Dinesh Rathi is the Managing Director/Chief Executive Officer of the Lagos Free Zone (LFZ). In this interview with Nairametrics, he discloses that the total deployed investments to date within LFZ including investments made by respective tenants, stands at about N600 billion ($1.2 billion) and by the end of the year, it aims to reach N1 trillion ($2 billion).
According to him, the Lagos Free Zone holds a lot of economic potential for the growth of the Nigerian economy and improvement of international trade.
Rathi has almost 20 years of experience working in India and Nigeria. He started his career with Unilever Group and has also worked in ICICI Bank, the largest private-sector commercial bank in India. Excerpts.
How would you assess the drive for investments to the Zone considering the several challenges the country and Lagos State, in particular, have had to contend with?
Let me begin by providing a brief background on the Lagos Free Zone. Lagos Free Zone (LFZ) is an 850-hectare industrial development, a fully functional special economic zone located 65km East of Lagos in the Ibeju-Lekki axis. We have been in operation for close to 12 years now. Out of our total area of 850 hectares, we are developing 300 hectares (35%) in Phase 1. Our vision is to become the preferred industrial and logistics hub in West Africa by offering world-class infrastructure, facilities and services.
So far, the drive for investment has been very encouraging. We already have 23 business entities operating within the Zone. Lekki Deep Sea Port, scheduled to be operational by the fourth quarter of 2022, will be the key catalyst for building on this momentum of attracting further investments into the Zone. Lekki Port and Lagos Free Zone combination offers a unique ecosystem to traders and manufacturers in Nigeria and will consolidate our position as the economic epicentre of Lagos and Nigeria.
Your engagements with various embassies over this past year have been in the news. Are we witnessing an investment drive from those countries into the Lagos Free Zone?
One of the key aspects of our investment promotion drive is to constructively engage with source markets that can drive Foreign Direct Investments into Nigeria. In that context, we are very happy with our continuous engagement with various diplomatic and trade missions from countries like US, UK, EU Japan and India among others. We collaborate with these respective offices to help guide investments originating from their countries into Nigeria.
The first phase (300 hectares) of the Lagos Free Zone already has lease commitments on more than 40% of the area, signifying that a critical mass of businesses already exists in the Zone. But like every other emerging market in the current situation globally, Nigeria is facing short-term headwinds in the economy. We believe that once Lekki Port is operational and the world learns to move past the pandemic, the investment cycle will see an uptick again. As soon as that happens, we will be ready to gain the maximum market share of FDI.
In a nutshell, we have done a lot of work that would continue to garner interest from decision-makers at stakeholders towards facilitating investment projects into Nigeria.
Nigeria remains India’s largest trading partner in Africa, with a total trade volume of about $14billion in 2020. This trade volume grew considerably in 2021. From what you have seen and observed, what do you think are the major attractions, and how best can the Zone tap into them?
At the outset, I would reiterate that we are an industrial estate developer. We are developing an industrial ecosystem that provides hassle-free investment for manufacturers, logistics operators, and other service providers to operate with a much higher quotient of ease of doing business. We are not focusing on any one geography over the other but what we are doing is to tick all the boxes that support industrial activities regardless of which source markets the investments come from. As long as the projects fit the master plan we are working with, we engage with investors across the globe.
Now, back to your question. With India USD10billion of the USD14Billion you mentioned comes from crude export, while USD4billion is what we import from India to Nigeria. Arithmetically speaking, Nigeria runs a substantial positive balance of trade with India.
We are looking at India for multiple sectors such as automobile, pharmaceuticals, chemicals, light engineering and assembly among others. As you are aware, India is the largest exporter of motorbikes and pharmaceuticals in Nigeria. Those are the two kinds of clearly attractive sectors to Nigeria. Given the way the whole economic progression has happened especially with COVID, what we are currently looking at primarily are the operators within Nigeria, looking for expansion opportunities or looking for a better location given that Lekki Port is coming on stream. So, if you want to relocate or expand your business, Lagos Free Zone is the place to be.
In parallel, we are also engaging with international industrial stakeholders from countries with which Nigeria has strong bilateral trade relations, for driving FDI into the Zone.
The key enablers include seamless integration with Lekk Port, access to quality infrastructure we have provided, and the ease of doing business we offer in the Zone while working with different government agencies. Apart from that, the port and zone combination can become a crucial enabler for Nigeria to become an essential player in the African Continental Free Trade Agreement. One of the key challenges that keep Nigeria from becoming an export powerhouse is port logistics. With Lekki Port coming on stream, the Zone ultimately becomes a panacea to achieving global competitiveness.
What is the Zone offering on the Ease of Doing business?
Ease of Doing Business is a combination of multiple factors. The biggest strategic differentiator LFZ has is the seamless access to Lekki Deep Sea Port which is the first modern, deep seaport in Nigeria that can service vessels of up to 18000 TEU capacity and is located inside our Zone. Furthermore, the breadth and quality of support infrastructure provided, such as Grade-A warehouses, prebuilt standard factories, central gas-based power stations, high-quality internal roads and civil infrastructure set us apart. Facilities such as the central processing centre, residential units, fire station, police station, a truck park, and medical facility enhance the ease of operations and emergency preparedness at LFZ.
When you look at the proximity to the deep seaport with the infrastructural facilities and services in Lagos Free Zone, the result is an entirely unique ecosystem that delivers better value than other free zones.
Secondly, the Ease of Doing Business also comes into play when dealing with government agencies and paperwork. We have 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 problems. The second is that we have put technology in all our processes to digitally get much of their transactions done, thereby helping to eliminate red-tape and archaic ways of business operations.
It is also noteworthy here to mention that these efforts have been received very positively within the industry and have contributed to LFZ being recognized internationally by fDi Intelligence as a Highly Commended Free Zone in the Regional (Africa) category of the Global Free Zones of the Year 2021 awards.
What is the value of assets invested in the project’s first phase?
The total deployed investments to date within LFZ including investments made by respective tenants stands at about N600billion (USD1.2billion). By the end of the year, our aim is to reach N1 trillion (USD2billion).
What impacts will these investments have on the Nigerian economy?
Due to the presence of Lekki Port, the Zone would have a substantial catalytic impact on the Nigerian economy. On account of Lekki Port alone, the Zone will be adding a handling capacity of 1.2million containers (TEU) annually, which will make us well equipped to handle a high volume of international trade. The second contribution is that economic activities would get a massive boost because historically, ports have unlocked a multiplier effect on the GDP of host countries. Thirdly, we generate substantial employment opportunities with close to 4,000 people working in the Zone, and almost 30% of them are from the local communities. Once the port becomes operational, the employment numbers would experience a growth trajectory of about 30,000 people working in the Zone within the next 4 or 5 years.
Beyond the employment opportunities, LFZ enterprises have contributed to the economy by significant revenue generation for the government through the payment of customs duties, PAYE and other levies.
I must also add that, at LFZ, we are providing all the factors for industrial production at a very competitive rate so that investors can enjoy the benefits of operating within the Zone as efficiently as possible. LFZ has equally created a much more competitive landscape that allows investors to cater to the market’s needs within Nigeria more efficiently. LFZ will enable them to utilize interconnectivity with other parts of West Africa through the Lekki deep Sea Port to improve export in a much more competitive manner.
In a nutshell, LFZ would position Nigeria as a formidable manufacturing hub in the coming years.
Can you tell us some of the FMCG companies already showing interest in the Zone and what they are likely to bring on board?
It may be premature to share all the details because these transactions are still in the pipeline. But I can tell you that we are engaging with some of the most reputable brands any country would love to have. We are in different stages of engagement with reputable brands from multiple sectors. We won’t be able to make an announcement now, but we will do so upon the consummation of the transaction.
In January 2020, Nigeria signed to be part of a borderless transaction within Africa called the African Continental Free Trade agreement. What do you think about it, and how do you hope to explore this opportunity?
I understand that the agreement has been signed but know that the procedures are still being laid out for actual trading to happen seamlessly. When that happens, it would be a significant step. The combination of LFZ’s infrastructure with Lekki Port would offer an excellent opportunity for Nigeria to become an export hub.
Tell us about your Corporate Social Responsibility footprints?
In the area of CSR, we are doing quite a lot. We have built a lot of infrastructure in the host communities. We also engage about 14 schools every year through a science competition tagged Tolaram Science Challenge. Two hundred students from the 14 schools participate in the competition. The top three schools are awarded cash prizes and winning students get scholarships. The students also visit facilities operating within the Zone to experience how the companies work.
While CSR remains one of the important pillars meant to drive a sustainable philosophy of operation and development in LFZ, we believe sustainable effort towards creating a controlled environment in harmony with the planet takes a lot more effort than just philanthropic contributions. We are developing a robust ESG policy to focus on doing much broader work to proactively complement our community engagement. A few examples include creating a master plan that has an inherent requirement for a green cover and reduces water wastage thru appropriate recycling and harvesting systems.
We are also trying to minimize our dependency on the traditional source of power like diesel. One of the things we have done is to move away from diesel-based power generation to meet the energy requirements of our existing clients. We are currently using CNG-based power at the zone and will transition into piped natural gas power generation over the next couple of years. For us, developing a more sustainably driven free zone is a responsibility and not just a feature