Pioneers weigh risks and rewards

The site, a collection of huts and tents flanked by Baobab trees where locals sell nuggets they get from crushing and washing rocks, is the kind of place Nigeria hopes will attract investors to reduce its reliance on oil exports.

Eighty percent of mining is done like this in Nigeria, where the only significant foreign investor is Australia's Kogi Iron. The experience of both the local miners and the Australian company sheds light on the advantages and challenges of following their lead.

President Muhammadu Buhari has visited more than 20 states in his first year of office to advertise largely untapped deposits of 34 minerals including gold, iron ore, coal, tin and zinc. He also wants investment to boost cocoa exports, cut a $20 billion food import bill and revive a once-mighty leather industry to offset plummeting oil revenues.

The country hopes to revive a moribund steel plant with help from Ukraine, modernise farming with Dutch experts and is counting on Chinese firms to build roads, railways and housing.

Africa's richest man, Nigeria's Aliko Dangote, is working with Morocco and Congo-Brazaville on a planned fertilizer plant, while also investing in rice and tomato farming as well as coal.

Buhari, a former military ruler elected on pledges to boost security and cut corruption, has made progress on both fronts; Boko Haram jihadists who spread terror across the northeast have been pushed back and a string of officials face graft charges.

But state revenues were almost halved last year by the oil price and the naira currency now trades informally 40 percent below the official fixed rate, limiting investment due to fears of an eventual devaluation.

For Sami Ibrahim, 35-year-old head of 100 artisan gold miners in the camp in Anka in the northwestern Zamfara state that was robbed last month, there is a long way to go.

"There is a lot of potential for mining here but only if the government improves security," he said.

"100 PERCENT SUPPORT"

Robbery has long been a hazard in Nigeria's informal gold rush but has increased as state wages are delayed and contractors are laid off. "We are afraid the robbers will come back at night," said Abu Bakar, a 25-year old miner who escaped into the fields after the shots woke him from sleep in his hut.

And while Boko Haram is under serious pressure for the first time in its seven year history, its fighters still stage suicide attacks, which has made firms reluctant to return to Kano in the former northern heartland of the leather and textile industry.

In the oil-producing but impoverished southern Niger Delta, militants drawing on unemployed youth have been blowing up pipelines of Western companies and kidnapping foreigners as they press the government for a greater share of oil revenues.

"Security is a major concern to companies working in the north and Niger Delta," said a security expert. "There is a risk of kidnapping of expatriates or Boko Haram attacks.

Nevertheless a local miner, Granite and Marble Nigeria Limited, has just signed a $55 million deal with a Chinese firm, Shanghai Shibang Machinery, to build a granite plant, according to the presidency.

Kogi Iron plans to invest up to $600 million to build a steel processing plant some 200 km (124 miles) south of the capital Abuja by tapping a plateau containing 205 million tones of iron ore to serve the domestic and European market.

That part of Nigeria is safer than the north but the company is building roads and employing workers only from nearby communities to ensure it is welcomed.

Like other foreign firms braving the economic downturn, Kogi Iron is eyeing a growing market; the 188 million-strong population is set to rise to 300 million in 2030.

"There was never any question whether to be in Nigeria. The market growth potential is the reason to be here," said its Executive Director Kevin Joseph.

"We feel absolutely safe, there are no kidnappings. We have been given 100 percent support from the federal and state governments."

The government plans a $1 billion fund to provide loans for new mining operations, hoping the sector will grow to 10 percent of GDP, from just 0.3 percent now.

But the dollar shortages, coupled with hefty foreign currency curbs to protect dwindling reserves, mean companies cannot import spare parts and machines and have to buy them for a premium on the black market.

NO MORE FREE LUNCH

Petrol is also in short supply as the country never invited in refineries.

Zamfara police commissioner Istefanus Shettima said he had put more officers on key roads after the gold mine attack but that the three patrol cars outside his office were out of fuel.

The robbers were probably competing diggers or gold traders, he said. "These are illegal miners... some of them are of questionable character."

Ownership of the land in Anka is unclear; the miners just set up crushing machines and bring bowls to wash the rocks using a dirt track to avoid a farmer seeking a toll on the road.

Foreign firms produced 360,000 ounces of gold between 1934 and 1954, when work largely halted as state priorities switched with the discovery of oil in the Niger Delta in the south.

The latest official estimate of proven gold reserves is 300,000 ounces and dates from 2013. Officials say it is likely to be more since no new research has been done for 30 years.

At the Anka camp, the robbery has put some miners off, but for others, the risks are worth taking; the United Nations estimates 70 percent of Nigerians live on a dollar a day.

"You need luck, but on some days you can make 6,000 naira ($20)," said Ibrahim Ladan, a 50-year old miner.

Traders who buy the gold say they take it to the northwest's biggest city, Sokoto. But experts say much is smuggled to Middle Eastern markets via the nearby porous border with Niger.

Licenses are under review and small-scale miners will have to pay royalties, ending their "free lunch", Mining Minister Kayode Fayemi said in December.

But inspectors have yet to visit Anka, where Sarkin Pawa, who has mined in the area for 25 years, had a message for would-be investors. "Foreign firms can come, but they need to work with us," he said, to cheers from his colleagues.