For the first time in Nigeria’s history, a local company, Lagos Deep Offshore Logistics Base (LADOL), is playing host to a $3.8 billion floating production storage and offloading (FPSO) unit, otherwise called the Egina FPSO. Applauded as first-of-its-kind in sub-Saharan Africa, the project was handled by the Korea-based Samsung Heavy Industries (SHI) on behalf of Total Oil Exploration, with LADOL serving as its local content partner. The Managing Director of LADOL, Dr Amy Jadesimi, asserts that the feat has put Nigeria on the global map. With the achievement, she believes Nigeria is on the threshold of sustainable industrial revolution. However, Jadesimi decries the level of financial scrutiny that businesses have to go through to access loans, warning that unless the federal government urgently makes policies to provide long-term, low-cost financing for small- and medium-sized businesses, the country may not be able to have global giants like the General Electric and Facebook. She speaks with Kunle Aderinokun, Eromosele Abiodun, Bayo Akinloye, and Ugo Aliogo
LADOL a key player in Nigeria’s oil and gas, maritime and logistics sector, how has it been so far?
LADOL is one of the facilities in Apapa port but we are also an industrial free zone. We cover a lot of sectors and in doing that we really understand how the economy is going and particularly how the private sector is faring. What I will say is that in the maritime sector, the Nigerian Ports Authority (NPA) has really done well. I think the Managing Director of NPA is really taking some giant strides in revolutionizing NPA and making it a modern parastatal, running a modern port. Of course, that cannot happen overnight. For instance, when the FPSO was coming, they formed a special committee and brought everybody together; brought in their new tugs and buoys. It was very professional. They were able to stand toe to toe with the international players when it comes to bringing in a vessel which is one of the most valuable in the world. That is really impressive and for a private investor, it means that we can continue to invest in development and reach for these massive projects – even beyond Egina – beyond Nigeria, for West Africa and for Africa. We have the confidence that the NPA can parley with us to make a greater success. I think in terms of the economy – we obviously had a recession but I also look at things from a global perspective. From a global perspective, compared with other export commodities-dependent countries, Nigeria has relatively done well.
If you look at what is happening in Latin America – even a powerhouse like Brazil and you look at what is happening in Nigeria – we are actually doing better. But are we doing well enough? Of course, not. We still need to improve. What the past few years have shown me is the importance of having a striving private sector. What that means is that we need to see more efforts now in supporting the private sector. We need financial reforms so that we can give long-term loans – not just to companies like LADOL but to small and medium-sized companies. We need to create tens of millions of jobs and that means you need to support small, medium and large companies; and to do that we need those financial reforms to go hand in hand with the enabling environment.
Let’s talk about the FPSO vessel that sailed into the country recently. What is happening at the moment?
Our role as far as the Total FPSO was to provide the facility in which the top sides – there are 18 top sides with the giant module that sits on top of the FPSO vessel. Out of these 18, six were fabricated in LADOL, which is the first for local content and going forward we would be able to do many more that for two reasons. First, when we started the Egina project, the shipyard in LADOL was not even built yet. So we have shown that local content capacity development works extremely well. We can build a facility. We can be operational and we can contribute to a project within a shorter period of time than people estimate. So our own facility will continue to support and do more fabrication and more integration. But more important, by being able to receive the FPSO vessel – this is the largest FPSO in the world being 70m-wide and 380m-long, I think must be about three football pitches – we are showing the world that we can receive that vessel and we have the crane capacity. Nigeria currently has the highest crane (lifting) capacity in Africa. Showing that to the world will definitely increase the local demand for fabrication because from now on everybody knows that whatever you manufacture in Nigeria can be fully assembled and integrated in Nigeria as opposed to what was happening before where you manufactured something in Nigeria and sent to the other side of the world to be made part of something bigger.
Naturally, the economics in that situation is not too attractive. The other side is that now that LADOL has received the FPSO whether you are making another ship or an Aeroplane or railway components, all of those pieces can be fully assembled locally. That would naturally and dramatically increase local demands and we are estimating a far increase in local demand for fabrication engineering and that increase will not be satisfied by LADOL. That is why we say that we estimated that 50,000 direct and indirect jobs would be created. For every job we create in LADOL, we think 10 jobs will be created outside of LADOL due to the increased demand for fabrication and engineering. Fabrication yards currently exist across Nigeria, it doesn’t matter what geopolitical zone you are in – we are all in Nigeria. As time goes on we will need more yards to be built so that we can keep more people perpetually employed.
What is the update on the issues LADOL has with Samsung?
Samsung is the contractor that was appointed by Total to carry out the EPC for the Egina FPSO. So what that means is that for this first project, Samsung did the fabrication, engineering and procurement for the FPSO. Going forward, what we are looking at is having a situation where we work with our technical partner that, maybe Samsung, and over an agreed period of time that technical partner transfer technology to us and the other Nigerian companies that they are working with so that similar to what happened in the United Arab Emirates (UAE) within a 10-year period Nigerian companies will have technology to do that EPC work by themselves.
Now that the FPSO had come in, what is the next step for LADOL?
We have been very busy since 2001 fulfilling this long-term vision. The FPSO coming in is an important milestone. But it is a milestone on a very long path which we clearly charted out in the past 17 years. The next milestone that we are looking for is further development within the free zones. We have already started building additional infrastructure. The construction of the power plant is ongoing. We are building new roads and more storage areas. We are doing that to accommodate our non-oil and gas clients. For instance, in the agricultural sector, one of the biggest issues Nigeria faces for agriculture export is the lack of processing and storage facilities. We are building new cold storage and processing facilities so that we can work with the agricultural companies that we are in discussion with to help them export from Nigeria. Many people know that in some agricultural areas such as yam and cashew nuts, we actually have high levels of productions but we don’t export (them). They get exported from neighbouring countries because we don’t have the type of facilities that LADOL is currently building.
Are you looking at the possibility of extending LADOL’s expertise to West African countries to see if they can take advantage of what you do here?
A core part of LADOL’s mission is to make Nigeria the hub. We started out saying that we should be the hub for West Africa. We have now expanded to say we should be the hub for Africa. With the shipyard, we have the highest lifting capacity in Africa. In terms of our neighbouring countries, they will gain a lot of benefits by building manufacturing engineering in Nigeria – because as the largest market, the Nigerian market is large enough to justify the type of investment that LADOL is making. Other neighbouring countries are smaller. Therefore, they cannot justify those kinds of investments. So they can use us as a regional hub for some of those high-value, massive industrial projects that the Nigerian market can cope with. The benefit they get is by working with their neighbours as opposed to working with people from the other side of the world; they get tremendous cost-savings. They also are able to absorb more of the technology, not to mention the fact that you can create a West African period of prosperity because we are able to collaborate, trade with one another and help one another – not just in terms of industrialization but sharing know-how and service provisions. That is really something that leads to prosperity within the region and we know that if we look at the success of the European Union (EU).
The EU is having problems now but when they first came together, it was very successful. One of the keys is whether people like it or not. If Nigeria is the hub, it will lead to great prosperity for everyone. If Nigeria is not the hub and our massive population now has to pay high prices to get services from other places, it is very likely that the entire regional economy will also suffer. It is important to them that we work together and collaboratively. It is beneficial to them to leverage facilities, infrastructure and know-how that we are investing in Nigeria and jointly we can create a prosperous West Africa.
Three years ago, oil prices dropped drastically. The news in town then was that there will be no further investment in FPSOs. Now oil prices are moving up. In terms of investment in FPSO, what are the possibilities?
For us, FPSOs are not really all that; what I mean by that is we are not focused on the petroleum sector exclusively. The real significance of the Egina FPSO coming in is that it proves that you can handle the most complex industrial project in Nigeria. But FPSOs are only going to come around once every five years. That is not the basis you develop a business model. We have actually developed a business model based on a range of other industries outside of oil and gas. So there is the railway, aviation, agriculture and even technology and having that shipyard enable us to participate in all of those sectors. In terms of what is happening in the oil and gas industry, prices are going to go up and down. Honestly, Nigeria has very little control over those prices. So my focus is or I think Nigeria’s focus should be on lowering the cost of doing business. We are blessed with an abundance of natural resources in oil and gas, in crops and minerals and other areas. The important thing is to make the industries we build around these sectors as efficient as possible. If they are very efficient and competitive, it will not matter what global prices are set. We still have a striving industry by servicing our own market, then eventually servicing the international market.
Have you ever thought about the political risk to your business?
In terms of what is happening in the maritime industry and how politics plays into it, I think there are different business models that people pursue at different times. Anybody who has studied economics or even anthropology and development of society, when you have low-income high growth countries at an early stage, they often suffer from monopolies. But as those countries grow, those monopolies become almost unstable because what a monopoly does is to enrich a very small number of people and keep everybody else down. In Nigeria, you also have the fact that we have a private sector that is very resilient and adds a tremendous amount of value. LADOL is proud to be one of the companies in the private sector. In terms of the shifts we have seen happening in the maritime industry, these are really micro-economic shifts. These are shifts that always happen as the country transition into the next stage of development where naturally the private sector will play a bigger role in contributing to the economy and the Gross Domestic Product (GDP). So that is not really a political thing. To me, it has always been clear that it is inevitable that monopolies will fall because everywhere in the world, even in America, they had the Standard Oil monopoly. They had a stronger monopoly than even the ones we have had in Nigeria that fell. Monopolies will always fall. That is a long-term trend as you see around the world as economies develop. In terms of political risks associated with elections, my dream is that of a Nigeria where it doesn’t matter who the president is. We need to get to that point as soon as possible and I think that this administration agrees with us. I think they have put us on a path to a Nigeria where the government will focus on regulation and private sector will focus on business as opposed to the situation we are in now – where 90 per cent of the business is the government. The fall in oil and the economic shock we experienced taught us the lessons that the country will not be able to survive unless the private sector is allowed to thrive. The government has learnt that lesson and if you look at the enabling business environment policies, those policies are actually designed to increase the participation of the private sector. That is what tells me that this government recognizes that we need to move to that place where an election is interesting, but it is not life or death.
Recently you said Nigeria will lead the sustainable global maritime economy. How possible is this given what you said the government has 90 per cent of the economy?
The key thing is that for Nigeria’s economy to develop, the private sector must be allowed to develop. What we have seen is that this government is allowing the private sector to grow. That growth I believe will be highly accelerated because Nigeria is such a naturally prosperous country. The fundamentals of our market are strong. We have a huge market that is poorly served by the local businesses and that is why most things are imported. So if you let private sector strive, there are many business opportunities: small, medium and large. If the government stops standing in the way, I believe the private sector will strive. If you look at what is happening in the global maritime industry, particularly in the areas of sustainability, the biggest issue they are struggling with in wealthy countries is how to redesign or retrofit or in some ways modify without it causing them too much money, jobs and existing infrastructure.
We don’t have that problem. We are blessed with an abundance of business opportunities. There is a huge market and we are just developing the infrastructure and facilities and training the human capital now. The reason I think Nigeria will be able to lead not just maritime, even agriculture and technology, is that if we continue to allow the private sector to thrive if we continue the financial and economic reforms that I mentioned earlier so that our local banks and international banks give us long-term loans. We already have smart hard-working people to invest in new technology and solutions that are much better than the ones currently being used in wealthy countries. Naturally, it will take much longer for those wealthy countries to change the way they do business than it will be for us to develop new ways of doing business and excel in many areas which they are currently leading.
How has the downturn in crude oil price that plunged Nigeria into a recession affected LADOL?
Actually, when the oil price fell it had a positive impact on LADOL. Our value proposition is that we provide services at a much lower cost than the cost prevailing in the market. In fact, the minimum cost-saving that companies enjoy by moving to LADOL for their deep offshore support was 50 per cent. For some companies, it can be up to 80 per cent tremendous cost-saving. And this has been known in the market since 2006 –j it’s been clear. Even that whole period of 2006 to 2016, I had thousands upon thousands of meetings and I never had a meeting where anybody disagreed with me that economically it would be attractive to operate out of LADOL. However, when the oil price was over $100 people behaved irrationally. They didn’t save – and by people – I meant particularly international companies. It is also important for people to realize that these excesses that we are talking about were far more egregious in the West than they were in Nigeria. When we see headlines about how much Nigerians are spending and so on, just know that for every dollar that a Nigeria makes, there is a foreigner making $10 on that same deal. So, when the oil price was about $100, a huge amount of our money was spent outside of the country – a huge amount of our money was paid for international organisations to do works. Yes, local content was also able to make some strides but the efficiency of the local content, the quality of the local content also wasn’t pushed as hard because it was a period of huge excesses.
So, when the oil price fell, the reason I said it was actually a good thing – and I agree with the president on this, it was a good thing – was that when the oil price fell people started to behave rationally. And what is the rational thing to do? When you have a deep offshore and offshore shock, the rational thing to do is to get your services as much as possible from local suppliers. Because everywhere in the world where you have real local content – meaning you are working with transparent, hard-working Nigerian companies that are providing quality products – everywhere in the world you have those dynamics it saves company’s money. As soon as the oil price fell the first thing the international companies did was to rationalize their business model and start seeing where they can get more local solutions. One of the places where they could get the biggest cost-savings was from LADOL and it was no coincidence – the level of local content at LADOL and the way we provide the service also include a high level of local content. We don’t just provide our clients with an empty space; we give them a fully integrated solution. Meaning, if you want us to manage your inventory, we will collect it and put it in a warehouse that we have built. We will electronically tag it and when you want to deliver it we will deliver it for you. You can seat in London and watch on your screen the movement of your cargo, which is all electronically tagged. That is very high local content because we are doing everything as opposed to a scenario where someone wants to sow something in Nigeria, you give him an empty land and say come and build and they do everything themselves. Having that fully integrated value proposition maximizes local content, efficiency and it maximizes cost-saving. The other benefit that you see in the fall of oil price is the higher use of local suppliers. That means you start to create prosperity in Nigeria and this is also important to international companies. Everybody, almost every single day, every single hour, is seeing the migrant crisis. We have seen horrible, heartbreaking scenes. We have cried. Some of us have seen our relatives on the television. The solution to that crisis is not different policies in America or Europe. The solution to that crisis is more jobs in Nigeria. The international companies can play their part by patronizing companies that are providing real local content. That will show that Nigeria is an attractive place to do business which will attract more investments and you can create a virtual cycle. The wonderful thing about all this is we don’t have to guess whether or not this will work. It has worked in the United Kingdom, Norway and Brazil. We know that this works. The fall in the oil price and this sort of crisis that it created, created an environment as well as in Nigeria where we can start to create this virtual cycle of development. The last thing I will say on that is part of the reason we have been able to start this cycle of development in Nigeria, and other countries have not is because we already have a local content act in place. We already had a private sector that was there but was struggling and growing. Our population is not just big; our population is hard-working. Our population is intelligent. We have over 100 million mobile phone penetration. So we have a lot of advantages that other countries do not have.
Statistically, what proportion of your operation is local content?
LADOL is 100 per cent Nigerian. So, we are 100 per cent local. There is nothing like a foreign investor in LADOL.
Generally, what is the biggest challenge you face as a company?
The biggest challenge we face, as is the case with every Nigerian company, is getting adequate finance. By finance, I mean low-cost, long-term loans. The level of financial scrutiny that Nigerian companies go through is huge. I know what LADOL goes through; I can’t even imagine smaller companies going through it. It is ludicrous. The level of security that people are asked to provide is crazy. I am constantly talking about this now because Nigeria is really on the threshold of becoming great; the country is on the threshold of sustainable industrial revolution. But we need the finance. General Electric and Facebook were not just created. All these companies got long-term, low-cost finance and that was what enabled them to create, invent, and invest. One of the major things holding back the country is the access to the right source of financing.
LADOL has plans to list on the Nigerian Stock Exchange (NSE) how far have you gone with your plan?
We have always had that as one of our targets, but it is not something we are going to do in the near term. But I will say in the medium to long term it is something we are looking at. We think that the characteristics of the company make it suitable for listing, but we think to do it now will be premature.
What about your plans to get into the power business, when can we expect to see action in that regard?
To be clear we are not a power company, we are just building power for our own needs. That was why I talked about power plant; we are not a power company.
Let us look at your other engagements. Recently, the Global Maritime Forum elected you to a strategic committee. Tell us about the forum and your role there.
The Global Maritime forum is a non-profit organization set up to promote sustainable development and sustainable maritime sector. The forum’s first event is going to be in Hong Kong in October this year. It is really an interesting forum for me to be part of because it brings together international players at different levels of maritime value chain and that is where I can see where Nigeria needs to improve, where Nigeria can fit in, and most important, I can be a voice telling the world that Nigerians are serious players; that the market is untapped but highly prospective and that it is not a market anybody can afford to ignore.
At a forum, you said Nigeria requires more companies like LADOL and INTELS given the size of the country. Can you tell us more about this?
What we suffered from in the last 20 years is a monopoly that kept the market small. Obviously, if a company wants to build something like the Egina FPSO, they cannot find sufficient capacity in Nigeria to build that entire vessel. Now let’s compare that situation to Brazil: if go to Brazil now they build an FPSO that produce 150,000 barrels of crude oil every 18 months. They have 30 FPSOs in Brazil working right now and they have 70 per cent or more local content, which is where we need to get to. But obviously, we cannot get there if only one company is doing everything. It is not possible. We need thousands, if not tens of thousands, of companies, contributing. We need millions of people working on different jobs so that we have a thriving environment where a company can now come and say, ‘Okay, I need to deliver a vessel not even for Nigeria. I need to deliver a vessel to Angola. I have 50 different companies I can choose from in Nigeria so I am going to Nigeria.’ Whereas right now, you come to Nigeria and you want to do a project for Nigeria, you put out a tender for the project, you only have two companies that respond and both of those companies are foreign companies. That is the situation we are in now. What they have in Brazil where they are building an FPSO every 18 months, something we struggle to do every five years is not acceptable.
What can the government do to address this?
I think the government has made a good start. We are hoping that in the few years they will do more – take bolder steps. This is a time for bold action; we have to cut down the bureaucracy even stronger. We need to see more accountability in government.
The government has put out these enabling policies but they now need to back that up by saying what the penalty would be if the enabling environment is not enforced. If you as a civil servant or minister fail to do what you are supposed to do what is the consequence? We need to see bolder actions being taken to reinforce the policies the government has already put in place. We need to see more support for the private sector. What we have seen so far is government saying, ‘Okay we are going to streamline the processes and government is effectively going to get out of your way,’ which is wonderful. But going forward, we also need to see the government saying, ‘how can we help you?’ And how they can help us is if you are a small business, ‘I am going to enable you without putting up your house gathering the whole family, the whole village has to mortgage in other for you to raise monies,’ which is completely impractical. The government needs to have a way that small businesses can access finance in a more practical way; and for large businesses, we need to make hundreds of millions of dollars of investment. So how can they help us to get access to that kind of money in a low-cost, long-term way?
Following on that, the federal government said it has granted LADOL port status to generate revenue. How is that coming along?
Actually, we were confirmed as a facility inside the Apapa Port as far back as 2010. What President Muhammadu Buhari did was to confirm that and even expand it. By doing that, the President has removed any iota of doubt anyone has that we have all the approvals we need to do our business. Naturally, that has boosted our ability to raise funds. It has boosted our ability to create jobs and we would not have been able to receive the Egina FPSO as easy as we did – or maybe at all – if we have not had that confirmation.
Most of Nigeria’s port activities are concentrated in Lagos while other ports in the country seem to be neglected. What strategy will you recommend to the NPA managers if they ask for your opinion on how to make the ports competitive?
If you look across the country, each port has a unique geography. The main thing we are suffering from is that we don’t have enough activities outside the petroleum sector. Therefore, if I was government I would focus on diversification of the economy. Firstly, by supporting private sector businesses in areas ranging from agriculture to technology, even medicine – all these different areas that will generate the requirements for export from our ports. I will then look at each port and develop infrastructure that is suitable for businesses that are set to thrive in various areas. Warri and Port Harcourt are areas that have tremendous potential for a range of agricultural products. And, the import to the export of those products can exceed that of other commodities in Ghana and Ivory Coast. Therefore, the first thing to do is look at where the factors that we need to pull businesses in are. Secondly, we need to look at what is the infrastructure that we need to build to enable import and export for those sectors in those ports. The most important thing is that we need to diversify so that when you are looking at this strategy you are specifically looking at what you can do outside the oil and gas sector.
Perhaps, we should have congratulated you earlier on your Breakthrough Award in Paris – congratulations.
Thank you. We won that award with Samsung and Total.
Going forward, what’s the next step?
We hope that the next breakthrough project will completely be in a different area and as part of our drive for sustainability we are looking at using alternative sources of energy. We are even looking at how we can expand in waste to power. We want to help to clean up the waterways. We want to help to clean up all the plastic wastes we see everywhere. Hopefully, the next award we get will be in that area.
How do you unwind given your responsibilities and hard work at LADOL?
In terms of being a workaholic, when you love what you do that’s what makes you a workaholic – and I really love what I do. I am very passionate about it. I feel privileged to be able to do what I do. It is not a question of working all alone – working hard – there is so much to do in Nigeria. There is so much to do in LADOL. There are new initiatives. The period we are in now – it feels hard – to be a Nigerian means life is hard. But guess what: life is actually hard everywhere. And the difference that Nigerians have – the privilege that we have as Nigerians is the potential for success; the potential for the brilliance that we have. We have more reasons to be hopeful. I don’t really look at things from the work side; I often look at it from the point that there are many things to do and so little time to do them. I unwind on the job. If you love what you do, you find joy in working.
You are passionate about your job. What really motivates you?
When you work in a company like LADOL you are able to see in real-time the impact you are having on the economy, the infrastructure and the facility from one day to the next. You are building so many things – I’m privileged to work with a wonderful team of people. We recently were approved for ISO 9001 certification. The reason we were able to get that was that the entire company pulled together. The motivation I get comes from the joy of seeing results of our work – also from working with such a wonderful group of people.
Specifically, what is LADOL doing in the area of waste-to-energy solutions?
The first phase of our power solution is our LNG-powered plant. The second phase is going to include solar power and waste power. Specifically, we are currently designing, with our engineers, waste-to-power solution based on the wastes we are going to be collecting in the free zone and turning that into waste energy. There is potential to go further in terms of collecting wastes – from the waterways and things like that – and that will be probably what we will do in the third phase.
You were recently elected into the B Team Africa. What is that all about and LADOL’s role in it?
The B Team Africa was set up last year and I joined the team in April this year. It is an affiliate of the international B Team. The idea of the group is to promote specific agenda that are Africa-focused and that we have decided that our focus will be on creating prosperity in Africa through sustainability. What I mean specifically is: we want to promote, first of all, anything that helps to change the negative perception about Africa. We want to promote initiatives that support small- and medium-sized businesses – and initiatives that give easy access to finance as well as making sure that every development that happens, happens sustainably. I think the difference between the B Team Africa and the Global B Team is because we are very focused on Africa’s situations; and because we are on the ground with the various members working in various organisations across the continent. We are more intimately aware of the challenges. We are more practical in terms of our approach to addressing those challenges. But at the same time it is important that we work with the international B Team so that we can get access to the most important people in the world so could drive the initiatives home.
Human capital development in your sector while critical is said to be sorely lacking. Do you think companies like yours have a role to play in developing human capital in Nigeria?
LADOL is setting up an upskilling academy so I will say in the first phase of our development we will focus on this development, key roles, water treatment, etc. Then, we will focus on operational facilities. We are focusing on human capital because in order for us to be successful we need to have a 100 per cent – or close to a 100 per cent – Nigerian employment as soon as possible. The upskilling academy is going to focus on training and development over the long term to fill skills gaps that are identified in the free zone and also in the country. We also want to make sure that the academy covers a wide range of different skills. So, we are not just going to focus on oil and gas alone. We are not just going to focus on what we are doing now. We are going to train people in finance, welding and even nursing. We are also working with NGOs, carrying out training in other parts of the country. We will also partner schools in the South-South and the North as well.
Where do you see LADOL in the next five years?
In the next five years, LADOL will look very different. We will have a wide range of different sectors representative of the free zone. We would have built our sustainable power solution and be on the path to make Nigeria the hub of Africa.