A new report by the Nigeria Extractive Industries Transparency Initiative (NEITI) has detailed how weak governance structures, illegal mining, and poor transparency are driving illicit financial flows in Nigeria’s mining sector.
The report, titled “Stemming the Scourge of Illicit Financial Flows in Nigeria’s Mining Sector”, a copy of which The ICIR exclusively obtained, disclosed that the country’s mining ecosystem is plagued by severe governance, transparency, and enforcement weaknesses, which enable widespread revenue leakages.
The document noted that illicit financial flows in the sector occur through illegal extraction, under-reporting of production, trade mispricing, smuggling, and laundering of proceeds. These activities, the report said, are not isolated but deeply entrenched.
“IFFs enablers in Nigeria’s mining sector are systemic rather than incidental,” the report stated, adding that the problem is embedded across institutions, markets, and security structures.
According to the findings, weak regulatory capacity, political interference, and poor coordination among government agencies limit effective oversight and allow exploitation of institutional gaps.
The report also highlighted the dominance of foreign buyers in the mining market, noting that “this creates pricing imbalances and enables the under-valuation of minerals, capital flights and concealment of actual transaction values.”
Data and transparency challenges were identified as major concerns, with irreconcilable datasets among agencies, incomplete production reporting, and weak verification of beneficial ownership making it difficult to track revenues and ownership structures.
In addition, the report pointed to the high level of informality in artisanal and small-scale mining, which operates largely outside regulatory systems, complicating monitoring, taxation, and enforcement.
Corruption and criminal activities were also found to be widespread, with illegal levies, extortion, and the involvement of armed groups facilitating smuggling and weakening state authority in mining areas.
The report warned that these challenges are fuelling organised crime, undermining legitimate operators, and depriving the country of much-needed revenue. It stressed the need for urgent reforms to strengthen governance, improve transparency, and restore control over the sector.
It further revealed that institutional capacity constraints and fragmented governance are weakening regulatory effectiveness. Key agencies, including the Ministry of Solid Minerals Development, Mining Cadastre Office, NEITI, Customs, and state bodies, face challenges such as inadequate staffing, limited expertise, and weak digital infrastructure.
These weaknesses are compounded by poor coordination and the absence of an integrated monitoring system, resulting in inconsistent data and limited oversight across the sector.
“Weak data governance, limited transparency, and insufficient enforcement of beneficial ownership significantly facilitate corruption and regulatory capture. Persistent weaknesses in data governance, manifested through reliance on manual record-keeping, non- verifiable production reporting, and incomplete export documentation, significantly reduce transparency across the mining value chain. These deficiencies facilitate misreporting, data manipulation, and the concealment of mineral flows,” part of the report reads.
“Furthermore, the lack of robust beneficial ownership disclosure and verification frameworks allows the use of shell companies and enables politically exposed persons (PEPs) to obscure ultimate ownership and control, thereby increasing the sector’s exposure to illicit financial flows and regulatory capture.”
The report noted that beneficial ownership transparency remains weak, with mining licences often held through shell companies and special purpose vehicles, making it difficult to identify the true owners. This opacity allows politically exposed persons and foreign actors to hide control of mining operations.
In addition, fragmented coordination among key institutions, including the Ministry of Solid Minerals Development, NEITI, Customs, the Nigerian Financial Intelligence Unit, and the Central Bank of Nigeria, limits the ability to reconcile production, export, and revenue data.
Market risks were also highlighted, with foreign buyers exerting a strong influence over pricing and export channels. The report said this dominance encourages under-valuation of minerals and creates opportunities for trade-based money laundering, especially with the prevalence of cash transactions.
It further revealed that weak regulation of artisanal mining leads to value chain leakages, as illegally mined minerals are often mixed with legitimate ones and exported, making traceability difficult.
The report warned that corruption and insecurity have worsened the situation, with bandits and criminal groups controlling mining sites, imposing illegal fees, and financing their activities through mineral proceeds.
Despite increased enforcement efforts, prosecution remains weak, with few convictions compared to the number of arrests. This reduces deterrence and allows illicit practices to persist, according to the report.
The report urged the presidency to establish and operationalise a structured inter-agency coordination framework involving the Ministry of Solid Minerals Development, NEITI, EFCC,NFIU, ICPC, Nigeria Customs Service, security agencies, revenue authorities, and relevant sub-national institutions.
“The Office of the National Security Adviser should enhance intelligence sharing, joint investigations, and coordinated enforcement actions targeting mining-related illicit financial flows,” the report said.
Nurudeen Akewushola is an investigative reporter and fact-checker with The ICIR. He believes courageous in-depth investigative reporting is the key to social justice, accountability and good governance in society. You can reach him via nyahaya@icirnigeria.org and @NurudeenAkewus1 on Twitter.