The Managing Director of the Lagos Free Zone, Dinesh Rathi, speaks on the economic significance of the zone and how it will leverage the prospects of the Lekki Deep Seaport to boost Nigeria’s economic output in this interview with EDIDIONG IKPOTO
Give us a brief history of the Lagos Free Zone and its current status.
The Lagos Free Zone is an 850 hectares of private free zone in Nigeria. It was established in 2012. It is promoted by Tolaram, which is headquartered in Singapore. We are the only economic zone, which is integrated with the Lekki Port. The Lekki Port is the first deep sea port in Nigeria, which has the capacity to quadruple the current output. We are a modern and multi-cluster development, which is located in the Lekki industrial corridor, one of the largest investment areas in Nigeria today with multi-billion dollar investments by multiple operators.
We have already attracted 20 international investors across manufacturing, logistics and services with a committed investment of $2bn. The key names which are operating within our free zone today include Kellogg’s, Colgate, BSF, Sana Building Systems and Dano Milk. We are positioned as a premier investment destination, and we have created a self-sustaining one-stop-shop ecosystem fully complete with houses, standard industrial factories, a truck park, a medical facility, a police station, a fire station, food courts, banking systems, a helipad, residential facilities, and a broadband network. All these complete a work-live-play environment, which has been created. We also have a single window, which means that all the government agencies which are supposed to be in a special economic zone are all operating under one roof and work hand-in-hand to provide ease of doing business.
How does the LFZ intend to leverage the potential of the deep seaport?
Lekki Port has been developed, as the first ocean port in Nigeria. Currently, it doubles the capacity of Nigeria’s maritime sector. Lekki port will not only be the gateway for Nigeria, but also it will position Nigeria as a transshipment hub. It will be interesting to note that 90 per cent of the cargoes, which come to ports like Cotonou and Lome ultimately end up in Nigeria. Our belief is that Lekki Port will change all of that.
These cargoes will not only terminate at Lekki Port but also, the cargoes meant for Lome, Cotonou and Accra will be transshipped through Lekki Port. Lekki Port comes in on the back of the free zone, which is well integrated. It creates a port and zone industrial and logistics ecosystem, which is unparalleled in Nigeria. And with the continental free trade agreement, which is in the works once the rules, regulations and procedures are clearly laid out, the port and the free zone can leverage the continental free trade agreement to not only be a hub for Nigeria but also be a pan-African industrial and logistics hub.
In your experience as the Managing Director of the Lagos Free Zone, what are the specific challenges that the Lagos Free Zone has encountered?
The first challenge has been the slowdown of the economy, which is impacting many things. There are inflationary pressures and the input costs for developing and growing our zone have increased. It has also slowed down investments, which are being planned by operators in Nigeria. However, we firmly believe that these are transitory and cyclical in nature and ultimately, a zone and a port ecosystem will help Nigeria come out of this.
The second challenge has been the road network. Here, I must thank the Lagos State Government and the Federal Government for their understanding and support in infrastructure development in the Ibeju-Lekki axis. However, given the kind of economic development which is happening in the region, I think there are more efforts needed to fast track some of these road infrastructure developments. Regardless of these, the drive for long-term investments is very encouraging. The port, which is a key catalyst for driving new investments in the zone, is already operational.
How would you say the Lagos Free Zone has impacted the economy of Lagos State?
When we were looking at the sectoral GDP share of Nigeria, we realised that the manufacturing share of GDP is less than 15 per cent, and that was alarming for a country of Nigeria’s size. So, the port and the zone ecosystem offer a unique opportunity to increase the contribution of manufacturing to the economy. It will help us not only to become a manufacturing hub but to grow our exports. So far, the Lagos Free Zone has contributed a lot in terms of Customs duties. Last year alone, we contributed N21bn out of the total Customs collection. It translated to one per cent of the national collection by the Nigeria Customs Service. If you take into account when the port started operations, which was in April this year, the Customs revenue will only increase. That is one of the biggest contributions we will be making to the economy.
The second contribution will be in the form of jobs. So far we have created 4,000 jobs in the special economic zone, and this is despite the port starting only in April month. We expect that in the next four to five years this number will become at least 30,000 because of the kind of attraction and impetus we are seeing. Out of the 4,000 jobs, 30 per cent of them have gone to the communities which surround the port and the zone.
Apart from Customs duties and jobs, one of the major impacts of the zone has been Foreign Direct Investments. So far, we have attracted FDI of $2.5bn into the free zone, comprising $1.1bn in the port alone. That really means that Lagos Free Zone has the potential to attract Foreign Direct Investment into the country.
How has the Lagos Free Zone positioned itself to tap into the potential of the African Continental Free Trade Agreement?
Initially, we started working under ECOWAS using the ETLS. However, once the continental free trade agreement started gaining momentum, we realised that this is a unique opportunity for Nigeria to use the AfCFTA to be a manufacturing hub, not only for West Africa but also the whole of Africa. Given that the Lekki Port offers efficient port logistics, Lagos Free Zone brings in natural gas-generated power, which is extremely cost-competitive. With the availability of abundant workforce in Nigeria, I think we are in a sweet spot of being a very cost-competitive manufacturing and logistics hub, which can compete with rivals in Egypt, Kenya and South Africa. We can be the ultimate destination for made-in-Nigeria products, which could be used across Africa.
You spoke about some of the countries we should be competing with. We just saw one of the biggest firms in South Africa move its operational headquarters to London because of the current power crisis in the country. What would you say to policymakers in terms of what needs to be done to improve access to energy in order to make Nigeria the manufacturing hub you expect it to be?
If we analyse the key problems faced by business operators running operations in Nigeria, there are two basic challenges. The first one is the port logistics, which is being solved by Lekki Port. The second-biggest challenge is access to efficient and low-cost power. We realise that the second one is a strategic point to be addressed when we were designing the growth map for our zone.
We have been able to put together a partnership with a consortium of three major companies in the oil and gas space. It comprises Falcon Corporation, ND Western Midstream Ltd and FHN Gas Ltd. All three of them have combined to create a consortium called Optimera and they are in the process of bringing piped natural gas to our zone by the middle of next year. So, the gas is available 10 km away from our zone. So, in the next 12 to 15 months, we will get piped natural gas delivered to our zone. We are simultaneously working on creating a power plant, which can leverage the piped natural gas to provide one of the lowest costs of power in Africa to the business operators. Currently, we are using CNG-based power, but we will have piped natural gas-based power in our zone very soon.
Can you speak on the value of assets currently in the zone?
In total, we have invested about $2bn between the port, the free zone and all the manufacturing entities, which are operating there. Our vision is that in the next 10–15 years, the free zone will have 150 companies operating inside the free zone, which means that between two and three per cent of the national GDP will come out of our zone.