Industrialisation, LADOL and moving forward

This year has proved to me time and time again that Nigeria, now more than ever, is capable of joining the G20. Our strong rule of law under this government, an increasingly transparent and proactive private sector and the economic opportunity brought forth by the drop in the oil price are offering Nigeria the tools and environment it needs to industrialise. Industrialisation in Nigeria is the key to diversifying the local market and ultimately releasing Nigeria’s economic power.

However, Nigeria’s economy is too one-dimensional right now. An enabling, open business environment must be built to counteract UN Comtrade figures analysed by McKinsey Global Institute that show that in 2014, 86 percent of Nigeria’s exports were resources, with manufactured goods hitting only 8 percent and agriculture lower still at 6 percent. Transitioning Nigeria to a diverse industrialised economy will ensure less of our resources are exported as raw materials, more jobs are available domestically and more money is spent as well as invested locally. Once achieved, Nigeria will bask in sustainable financial stability.

The deep offshore oil and gas industry provides an important opportunity for industrialisation that Nigerians must seize with tact and transparency. The country’s deep offshore assets will ensure Nigeria remains an enticing business destination, but in a low oil price environment more must be done to create an open and secure business environment that lowers the cost of doing business locally. Kachikwu’s recent move to repay debts owed to some of the major oil companies (Chevron, Royal Dutch Shell, Eni and ExxonMobil) operating in Nigeria is a signal of increasing market transparency at a time when the IOCs are particularly cautious about the money they spend. The ongoing lawsuits against some of the oil majors, perhaps counter-intuitively, is a further step to radically change the type of business behaviour that has stunted Nigeria’s economic growth in the past.

Now the private sector has a real call to action. It must go above and beyond the government’s actions to show that there are legitimate partners available in-country so business doesn’t shift to competitors like Ghana and Angola. These partnerships with multi-national corporations are particularly important in the short to medium term for skills and technology transfer, both in the oil industry and beyond.

Concurrently, while a lower cost of doing business attracts more foreign business, it will crucially enable more local entrepreneurs to take part in the real, competitive market. The nuance of the deep offshore industry is its relative infancy and security. With a cleaner slate, entrenched rent-seeking relationships and agreements will not stifle the sector to the same extent as in other parts of the industry.

Involving the real local private sector will lead to real value added local content – which will lower local costs and attract more investment into Nigeria. These real private sector companies are also the optimal vehicles for technology transfer, as they have both a financial and nationalistic incentive to train their Nigerian workforce to replace foreign workers.

For the last 15 years LADOL has been working to support Nigeria’s transformation into an inclusive high value economy.

LADOL is building strategic infrastructure; most recently West Africa’s largest shipyard was completed inside the Free Zone. Such infrastructure is strategic because it has a huge multiplier effect on job creation. For every one job created in the shipyard, 10 will be created outside; analysts estimate that 50,000 direct and indirect jobs will be created thanks to LADOL.

LADOL is also now focusing on human capital development as well, launching its Upskilling Academy, which will ultimately train thousands of Nigerians each year.

LADOL’s developments will go a long way in addressing the approximately $30bn funding deficit in Nigeria’s oil and gas industry, both by lowering costs and by reducing the need for foreign expenditure via increasing local capacity. Extensive new capacity development is needed across Nigeria for LADOL to fulfil its mission of making Nigeria West Africa’s hub, and get an optimal return on its investment. The market can easily support several LADOL’s and related facilities due to the huge local demand.

LADOL’s mission and vision have not changed since its inception in 2001 – to encourage more real private sector infrastructure investment, make Nigeria West Africa’s hub and an attractive global investment destination. As McKinsey Global Institute notes, Nigeria accounts for 15 percent of Africa’s growth in consumer spending to 2025. Specifically, Nigerian households are likely to spend the most across food and beverages, housing, consumer goods, education and transportation service. Therefore, both local and international investors have a huge incentive to invest in industrial facilities that will cater to that growing market, and facilities like LADOL offer a platform through which they can immediately economically set up shop and service the market.

 

Amy Jadesimi