June 23, 2020

Saving Foreign Investments in Lagos Export Free Zone

Saving Foreign Investments in Lagos Export Free Zone

By Ikanga Obot

Since President Muhammadu Buhari came to power in 2015, he has made commendable efforts to encourage local and foreign investments in the country.

President Buhari has not only mounted international campaign for inflow of foreign investments into the country but has also taken deliberate steps to improve the ease of doing business in Nigeria.

Following the measures put in place by President Buhari’s administration, the ease of doing business in Nigeria improved considerably barely two years after he took over power.

For instance, the World Bank ranked Nigeria 145th position out of 190 countries in the Ease of Doing Business index for 2018, as the country moved up 24 points on the World Bank’s Ease of Doing Business.

The report had indicated that Nigeria had moved up by 24 points from 169th position on the 2017 ranking and also 170th position on the 2016 ranking to 145 in the World Bank’s 2018 report.

According to the World Bank, Nigeria alongside El Salvador, India, Malawi, Brunei Darussalam, Kosovo, Uzbekistan, Thailand, Zambia and Djibouti are the top 10 improved countries worldwide, after carrying out numerous reforms to improve their business environments.

Before President Buhari assumed office, policy summersault, excessive bureaucracy and other anti-business policies by successive administrations had made Nigeria one of the most difficult places to do business.

But President Buhari changed this narrative and sustained Nigeria’s impressive performance in 2019 as the country was ranked 131 on the World Bank’s Ease of Doing Business 2020 Index released in October 2019.

According to the World Bank, Nigeria moved up 15 places from its 2019 spot and was tagged as one of the most improved economies in the world for running a business.

An obviously elated President Buhari had celebrated this feat on his verified personal Twitter handle, @MBuhari, saying “Nigeria’s 15-place rise on the World Bank’s 2020 Ease of  Doing Business Index is welcome news. We‘re now ranked 131st, from 146th last year, and up 39 places since 2016, when we established the Presidential Enabling Business Environment Council (PEBEC). Our goal is a Top 70 position by 2023.”

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However, certain actions and inactions of the federal government in recent months have the potential to reverse these gains and threaten the confidence of foreign investors in Nigeria’s operating environment.

For instance, foreign investors were alarmed by a recent media report that President Buhari had directed the Nigerian Ports Authority (NPA) to restore the Federal Government’s approval of a 25-year lease agreement with the Lagos Deep Offshore Logistics Base (LADOL).

When viewed from the surface, the Federal Government’s action would seem as part of the efforts to restore investor confidence in Nigeria but the reverse is the case as the action will discourage foreign investors.

When NPA sanctioned LADOL for violating the terms of the land lease, foreign investors had hailed NPA for ending the regime of monopoly and opening up the Lagos Free Zone for more investments.

Apart from creating monopoly and chasing away other local and foreign investors in the free zone, LADOL was accused by the NPA of shortchanging the Federal Government.

Specifically, LADOL allegedly shortchanged the Federal Government by subleasing 11.2426 hectares of land out of the total 121 hectares leased to it at an outrageous amount of money.

NPA revealed that LADOL collected an outrageous $45 million (N16.2billion) from a third party for the 11.2426 hectares of land for which it paid only $524,105 (N37.73 million) to NPA.

LADOL was also accused of monopolistic tendencies and chasing away foreign investors from the free zone.

Since LADOL was given the lease by the previous administration led by the Peoples Democratic Party (PDP), the company’s anti-business policies made it difficult for investors to patronise the free zone and the free zone has remained largely an undeveloped swamp.

So, investors heaved a sigh of relief when NPA took a bold step to terminate the contract so as to bring in more investors and restore investor confidence in the system.

NPA consequently leased 11.24 hectares of developed portion to another third party.

NPA also granted a fresh lease for 5.7574 hectares of developed land, and 69,2874 hectares of undeveloped land to LADOL.

From the foregoing, it is obvious that only less than 17 hectares out of 114,552 hectares were developed after over 20 years of LADOL’s management of the zone.

The most worrisome aspect was that even the foreign investors that developed the 17 hectares were frustrated out of the zone.

It is against this backdrop that foreign investors are worried by the Federal Government’s purported reversal of NPA’s laudable initiative to encourage competition and attract more investments in the zone.

Foreign investors believe that LADOL used its better understanding of the local political environment to manoeuvre its way and regain the lease at the detriment of foreign investments and the Nigerian economy.

While LADOL’s promoters will continue to smile to the banks, the Nigerian economy will continue to suffer due to lack of investments in the free zone.

….Obot writes from Calabar, Cross River State