Guest article by Dinesh Rathi, Chief Executive Officer, Lagos Free Zone
It is now less than 15 months since the birth of the African Continental Free Trade Area (AfCFTA) on New Year’s Day 2021. The setting up of the free trade area (FTA) was announced amidst much fanfare.
With the sole exception of Eritrea, the other 54 African nations are signatories to the agreement. Over time, ratifying counties pledge to eliminate tariff and non-tariff barriers on 97% of goods traded between African states. The hope has been expressed that AfCFTA will increase trade between African countries – which will, in turn, boost manufacturing and create jobs, bringing more prosperity and social equality to those on the continent.
According to the World Bank’s 2020 report titled “The African Continental Free Trade Area: Economic and Distributional Effects”, implementation of AfCFTA is expected to boost the intracontinental trade by 81% and the exports to non-African markets by 19%.. These gains are expected to be driven by decreased tariffs which are unreasonably higher than global benchmarks and even more broadly, due to reduction of nontariff barriers through efficient trade facilitation measures at the borders.
If one looks more closely at the ecosystem of free trade zones (FTZs) operating in Nigeria, known to be among the most progressive of the African countries, the Nigeria Export Processing Zones Authority (NEPZA) reveals that over 500 local and international companies have taken advantage of the 42 licensed FTZs under NEPZA’s umbrella, with about 20 of these FTZs being actually operative.
A wide range of enterprises operate in Nigeria’s Free Trade Zones – oil and gas companies, manufacturing industries, car assembling industries, steel rolling mills, pharmaceutical industries, food processing industries, and new upcoming Industrial Parks.
The most significant entity among the free trade zones in Nigeria is Lagos Free Zone (LFZ), which is uniquely integrated with the deepest seaport in the region – the upcoming Lekki deep-sea port, that can service vessels of up to 18,000 TEU capacity due to available draft of -16.5m. Once Lekki port is fully operational in the last quarter of 2022, its container terminal will boost Nigeria’s container handling capacity by 1.2 million TEUs, thus turning LFZ into a unique location that will provide tenants with a seamless and cost-efficient access to domestic, regional and international markets.
LFZ is an 850-hectare industrial development, a fully functional special economic zone located 65km East of Lagos in the Ibeju-Lekki axis, that has been in operation for close to 12 years. 300 hectares (35% of the total area) is being developed in Phase 1.
LFZ completed the land acquisition process in 2012, and has since invested over a decade into the development of critical industrial infrastructure, most importantly the Lekki Port project. Over the past ten years, we completed conceptualising and actualising the project to meet the requirements of international investors that are keen to bring FDI into Nigeria.
Support infrastructure of top quality has been provided, such as Grade-A warehouses, prebuilt standard factories, central gas-based power station, high-quality internal roads and civil infrastructure. Facilities such as central processing centre, residential units, fire station, police station, truck park and medical facility enhance the ease of operations and emergency preparedness at LFZ.
Tolaram, LFZ’s corporate parent, has been in Nigeria for over 45 years, and has gone through a sustained learning curve which has helped it understand the challenges and opportunities that are peculiar to this market. This rich experience is being harnessed to ensure that access to the requisite industrial infrastructure to successfully operate and chart a growth path as an investor in Nigeria becomes as efficient as possible.
In addition, LFZ’s deep focus on Ease of Doing Business advantage comes into play when dealing with government agencies and paperwork. LFZ has two ways to address that – one is a one-stop-shop where all agencies are under one roof, working hand in hand to ensure that the business entity faces no operational hassles. The second is that we have used technology in all our processes to get most of their transactions done digitally, thereby helping to eliminate red-tape and archaic ways of business operations.
So far, the drive for participation by international investors has been very encouraging. The total deployed investments within LFZ to date stand at about Naira600 billion (US$1.2 billion). By the end of the year, our aim is to reach Naira1 trillion (US$2billion).
We already have 23 business entities operating within the Zone, amongst which are Kellogg’s, BASF, Colgate-Palmolive, Arla, Indofoods, Power Oil, Lekki Freeport Terminal (a subsidiary of CMA Terminals), SANA Building Systems and CNC Logistics. We are expecting additional tenants because we have put in the necessary infrastructure to support efficient industrial operations and value-added services at LFZ.
It is worth mentioning that these efforts have been received positively within the industry and have contributed to LFZ being recognized internationally by fDi Intelligence with the award of Highly Commended Free Zone in the Regional (Africa) category in the Global Free Zones of the Year 2021 awards.
It must be underscored that the absence of a logistics infrastructure has been one of the biggest challenges preventing Nigeria from becoming the export hub of the African continent. The combination of Lekki Deep Sea Port, which will come online by the fourth quarter of 2022, and Lagos Free Zone offers a unique ecosystem to traders and manufacturers in Nigeria and will consolidate our position as the economic epicentre of Lagos and Nigeria.
In sum, our vision is to become the preferred industrial and logistics hub in West Africa by offering world-class infrastructure, facilities and services, and we are glad with the progress we have made so far in realizing this vision.