The Nigeria Extractive Industries Transparency Initiative (NEITI) said weak regulatory capacity, fragmented institutional coordination, opaque ownership structures, informal artisanal mining, foreign buyers’ dominance and criminal infiltration of mining zones are key factors enabling Illicit Financial Flows (IFFs) in Nigeria’s solid minerals sector.
NEITI, in a policy brief titled ‘Stemming the Scourge of Illicit Financial Flows in Nigeria’s Mining Sector’ released on Thursday, noted that Nigeria’s mining sector is widely regarded as a cornerstone for economic diversification.
NEITI said that with commercially viable deposits such as gold, lithium, limestone, and gemstones, the sector should be a major revenue driver.
Despite this endowment, NEITI 2023 industry audit report disclosed that the sector contributed only N401 billion in revenue and accounted for 0.72 per cent of Gross Domestic Product (GDP).
The brief explained that the stark underperformance is driven by 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 organised criminal networks.
It said the study’s findings establish that IFF enablers in Nigeria’s mining sector are systemic rather than incidental, embedded across institutional arrangements, market structures, data systems, and security environments.
“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 collects sector-relevant data in siloes, with limited interoperability and no integrated sector-wide digital monitoring system,” NEITI said.
Also, the brief identified weak data governance and insufficient enforcement of beneficial ownership (BO) disclosure as a structural enabler of IFFs; one that makes 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.
The brief said 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, it said, 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 added.
Over 70 per cent of mining activity in Nigeria is dominated by Artisanal and Small-Scale Mining (ASM).
Many artisanal miners and cooperatives operate without licenses, receipts, digital records, or traceability documentation.
According to the brief, an estimated 80 per cent of mining in North-West Nigeria, particularly in Zamfara, Katsina, and Kaduna States, is carried out illegally.
The brief pointed out that those 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.
It added that the 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 will remain the sector’s widest single vulnerability to IFFs,” it said.
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Recommendations
In a bid 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 ASM 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, it said, 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).
NEITI reiterated that tackling illicit financial flows is central to Nigeria’s economic stability and long-term development.
Therefore, it said 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.
Call for action
NEITI called on the government institutions, industry stakeholders, and civil society to prioritise the 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,” it said.
