Oct. 2, 2020
Free trade zones are not new to Nigeria. In fact, the country's federal military government established the Nigeria Export Processing Zones Authority at the end of 1992, and the Oil and Gas Free Zone at Onne (OGFZ) in 1996. However, according to A Review of Nigeria's Free Trade Zone Scheme, published by Kachifo Limited in 2015, previous zones have left much to be desired. According to their figures, free trade zones earned only USD8.3 million in forex and contributed only NGN58.4 million to the government. However, all is not lost for Nigeria's free trade program. According to the World Bank's policy note on Nigeria's economic zones, the Lekki Free Zone and the Ogun-Guangdong Free Trade Zone have made real progress in terms of onsite infrastructure, with several committed firms already operating in these zones.
The Lekki Free Trade Zone (LFTZ) is perhaps the more impressive of the two, thanks to the coming deepwater seaport for which construction has just started. LFTZ is located 65km east of Lagos, with the Atlantic Ocean to its south and Lekki Lagoon to its north. LFTZ plans to be a multi-use trade zone, with planned residential, commercial, industrial, logistics, and recreational development. As its CEO, Tunde Sodade, told TBY, “The free zone is particularly suited to export-oriented businesses, and we are encouraging entrepreneurs to establish more export companies within the [zone]." Like many other large infrastructure projects, LFTZ is part of a JV featuring Chinese and Nigerian stakeholders. Chinese consortium China-Africa Lekki Investment Co. Ltd (CALIC) has a 60% stake, the Lagos State government will hold 20%, and its sub-entity, Lekki Worldwide Investment Ltd, will hold the remaining 20%.
Costing an estimated USD400-500 million, infrastructure to be built will include roads, landscaping, water supply and sewage, power supply, telecommunications, gas supply, industrial workshops, warehousing, logistics, and storage facilities, residential facilities, and even environment protection facilities. Developers say more than 100,000 new jobs will be created once the zone is completed. Furthermore, the zone will be a driver of building further infrastructure in the area: the planned Lekki-Epe International Airport will need roads to get to it. Not only will this second airport serve as an important mover of goods for free zone, it will also help local residents make their flights, as traffic in Lagos has only increased in recent years.
Indeed, LFTZ might even help with the never-ending problem that commuters working in Lagos face daily. In addition to serving as an industrial hub, LFTZ aims to create community-living spaces with its planned residential development, Alaro City, where residents can commute traffic-free to work and school. The integrated, mixed-use “city" within the free trade zone will measure over 2,000ha. Companies already invested include Ariel Foods and HMD Africa, with the first residential phase of 500 apartments being developed by Universal Homes. Building developments like Alaro City is important, Alaro City CEO Odunayo Ojo told TBY, because “we need cities where the quality of life can be as good as it is in other parts of the world, where you can cycle to school or take a jog in the evening and not feel threatened."
While free trade zones are often highlighted for the foreign exchange they bring in, they can also be drivers of national employment. According to World Bank estimates, free zones account for over 1.5% of national employment throughout MENA. As Sodade explained in his TBY interview, “free zones have the capacity to suck up unemployment where skilled labor is available. Job specific training for the unskilled is also more available in free zone environments."
Furthermore, free zones, especially in Nigeria where basic access to infrastructure such as power and water can be hard to come by, are especially good for SMEs. As part of its promise to better Nigeria's economy, LFTZ has made supporting SME clusters one of its priorities. Though it may be a challenge, Sodade told TBY, supporting SMEs is worth it, as “ultimately, SMEs will be the backbone of our economy; the more SMEs are encouraged, the stronger the overall economy of the country will become." And a stronger economy is certainly something Nigeria needs.