Ladol is very much focused on building capacity in Nigeria
Dr. Amy Jadesimi, Managing Director , Lagos Deep Offshore Logistics Base , the 100-hectare free zone and logistics hub, talks to MEET THE BOSS on advantages in the low oil price environment, best practices in the Free Zone and how the private port facility could help in bringing in FDIs into the country.
Pioneering appears to be a common theme incorporated into new businesses. How does Ladol embody the pioneering vision?
Ladol has scored many firsts. We are the first 100% Nigerian 100% privately developed port facility in Nigeria. We are also the single largest local content capacity developer with our USD 300-million shipyard, which is the largest vessel construction and integration yard in West Africa.
Pioneering is a very challenging thing to do particularly when you have an established market with very strong incumbents who are not happy to see the market disrupted and who do not want the market to be more transparent and efficient. In spite of the challenges faced, Nigeria has definitely entered a new era where we are going to see a lot of domestic growth and job creation. And I strongly think that’s going to be possible due to us having a strong political regulatory framework on the one hand and a huge amount of local long term private investment on the other.
To what extent does Ladol act as an ‘amplifier’ for the oil and gas sector, giving the country a much greater role on the West African scene than it would have without the port?
Ladol Free Zone is actually an industrial free zone so we cover sectors outside of oil and gas as well. However, our focus is on strategic investments and infrastructure—- building infrastructure that has a multiplier effect, for example our ship yard has a 9 to 10 times multiplier effect on job creation. So, for every job created inside the yard, there are 9 to 10 jobs created outside. We can calculate the multiplier effect based on analysis from economic studies on the impact of similar yards in other parts of the world. In addition, there is a huge amount of unmet local demand in Nigeria which is currently being met internationally. Our local content in real terms is around 10 or 15 percent which is extremely low for such a large market, for example Brazil has 70% local content. Having 70% local content is one of the factors that made Brazil the 6th largest economy in the world, local content also significantly reduced their production costs, which are 50% of those in Nigeria. Local Content will have an even bigger impact in Nigeria, by increasing the percentage of real work done locally from 15% to 70% we’re going to create a win / win situation, with GDP growth and job creation benefiting the Nigerian public and private markets while international companies operating in Nigeria benefit from drastically lower costs. Local content also drives economic diversification, with jobs and technology being created in a number of related support services as well as strengthening of the banking sector through greater inflow of foreign currency and higher returns from local investments.
What obstacles has the drop in oil prices created for the Free Zone and what have you done to mitigate the risks?
LADOL has been fully operational for a decade and our value proposition is that we provide large cost savings (over 50%) and safe efficient operations for industrial activity in Nigeria. For example, oil companies with offshore oil and gas blocks can save a minimum of 50% on their costs just by moving to LADOL for offshore support. When the oil price was above USD 100, many companies behaved irrationally and stuck with high cost, inefficient solutions. With the oil price hovering between USD 30 and USD 50 oil companies are looking for solutions just like LADOL, to lower their operating costs and make their businesses in Nigeria viable.
LADOL’s investment is continuing, but these are long-term investments, our infrastructure and facilities are built to give a return over a 10-year period and to last for a hundred years. So the short term volatility in oil price is not something that distracts us. In fact periods of time when the oil price is low are actually a good time to invest because investment is cheaper during such periods.
How has Ladol increased its West African footprint?
We are very much focused on building capacity in Nigeria in order to fulfill one of our key missions which is to make Nigeria the hub for West Africa. We are using our capacity built in Nigeria to attract business in from from the sub-region. Even though many countries on the African continent have now discovered oil, Nigeria is still by far the largest producer and potential producer of oil and gas on the continent. The reserves that we have, particularly considering the fact that there’s been very little exploration in Nigeria in the past decade, mean that we can afford to build the largest facilities and infrastructure for oil and gas manufacturing and support in Nigeria, whereas other markets are too small to justify such large investments. That makes us the natural hub for a lot of high value, large scale activities such as the integration of FPSO’s (Floating Production Storage and Off take) vessels. Our neighboring countries welcome these developments as well, because instead of sending their vessels and people to the other side of the world, they can just send them down the coast to Nigeria where local content helps reduce costs, particularly when we improve the level of the human capital capacity in the country.
Why was Ladol sited in Lagos?
In 2001 when we started looking around for a location, we looked for a location that could handle the largest vessels in the world. And because of its short and well dredged channel, Lagos has the natural geography that makes the easiest location in Nigeria into which to bring these vessels. And we have to remember that Nigeria is not competing with itself; we are competing with South Korea, Singapore, Norway and some of these countries have natural drafts in some of their ports of up to 20 meters. So first and foremost, what we looked out for was a geography and operational environment that favored the different types of activity we planned to do and it just so happened that the geography in Lagos favors bringing in very large vessels. Then, we looked at other factors like the turnaround time, available space etc….
What is the turn-around time like at Ladol?
Deep offshore activity is very expensive because downtime of one day can cost you millions of dollars. So when people are carrying out deep offshore exploration and production across the world, they require support from a fully integrated logistics base, that can give them 24/7 operational support and an 8-hour turnaround time, i.e. the vessel can come in and out 24-hours a day within 8 hours. There are very few truly fully integrated logistics bases in the world, because they have to the custom built and designed, with the offshore market support in mind. LADOL is now of the handful of fully integrated deep offshore logistics bases in the world, offering on site industrial support, offshore support fully serviced and furnished offices, catering and hotel services. In addition, LADOL base is particularly unique because in addition to being a fully integrated deep offshore logistics base we can also receive the largest vessels in the world at our quayside and we have the largest crane capacity in Africa.
What other types of ancillary business could Ladol venture into?
LADOL is a high value industrial Free Zone, so we are building general infrastructure to support a range of manufacturing and industrial activities from agricultural processing to car manufacturing. Currently we have the largest capacity pipe coating company in Nigeria, Africoat, working in LADOL and we see many other industrial companies coming into the Zone in the next three years. Our development will then help drive the development of an industrialised Nigeria. As Nigerians, I think we should focus on making the most of the competitive advantages we have in all the different regions and attracting private investment to create factories across the country. And because we’re competing with the other countries in the world, we have to give ourselves the best chance of success by making the most of all the resources that we have across the country.
What are your thoughts on the economy, in general?
Well, for the country in general, I think we’re going to see a lot of improvement. We’ve seen a lot of dislocation and corrections happening this year and we’ve felt the impact of the drop in oil price. But we have to look past this turmoil and use this time as an opportunity to bolster our manufacturing base, reduce our use of foreign currency and drive local job creation. Made in Nigeria is no longer a nice to have, it is a must have so we have to use those difficult times to start to refocus our economy on fundamentals like having a strong manufacturing and agricultural base. We are beginning to see that in the public and the private sector that this is the direction that people are moving in. It’s going to be tough this year but if we stick to this new economic plan we will see benefits from next year and beyond.