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Harnessing coal for economic growth


…Managing its downside effect

By Adewale Sanyaolu

February statistics released by the National Bureau of Statistics (NBS) on the Gross Domestic Product (GDP) performance of coal mining and metal ore activities for quarter four of 2016, gave an abysmal low scope to the sector.

The NBS statistics showed that the contribution  of  mining  and  quarrying  to  real  GDP  in  the fourth quarter of 2016 stood at 7.32 per cent, representing a decline of 0.89 per cent points relative to the corresponding quarter of 2015 and also a decline of 1.02 per cent points relative to the third quarter of 2016.

The mining and quarrying sector contributed 7.10 per cent to overall GDP during the fourth quarter of 2016, higher than the contribution recorded in same quarter of 2015 at 5.18 per cent, and its contribution in the preceding quarter of 6.23 per cent.

Ironically, coal remained the lifeblood of the South African economy, providing over 90 per cent of the country’s energy needs and employing over 13.5 million people across a spectrum of sectors.

Without coal-derived electricity, the South African Chamber of Commerce says industries including manufacturing, financial services and social services would be severely crippled, with an estimated 430,000 people being without work or means of livelihood.

According to the chamber, the mining and quarrying industry in South Africa contributed roughly R32 billion in taxes to the national treasury, making it one of the top 10 tax-paying industries in the country.

But in Nigeria, not much progress has been made in the area of adding value to coal, either for the purpose of generating revenue to the country through mining or for generation of electricity.

The Nigerian Electricity Regulatory Commission (NERC) had in time past issued licenses to several power generation firms in a bid to generate power from coal but none has been able to add a single megawatt of electricity to the national grid.

In 2015, NERC granted Trombay Power Generation Limited, license to build and operate a 500 megawatts coal plant in Gombe. As at the moment, the plant is yet to commence operation. 

In the beginning

The core domestic market for coal production in Nigeria was its emerging rail system, which depended heavily on the produce to power locomotive engines.

But with the sudden discovery of hydrocarbons in the late 1950s, the Nigerian Railway Corporation (NRC) switched from coal to diesel powered energy. Attempts at merchandising production ended badly, as both the implementation and maintenance of imported equipment proved troublesome and disrupted production. Regretably, since the end of the civil war, the Nigerian coal industry has not been able to return to its peak production in the 1950s.

The opportunities

Nigerian coal is one of the most bituminous in the world owing to its low sulphur and ash content and therefore the most environmental-friendly, given the need and campaign for cleaner source of energy in recent past. There are nearly 3,000,000,000 tonnes of indicated reserves in 17 identified coalfields and over 600 million tonnes of proven reserves in Nigeria. Some of the states where coal has been discovered in commercial quantity include Enugu, Benue, Kogi and Plateau States, respectively.

Coal is used as fuel and in industrial production of tar, gas and non-edible oils. Arguably, the most singular impediment to the attainment of the Vision 20:2020 in Nigeria is power (electricity) because of the direct bearing it has on other economic indicators like unemployment rate and low capacity utilisation in the manufacturing sector. Nigeria can against the emphasis on gas for power generation, tap into the rich coal deposit scattered in different parts of the country to generate electricity.

The country presently generates about 4,000 megawatts of electricity and it has been estimated that it would require at least 40,000 megawatts to support its industrial and economic aspiration of being among the top 20 economies in the world by 2020. Comparatively, it has been estimated by experts that a coal powered plant would cost one-sixth the cost of powering the plant by gas.

Given the large deposits of brown coal in the tertiary sediments East and West of River Niger, Nigeria can cash in on foreign investors’ technology to produce coal pellets for industrial use, coal briquettes for domestic use; that is, to replace firewood and fight back desert encroachment and extreme weather conditions in the northern part of the country.

Getting licensed

A grant of a Mining License to a prospective company is subject to proof of economic reserve of the mineral commodity for which a concession is sought. The process involves the company first applying to the Minister for Certificate of Entry into Mining Industry. The requirements for this include submission of the company’s Certificate of Registration, evidence of technical competence and of financial capability.

The next step is for the company to apply and obtain a Prospecting Right (PR) to enable it carry out general and scientific prospecting for the categories of minerals within the prospecting right. If properly conducted, work on this right will guide the company towards zeroing into a particular mineral within a specific land area.

The company will then put up application for an Exclusive Prospecting License (EPL) in the State Mines Office where the mineral is located. This is an exploration license for a particular mineral(s) over a particular land area which, by law, should not exceed 22 square kilometers. Once granted, the area is held exclusively to the company, which will now confidently invest in mineral exploration work on the area without hindrance. This license is renewable every one or two years depending on the nature of the terrain.

It is only after the company has satisfied itself of the availability of the mineral in commercial quantity on the EPL that it will apply for grant of a Mining License over the whole or part of the area covered by the EPL.

In the course of all these processes, the law insists that the company employs the services of a “technically competent person” in carrying out the prospecting under the PR, the exploration within the EPL and finally the extraction of the mineral within the mining license area.

Some of the investment incentives in the solid minerals industry in Nigeria include three-five years tax holiday, deferred royalty payments, possible capitalisation of expenditure on exploration and surveys, extension of infrastructure such as roads and electricity to mining sites, and provision of 100 per cent foreign ownership of mining concerns.

Coal-to-power constraint

But despite government’s plan to increase revenue by diversifying and increasing investments in the non-oil sector, coal-to-power generation has huge challenges because coal has the highest carbon content among all fossil fuels.

 Coal mining and combustion causes a massive emission of greenhouse gases. When coal is burned, carbon dioxide, sulfur dioxide, nitrogen oxides, mercury compounds are released into the atmosphere. Sadly, all these are gases that the United Nations Framework Convention on Climate Change is working very hard to reduce their emissions.

More troubling is the coal mining technique usually adopted in coal mines in Nigeria, which is the surface mining method also called strip or open cast mining. This method is notorious for releasing toxic amounts of minerals and heavy metals into soils and water bodies that host communities usually patronise.

This method of mining is also notorious for destroying landscapes, forests, wild life habitats and biodiversity in general. It also predisposes the community to erosion since plants, trees and topsoil are usually uprooted from around the mine sites. As rain falls, the loose topsoil contaminated with carbon sediments is washed into water bodies. This is very destructive to fishes and other aquatic life forms. It may also distort the flow channels of streams and rivers leading to flooding in some areas and water scarcity in other areas. Water sheds are also destroyed when disfigured lands lose the water they once held.

Just recently, China announced the cancellation of 103 coal power plants, some of which were operational and some under construction. The government admitted that a lot of resources had been put into the projects but there was need to move away from one of the dirtiest sources of generating electricity.

 Some other western nations have started curtailing investment in coal-to-power. The fact that you are blessed with a resource is not a compulsion that you must use it, especially considering the fact that side effect exists. There is therefore need for Nigeria to review its decision to make budgetary appropriations for coal-to-power if it really wants to cut carbon emission

Another challenge with coal-to-power is that coal mining generates a lot of noise and air  pollution. The excavation and transportation of mined coal within host communities usually cause massive amounts of coal dust to circulate in the air. This puts community   dwellers who inhale this dust over long periods of time at risk of developing varying degrees of respiratory ailments including black lung disease, bronchitis and asthma.

This dust also has the capacity to complicate the health of children and may even cause them to have stunted physical and mental growth. The roads in such communities are usually untarred and when trucks move around in the dry season, large quantities of dust are usually raised into the surrounding. This dust is not healthy for inhalation.

To make matters worse, most coal mining communities do not have a decent health facility and the community dwellers are usually very indigent people who cannot afford to travel far and wide for first grade medical services. This condemns them to live and die with whatever health challenge coal mining has brought on them. Also, coal mining produces very loud and disruptive noise in the host community. Heavy equipment excavating coal usually causes massive vibrations that have the capacity to cause cracks and collapse of buildings.