Nigeria has an infrastructural deficit that is difficult to calculate. Every industry is restricted by a lack of power, by inadequate and failing road infrastructure, by crowded ports, and by the paucity of rolling stock to transport goods across the nation’s vast geography. President Buhari mentioned infrastructure in his inaugural speech, calling it “dilapidated,” a signal of its importance to the new administration. After moving into the presidential villa at Aso Rock in Abuja, he also announced that he had inherited an almost empty treasury. The Nigerian government cannot spend the billions of dollars required to improve and massively expand the country’s infrastructure at todays or next year’s oil prices. That, however, is not the end of the story. Outside of the highly liquid Arabian Gulf states and China where governments have the hard cash to finance construction, many government strategists in emerging economies have settled on concession-based and public-private partnership (PPP) models to fund infrastructural expansion. Treasuries with billions on hand are growing increasingly rare in an era of plummeting commodity prices and tightening US federal reserve policy, but investors seeking sustainable long-term returns are eager for opportunities on the African continent. Before 2005, Nigeria had almost no concession-based or PPP projects. Two mega-projects in Lagos State are testing the waters in resplendent fashion through exclusive deals with the state government. Eko Atlantic and the Lekki Free Zone (FTZ) are both joint ventures between private companies or state actors and the Lagos State government. In both cases, land has been given in long-term agreements in order to stimulate massive investment. Together they may change the face of Lagos. Eko Atlantic has been widely reported for its audacity of vision and scale. It is being developed primarily by Ronald Chagoury, a longtime Nigerian-Lebanese businessman with close ties to successive governments in Nigeria. The vast new landscape created by the hundreds of thousands of tons of sand that have been deposited, in what was only a few years ago part of the Lagos shipping channel, is impressive, but perhaps equally so are the terms of the legal arrangement under which Eko Atlantic will exist. Eko Atlantic is classified as its own municipality, and will operate under its own bureaucracy which, while overseen by that of Lagos State, will operate independently with an eye towards easing investor access. Eko Atlantic will also be an offshore banking zone (pending approval by the Central Bank, the CBN) and allow free movement of capital by investors. Most significantly, the agreement between Lagos State and the Eko Development Company is essentially a concession, granting what was formerly water to the company in exchange for billions in investment. With any luck, Eko Atlantic will transport at least part of Lagos into the next decade. Its legal provisions certainly make exposure to Nigerian markets safer for multinationals, and its existence may reform public opinion about Nigeria all over the world. It will also boast its own power, water, and security, ensuring that, at least for major companies who can afford to be located there, business can continue as usual and not be dependent on an ultimate solution of the nation’s infrastructural problems. Although striking, Eko Atlantic will do little to promote industry in Nigeria as it is conceived as primarily a residential area. There is another project just over an hour outside Lagos called the Lekki Free Trade Zone that may give Nigeria its first working steel mills. The Zone offers similar protections as Eko Atlantic including tariff free importation of materials for use within the zone, tax free operation within an offshore banking zone (pending CBN approval), and on site power, water, and security. The Lekki Free Trade Zone is unique in Nigeria and on the continent because the investment vehicle that owns the 50-year lease on the land, namely the Lekki Free Zone Development Company (LFZDC), is 60% owned by the Chinese Civil Engineering and Construction Company (CCECC), and 40% owned by Lagos State. The zone has been in process since the early 2000s, but the first phase of the Zone’s generating plant opened in mid-2015, attracting tens of millions in Chinese investments including a steel mill and other industrial projects. The Zone’s infrastructure, including its power plant, housing for tens of thousands of workers, roads, and much more is all financed by the Chinese government. The Zone is part of the China’s policy of creating conditions favorable to Chinese companies abroad, although in Nigeria there are still pieces of the agreement that have not been finalized. Officials in the CCECC suggest that once the terms are complete there will be a major influx of investors. However, the LFTZ has already advanced the concession model in Nigeria. Close to the LFTZ is the $1.65 billion Lekki Deepwater Port, on which construction began in May of 2015. It will be the only post-Panamax port in sub-Saharan Africa and its being developed by the Singapore-based Toloram Group, which has various interests in Nigeria. There is also the proposed Lekki-Epe International Airport, which will be constructed on a PPP basis. The airport has seen sincere interest from foreign and international investors interviewed for The Business Year: Nigeria 2016, but at the time of press a binding agreement has yet to be signed. Nigeria is famously rich in labor, resources, and land–the raw material of a strong economy. Concession and PPP-based infrastructure developments may soon transform the pace of construction in Nigeria. By 2020 Eko Atlantic, the Lekki Deep Water Seaport, the LFTZ, and possibly the Lekki-Epe International Airport will have been developed with private funds and expertise, but will benefit the Nigerian economy by delivering much-needed fundamentals. As always, it’s the execution that’s tricky, but there is cause for optimism. If the above mentioned projects prove successful, concession-based development will likely become a popular model across the region and may offer a solution to pervasive governance and financing issues that have thus far curtailed the construction of crucial infrastructure.
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