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Open-door policy allows Nigeria advance

Interview - October 1, 2012
An ability to do business across the world is helping country´s sectors evolve

Last year Nigeria grew by 7.4%, and it is an economy built on oil revenues. Everybody cites the need to diversify, but what areas do you think it can diversify into?

The first sectors that come to mind are agriculture, consumer goods and heavy industry. These form the bedrock of the growth of a country that is developing. There are opportunities in these sectors in Nigeria. We are the country with the most potential in Africa, a six-hour flight to Europe, and a seven-ten day ship trip. We have always been a traditional market for Europe ever since colonial times whereby the highest trade volumes between Europe and Africa were in Nigeria. This has changed over time given the needs of the buyers and producers. Europe has changed however, and Africa has lost its edge over the raw materials´ business. We need to reactivate and regenerate growth and trade partners within Europe and other parts of the world. There is more of a focus now on finished goods, so this means we need a base for manufacturing. But one thing that never changes is consumption – it has always been there and always improves and its sophistication changes as civilisation grows in an area.

When investors look at a country, they consider the environment. They consider security, governance and the ease of doing business. Your institution is trying to help with the ease of doing business here in Nigeria. What successes have you had, and what projects have you launched?

It is very important to know that an absence of conflicts does not automatically mean peace and vice versa. It depends on which one is more prominent than the other. It is obvious that there are a few conflicts going on here, just like there are all over the world, but that does not mean that there is no peace or security. On average, I would say despite the issues in some parts of the country, this does not reflect the entire situation. There is still a suitable environment for investment in Nigeria. I think the free zones create an enclave within the situation by providing a country within a country, so conflict is not present in these zones. It is within a buffer where you are almost separated from the other issues. Free zones are regulated separately and this gives continuity and stability to them.

One of the key concerns for investors when coming to a free zone is the communication of the regulatory framework between the federal government and the free zone. What level of interaction and what security do investors have that ensures that free zones are here to stay and that they are not going to be at the whim of government?

Since the first free zone was established in 1992 via regulation, the free zone law itself has actually improved from what it was in 1992. That ensures stability. For every free zone that is established, it has its own peculiar regulation. The free zones have regulation particular to the type of activity taking place in them. We have free zones across the country, but no two free zones are the same. That is why you have regulation. It has been developed in collaboration with all government agencies, the Nigerian revenue agency, immigration agencies and all the security agencies. We all work together as a team, and there is no conflict whatsoever as to creating an enabling environment for any investor coming in.

What incentives are there for somebody to choose Nigeria over anywhere else in the region?

Most investors make decisions based on the market and the production they are involved in; it is not based on security or other issues. We have never had a situation where an investor has decided against Lagos because of security issues or otherwise. It is always based on the market, the stability of the product and the products they want to manufacture and export. All the free zones are stable, with adequate security in them. The incentives are in all free zones, but we are trying to market the efficiency of our zones, in terms of delivering and ease of business within the free zones. We have the financial incentive package to rival any international free zones but where we believe we define ourselves is in the delivery of an environment where companies can maximise performance.

Where does the structure of free zones in Nigeria stand, and how many free zones have been completed?

The free zone construction has different stages, including granting licences, and commencing the free zone. Most of the free zones we have on our books are at beginning declaration stage. Before you can start a free zone project, you need a licence. That is what we call declaration. When you have a licence, you look for finance to develop the free zone and then commence the process of building. You cannot operate a free zone based on feasibility studies. You need to get a licence from the federal government through a recommendation from the Honourable Minister of Trade and Investment. There is always a two to three year gap between the time you get the licence and when you are on the ground. Most of the free zones we have listed on our books are declarations, and the ones that are on the ground are those that have obtained the declaration before now. Kano, Lagos, Lekki, Snake Island, Onne and O.K. Free zones are all up and running. We are currently reviewing all the licences, and those which have not commenced operations beyond the grace period permitted will be revoked, and new companies can come on board.

The ministry of Trade and Investment mentioned yesterday that given the situation in Europe, companies are looking for new markets, and competition for investment is huge. At the moment you are competing with Ghana and South Africa. What gives your free zones a competitive edge and why should investors look to your free zones compared to other areas in Africa?

You mentioned human capacity and consumption. If you put South Africa and Ghana together, they consume less than what we consume and our purchasing power and output expenses are higher than these two countries. But the only advantage they both have over us at the moment is infrastructure, which we are also investing heavily in. Do not forget that most people who come to free zones in Nigeria are also targeting Nigeria, and we have a principle that we should add value to every product we consume. If our rate of consumption is high and based on imports, every item we add value to within our economy is a plus for us. It is also a plus for free zone vendors to sell within Nigeria as costs such as shipping and storage are reduced. Even though we do not have formal trading agreements with countries that are around Nigeria, Nigeria services feed these countries, even as far as central Africa. So by coming to Nigeria´s free zones you are targeting almost two thirds of Africa.
Two months ago the UK government announced that it is looking to establish 14 economic zones in Europe, so this trend of regenerating growth in all economies is paramount. We are pursuing the same fundamentals. We are adding value to everything we consume. In this way we are taking action to release Nigeria´s potential.

A lot of investors at the moment have an opportunity to get a first-mover advantage. Who are currently operating in your free zones that you would say are success stories?

Nigeria spent virtually the same amount of money we earned from selling crude oil on various capital projects. Most of these contracts usually go out to facilities outside of the country. Because of the establishment of free zones, we have contracts being awarded within the country. About two months ago, the President also commissioned a big infrastructure project in Lagos, an FPSO vessel which was constructed by a company operating in a free zone in Nigeria. That alone employs over 2,000 people. We also serve other regions within Africa. Before now, these kind of contracts used to go to Ireland, but now we have the opportunity to do this within our own economy. Because of the deregulation and the PIB (Petroleum Industry Bill) that is due to be passed, the downstream industry is also looking to keep operations within the country. Another vital source of investment is power infrastructure. It takes time for capital projects like this to move through the phases towards completion. This capacity will be online in the coming years making Nigerian manufacturing very attractive to outside investors.

Many states are more developed and advanced, and in some cases they are being held back. What would you like to see happen to make it easier for your free zones to develop and push forward when it comes to infrastructure?

10 or 15 years ago Cross River State wasn´t as developed as it is now. Today you can barely get a piece of land at a reasonable price. Fortunately I had the opportunity of serving as a general manager in Calabar Free Trade Zone in 1996, and when I was there, there wasn´t a single investor. I watched it grow from one free zone to about ten that are active now, and about 14 or 15 of them are just declarations. Along with this growth, there have been opportunities for us to have our own infrastructure development.  We are signing IPP agreements directly with investors. The potential is there.

One of the key areas for Nigeria at the moment is branding. Your job here is to attract investment and bring investors into an environment that is ready for them. How do you communicate the message that “Nigeria is open for business” to investors?

We do marketing through the embassies, and the ministry is starting to establish regional trade offices, which we hope will be ready in a month or two. We used to have these, but they have been reinvented by this Minister. The President is also our chief marketer. We are not in conflict with anybody or at war with any country, and our policy is dominated by doing business with everybody across the world. That is where we are pushing. From the beginning of 1996 to date, the inflow has increased tremendously.

We also embark on trade missions; we go to investor forums across the world, and we target individuals who we know there, and industries that want to come. We just came back from the US after having a meeting there with the Department of Trade. We are trying to see how we can have a relationship. They have an oversupply of agricultural vehicles etc., and here in Nigeria we need all of these. But there is no communication. Businesses themselves are not venturing to go out. How can you complain about being overstocked, when there are countries around the world that need everything you manufacture and we can afford to pay for it? We are trying to develop relationships with manufacturing companies in the US by approaching the US Department of Trade. We can also add value. The whole world must be moving and dynamic. We cannot do it alone, and neither can they. There must be movement over a period of years, both on their side and our side. The US and Europe cannot be complacent when Africa is yearning for growth. It can be a win-win situation if there is more movement and collaboration.

What would you like the ‘Made in Nigeria’ brand to stand for in the future?

I was trained in agriculture produce. Today we are the largest producer of cassava but we consume them all. But we still have the capacity to double that production and bring the price down. We have the natural environment to produce every tropical fruit that is required by the whole world. I think there are opportunities in agriculture, and we have not even started. That would be my selling point to reach the world. If we start with agriculture, everything else follows. We have the people, the land and the weather – we could not be luckier.

On a personal note, you are a specialist in your field. You mentioned you are a general manager in Calabar, so you understand the concerns of your members, and you also have to relate with government. What are the challenges you face on a day-to-day basis at the moment that you really want to overcome, to make sure that these free zones can develop very quickly?

The challenges are within the human element of growth. The challenges are not fundamental, but they are mostly due to a lack of understanding on the part of colleague agencies who we work together with. Most of the time, these issues are resolved quickly. But the conflicts are minimal. The freedom is not in a loss of revenue – the freedom is in doing business. It takes time to be able to explain this to them. The freedom is also limited to the environment we are in. We have more records of activity in the free zone than what we have in the general economy.
NEPZA is in charge of the Cross River State Free Zone as well. Calabar is a branch of NEPZA.

How did your experience prepare you for your position here?

I think the reason why I got here is a result of my activity in Calabar. When I got here as CEO, things changed. I was used to being in the field on the front lines. We used to have our activities regulated in circulars, but we now have them documented. I am trying to reduce a lot of the waste in the offices especially in administration.

What would you like to see done before you think about leaving or retiring from the agency?

I would like to see the system harmonised and for NEPZA to have the authority to separate its role from regulating to management. We are regulating but managing at the same time at the moment, and I would like to see this separated. It would be better if NEPZA was a pure regulator and the management was independent. There is no way you can regulate and manage at the same time.

What final message would you like to send to the readers?

Nigeria will grow bigger than what it is, but the growth in the country must be sustained. It is like a war that has to be won. I would like to speak to the people and government of Nigeria that the issue of economic growth is very important. It is the greatest strength that Nigeria has as a state. They need to grow our economy and provide for the people within the country. We are growing at a very fast rate and middle-class unemployment is growing which is a danger to stability. I want them to take it more seriously.