From: Femi Mustapha in Kaduna
Nigeria loses billions of naira every year to illicit financial flows in its mining sector, with systemic governance weaknesses, informality, and weak enforcement allowing tax evasion, smuggling, and money laundering across the mineral supply chain, a new policy brief has revealed.
This is stated in a report titled “Stemming the Scourge of Illicit Financial Flows in Nigeria’s Mining Sector,” released in March 2026 by the Nigeria Extractive Industries Transparency Initiative, NEITI, in collaboration with the Africa Network for Environment and Economic Justice, ANEEJ, and the Federal Ministry of Solid Minerals Development, with support from the UK Foreign, Commonwealth & Development Office, FCDO.
Despite Nigeria’s abundance of at least 44 commercially viable minerals, including lithium, gold, cassiterite, columbite, limestone, and gemstones, the sector contributed only N329 billion in 2022 and N401 billion in 2023.
Exports were only N35.67 billion in 2023, which is less than 1% of GDP, 0.28% of government revenue, and 0.75% of total exports. This is small compared to oil and gas, which made up 6% of GDP, 29% of revenue, and 82% of exports during the same period.
The study found that over 70% of mining activity is dominated by artisanal and small-scale mining, ASM, characterized by informality, weak documentation, and unsafe practices.
These conditions create multiple entry points for illicit financial flows (IFFs), as described in the report, which are the illegal or hidden movement of money and the value of minerals derived from business manipulation, corruption, or criminal activity.
The findings show that IFFs in the mining sector mostly happen through three main pathways: commercial IFFs, such as trade misinvoicing, underpricing, and non-repatriation of export proceeds; corruption-related IFFs, including bribery in licensing and unlawful levies; and criminal IFFs, such as smuggling, illegal extraction, and mineral-for-cash or mineral-for-weapons exchanges.
The report identified governance fragmentation, weak data systems, and opacity in beneficial ownership as major enablers. It noted that mining licenses are often held through shell companies and special-purpose vehicles, making it difficult to identify the true owners.
Verification of beneficial ownership across the Ministry of Solid Minerals Development, Mining Cadastre Office, and Corporate Affairs Commission remains limited and largely based on self-declaration.
Market risks are also high, with foreign buyers, especially Chinese actors, dominating pricing and export channels.
The study said price negotiations are mainly buyer-driven with limited government oversight, enabling systematic under-valuation of minerals. Cash transactions are still common, especially in ASM communities, further obscuring financial trails.
Security issues worsen the situation. The report stated that about 80% of mining in North-West Nigeria, especially in Zamfara, Katsina, and Kaduna States, is illegal.
In many mining areas, bandits and criminal groups impose levies, control sites, and divert profits into criminal economies at below-market prices.
Beyond revenue loss, the brief warned that IFFs contribute to insecurity, environmental damage, loss of investor confidence, and the erosion of community livelihoods.
The Nigerian Financial Intelligence Unit, NFIU, also identified illegal mining as an emerging threat to national security, linked to money laundering and organized crime.
To address the crisis, the report recommended seven key actions. These include strengthening coordination among agencies led by the Presidency and Office of the National Security Adviser, integrating AML/CFT controls throughout the mining value chain, and speeding up the formalization of ASM through simplified licensing and traceability systems.
Additional recommendations involve enforcing mandatory beneficial ownership disclosure, updating outdated laws on mining and financial crimes, improving community participation, and maintaining civil society oversight.
The brief urged alignment with Nigeria’s commitments under FATF standards, the EITI, and the Medium-Term National Development Plan.
The report concluded that Nigeria stands at a critical point. “Strengthening governance, transparency, and institutional coordination can considerably reduce IFFs, boost revenue, and support national development goals,” it stated.