NEITI urges federal government to reform mining sector to eliminate illicit financial flows

• Blames opaque ownership structures, foreign dominance, and other factors

• States that 80% of mining in the North‑West is conducted illegally

The Nigeria Extractive Industries Transparency Initiative (NEITI) identified opaque ownership structures, informal artisanal mining, foreign buyer dominance, and weak regulatory capacity as key drivers of illicit financial flows (IFFs) in the country’s solid minerals sector.

In a statement released in Abuja yesterday, the organisation also cited fragmented institutional coordination and criminal infiltration of mining zones as major contributors to sector leakages.

In its Policy Brief, “Stemming the Scourge of Illicit Financial Flows in Nigeria’s Mining Sector,” NEITI noted that Nigeria’s mining industry is widely regarded as a cornerstone for economic diversification.

With commercially viable deposits such as gold, lithium, limestone, and gemstones, NEITI said the sector should be a major revenue driver. However, the 2023 industry audit report revealed that mining contributed only N401 billion in revenue and accounted for 0.72 percent of gross domestic product (GDP).

The brief explained that this stark underperformance is driven by IFFs that erode the sector’s potential through revenue leakages, tax evasion, illegal mining and smuggling, corruption, weak institutional oversight, and money laundering linked to organised criminal networks.

Moreover, the study found that IFF enablers in Nigeria’s mining sector are systemic rather than incidental, embedded across institutional arrangements, market structures, data systems, and security environments.

“There is 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,” the brief states.

“Each institution collects sector‑relevant data in silos, with limited interoperability and no integrated sector‑wide digital monitoring system,” it adds.

In addition, the publication identified weak data governance and insufficient enforcement of beneficial ownership (BO) disclosure as structural enablers of illicit flows, making most other illicit pathways possible and, critically, undetectable.

It explained that persistent reliance on manual record‑keeping, non‑verifiable production reporting, and incomplete export documentation significantly reduces 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,” the brief says.

“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,” it stresses.

In the same vein, it emphasised that over 70 percent of mining activity in Nigeria is dominated by artisanal and small‑scale mining (ASM), noting that many artisanal miners and cooperatives operate without licences, receipts, digital records, or traceability documentation.

An estimated 80 percent of mining in North‑West Nigeria, particularly in Zamfara, Katsina, and Kaduna states, it said, is carried out illegally.

The brief pointed out that minerals extracted from illegal or informal pits are 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.

“ASM informality also complicates monitoring, taxation, and enforcement across the value chain, entrenching parallel mineral economies that operate effectively beyond state control. Until ASM is brought within a formalised regulatory framework, through simplified licensing, cooperative structures, access to finance, and traceability systems, the sector’s widest single vulnerability to IFFs will remain,” NEITI argued.

NEITI therefore recommends expanding inter‑agency coordination, integrating anti‑money laundering and counter‑terrorism financing measures into mining governance, formalising ASM activities to enhance traceability, and mandating beneficial ownership disclosure.

It also calls for legal and institutional reforms, enhanced community engagement, and sustained civil society and development partner involvement, stressing that these recommendations align explicitly with Nigeria’s existing policy frameworks.

It reiterated that tackling illicit financial flows is central to Nigeria’s economic stability and long‑term development.

“Therefore, stemming the scourge of IFFs in Nigeria’s mining sector requires coordinated institutional reform, better data systems, stronger transparency mechanisms, and inclusive engagement of the ASM communities,” NEITI said.

“NEITI calls on government institutions, industry stakeholders, and civil society to prioritise implementation of the recommendations outlined in the brief. By addressing governance failures and closing systemic loopholes, Nigeria can reposition its mining sector as a credible, transparent, and revenue‑generating pillar of the economy.”

The brief is published by NEITI in collaboration with the Federal Ministry of Solid Minerals Development (MSMD) and the Africa Network for Environment and Economic Justice (ANEEJ), with support from the Foreign, Commonwealth and Development Office (FCDO).