In this interview, the Managing Director of Lagos Deep Offshore Logistics Base (LADOL), Dr. Amy Jadesinmi, speaks on the importance of the local content policy and collaboration among indigenous players in the maritime industry.
What is the downside of the drop in crude oil price for the logistics sector?
In terms of our business and local content, the falling oil prices actually play in our favour. The premise of LADOL and the new entrants coming into the market is that we create value by making it easier for foreign companies to do business in Nigeria.
This situation can actually be a positive one for local content; we have committed companies like Shell who have big upcoming projects but they are under significant price and cost pressure. For such companies to make the decision to go ahead with these projects, we have to continue to lower our costs and increase our efficiency.
What we have to worry about is the future. Our government has made a good point that we have to diversify the economy. Now we have more of an incentive to diversify the economy, invest more in agriculture and other industries. That is why LADOL is not just about the oil and gas industry; it is about maritime, manufacturing and people who want to bring in fertilizer plants, who want the kind of environment we provide to set up their industries.
A lot of stakeholders complain about capital flight in securing contracts . What has LADOL’s experience been like in this regard?
Over the past decade, we have seen a complete shift in the attitude of the government and the private sector- both on the foreign and domestic side; a shift towards local content. There is no way you can be involved in a project in Nigeria now and not consider local content before you even think about the other factors.
Yes, we still have the vast majority of projects spending more than 70 per cent of their funds outside of the country but the trend is towards increasing local content. I firmly believe if this trend continues and is supported, in the next 10 years, we would see a shift from 10 or 15 per cent to at least 50 per cent local content. The shift is happening because in recent times we have seen unprecedented levels of local investment in Lagos, the South-south, middle belt and in the agricultural sub-sector.
That means Nigerians have started taking control of their country at all levels; by doing that we have now started to create the same positive change action we saw in Brazil and China.
Why do you think this situation of capital flight persists?
The world is not set up to favour Nigeria or any African country. That has been the status quo for decades. The point is that this perception is not going to be changed by foreigners. Foreigners are only going to do what is in their best interests. If they are doing business in Nigeria, of course, they would do it in such a way that they can take the jobs and finances out of Nigeria because that is in their best interests.
We have to recognised that we live in a world that will not do us any favours so we have to be better than our foreign competitors. It is not enough to be as good. You have to offer something better than the status quo in order for people to patronise you.
If we were building a company like LADOL in Europe or US, we didn’t have to spend $150million before we got any business. But when you operate in an environment where economically, people have invested heavily in a system that takes business outside Nigeria, you have to do something overwhelmingly attractive for them to do business in Nigeria before you can attract the jobs back.
What extra work did you do to make LADOL attractive to foreign businesses?
Logistics bases and industrial villages like LADOL are often custom-built. They are built in line with certain contracts or business expectations. If I was doing this in Europe, I would simply meet with all the top companies and tell them that they need to undertake certain projects based on their track record. Then I would tell them that I could build the ideal facility for the projects. Based on that, you then raise your funds. It is not easy; you would still have to invest some money.
In our case, we had to finish the base, be completely open and operational before we got our first contract. We had to clear the land, build the quay wall, warehouses, workshops, fully serviced offices, hotels, etc. It took us seven years from when we started to get our first contract; success doesn’t happen overnight. It was a massive investment but necessary because the international community has very little faith in us so they are not going to believe it until they see it.
When we first started out, an expatriate in an oil company told me that LADOL in Nigeria was the equivalent of the United States putting a man on the moon. People did not think that the kind of massive projects we are doing in Nigeria was possible. It just shows that in addition to the economic challenges, there is also a perception issue that we have to recognise. If we want to grow our economy and grow jobs, tackling that perception in a positive way is one of the things we just have to do.
Do you get patronage from Nigerian shipping companies?
As local participation increases, we see a lot of indigenous players. One of the high-profile ones for us is Caverton Helicopters. We do a lot of work with NISA; they have also started to propose something that we are a big proponent of and that is collaboration.
When we collaborate, that is when our private sector shipping fleet will be able to compete with the international players. Most Nigerians own between one and three vessels on an average so we can’t compete with international companies who have a fleet of 100 vessels.
We also get increasing patronage form the West Africa sub-region in terms of vessel and rig repairs. I expect however that going forward, as the level of fabrication that is done in Nigeria increases, we will see increasing amount of export of offshore fabricated pieces and engineering.
In order to even attack the West African market, we need to probably increase fabrication capacity by ten fold. Even with the local content at 10, 15 per cent, we find that there is not enough in-country capacity to reach the low levels of local content that is the target of most projects. So if we want to go from to percent local content to 50 per cent we need like five more Nigerdocks, three more Saipems and three more LADOLs.
Nigerians are missing a trick; we do a lot of damage to ourselves by not collaborating. It is insignificant to what we face trying to get business in the international market. In order to meet the local capacity, we need facilities in Baylesa, Port Harcourt and in Lagos and Warri. We also need to develop capacity in the Middle Belt and in the North.
We do ourselves huge damage in Nigeria when we don’t collaborate; we don’t have to pick and choose. Once we have enough capacity to meet our local demands that is when we can start thinking about being the hub for West Africa. We are literally turning away tens of millions of dollars each year because we don’t have the capacity and by continuing the infighting between stakeholders. It is hugely ironic to the point of being sad because Nigeria needs jobs.
What are the prospects of the logistics and maritime sectors?
Logistics and the maritime sectors in general have a great potential to become a major foreign exchange earner. 70 per cent of the maritime imports that come into West Africa go to Nigeria; we have got the highest population in Africa. Without becoming the hub, we would constantly be facing higher costs and lower efficiency. We would get into a negative cycle.
The maritime industry can help by building more deep seaports, which the government has already committed, to do. We need more deep seaports for larger vessels.
Then for the related industries, we need trained Nigerians manning these vessels, we need trained Nigerians being exported to other countries to help set up their facilities and man their vessels. We also need to look at the ship and rig repair sector.
That is what LADOL has been focused on for a long time. If people know that they are going to bring in their ships to dock and they would be repaired and maintained in Nigeria, it would help a great deal because all of these elements are vital for us becoming a hub. Nigeria needs to become a one-stop shop for the maritime industry in West Africa and that would generate tens of billions of dollars and tens of thousands of jobs. Bearing in mind that we are a coastal country, that is a must to do.
What are the challenges of the logistics industry?
Finance is the biggest challenge for any infrastructure developer. Getting finance is very challenging. Getting people to lend you money for future business and getting people to lend you money based on fundamentals is very challenging.
The other challenges are human capital; this is the life blood of any company and getting the right sort of people into the company, training them, keeping them, helping them to develop is a massive ongoing challenge. Even after building the infrastructure it never goes away. The necessary environment is another challenge. We have the Local Content Act that is fantastic and it has enabled us to be where we are today but we still need some other things to happen.
The Petroleum Industry Bill needs to be passed on the oil and gas sector side, the Cabotage Act needs to be developed to be more effective, we need it to be clear within the maritime industry that you shouldn’t be taking your ships outside Nigeria for crew changes, or crewing with foreign crews, or using foreign facilities to maintain your ships and sending the bills back to Nigeria.
The Cabotage Act needs to be strengthened. We also have challenges with the contract/tender structure. Getting a contract in this industry takes months to years. In the interim, you have very little businesses to sustain yourself.
So things can always be improved but we are now past the point of no return. I see a bright, positive future for Nigeria, but if we want to continue to get to a point ten years from now, where we can look on these challenges and smile, we need to keep working together, collaborating and investing in our country.
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