September 1, 2010 / 11:32 AM / in 7 years

Nigeria embarks on vast free trade zone with China

LAGOS (Reuters) - Nigeria is building a multi-billion dollar free trade zone with Chinese investors on the edge of its commercial capital Lagos to try to develop a local manufacturing base and help reduce its import dependence.

<p>Nigerian president Goodluck Jonathan (R) stands with military aides in a parade convoy during Army Day celebrations in the capital Abuja July 6, 2010. REUTERS/Afolabi Sotunde</p>

The $5 billion first phase of the Lekki Free Zone, a 3,000 hectare site on the eastern fringe of the city, is 60 percent held by Chinese investors and 40 percent by the Lagos state government, the deputy head of the project told Reuters.

The consortium will provide basic infrastructure including roads, power plants and water plants before manufacturing firms are invited to set up business, Lekki Free Zone Development Co (LFZDC) deputy managing director Adeyemo Thompson said.

“We have a number of Chinese companies which are coming in the manufacturing area,” Thompson said in an interview.

“They are coming to produce furniture, electronics, pharmaceuticals and heavy machinery. We are having a fair in November, that is when we kick off operations.”

The Chinese shareholders in the project include China Railway Construction Corp., the China-Africa Development Fund Ltd and the China Civil Engineering Construction Corporation Ltd.

A total of 16,500 hectares of land bordered by the Atlantic Ocean and the Lagos and Lekki lagoons has been earmarked for the whole free zone, which will include a deepwater sea port and a new international airport in close proximity.

The aim of the free zone is to make it easier for foreign investors, particularly manufacturers, to build a foothold in sub-Saharan Africa’s most populous nation and second-biggest economy while still owning 100 percent of their firms.

It is modelled on free zones around China which have helped the Asian giant to develop its manufacturing base and economy over the past three decades.

“We have a one-stop shop ... No investor has to deal with any government agency directly. We license the enterprises. You can register your enterprise within a week, get permits and everything you need to run your business,” Thompson said.

“The free zone allows you to attract foreign direct investment into the country and investors are given some incentives ... It helps boost production, manufacturing, create employment and is a basis for sustainable infrastructure.”

The manufacturing and agricultural sectors have been neglected since the 1970s oil boom, when Nigeria began making easy money from crude oil sales. Oil accounts for more than 80 percent of revenues and more than 60 percent of exports.

SHINING EXAMPLE OR WHITE ELEPHANT?

Nigeria imports everything from toothpicks to cement, with a growing proportion of the goods coming from China. The Lekki Free Zone will enable Chinese and other manufacturers to test their products on Africa’s largest potential consumer market.

“There is a huge market in waiting,” Lagos State Governor Babatunde Fashola said at an opening ceremony this month.

“When you look at how much our people spend importing goods from abroad, how much they pay in excess baggage at major airports, bringing this here is like bringing home prosperity.”

The vast majority of Nigeria’s 140 million people live on less than $2 a day but economists say a growing middle class means a consumer market is developing that could help its economy surpass South Africa’s in the coming years.

The West African head of private equity firm Actis estimated earlier this year that some 10 million people had moved from low income towards the middle income bracket in Nigeria in the past five years alone.

Thompson said China was encouraging manufacturers whose Western export markets had suffered in the global downturn to explore frontier destinations such as those in Africa.

The administrative complex housing Thompson’s office, customs and company registration officials, and a few warehouses are so far the only buildings to have been completed.

The architect’s models show glistening glass and steel warehouses around a central lagoon, and the ultimate aim is to build a mini-city which will house more than 180,000 people.

Sceptics point to the lacklustre interest in some other free zones around Nigeria, particularly the $300 million Tinapa resort in the southeastern state of Cross Rivers, envisaged as a tourist resort and duty-free shopping paradise.

Its launch two years ago was marred by armed customs officers trying to impound products bought by its customers.

But Lekki’s investors say the two are incomparable.

The new zone is adjacent to Nigeria’s most populous city, Chinese investors own a majority stake, no commercial loans are involved, and manufacturing -- not tourism -- is at its heart.

“The choice of China as partner is because in recent times they have had experience of transforming an unrated nation into a world class nation,” Thompson said.

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