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Towards Developing an all inclusive Gemstone & Jewelry Industry in Nigeria

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This document centralized the vision to be this - increase in awareness of the availability of some of the world’s most sought-after gems in Nigeria!

Issues along supply chain including poor mining techniques and lack of beneficiation were also highlighted.

These findings helped create the expectation that the stakeholders want a functioning infrastructure that will enable the industry to thrive!

What’s the way forward? Brands are encouraged to embrace this vision by innovating ways through which the gemstone value chain can maximize benefits for the country and her people.

With the right structures put in place, a well-functioning gemstone industry in Nigeria is highly feasible and is of utmost economic importance as it can be an avenue to get a reduction in the unemployment rate.

A big thank you to those who contributed in making this publication possible:

Dr Titi Akindeinde
Ronke Nedd (GIA GD)
Tundun Taiwo
Timeyin Gordon
Tomi Adeniji


Published in: Government & Nonprofit
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Towards Developing an all inclusive Gemstone & Jewelry Industry in Nigeria

  1. 1. 1Towards Developing an all Inclusive Gemstone and Jewelry Industry in Nigeria Lotanna Amina Egwuatu, Mina Stones Lotanna Amina Egwuatu(GIA GG, AJP)
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  3. 3. 3Towards Developing an all Inclusive Gemstone and Jewelry Industry in Nigeria Lotanna Amina Egwuatu, Mina Stones Con- tent Content Foreward 5 Executive Summary 6 Solid Mineral Distribution 7 Gemstone & Jewelry Manufacturing In Nigeria 8 Past Initiatives 9 Policies 10 Outcomes 10 All Inclusive Gemstone & Jewelry Industry 11 Low Start-up Costs 12 Traceability of Gemstones 12 Financial Accountability 12 Stakeholder Attraction 12 Recommendations 13 Stage 1 13 Stage 2 14 Stage 3 15 Other Recommendations 15 Conclusion 16
  4. 4. 4 Towards Developing an all Inclusive Gemstone and Jewelry Industry in Nigeria Lotanna Amina Egwuatu, Mina Stones
  5. 5. 5Towards Developing an all Inclusive Gemstone and Jewelry Industry in Nigeria Lotanna Amina Egwuatu, Mina Stones ForewordForeword01 O ver the last ten years I have been privileged to work and travel as an ethical gemstone jeweller. During this period of my life, I have met many artisanal miners in Nigeria’s most remote locations: from the bushes of Kaduna and its environmental friendly small-scale mining communities, to the sites located in many parts of Nasarawa and Niger states. I have seen the many challenges both men and women face in trying to set up their mines and make a decent livelihood from the metals and minerals they mine. It is not an easy job being a miner, without doubt it is made much harder when policies and regulations seem to work against you. I believe the reserves of the land should profit the people of the land; the gemstone manufacturing potential of Nigeria could be a global game changer in international gem and jewellery production that could lift many out of poverty. This document will underline the present lost prospects and what we stand to gain in the future. I have no doubt that a Nigerian processed mambilla sapphire or copper-bearing tourmaline would be a powerful product that will be a game changer when put out in the international markets. The recommendation in this report, and in particular, that of an all-inclusive gemstone industry that benefits all stakeholders in the Nigerian Gemstone and Jewellery industry is possible. What is now required is for the Nigerian government to step up to the challenge and create the right legislative environment for this to happen. I remain optimistic that this will come to pass. Lotanna Amina Egwuatu (GIA GG, AJP) Creative Director, MINA STONES
  6. 6. 6 Towards Developing an all Inclusive Gemstone and Jewelry Industry in Nigeria Lotanna Amina Egwuatu, Mina Stones ExecutiveExecutive Summary02 T he gemstone industry in Nigeria is highly untapped for many reasons. Prior to the October 2015 Nigeria Gemstones and Jewelry Exhibition (NGJE), a white paperwas presented showcasing the Nigerian gemstone and jewelry value chain, which documented the start of a new direction for the industry. Central to the vision was the increased awareness of the availability of some of the world’s most sought- after gems. Issues along the supply chain including poor mining techniques and lack of beneficiation were also highlighted. This deeper awareness has also created the expectation that the stakeholders want a functioning infrastructure that will enable the industry to thrive. The conclusion of the report came with a call to brands to embrace that vision by asking the question of how the gemstone value chain can maximize benefits for the country and her populace. Withtherightstructuresputinplace,awell-functioning gemstone industry in Nigeria is highly feasible and is of utmost economic importance as it can be an avenue to get a reduction in the unemployment rate; Thailand for instance, has a population of approximately 60 million people with over 25 million working within the gemstone value chain. This document highlights some issues the industry currently faces and proffers some attainable possible solutions to tackle them.ppen. I remain optimistic that this will come to pass.
  7. 7. Solid Mineral Distribution in Nigeria Towards Developing an all Inclusive Gemstone and Jewelry Industry in Nigeria
  8. 8. 8 Towards Developing an all Inclusive Gemstone and Jewelry Industry in Nigeria Lotanna Amina Egwuatu, Mina Stones Gemstone & Jewelry Manufac- turing In Gemstone & Jewelry Manufacturing In Nigeria 03 N igeria is endowed with abundant mineral resources that have the potential to generate foreign exchange earnings for the country. Nigeria is home to various precious stones and metals such as Gold, Silver, and Platinum. Amongst the precious gemstones found in Nigeria are the Mambilla Sapphires which have been compared to the famed Kashmir Sapphires found in some parts of the North- West Himalayas known for their unparalleled beauty and vivid blue colour and Copper bearing Tourmaline, which are compared to the Paraiba tourmalines found in Brazil. These gemstones are rated to be of very high value at (thousands of dollars per carat) in the international market. It is also speculated and as shown in the map above that diamonds are also present in the country. The value of a gemstone increases when it is cut and polished, however, gemstones mined in Nigeria are being exported mainly as raw gems without value addition. The value variance between uncut and cut gemstones is 1:100 in many cases¹. The value increases even more significantly when the gemstones are set in jewellery, that is, when they have a metal setting. Nigeria as we all know has not been able to profit significantly from this value addition despite several interventions, as investments and the skills for cutting, polishing and jewelry making in the country is still very low. In order for the country to generate foreign exchange from the Gemstone Industry, there is a need, amongst others, for the government to support this sector. ¹ Ali Consultants (2006), “Pre-Feasibility Study for Gemstones, Production, Processing and Marketing”, Commissioned Study Report, Employment and Research Section, Government of Pakistan, Islamabad.
  9. 9. 9Towards Developing an all Inclusive Gemstone and Jewelry Industry in Nigeria Lotanna Amina Egwuatu, Mina Stones Past Initiatives Despite interventions by the Nigerian government and the World Bank who introduced the Sustainable Management of Mineral Resources Program (SMMRP) in 2004 and others, the lapidary and jewelry- manufacturing sector in Nigeria remained virtually non-existent until 2009, when a Lapidary was set up at the Nigeria Institute of Mining and Geoscience (NIMG) in Jos. This project was slated to train over 500 gemstone cutters within 5 years which currently account for the little percentage of cut gems that are being sold. Till date, it is unknown if the 500 individuals were actually trained. In 2015, the first ever Gemstone & Jewelry exhibition and seminar took place, which brought foreigners from far and wide to buy and trade gemstones and Jewelry. The program ended with a list of recommendations to help build the industry and a plea to the government to support these types of trade shows which attract buyers and cutters from all over the world. However, since the event in 2015, not much has been done to make Nigerian gemstones more attractive to the international market. High levels of rough stone smuggling continue to undermine potential value-addition within Nigeria, whilst the unregulated nature of gemstone mining and production impedes the success of programs designed to engage with the sector and add value. Very little jewelry making currently takes place in the country due mainly to shortage of skills and adequate technology. Figure 3.1 Unpolished Mambilla Sapphire Figure 3.2 Polished and Cut Sapphire ² Sustainable Management of Mineral Resources Project, World Bank (2004)
  10. 10. 10 Towards Developing an all Inclusive Gemstone and Jewelry Industry in Nigeria Lotanna Amina Egwuatu, Mina Stones Policies According to a World Bank report in 2012, the Nigerian government has identified the potential in the establishment of a gemstone processing industry to generate revenue for the country and create jobs. However, as of the time of this white paper, there does not seem to be an official policy in place to guide the gemstone and jewelry manufacturing industry. Inconsistencies in government policies for mining make it difficult for prospective investors in the industry, thereby hindering growth. Outcomes Generally, Nigeria has not been able to profit from this industry even with the several interventions proffered. One main issue that consistently impedes the growth of the Nigerian lapidary and Jewelry manufacturing industry is the continuous illegal transfer of gemstones (mainly in their unrefined state) out of the country. According to Ojeka Patrick, the Director of Artisanal and Small-Scale mining, approximately 80% of gemstones mined in the country are exported illegally . Gemstone buying centres were set up by the government to counter this but the lack of trust by both buyers and sellers in the government has rendered this very ineffective. Diamond 12 - 14 Billion Jade 3 - 6 Billion Emeral/Ruby/Sapphire 1.5 - 2.5 Billion Other Colored Gemstones 250 - 750 Million Figure 3.3 Estimated Global Rough Gemstone Sales, 2015 ³ ³ Figure 3.3: this chart indicates the sales of gemstones in the global market. Nigeria can use it the above figures to understand the importance of gemstones in the world market. Governing the Gemstone Sector: Lessons from Global Experience 4Ojeka Patrick (2015)
  11. 11. 11Towards Developing an all Inclusive Gemstone and Jewelry Industry in Nigeria Lotanna Amina Egwuatu, Mina Stones All Inclu- sive Gem- All Inclusive Gemstone & Jewelry Industry 04 T he idea is for Nigeria to have an all-inclusive value chain to benefit from vertical integration in the gemstone and jewelry industry. Small-scale artisanal miners produce about 85% of the world’s coloured gemstones. This is mainly because it is uncommon to find a single deposit sizeable enough to validate the cost of setting up a large- scale mining operation. Therefore, in order for Nigeria to reap the full benefit of its gemstone resources both medium-scale and small-scale approaches need to be considered. In the case of Jewelry manufacturing, it is of utmost importance in generating enhanced exports to ensure increased production and consistent availability of raw materials. According to Gemological institute of America and information gathered at the African Gems and Jewelry Exhibition and Seminar, very few are skilled and even fewer are globally trained within the industry in Nigeria, it will therefore be beneficial to support people with the right skills to have control over majority of the value chain. This will also help set up a structure that will allow for closer monitoring and evaluation of the gemstone and jewelry industry by having checks to ensure global standards are met amongst other things. Development of the whole value chain will create more jobs for the citizens and
  12. 12. 12 Towards Developing an all Inclusive Gemstone and Jewelry Industry in Nigeria Lotanna Amina Egwuatu, Mina Stones importantly, these jobs would be largely dispersed, favouring the locals, thus providing openings for individuals to earn a living without having to seek jobs in foreign lands. Some other advantages are: Low Start-up Costs The start up costs accompanying small-scale/ artisanal mining is minimal. Feeding, transport to the site and purchase of a few tools is all that is required. This means that it does not require a high number sale before the individual is making a profit and the Traceability of Gemstones With regards to demand, the notion that a gemstone can be traced to the individual miner who collected it carries with it a premium, that allows gemstone and jewelleries to sell for a higher margin than a non-traceable gemstone. International buyers (middlemen, cutters and jewelers) indicated that the idea of buying Nigerian gemstone, which is free of many of the ethical hurdles, directly from Nigerians makes it most appealing. Financial Accountability One of the key questions we encountered when talking to Nigerian government officials was, “how we ensure accountability and make sure that tax revenue is collected on the sale of gemstones and jewelry by individuals?” This is a valid concern but with the appropriate institutional support, small-scale mining would have an important role to play in facilitating financial accountability in the gemstone and jewelry sector. As such, we propose the following three- phase approach as a way of operationalizing financial accountability in the gemstone sector in Nigeria. Stakeholder Attraction The growth of the gemstone industry can lead to be an added source of annual income. Take for example the Israeli Diamond Exchange attracts about 330,000 visitors to that country yearly, providing employment for over 20,000 families and contributing an annual income of an estimated $800m to the nation. PRODUCTION JEWELRY MANUFACTURING RETAIL CUTTING & POLISHING Polish Trading Wholesale Rough Trading Figure 4.1 Gemstone Value Chain ⁵ ⁵ Figure 4.1 shows the summary of gemstone value chain process, Governing the Gemstone Sector: Lessons from Global Experience , (May 2017) government is receiving revenue.
  13. 13. 13Towards Developing an all Inclusive Gemstone and Jewelry Industry in Nigeria Lotanna Amina Egwuatu, Mina Stones Recom- menda- tions Recommendations05 B elow are suggestions that may aid the government in improving the overall structure of the gemstone mining industry. These recommendations are proposed in three stages. Phase 1 Stage one would involve giving unrestricted private mining rights to Nigerians and the creation of an Export and Trade Agency, with which all gemstone and jewelry sales should be registered. This simple process has been shown to be successful in countries such as Sri Lanka. Confirming that all local and overseas sales are disclosed at the Export and Trade Agency enables accountability, traceability and permits the relevant authority to oversee sales and collect tax revenue. The Export and Trade Agency would also postulate regulations, in that it could suspend rights for anybody who breaks the rules. Another benefit of guaranteeing that all gemstone and jewelry exports are registered at the export house is that it allows the relevant body to oversee and compare the handover prices being paid. This would go some way towards enabling government revenue collection from international buyers, and overcoming the risk of artificially low transfer prices. Under this model, the government would potentially receive income from the following sources: • Income tax payable by those collecting and selling gemstones and jewelry. All sales would have to be registered at the export office, ensuring that the correct amount of tax paid is an attainable objective. • Royalty payment on the export of gemstones and jewelry, this would result in another stream of government revenue, payable by the international buyers. ⁶Boost trade in Sri Lanka through reforms and access to information, World Bank (September 2017) Formation of TRADE AGENCIES 1
  14. 14. 14 Towards Developing an all Inclusive Gemstone and Jewelry Industry in Nigeria Lotanna Amina Egwuatu, Mina Stones Phase 2 A tactical implementation of stage one will lead to the expansion of secondary industries. These would include cutting/polishing workshops, gemstone traders, final product jewelry designers, valuation houses and trade shows. Based upon our conversations with local miners, the same people collecting the gemstones may also cut, polish and trade. However, it is equally likely that individuals may prefer a specialization within the value chain. This will create additional employment across the industry in Nigeria. Due to initial initiatives to develop local capacity in gemstone identification and transformation, there is already a core group of people with cutting and polishing skills. Furthermore, courses are available at the Century Cuts and NIMG college. There are also plans to make some of these courses available in the major Nigerian languages for miners and other adherents to be able to access information. Another activity that is likely to arise is that of gem valuation. Gem pricing can be subjective and in order to ensure both parties obtain a fair price, it is often useful to have a third-party valuation on which to base the asking price. This is something that will develop with greater awareness of the value of gemstones. Furthermore, as gemstone industries develop within Optimization of the VALUE CHAIN 2a country, technical support can be provided by organizations such as GIA when they open offices in a country. This is also another potential source of revenue. A call for world-trained professionals (local and international) who understand the gemstone and jewelry manufacturing business on a global level is of utmost importance to facilitate these strategies. Action should be taken to promote the gemstone and jewelry sector globally, to guarantee there is a demand and interest, which could also boost investment. Government partnerships with private certified companies in this industry should have a significant role in setting up regulations, policies and commercial processes for gemstone and jewelry trade and export thereby creating a friendly environment for the gemstone and jewelry industry to thrive. Securing availability of raw material is of utmost importance in generating enhanced exports. The major gemstone producing countries, which need to be targeted through bilateral engagement to secure reliable and adequate long-term supply are Kenya, Botswana, Angola, Namibia, South Africa, Democratic Republic of Congo (DRC) and Zimbabwe as per Kimberley Process Certification Scheme (KPCS) guidelines. ⁷ Kimberly Process Certification Scheme, 2017.
  15. 15. 15Towards Developing an all Inclusive Gemstone and Jewelry Industry in Nigeria Lotanna Amina Egwuatu, Mina Stones Phase 3 Phase three would involve forming cooperatives, associations and small scale companies in order to take advantage of funding opportunities and exclusive rights to certain areas. These collective organizations would be required to adhere to Nigeria’s gemstone & jewelry legislation. One of the reservations faced when offering the idea of clusters revolves around the notion that people may try and circle around the process and smuggle gemstones the opportunity to this in-turn allows of world-trained who understand business in workshops, 100% concessions. This represents an opportunity for the Nigerian government to develop an inclusive, efficient and prosperous economy, without excessive costs to begin the process. Other Recommendations • There should be an all-inclusive social and financial feasibility study on the creation of a Nigerian Gemstone & Jewelry industry. The study should act as the foundation for the implementation of stage one and two. • Establish a National Gemstone & Jewelry Export House, which entails hiring consultants/ professionals in the gemstone and jewelry industry whose mandate will be to evaluate taxes and tariffs, and to document data, for all jewelry, gemstones sales, both rough and polished. The set up would guarantee that gemstone value is equitably priced and serve to control and monitor prices in view of maximizing export earnings for the benefit of the Nigerian people. Association & TRADE GROUPS 3
  16. 16. 16 Towards Developing an all Inclusive Gemstone and Jewelry Industry in Nigeria Lotanna Amina Egwuatu, Mina Stones Conclu- sion Conclusion06 P rior to the October 2015 Nigeria Gemstones and Jewelry Exhibition (NGJE), a white paper was presented showcasing the Nigerian gemstone and jewelry value chain, which documented the start of a new vision for the industry. Central to the vision was the increased awareness of the availability of some of the world’s most sought-after gems. Issues along the supply chain including poor mining techniques and lack of beneficiation were also highlighted. This deeper awareness has also created the expectation that the stakeholders want a functioning infrastructure that will enable the industry to thrive. The conclusion of the report came with a call to brands to embrace that vision by asking the question of how the gemstone value chain can maximize benefit for the country. With the right structures put in place, a well-functioning gemstone industry in Nigeria is highly feasible and is of utmost economic importance as it can be an avenue to get a reduction in the unemployment rate, taking a cue from Thailand which has a population of approximately 60 million people with over 25 million working in the gemstone industry. Nigeria’s coloured stones are regarded to be of a high quality in its raw state and even more so when refined. According to Umar Bamali, (former Director/Chief Executive Officer Nigeria Institute of Mining and Geosciences - NIMG) over 500 times more revenue can be earned from refined gemstones than from raw ones. The government has a role to play in the development of this industry as a policy maker and also in ensuring that access to finance is a thorough and transparent process, as this is the major issue limiting the development of the industry. The Nigerian government needs to ensure that policies it sets in place are followed through to the end. Training lapidaries with current beneficiation techniques and proper certifications that meet world standard, could help Nigeria export expertise to other countries in need of skilled artisans.
  17. 17. 17Towards Developing an all Inclusive Gemstone and Jewelry Industry in Nigeria Lotanna Amina Egwuatu, Mina Stones
  18. 18. Lotanna Amina Egwuatu (GIA GG, AJP) amina@minastones.com +2348099444117 minastones mina_stones

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