The Lagos Deep Offshore Logistics Base (LADOL) is a 100-hectare free zone and logistics hub for multinational industrial and offshore enterprises. It is located at the entrance to Lagos Harbour and accommodates a range of foreign and local companies such as Shell, Total, Samsung Heavy Industries, Dorman Long and Fortune Global. Construction on the base started in 2001 and development is still ongoing.
How we made it in Africa talks to Dr Amy Jadesimi, LADOL’s managing director, about setting up the hub in Nigeria and the potential for similar free zones in West Africa. Below is the edited extract of the interview.
Tell us about LADOL and its development.
The free zones in Nigeria are quite similar to those in Dubai 15 years ago. Dubai started its free zones with bare land and had different zones to focus on different sectors. Similarly LADOL has been built from scratch. It is a 100% private development, and we focus on high-value industrial projects, where the inputs or outputs – or the process – is expensive. These are generally projects that value at hundreds of millions of dollars and, because the projects are either so valuable or so difficult to do, they typically haven’t been done in Africa before. We focus on that end of the market because we know that if we can create an environment where those projects can be done in Nigeria, it will have a huge multiplier effect.
An example of one such development is our shipyard. We built a US$300m shipyard, and that is the largest vessel integration yard in West Africa. Right now we are involved in a project where we are building a $3.8bn offshore oil and gas vessel, and that is going to enable, for the first time in Nigeria’s history, a vessel of this kind to be birthed onshore in Nigeria. This means that instead of the entire project being centred around an offshore location – either in America or more recently in South Korea – all of the work can now be done in Nigeria.
What is the impact of this?
In real terms this means that if you’re fabricating something that needs to go onto this vessel, before LADOL built this facility you would have had to put whatever it was you are fabricating – and these are massive structures, weighing like a 1,000 tonnes – on a ship and send it to South Korea to be made part of something else. And clearly the economics of that don’t make sense. So because it was so difficult and so expensive, people didn’t fabricate in Nigeria. It just wasn’t worth it. Now, because we have this facility at LADOL, we have created a space where you can do this fabrication in country and it is economically viable because you don’t have to ship the fabricated pieces to the other side of the world – everything stays in country. So the local demand for fabrication is going up four times and we are creating 50,000 jobs directly and indirectly because there is a 10x multiplier effect.
By building this all-in-one industrial village, we are able to give people the sort of specialised infrastructure, equipment and trained personnel they need, all in one location. And we are able to do these massive projects in Nigeria instead of doing them outside of the country, which obviously has tremendous benefits for Nigeria.
But clearly building this kind of infrastructure and setting up this kind of operation takes a long time… We’ve been building the facility now for almost 15 years. We have invested $500m and the investment is still continuing.
Other than skilled labour and manufacturing facilities, what are some of the infrastructural and operational benefits of LADOL’s industrial village?
The town has been built with infrastructure which is tailored towards heavy industrial activity. So the roads can carry a much heavier load, and the equipment, buildings, and everything is built with a very high level of structural integrity. We have very heavy cranes, which aren’t available elsewhere in the country. And because we focused exclusively on this high-value industrial end of the market, throughout the whole village the health and safety standards, as well as the security standards, are also very high. So if you’re a foreign company coming into this environment, you will literally be able to land and just focus on doing your business. You won’t have to make any further investment nor worry about safety and security considerations.
On top of this, the village is also a free zone which means it comes with another set of benefits such as duty free importation, zero corporate taxes, and ease of bureaucracy. In a free zone, all of your visas, customs, tariffs, and so on, are all done in the same place. This all adds to its efficiency, coupled with the fact that we have specifically designed it to operate 24/7 and have all the government agencies in the free zone. This enables companies to have a very predictable manufacturing or fabrication schedule, which is important for these industrial projects.
So someone sitting in Houston or London can predict how much they are going to spend, when they are going to spend it, and what the timelines are. Because of the environment we have created, when they do their planning for their project, they will find that they will be able to do their project in Nigeria as cheaply (or even more cheaply) than in South Korea or in other places in Europe.
How much room exists for more free zones like this in West Africa?
The market is grossly, grossly underserved.
While I am a huge believer in free markets and an advocate of competition, at the stage we are at now, I am actually advocating that in Nigeria – and even countries across West Africa – we actually look at collaboration. Because within Nigeria we could do with 10 or 15 LADOLs, providing different infrastructure for different business focuses.
Look at the market in terms of local content. Local content is the amount of a given project that is done in country. In Nigeria right now, if a project is worth $10, the average local content level is probably about 10%. So out of that $10 only $1 is being spent in Nigeria. Our new local content law, passed in 2010, stipulates certain levels of local content – the minimum is around 50% with a target of reaching 70-100% depending on the area you’re looking at.
So with the new local content law stipulating such high levels of local content and if you look at the existing level of activity, there is a need to increase the facilities that we have at least five-fold. It is probably more because we want to service not just Nigeria, but also the West Africa market. And so the capacity that the market has right now exceeds the available services and facilities by a factor of at least five to seven.
If you look at Nigeria over the next 10 to 20 years… oil and gas is supposed to double. This is massive. We will go from two million barrels of oil a day to about four million. If you then think about in terms of local content, currently at 10%, we are then talking about a 10 times increase in the amount of local activity we are targeting. So that means we are looking to employ and train hundreds of thousands of Nigerians in this sector.
And if you look at what happened in Norway, when it did exactly what Nigeria is doing now between 1970 and 1990, it went from being a sort of fishing-orientated rural country, to now being the leading most technologically-advanced country in terms of oil and gas engineering and fabrication. They became world leaders in this, and they started out by relying on technology transfer from the British, as well as coupling that with investments from Norwegians and the Norwegian government.
In Nigeria we are doing exactly the same thing. We are getting technology transfer from the Koreans, Americans as well as some European companies, and we are relying on that technology being passed onto Nigerian companies, with a lot of private sector investment building facilities like LADOL.
So the market is not endangered of being saturated for at least another 20 years.