bodies were hampered by inadequate staffing, limited expertise and weak digital infrastructure.

“These weaknesses are compounded by poor coordination and the absence of an integrated monitoring system, resulting in inconsistent data and limited oversight across the sector,” the report stated.

It further emphasised that weak data governance, limited transparency, and inadequate enforcement of beneficial ownership disclosure are enabling corruption and regulatory capture.

According to the report, reliance on manual record-keeping, unverifiable production data, and incomplete export documentation has reduced transparency across the mining value chain, creating opportunities for misreporting and concealment of mineral flows.

It added that the absence of robust beneficial ownership frameworks allowed the use of shell companies and enabled politically exposed persons to obscure ownership and control of mining assets.

The report also raised concerns over market risks, noting that the dominance of foreign buyers encouraged trade-based money laundering, especially amid widespread cash transactions.

It stressed that weak regulation of artisanal mining had led to value chain leakages, as illegally mined minerals are often mixed with legitimate ones and exported without traceability.

The report further warned that insecurity was worsening the situation, with bandits and criminal groups reportedly controlling mining sites, imposing illegal levies and financing their operations through proceeds from mineral resources.