Back in 2018, The Business Year talked to Seni Edu, Managing Director of Eko Support Services, on the Oil and Gas Free Zone Authority, traffic congestion in Lagos, and plans for the coming years. We thought it would be nice for PFN members and interested readers alike to read this interview. 2021 has looked really different for many. We plan on doing a follow-up interview this summer with Seni to see what has changed and how things are now? but for now, read this week’s throwback.
How would you assess the current business environment in Nigeria?
It is definitely better in 2018, though it took longer to turn around from 2017 than we had hoped. We now see some real activity with stability in the foreign exchange market, higher oil prices, and the government understanding the challenges better. It took the new administration a bit of time to assess the situation and put its policies in place. The end of 2017 through to 1H2018 has definitely been much better thus far.
Has the government’s policy to promote local companies, industry, and the Made in Nigeria brand worked?
The Made in Nigeria campaign resulted not only from policy, but also from circumstance. It was expensive to import anything, and we realized the country did not need to do this. There was a shift to businesses operating at a commercial level that made sense. Firstly, because people could not access the dollar and secondly, it was difficult to price one’s goods in naira when businesses materials were imported in dollars. The focus turned inward to determine what could be produced in country. People also started focusing more on trying to export. This showed it is possible to operate here despite the transportation infrastructure challenges. People started realizing it is possible to use made-in-Nigeria raw materials for their finished products. Many international companies moved out of the country as well because the unfavorable forex situation meant it did not make economic sense for them to stay here.
How did the international companies leaving Nigeria impact your client base and business?
Many of our clients were in the oil and gas service sector; hence, there was a significant impact. We had to shift our focus from predominantly oil and gas clients; now, we have many commercial clients in Nigeria as well. This forced us to look at a different model, particularly partnering with other companies to have backward integration of our services. We are also considering doing things directly ourselves because the more of the chain we can manage and control, the better the solution we can provide to clients. Especially in logistics, it is about finding solutions for our clients to create a better platform, and that way we can grow our business.
Would you tell us about your talks with the Oil and Gas Free Zone Authority (OGFZA)?
The OGFZA has moved on from its initial regulations; for example, it is now self-funded rather than being funded through the Ministry of Trade and Investments. OGFZA is now more autonomous today and seeks to promote the free zone. It is currently helping us to increase Eko Support Services’ footprint beyond the port. Any area we have outside the port needs to be annexed to the free zone so we can still manage the logistics as free zone-to-free zone movements without customs clearance and so forth. Clients may also want to set up small assembly plants to add value to their goods and services, though we do not have room for this within the port area, hence the need to expand the zone. The current free zone administration has engaged with other government agencies, such as customs, better. They are all on the same page so the system is more efficient, which creates an ease of doing business. This has been a big focus, especially in the ports.
What are the challenges for businesses like Eko Support Services, despite the progress made to date?
The biggest challenge remains the traffic congestion on Apapa Road. Many people use water transportation as an alternative, though this solution cannot be used for cargo in most cases. The turnaround time for trucks significantly delays matters for us. The time taken has increased by around 150%. A truck that used to take three days to deliver to Lekki and come back to Lagos Port can take up to nine days now. The government’s security agencies seek to control the chaos where trucks queue up outside the port, and this helps slightly. The delays have huge economic impacts, especially for cargo coming into the port to support the offshore oil and gas industry. The authority is looking into the option of removing containers from the port by barge. The problem is that this adds to the cost in terms of chartering barges, having cranes in place to load and unload at each end, and renting a jetty to use. In addition, consumers here are sensitive to any price increase that manufacturers would have to impose to cover these additional transportation costs. There is no incentive to manufacture if one cannot even break, even due to the logistics costs.
Do you see the road logistics situation improving in the near future?
We are still nine or 10 months away from the road network improving. The new road is being done; however, trailer parks need to be built where trucks can wait, off the road. There are many truck breakdowns, though another big problem was trucks blocking the roads. If there is somewhere for them to wait to come into the port, this will make a big difference. The congestion and waiting times will improve once both these solutions are up and running properly. Another solution the port authorities are looking at is other ports, such as Lekki Port and Badagry. However, these options are not on the horizon for another two or three years.
What are your expectations from 2019?
We hope 2019 will not be a volatile year due to the elections. We hope none of the results are challenged such that whichever administration comes in will be able to set up its team relatively quickly. As the business environment picks up, 2019 will see an improvement on 2018 in terms of activity levels and some of the policies will come to fruition. Hopefully 2019 will be a better year, as long as we do not have any issues with the elections. For Eko Support Services as a company, we want to get the technology and software we require, which will have to be custom-made for us. We are in talks with bright young programmers here, as well as with a company in the US about designing and assisting us with exactly what we need. If we manage to do this and increase Eko Support Services’ footprint, we will be able to provide a better and complete logistics solution, not only to the oil and gas sector, but to other sectors as well.