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Agricultural Development Bank of China
Project

South-South In Action -- Nigeria: Lekki Free Trade Zone Project

September 18, 2020


Abstract : The United Nations Office for South-South Cooperation (UNOSSC) and the China-Africa Development Fund (CADFund) have published the South-South in Action series of seven case studies showing the great impact made by the CADFund in Africa in advancing the achievement of the UN sustainable development goals (SDGs).

The United Nations Office for South-South Cooperation (UNOSSC) and the China-Africa Development Fund (CADFund) have published the South-South in Action series of seven case studies showing the great impact made by the CADFund in Africa in advancing the achievement of the UN sustainable development goals (SDGs). 

The cases present some of the best practices in South-South and triangular cooperation initiatives and provide a window for Southern partners to learn and recognize the opportunities for collaboration that exist in the South. 

As one of the important initiatives of the Forum on China-Africa Cooperation, the CADFund has been committed to serving China-Africa cooperation with a market-oriented approach, giving full play to its financial advantages and guiding role as a platform in the 13 years since its establishment.

The CADFund introduced Chinese enterprises as well as Chinese capital, technologies, production capacity and management experience which help create employment opportunities, increase tax revenues and enhancing productive capacities of Africa.

The seventh case of this series focuses on the construction of a free trade zone in Nigeria, jointly invested by the China-Africa Lekki Investment, the government of Lagos State and Lekki Global Investment Co., Ltd. (Lekki Global), which has brought beneficial changes to the local economy and social life. 


Overview

Nigeria is the largest African country, with a population of about 190 million in 2018, and it is also one of the largest African economies, with a large population and huge market demand. However, its industrial structure is not balanced or diversified. The oil industry dominates the market, far outstripping other industries. Given those conditions, the leaders of China and Nigeria exchanged views on China-Nigeria cooperation on the construction of the Lekki Free Trade Zone (FTZ) in Nigeria at the 2006 Beijing Summit of FOCAC, and both countries expressed support for that project. In March 2006, the CADFund, the China Railway Construction Co., Ltd., China Civil Engineering Group and other enterprises set up the China-Africa Lekki Investment Co., Ltd. (hereinafter referred to as "Lekki Investment"). In May of the same year, Lekki Investment, the government of Lagos State and Lekki Global Investment Co., Ltd. (Lekki Global) jointly invested in the construction of the Lekki FTZ. The establishment of the FTZ provided a new development model for use by the Government of Nigeria to develop its economy. Many advanced enterprises have opened offices in the zone, which has helped to optimize local industrial structure and development of the regional economy, alleviate employment pressure, and increase fiscal and tax revenues, solving problems concerning the economic development of Nigeria.

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The Lekki FTZ is located on the Lekki Peninsula southeast of Lagos, the capital of Nigeria. The peninsula is flat and scenic and is currently being constructed as a satellite city of Lagos. It is Nigeria's fastest growing zone. The Lekki FTZ covers an area of 30 km2 and has 99 years of land tenure and 50 years of franchise. It is a development model of a "comprehensive industrial new town" and will be developed into a comprehensive special economic zone integrating industry, trade and logistics, bonded storage, residences, entertainment and tourism. Since 2008 when the construction started, the project has invested more than 13 million naira (approximately $1.9 million) in community affairs and has created more than 1,000 jobs for local communities. In the future, the FTZ will focus on the development of processing and manufacturing industries as well as trade and logistics industries. It is expected to become a "large platform for China-Nigeria cooperation in production capacity and equipment manufacturing", with a total output value of nearly $2 billion and local employment of about 50,000 people.

The Lekki FTZ adopted the public-private partnership (PPP) model, which enabled the Government of Nigeria to participate in the project through priced land concession. The project is jointly funded, constructed and operated by China and Nigeria without loans. The PPP investment model has greatly enhanced the capacity of Nigeria for sustainable development in building FTZs and developing capacity.

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Operation

The management model of the project is "government and enterprise", with China and Nigeria jointly participating in the operation and management. The highest authority is the Board of the project, which has 10 members; China nominates 6 directors and Nigeria nominates 4. The Board of the project meets three times a year to discuss Lekki Investment (the joint venture) major strategies and management issues. The selection of the Board chairman will be made by the Board of the project in consideration of the interests of all shareholders and in accordance with the principle of the best interests of the company. The management personnel of the company are also jointly appointed by China and Nigeria, with the General Manager and the Chief Financial Officer appointed by Lekki Investment and the Deputy General Manager appointed by the government of Lagos State.


Impact

Promotion of local productivity and level of economic development

By the end of December 2019, the Lekki FTZ had completed a total investment of $171 million. A total of 84 enterprises had entered the zone and started operation or construction, bringing in an accumulated investment in the zone of $200 million. In 2019, the Lekki FTZ achieved a total output value of $74.75 million, which generated $11.35 million of various taxes paid to the host country and 1041 job opportunities for Nigerians. 

Prioritization of local communities and creation of local employment opportunities

The Lekki FTZ pays special attention to promoting the employment of villagers in local communities. The company itself not only gives priority to the employment of villagers but also requires enterprises entering the zone to give priority to the employment of local villagers. The enterprises are required to formulate training plans and carry out systematic skills training to enable local villagers to fit into their new positions better and faster. According to statistics, as of March 2017, the total number of local employees in the Lekki FTZ had reached more than 3,000. In addition, the Lekki FTZ actively supports and encourages local college students to seek internship opportunities with companies based in the FTZ. By the end of 2016, 20 students had been offered internship positions, with accommodation and a monthly stipend provided.

Active integration of the local society

The Lekki FTZ has built the following projects for local communities: 6 toilets in four surrounding communities, a 30-metre-deep water well together with a water tank, two 50-metre-deep water wells with water tanks, a septic tank and a percolation well, a 700-metre-long and 6-metre-wide bauxite road, and an office building for the local police department. 

In the case of the village children who have no money for school fees or who are in urgent need of medical treatment, the Lekki FTZ lends a helping hand and makes timely financial contributions to solve the difficulties of the villagers, such as providing mattresses for community hospitals, repairing community vehicles and sponsoring community elections. These measures have been well recognized by the local community and have improved the relationship between the zone and the villagers. The Lekki FTZ has also sponsored important activities such as the Lagos Expo and the boat racing festival, a traditional festival in Lagos, which have earned the Lekki FTZ a good reputation and wide recognition from the local government and residents. 


Replicability

The operation model of the project is replicable in other African countries that are in urgent need of developing their manufacturing industry. The Lekki FTZ model can be applied in neighbouring countries to build and develop FTZs, expand the influence of China-Africa cooperation to develop capacity, and promote the capacity and further develop the manufacturing industry in African countries. (Source: United Nations Office for South-South Cooperation, China-Africa Development Fund)

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Keyword: CADFund South-South Cooperation

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