Direct investors have shunned Lagos State in the last six years, preferring rather to set up plants in Ogun State, a neighbouring state with cheaper doing business environment.
BusinessDay’s analysis of data provided by the Manufacturers Association of Nigeria (MAN) shows that Ogun dwarfs Lagos in new real sector investments by 23 percent between 2014 and 2019.
The elephant in the room is the constant harassment of corporate organisations in Lagos by touts unleashed by local governments to collect multiple taxes and levies. BusinessDay recalled that in a December 2019 investigation that micro, small and medium businesses paid 13 different levies and taxes in Mushin, Oshodi and Ikeja local governments in Lagos. Such taxes ranged from television and radio tax to local government levy, ‘land levy’, ticket levy for hawkers, and LASAA fees, among others.
Investors complain that traffic and Apapa port congestions in Lagos make movement of trucks and lives difficult. They say the land tenure system in Lagos has been tougher, making business expansion onerous.
Though Lagos and Kano were responsible for Nigeria’s jump to 131 from 146 in 2020 World Bank Doing Business Report, the challenges faced by businesses in the state arise mainly from local governments and those claiming to represent them, manufacturers say.
Out of N3.353 trillion pumped in new investments in manufacturing and agro processing sectors in six years, Lagos got N928.02 billion while Ogun welcomed N1.682 trillion within the period. BusinessDay analysis shows that while Lagos got 27.67 percent of the total investments, Ogun got 50.16 percent – an indication that the state is now Nigeria’s industrial hub. Thirty-four states and the Federal Capital Territory shared the remaining 22.17 percent, reflecting their unattractiveness to investors.
“There are a few landmarks in Ogun State. Manufacturers and other investors have more room for expansion in Ogun than Lagos,” Ambrose Oruche, acting director-general of MAN, told BusinessDay on the phone.
“Secondly, comparatively, there are fewer taxes and levies in Ogun, and, thirdly, Ibadan DisCo is a little bit better in electricity supply than Ikeja and Eko DisCos (both in Lagos),” he explained.
He pointed out that Ogun’s proximity to Lagos had also provided an advantage, with the state leveraging opportunities in Lagos’ weaknesses.
A breakdown of the data shows that out of N691.77 billion worth of investments made by manufacturers in 2014, Ogun got N514.87 billion, whereas Lagos got N100 billion. In 2015, out of N489.45 billion total new investments made by manufacturers and agro processors, Lagos got N29.79 billion as against Ogun’s N430.56 billion.
Also, Lagos got N94.83 billion value of investments in 2016 while Ogun received N351.13 billion out of N614.55 billion total investments. But things changed in 2017. Out of a total of N508.98 billion investment made in 2017, Lagos received N235.61 billion as against Ogun’s N94.32 billion.
MAN’s data further show that out of N552.64 billion investment in 2018, Lagos welcomed N287.16 billion whereas Ogun got N186.47 billion. More so, a total of N496 billion investments were made in 2019, out of which Lagos got N180.63 billion and Ogun, N105.05 billion.
In 2017, Frank Udemba Jacobs, former president of MAN, told BusinessDay that manufacturers found Ogun a good investment destination due to the government’s commitment to industrialisation.
“Manufacturers are happy with Ogun because they get incentives from the government,” said Jacobs.
Manufacturers said during interviews that they got tax and land rebates in Ogun during the Ibikunle Amosun government, which lowered their production costs in the long run. They also said it was also easier and seamless to get certificate of occupancy (C-of-O) in Ogun than in Lagos from 2015 to 2017.
In the last six years, manufacturers have either moved from Lagos to Ogun or relocated their factories to the state, leaving only administrative offices or small plants in Lagos.
Some of the companies that have done that include Fidson Healthcare, May & Baker, Pure Chemicals, Eagle Packaging, Nycil Limited, and Dufil. Also, some manufacturers in Lagos now have other plants in Ogun to tap cheaper business environment. They include Flour Mills of Nigeria and Unilever.
Jaro Industries, a carton manufacturing company, set up a $12 million inaugurated factory in OPIC’s new Makun Industrial City, Ogun State in 2019.
“Seventy manufacturing companies were established during first four-year tenure of Governor Ibikunle Amosun of Ogun State and both existing and new companies were given some level of incentives and benefits that prompted rapid development in manufacturing sector,” said Bimbo Ashiru, former commissioner for commerce and industry.
Questions have, however, been asked concerning the sustainability of Ogun as an industrial hub, with the shutdown of Procter & Gamble’s $300 million consumer goods plant at Agbara in July 2018. As of the time they shut down, Agbara was notorious for its poor road network and multiplicity of taxes.
“The present administration must provide business-friendly environment to ensure that investors do not exit the way they do in Lagos,” Ike Ibeabuchi, a manufacturer of chemicals, said.
A research done by The Economist in 2015 showed that an average company in Lagos spent/waste 956 hours per year in paying taxes. However, things have changed since 2017, as the recent Doing Business Index by the World Bank shows some positive changes in doing business in Lagos. But they are not enough to dwarf Ogun’s investments in six years.