The Managing Director of the Lagos Deep Offshore Logistics, Dr. Amy Jadesimi, speaks about the potential of the maritime sector and LADOL’S $500m investment in a vessel-fabricating facility expected to generate 50,000 jobs and attract $10bn private sector investment:
How has it been running LADOL for eight years?
As the Managing Director of LADOL, I have a very broad charge. We run an industrial village for offshore drilling and production support. We sell our services to some of the biggest oil and gas companies in the world.
We also provide the seaway, the roads and security. We need a very experienced and talented management team to put all of these together and to run everything on a 24/7 basis.
What are the challenges?
There are a lot of challenges with doing anything anywhere in the world; however, doing it in Nigeria comes with pros and cons. The cons are that you have to do a lot more yourself. The pros are that an abundant workforce is available.
There are some political challenges. For instance, we are the first 100 per cent private and Nigerian company to do this on such a large scale. That made a lot of people nervous, particularly many foreigners who were accustomed to a situation where they come to Nigeria, take what they want and go out. So, when negotiating with foreign companies, it takes some time to find the ones that are willing to partner with us, do the work on the ground and understand that it is necessary to put something in before they take something out.
We were very lucky in the work we have been doing with Total. Total has invested a lot in oil and gas activities in Nigeria and I like to think that they chose to support LADOL because they understood that for them to have a long-term future here; they had to help create jobs and stability. Today, we have the largest shipyard in West Africa to show for their support.
The other challenges have to do with the local environment. We still don’t have a level playing field in the maritime sector. Under this government, the situation has improved and private sector is making progress in that regard, but we have to be vigilant and not get pulled back into a situation where private sector will be chased away again.
The Nigerian maritime sector and an industrial sector should be attracting tens of billions of dollars every year in private investment. The private investors and the private market should far exceed public market and what the government is doing.
But right now, government controls about 90 per cent of the market and private sector controls 10 per cent. We have to turn that around completely; and in order to do that, we need government to keep doing what they are doing but do more to protect the private sector to maintain a level playing field. We also need more private operators to invest in the sector.
How has the economic situation in the country affected your operations?
Having the oil price halved was a shock; but it was also a blessing in disguise. I think the President himself has said that this period of austerity has given us an opportunity to become more self-reliant. In the case of the oil and gas sector, a lot of bad behaviour happened when the oil price was above $100. Nobody cared about saving cost or transparency. A lot of the benefits that we should have derived as a nation, we did not derive them. And that was not just limited to Nigeria; the same thing happened all over the world.
In Nigeria, the oil and gas companies are now insisting on greater transparency. From LADOL perspective, our offshore production and drilling support business is now very popular because for years, we have been offering over 50 per cent cost savings for offshore oil and gas blocks close to Lagos.
We are talking about billions of dollars in cost savings and the reason we can offer such cost savings is because we are doing more locally. So, this is an example of how local content lowers the cost of doing business. And now that the oil price is low, more oil companies and oil servicing companies are taking local content seriously. They are not just pretending anymore because they know that if they work with companies like LADOL, they are going to create more opportunities, more stability and position more Nigerians in the middle class.
If you had competition when the oil price was high and your services were not that much desired compared to these other companies, who were your competitors?
I would not say we had competition. For lots of reasons, including the high oil price, historically, there has not been any competition in the provision of logistic services and the local maritime sector had been dominated by one company. In other words, we had a monopoly situation and over the years, that monopoly prevented private investment from coming in. The monopoly resulted in high prices and low benefit to the local community.
It was not just them. There wasn’t enough push from the oil companies to do the right thing, to introduce competition, to lower prices, and to be more transparent. So, when prices are that high, it forms a lot of bad behaviour. Now the oil prices have come down and we have a president who has put his foot down on a lot of critical issues. This year, things are getting slightly better and I feel like because of the way the oil price suddenly fell, because of the higher participation of local companies like LADOL, when we now come out of this period and the oil prices start to go up, we will not go back again. We will end up with a much stronger economy and a much larger private sector.
With a lot of demand for your services currently, are you under pressure to meet the demand?
I won’t say that. I will only say that there is a lot of interest and it is more of a shift in the way people are doing business. If you look at our wider strategy of industrialisation, we are also building a power plant and roads so that we can attract people to do things like manufacture cars in Nigeria from scratch. And our market strategy is to build that infrastructure ahead of the needs of our clients so that when we go and see our clients, we are not selling them a pipe dream, we are showing them reality.
So, we have to invest tens of millions, sometimes up to a $100m ahead of the market in order to get the market to locate their industrial operations in Nigeria.
What should guide a major project like car manufacturing considering the challenges in that sector?
There are a lot of challenges but if you look at all manufacturing companies, there are the basic things that they want that the free zone provides. The first is 24/7 cheap power. The other is suitable infrastructure. They need easy access in and out, a trained workforce on the ground and a secure area where people can be comfortable. These are all solutions that LADOL provides, which are all built into our business model. This is why we call the free zone an industrial village. The value proposition is that if you are manufacturing at a low price for a market that is immediately adjacent to you, that market will also need after-sales care. So, it is not just manufacturing, you also need to maintain the cars.
If BMW, for instance, can be manufacturing cars in South Africa, why is it not manufacturing cars in Nigeria? Our market is bigger. So, these are some of the industrial projects that we want to tackle and the way we are addressing the issue is by building an ecosystem where these companies can set up their own manufacturing plants right here in Nigeria.
How are you positioning yourself to play a leading role in the diversification of Nigerian economy?
We see ourselves as an investor in strategic infrastructure, meaning the infrastructure we build will result in job creation. For example, the shipyard is on course to create 50,000 direct and indirect jobs over the next decade provided other private investors come and build other facilities. One out of 10 of those jobs will be in LADOL and the other jobs will be outside LADOL.
So, we need other people to invest and build facilities all over the place. But their ability to build those facilities has now been significantly eased by the fact that we have this integration facility in LADOL. It means that if you are fabricating something in Port Harcourt, you just put it on a barge, you send it to LADOL and we integrate it into the vessel or the rail or whatever needs to be built, instead of sending it to the other side of the world.
In the next 10 years, how much can this company contribute to the Nigerian economy?
If Nigeria becomes West Africa’s hub, we will be able to create 200,000 jobs. In terms of attracting investment to the maritime sector, $500m has been spent inside LADOL. We think that if the government maintains an enabling environment, the private sector is ready to bring another $10bn into Nigeria to build infrastructure and equipment to train Nigerians.
What three suggestions would you offer the government to make your job easier?
The first thing I would say is that the government should make it imperative to have a level playing field in the maritime and oil and gas sectors. In other words, preference should not be given to any one company and there should not be any kind of monopoly so that we can make sure that the best companies get the jobs and we can attract more foreign investments.
I would also ask that they create a forum where stakeholders in the private sector can come together and work with government on maintaining an enabling environment. This is about private and public sectors working together, where the private sector is spending the money and the public sector is providing the rules and regulations. Right now, there is not enough interaction between the two parties to get the best.
Thirdly, I would ask that they prioritise the maritime sector as a sector that could earn even more foreign currency than we get from oil and gas.
You demanded for local participation in the Egina project, but local businesses do not outlive their original owners, what are you doing to prevent this from happening?
The issues we had at the start of the Egina project had to do a lot with perception and expectation. This is the first time that a private Nigerian company has made the kind of investment necessary to ensure that the infrastructure built during the project will result in job creation for the next 15 years and will significantly change the landscape for local content in Nigeria.
But because no one had done it before, there was a lot of scepticism from many people who were used to benefitting in a certain way who thought they would not benefit if we put up this project.
But it is a different story now. The stakeholders are all aligned and they see that by building this facility, we have created far more opportunity for every single stakeholder. The majority of jobs created in the facility will be created outside the facility. So, what that means is that if you are a stakeholder who previously would have been earning a living by getting whatever was coming and left once the deal was done and the work was taken out of the country, you are now in a situation where you can demand a seat at the table; you could build your own yard and year in year out that yard will have business because the integration is being done locally.
How sustainable is your relationship with Samsung and Total? Do you foresee any kind of conflict?
Samsung is Total’s sub-contractor, so Total chose Samsung to be the company to build the FPSO; at the same time, Total also provided a lot of support for the shipyard that we built in LADOL. And obviously, Total is here to stay and LADOL is here to stay.
It is very clear from Total’s statement that one of the reasons they wanted this shipyard to succeed is because they want it to be used for multiple projects for the next 20 to 30 years. And they want to ensure that whichever contractor wins the next FPSO project has to integrate in Nigeria.
What is your general assessment of the Nigerian maritime sector?
Historically, the sector has been a wasted opportunity. And there are a lot of reasons for that but let’s not look back, let’s look forward. In looking forward, we see a country that has enough money to develop a lot of its own infrastructure through the private sector. So, we need to stop looking at government to build and pay for things.
The key site we built in LADOL was the first new key site built in any part of the port in Lagos since Tin Can was developed; and Tin Can has existed since early 1970s. That means for 30 years, we did not have any environment other than this private investment from LADOL. And LADOL is the largest private investment in the Nigerian Ports Authority facility. So what we need is more LADOLs. We need more people to step in.
We have tried asking foreigners to come and build our ports for us. They are not going to do it. There is nowhere in the world where they are doing it. There are a lot of Greenfield sites within our existing ports and we need to get private investors from Nigeria to invest in building that infrastructure.
We have to build infrastructure, train our people and bring in equipment. These things are relatively simple to do once the infrastructure is there, given how huge the local market is. And as I said, that private sector know-how also has to be matched with a partnership with government; but this time, not a partnership where we are asking them for money; it is a partnership where we are asking for their support and understanding.
What are the innovations you have brought on board since becoming MD of LADOL?
LADOL has changed a lot. When I started, I was not the MD. Then, we just had a bare piece of land and one warehouse. Now, we have 700 metres of seaway; we have tens of thousands of laden areas and warehousing. We have some of the largest cranes in Africa and the largest crane capacity in West Africa.
Our business model is unique. We have a fully integrated business model. We don’t say to you, ‘come, here is an empty piece of land’ or ‘here is an empty warehouse’. We provide you with solution, so we do inventory management. We provide you with facility if that is what you need. And that lowers the barrier of entry for Nigerians who want to get into this business because they need that huge capex (capital expectation) and it makes it more transparent and a lot cheaper for international oil companies to work with us.
And even their service providers don’t have to worry about capex. So, I would say in terms of infrastructure and equipment and personnel, we have come a long way. But in terms of the contribution to the way of doing business in the oil and gas sector, I would say that we have really disrupted a model that was in existence. This is because it was expensive and we have introduced a new way of doing business that is transparent, value-added and dynamic and that will drive Nigeria towards being the hub for West Africa.