Lithium – A Potential Game Changer For The Nigerian Mining Sector

Nigeria is blessed with over forty-four (44) identified solid mineral resources in commercial quantities. Yet, the contribution of the mining Sector to the country's gross domestic product (GDP) has remained less than 1% in each of the past five (5) successive years – although, it has consistently grown over the same period to 0.85% in 2022 (from 0.19% in 2018). The government has designated seven (7) of the mineral resources as "strategic" for focused development, due to their commercial reserves¹ and their capacity to accelerate overall economic diversification and development. The strategic minerals are Coal, Bitumen, Limestone, Iron Ore, Barites, Gold and Lead/Zinc. In June 2022, global attention was focused on Nigeria when high grade varieties of lithium was discovered in some parts of the country. Since then, several investors have indicated interest in exploring the mineral and / or directly purchase it. What is the trigger for the global interest in lithium?

The demand for Lithium globally has skyrocketed over the past decade with the quantity produced annually (worldwide) increasing from about 28,100 metric tonnes in 2010 to over 130,000 metric tonnes in 2022². Interestingly, pre-2015, the global demand for lithium was more in the ceramics and glasses, greases, metallurgical powders and polymers industries with only about 30% of the entire demand used in rechargeable batteries³, as lithium ions have a high capacity to store energy. However, it is projected that by 2030, its use for battery production will account for 95% of global demand for the mineral! Evidently, the demand for the mineral will not recede given the growing demand for electric vehicles (EV), inverters and consumer electronics powered by rechargeable batteries e.g., robotics, smartphones, laptops, drones etc.

Overview of Global Lithium Producers

Globally, four countries produce most of the world's lithium i.e., Australia (world's largest producer), Chile, Argentina and China. However, these countries do not produce enough to meet the growing global demand. The search for lithium has therefore expanded to Africa. African countries like Zimbabwe (Africa's largest producer), Namibia, the Democratic Republic of Congo, Mali and Ghana also have active mines and significant deposits of lithium mineral. Nigeria has now joined the list of countries with significant untapped lithium deposits.

Before the discovery of the vast high-grade varieties in Nigeria, the low-grade varieties existed in small pockets in some parts of the country, albeit, in association with other minerals such as cassiterite, columbite-tantalite and pegmatites in states such as Nasarawa, Kogi, Ondo, Osun, Zamfara, Kaduna, Oyo, and Cross River. In 2019, the total production volume of low-grade lithium in Nigeria reached 50 metric tons, compared to 1,200 metric tons produced in Zimbabwe in the same period⁴.

Economics of Lithium

The price of lithium per tonne varies depending on the grade and the market forces of demand and supply. In 2021, the average price of one tonne of battery-grade lithium carbonate was $17,000⁵. The price of lithium metal as of May 2023 was over $32,000⁶ per metric tonne. The near doubling growth witnessed within the period is quite impressive, which may not be unconnected to the increasing demand. However, it is doubtful whether growing demand will not continuously outstrip the supply.

Economists have projected that annual lithium demand will reach around 1.5 million tonnes of lithium carbonate equivalent by 2025, and over 3 million tonnes by 2030⁷, with EVs accounting for about 84% of total lithium demand by that time. Consumer electronics, energy storage and other industrial applications are likely to account for the balance of demand. In the long run, demand for lithium has been forecast to far exceed the scale of the industry's capacity today – a justification for Nigeria's advent into the lithium market being a big deal.

The case for Lithium development

The towering demand for the mineral, substantially triggered by the push for environmental sustainability through transition to alternative green/renewable energy options across the globe, presents Nigeria with a huge opportunity to latch on to this "new gold". Apart from the apparent export potential of the mineral for ramping up foreign exchange earnings and by extension, enhancing the Sector's contribution to GDP, Nigeria will directly benefit from the processing and utilisation of the mineral.

A good example is Nigeria's decision to ending fuel subsidy, which may potentially result in high cost of petroleum motor spirit (PMS), which is not eco-friendly. The lithium option for manufacturing batteries, offers a great opportunity as an alternative source of energy for the country. The expected rise in the cost of PMS, which several households and businesses depend on for running their power generators and automobiles, would soon become very uneconomical, pushing individuals and business owners to explore cheaper and environmentally friendly alternatives. Thus, the availability of lithium in-country should significantly reduce the costs of producing lithium-ion batteries which are critical components of inverters, EV and smartphones amongst others. This will foster faster adoption of cleaner energy sources and less dependence on fossil fuel (oil and coal in particular) thereby resulting in a win-win situation for both Nigeria and Nigerians. It will fast track our journey towards net-zero emissions target by 2060 and align with the United Nations' Sustainable Development Goal No 7 on the provision of sustainable, cleaner and environmentally friendly sources of power.

Furthermore, the country's preference for interested investors to build lithium processing plants in-country (in the drive for value addition before export of processed lithium or batteries), has the potential to create jobs across the mineral processing value chain for Nigeria's teeming population. The fortunes of lithium mineral also presents Nigeria with revenue earning prospects from royalties, taxes and duties, licencing fees etc., given the fledging global market for the mineral.

Aside of the above, the development of lithium can facilitate new trade ties between Nigeria and her existing and / or potential trade partners, while alluring new trade agreements with developing countries seeking lithium for sustainability, trade and technological advancements. A lithium-rich economy could foster partnerships with big global brands which require the resource for their production line. For instance, Tesla (an American multinational automotive and clean energy company headquartered in Austin, Texas) had indicated interest in purchasing Nigeria's raw lithium for export. Although, this offer didn't come through with the Nigerian government, it clearly sent the signal that world demand for the mineral from Nigeria is real. Given the good grade of the country's lithium and the seeming scarcity globally (occasioned by its high demand), Tesla or other would-be off takers and processors may reopen/open conversations with Nigeria for the resource. It is expected that other big brands who need lithium as input for their operations (like China's Ming XinMineral Separation Nig. Ltd that has already commenced building a lithium processing plants in Kaduna State, Nigeria) will turn to Nigeria for this mineral.

Challenges with exploration

It is no gain saying that lithium will be critical in the transition to clean energy. However, in the journey towards clean energy via this route, the country should be alert to the following challenges:

• The methods typically used in lithium extraction and processing present several environmental and social challenges. For instance, the mining of lithium (hard rock) can lead to environmental degradation and / or erosion of the topography, air pollution, sinkholes, and loss / contamination of aquatic biodiversity. One interesting but rarely referenced fact about lithium utilisation is that the volume of carbon dioxide (CO2) emitted in the production of the battery (weighing 1,100 pounds) for an EV exceeds, by about 70%, that emitted during the production of a conventional gas-powered vehicle⁸. The mining and processing of lithium can also result in the production of large quantities of mineral wastes, tailings / gangue, and the alteration of the hydrological cycle and a startling volume of greenhouse gas emissions.

• The activities of illegal miners and smugglers which has plagued the Nigerian mining Sector, may also affect the nation's ability to benefit substantially from the economic viability of the mineral. While the government has invested significantly in implementing strategies and policies aimed at tackling the menace of illegal mining activities, more work still needs to be done to curb the menace.

• The seeming paucity of substantive data about reserves information of the mineral resource deposit in the country may pose a challenge and a significant drawback, given its importance in making investment decisions. It is imperative that the Ministry of Mines and Steel Development (MMSD) should make this information available publicly (that is, if the information exists) to strengthen investor confidence and to effectively position Nigeria among the major global lithium markets to reckon with.

• Lithium mining requires significant use of advanced technology and sustained production to meet the continually growing demand. Such technology comes at huge costs, not to mention the cost of setting up plants for processing the mineral. A perennial issue in the Nigerian mining sector has been that of inadequate capital. Without adequate funding from financial institutions and or multilateral organisations, the development of the mineral resource may be sluggish.

Recommendations

• Global forecasts suggest unprecedented opportunities for lithium-rich economies, considering the dynamics of global supply (which may be inelastic in the short run) and global demand that is suddenly escalating. As such, the government should, as a matter of priority, consider enlisting lithium as one of the strategic minerals for focused development. As a consequence, the MMSD should begin to direct its attention to facilitating the exploration of the mineral, as it is doing for the seven strategic minerals previously identified in the Nigerian Mining Roadmap. This will give investors the confidence that Nigeria is ready for business in that space.

• The government should consider enacting laws and implementing policies to control illegal exploitation, exploration, production and exportation of lithium in the country. Illegal miners are mining parasites, practically "taking all and giving nothing in return" to the society (in terms of, and including, royalty, taxes and duties). This poses a significant revenue leakage for the government. Thus, the government, in its war against illegal mining, should strengthen the collaboration efforts among the relevant agencies such as the Economic and Financial Crimes Commission (EFCC), the Nigeria Security and Civil Defence Corps (NSCDC), Nigerian Police Force, and the Nigerian Customs Service (NCS) for improved surveillance and monitoring of those activities and bringing perpetrators to book. The government can also consider introducing local mining task force for specific communities with mining interests. This will enhance the security architecture for the mines, the mining communities and ultimate reduction in the activities of illegal miners.

• Given that lithium mining tends to have adverse impact on the environment, there is no better time than now for the mining sector regulators and operators to embed Environment, Social and Governance (ESG) goals in their overall corporate strategy. This is critical and requires a very clear road map to ensure that their mining operation is environmentally friendly (reduced carbon footprint). There is need for tougher government scrutiny of the ESG strategy and net zero emission performance / compliance of companies, through effective monitoring and enforcement of agreed targets. This will help put pollution and harmful practices on check and ensure that environmental sustainability is achieved.

• The government should also consider introducing targeted incentives solely for lithium miners to attract investors and facilitate shorter investment payback and or return on investment (ROI). For example, the government may consider including lithium as a "pioneer product" to afford lithium miners thereof, the other benefits enshrined in the Industrial Development (Income Tax Relief) Act (IDITRA), in addition to the three to five years tax holiday currently available in the Nigerian Minerals and Mining Act. Such exclusive incentives will facilitate the influx of big miners into the Sector, improve job creation, and enhance possible bilateral trade agreements with foreign countries.

• While government's position in the renowned Tesla deal is understandably reasonable, the authors believe that there are still opportunities for Tesla's involvement in the Nigeria's high-grade lithium ecosystem. The government can, in the future, seek for partnerships with foreign end users of lithium (like Tesla) for its exploration and production, in the most environmentally friendly manner and set up processing factories in the country where raw form could be enhanced before export.

• The government, in its efforts to woo potential foreign investors to set up processing plants in-country, must also create an enabling environment for businesses and individuals alike to thrive, as this is a critical investment consideration for investors. The government should seek for effective ways to stem the menace of local restiveness, militancy, community clashes, etc., as these are natural repellents to investors.

Conclusion

On the global journey towards carbon neutrality, there is going to be significant demand for more batteries for EV productions and to support the electricity grid's deficits. Thus, Nigeria can count herself lucky to have joined the train of countries currently playing in the lithium market, as the world is at the dawn of an ESG revolution. The government, through the MMSD and other relevant governments ministries, departments and agencies, should ensure that lithium is mined ethically, using environmentally friendly methodologies to avoid creating a paradox effect where the anticipated future decarbonisation gains afforded by transition to cleaner energy sources (using lithium battery supported devices and technologies) are neutralized by the negative health consequences of unsafe exploration and mining practices in the mining ecosystem.

The opportunities for a thriving lithium economy is vast, and for a developing country like Nigeria, it may have significant ripple effect on the growth of entire value chain of the EV market. In the long run, this would result in wealth generation for the Sector and for Nigeria at large.

Footnotes

1. Top Seven Solid Mineral Resources of Nigeria Ready for Investment - All of the Latest Oil and Gas News-Find Oil and Gas Jobs (theenergyrepublic.com)

2. Global lithium production 2022 | Statista

3. Lithium-ion batteries demand to grow 30% a year - McKinsey | Mining Digital

4. Nigeria's latest lithium find: some key questions answered (downtoearth.org.in)

5. Lithium Costs a Lot of Money—so Why Aren't We Recycling Lithium Batteries? - Batteries News

6. Daily Metal Price: Lithium Price (USD / Metric Ton) for the Last Day

7. Lithium Market Update: Elevated Prices Are Creating Favorable Dynamics for Miners – Global X ETFs

8. The Paradox of Lithium (columbia.edu)

8 Lithium Shortages (mining-technology)

The opinion expressed in this article is solely personal and does not represent the views of any organization or association to which the authors belong.