Chinese builder completes US$1.5 billion deep water port in Nigeria
- Lekki Deep Sea Port, in Lagos state, can handle 1.2 million standard-sized containers a year
- Able to accommodate vessels with draughts up to 16.5 metres, it promises to become transshipment hub
Designed to handle 1.2 million 20-foot equivalent units a year, it will be one of the largest deepwater ports in West Africa and help Nigeria meet growing demand from large vessels.
The city’s existing ports at Apapa and Tin Can Island faced constraints on expansion and lost a considerable amount of business to ports in other countries in the region, such as Ghana, due to deteriorating infrastructure, including roads.
In July, the heavy-load carrier Zhen Hua 28, which is registered in Hong Kong and owned by Shanghai Zhenhua Port Machinery, arrived at the port with the equipment needed to put the finishing touches on its infrastructure.
The construction and development of the port was undertaken by China Harbour Engineering LFTZ Enterprise, a special purpose vehicle that was awarded a 45-year concession by the Nigerian Ports Authority on a build, own, operate and transfer basis – a model of infrastructure financing that has gained traction in Africa recently as Chinese policy banks become more cautious in their lending for risky projects.
The port is one of a growing number of projects funded by Chinese enterprises through a combination of debt and equity in public private partnership deals as some African countries experience debt distress. Investors in PPPs recover their money from operating the projects or charging fees like road tolls.
He said that by October 2019, China’s PPPs involved over 9,000 projects with a total investment of 14.2 trillion yuan (US$1.97 trillion).
Lui said Chinese participation in overseas PPP projects was largely driven by commercial forces, the host-government’s acceptance of the PPP model and whether a suitable legal framework had been established.
“By the end of the last decade, we started to see a significant demand by host governments to structure major [belt and road] infrastructure projects as PPPs,” he said. “The successful completion of the Lekki Port PPP project is an example of how the [Belt and Road Initiative] evolved and adapted to market conditions and stakeholder demands over time.”
He said PPPs typically involved complex negotiations between stakeholders and required a high degree of expertise and competence from participants.
In 2020, China Harbour Engineering injected US$221 million of equity capital into China Harbour Engineering LFTZ Enterprise. China Development Bank then advanced a US$629 million loan facility for the construction of the port, designed to make Africa’s most populous nation a logistics hub.
China Harbour Engineering is the majority shareholder with 52.5 per cent, followed by Singaporean conglomerate Tolaram Group with 22.5 per cent, the Lagos state government with 20 per cent and the Nigerian Ports Authority 5 per cent. The completion of the port paves the way for container terminal operator Lekki Free Port Terminal, a subsidiary of French container transport and shipping company CMA CGM, to take over the port in readiness for the start of operations.
At an event on Monday marking the completion of construction work, which began in 2020, Babajide Sanwo-Olu, the governor of Lagos state, said that besides providing thousands of direct and indirect jobs, the port “will position Lagos as a new maritime logistics hub not only in West Africa, but in the whole Central and West African region”. He promised to expand roads leading to the port to six lanes to make it easier to move cargo from the port.
Cui Jianchun, China’s ambassador to Nigeria, told the event the project was “of great significance for promoting belt and road cooperation in Africa”.
He said the new port, which has two container berths that can handle large cargo vessels, would also help Nigerian commodities reach international markets.
Lekki Deep Sea Port is in the Lagos Free Zone, which is fully owned by Tolaram Group, and investors in the zone are expected to benefit from tax concessions.
The port is expected to generate US$361 billion over 45 years, contribute more than US$200 billion to government coffers and create close to 170,000 jobs.
At Monday’s event, the chairman of the port’s board, Biodun Dabiri, said its ability to handle larger vessels with draughts of up to 16.5 metres (54 feet) promised to turn Nigeria into the region’s transshipment hub.
“This project is a poster child for how effective global cooperation and collaboration can bridge the infrastructural gap in Nigeria,” he said.
Lauren Johnston, a China-Africa researcher at the South African Institute of International Affairs, said Lekki, the first deep water port in Nigeria, would improve cargo flows in the country, which has the biggest economy in Africa.
“Some of Nigeria’s neighbours had been redirecting trade to ports in Ghana because Nigeria’s were too clogged,” she said.
Johnston said ports were highlighted as one of the Belt and Road Initiative’s five pillars when it was launched to foster “unimpeded trade”.
“One can’t develop easily without a functioning port,” she said.