• Friday, March 29, 2024
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BusinessDay

With bet on Lekki Port, China makes biggest investment in Nigeria

NCS puts January 2020 as timeline to commission Jos, Funtua Dry Ports

China Development Bank and Tolaram Group, the parent company of the Lekki Port LFTZ Enterprise Limited, will sign a $629 million deal on the much-awaited Lekki Deep Sea Port in Lagos today.

Sources tell BusinessDay that this will be China’s single biggest equity investment in Nigeria and is in line with its Belt and Road Initiative – a global Chinese strategy targeted at building infrastructure in 152 countries and international organisations.

The deal, according to a source close to the Tolaram Group, is a major step towards the financial close on the funding for the construction of Nigeria’s first deep seaport project, estimated to gulp over $1.6 billion.

Lekki deep seaport is jointly owned and developed by the Tolaram Group, China Harbour Engineering Company (CHEC), the Nigerian Ports Authority (NPA) and the Lagos State Government as equity investors.

While China Harbour Engineering Company (CHEC) owns 52.5 percent equity, Tolaram Group owns 22.5 percent while the Nigerian Ports Authority and the Lagos State Government have 5 percent and 15 percent equity respectively.

The port project is jointly financed by a consortium of six banks, which include the African Development Bank (AFDB), the European Investment Bank (EIB), Standard Chartered Bank (SCB), RMB, Africa Finance Corporation (AFC) and Standard Bank.                                                       

Tolaram, which has the concession to build and operate the port for 45 years, appointed the China Harbour Engineering Company (CHEC), the world’s biggest marine engineering company, as the Engineering, Procurement, and Construction (EPC) contractor to oversee the design, construction and commissioning of the port project under the supervision of an American project management consultant known as Louis Berger Group.

Lin Yichong, Chairman of CHEC is also expected at the signing ceremony today.

“This is a real game changer for us. Doing project financing of this scale, it is not easy to raise money for a factory. You need $30 million, $50 million. But you want to raise $800 million? That’s a whole different ballgame,” Haresh Aswani, Tolaram’s managing director for Africa, told Financial Times on Tuesday.

The Lekki Deep Seaport will help in solving one of Nigeria’s export problems and will be financed with $630 million from the China Development Bank, and $470 million in equity from the state-owned China Harbour Engineering Company, which has a 52.5 percent stake and will be responsible for building the port.

Authenticating this, Sekonte Davies, executive director, Marine and Operations of the NPA, disclosed at a stakeholders meeting in Apapa recently, that promoters of Lekki Port project, which is supposed to have concluded the financial closure of the port project on 21st of September 2019, shifted the date to 21st of October, 2019.

He said upon completion, the port will help shippers to achieve economic of scale in shipping, which requires larger vessel to lower the cost of freight per Twenty-foot Equivalent Units (TEUs) that comes to Nigeria.

“Shipping companies are building bigger vessels and the draft needs to be bigger as well to accommodate them,” he said.

It was proposed that the multi-purpose port would cover area of 90 hectares with three container berths, long dry bulk berths and three liquid berths. Initially, the port will handle close to 1.5 million TEUs of containers annually, and this would be upgraded to 2.5 million TEUs in future.

The channel will be dredged to 14 meters depth, which will be deepened to 19 meters as traffic grows while the breakwater is 1.5 kilometers long.

Already, the consortium developing the port is said to be working with Dangote Group to fix the port access roads.
Nigeria’s Apapa and Tin Can ports have overshot their capacity, with about 5,000 trucks seeking access to the two ports in Lagos every day, according to a maritime report released by the Lagos Chamber of Commerce and Industry (LCCI).

Nigeria loses N600 billion in customs revenue, $10 billion (N3.6trn) in non-oil export sector and N2.5 trillion in corporate earnings across various sectors on an annual basis due to the poor state of Nigerian ports, the LCCI report said.

“Government is trying to ensure it decongests the ports, but it is just the sheer volume that is the problem,” Paul Gbededo, CEO of Flour Mills of Nigeria, told BusinessDay recently.

“If we construct the roads, it makes orderly arrangements for trucks to enter, but it is still beyond the capacity. Technology needs to be employed and other infrastructures need to be deployed,” he said.

AMAKA ANAGOR-EWUZIE, ODINAKA ANUDU & ENDURANCE OKAFOR