Nigeria embarks on vast free trade zone with China

* Zone to spread over 16,500 hectares on edge of Lagos

* China holds 60 percent of development company

* Aim is to reduce Nigerian import dependence, create growth

By Chijioke Ohuocha

LAGOS, Sept 1 (BestGrowthStock) – 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.

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. (601186.SS: ), 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. [ID:nLDE6300Y6]

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.
(For more Reuters Africa coverage and to have your say on the
top issues, visit: http://af.reuters.com/ )
(Editing by Nick Tattersall and Elizabeth Fullerton)

Nigeria embarks on vast free trade zone with China