After conquering Nigeria’s noodle market, company turns to infrastructure

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After conquering Nigeria’s noodle market, company turns to infrastructure



Singapore-based Tolaram sees opportunity in infrastructure with new port and free zone.

In late January, the largest container vessel ever to berth in Nigeria, the CMA CGM Scandola, with a capacity of 14,800 standard containers, docked at the new Lekki Deep Sea Port on the outskirts of Lagos. At a depth of 16.5 metres, this port, which officially opened about a year ago, can accommodate significantly larger vessels than the existing ports in Lagos. It has been hailed as a transformative development for Nigeria’s marine logistics sector.


The Lekki Deep Sea Port is a key component of the Lagos Free Zone (LFZ), an 850ha private industrial area situated 65km from Nigeria’s largest city. Both initiatives are spearheaded by Tolaram, a Singapore-based conglomerate with interests in consumer goods, fintech, and infrastructure across Asia, Africa, and Europe. The company, which has been operating in Nigeria for several decades, primarily as a manufacturer and distributor of fast-moving consumer goods (FMCG), aims to improve the operating environment for companies in Africa’s largest economy through these infrastructure investments.

Dinesh Rathi, CEO of the LFZ, says that when Tolaram conceptualised the zone, research showed that port logistics and electricity supply were critical challenges for local businesses. Nigeria, a country of over 220 million people dispatches less than 5,000 MW of electricity to the grid, forcing companies to rely on generators for up to ten hours a day or more. Additionally, Lagos’s existing port infrastructure is plagued by congestion and excessive red tape, causing significant delays for both importers and exporters. The 2022 Container Port Performance Index by the World Bank ranks Lagos’s Apapa and Tin Can Island ports 260th and 308th, respectively out of a total of 348 ports. These rankings are derived from the average port stay per call, which is the total time from a vessel’s arrival in port to its departure from the berth.


Tolaram’s expansion into Africa

When Mohan Vaswani, now Tolaram’s chairman, first travelled to West Africa in 1977, he discovered an untapped market for consumer goods in Nigeria. Tolaram capitalised on the unmet demand through imports, initially selling textiles. By the late 1980s, it began importing Indomie instant noodles. In 1995, Tolaram formed a joint venture with the Salim Group, the majority shareholder of Indofood, an Indonesian listed company that holds the Indomie trademark and technology. The next year, they established Nigeria’s first instant noodles production facility. Today, the company manufactures and markets instant noodles under the Indomie and Minimie brands in Nigeria and Ghana, alongside a variety of other snacks, cooking oil, pasta, and flour.


In 2014, Tolaram formed a joint venture with Danish dairy outfit Arla Foods to import and package dairy products under the Dano brand and distribute Lurpak butter in Nigeria. The company also collaborates with multinationals like Colgate-Palmolive and Kimberly-Clark to offer a range of oral and personal care products. In 2015, Tolaram and American food giant Kellogg’s established a joint venture to produce and market cereals and snacks in Africa, as well as instant noodles under the Kellogg’s brand within and outside the continent. Tolaram has so far invested US$500 million in 24 manufacturing facilities across Nigeria.


Moving into infrastructure

From its experiences of operating in Nigeria, Tolaram recognised the need for a new deep sea port. Taking learnings from the Jebel Ali Free Zone in Dubai as well as examples from India and China, Tolaram realised the importance of building an industrial ecosystem around the port, which led to the idea for the LFZ. The master plan for the zone was developed by Singapore-based urban planning outfit Surbana Jurong, and the zone was established in 2012.


Rathi anticipates the zone’s 300ha first phase to be entirely completed by the end of 2024. The only remaining tasks are the completion of a pipeline to supply gas directly to the power plant – currently, gas is transported by truck – and the finishing of a commercial tower that will accommodate various company offices.


The LFZ’s development has been partly funded through bond issuances, collectively raising about US$100 million. In the most recent issuance, in March 2023, the Lagos Free Zone Company raised NGN17.5 billion (approximately US$38 million at the time). With a 20-year term and an annual fixed interest rate of 15.25%, the bond drew investments from 10 Nigerian pension funds and an insurance company. According to Ashish Khemka, chief financial officer of the Lagos Free Zone Company, the bond issuances show that domestic institutional investors have the ability to finance critical infrastructure in Nigeria.


Initially, Tolaram encountered challenges in launching the port. In 2012, the project was on the brink of financial closure with the backing of a consortium of six banks and institutions, including Africa Finance Corporation and Standard Chartered Bank. However, Nigeria experienced political and financial instability in the following years. Oil prices halved between June 2015 and February 2016, the naira devalued by a third, and business sentiment reached a new low. By the end of 2016, nearly all its partners had withdrawn, citing high risks. “That was the lowest moment,” said Navin Nahata, managing director for fintech and infrastructure at Tolaram, in an earlier interview.


Tolaram redesigned the project and brought on China Harbour Engineering Company as an engineering, procurement and construction partner and investor. The current shareholders in Lekki Port LFTZ Enterprise Limited (LPLEL) – which was awarded the concession for the development and operations of the facility – are China Harbour Engineering Company, holding 52.5%, Tolaram with a 22.5% stake, and the Lagos State Government and the Nigerian Ports Authority owning the remaining shares. The port officially started operations in April 2023.


Creating a West African industrial hub

Nigeria’s manufacturing sector contributes about 8% to the GDP and employs 7% of the workforce. Its capacity to create jobs and reduce the country’s reliance on imports presents a compelling argument for enhancing the industry, especially in areas where Nigeria has shown potential, such as fertilisers, food packaging, and FMCG.


However, the manufacturing sector faces several challenges. Last year, the American consumer goods company Procter & Gamble (P&G) announced it would close its manufacturing operations in Nigeria, shifting its focus to imports. The company, which generated approximately US$50 million per year in Nigeria from sales of brands like Pampers diapers, Ariel detergent, and Oral-B toothpaste, cited currency issues and a challenging macroeconomic environment as reasons for its exit. P&G’s downsizing is indicative of a wider trend of multinational corporations withdrawing from or reorganising their operations in Nigeria. In August, British pharmaceutical giant GlaxoSmithKline (GSK) also announced its exit, following earlier statements about the economic challenges and a foreign currency crisis adversely affecting its operations. Earlier in 2023, Unilever withdrew its OMO, Sunlight, and Lux home and skin care brands from Nigeria.


Over the past year, the Nigerian naira has experienced a significant depreciation, reaching record lows of over NGN 1,600 to the US dollar in recent months, although it has since strengthened considerably. This depreciation was due to various economic factors, including eased foreign currency controls, reduced foreign investments, and a decline in crude oil exports, a crucial revenue source for Nigeria. The weakening naira has reduced the converted dollar earnings for foreign companies.


In addition to currency-related issues, manufacturing in Nigeria is hampered by inadequate electricity, poor quality roads, an underdeveloped rail system, problematic port infrastructure, complex customs clearance and port management protocols, and a shortage of skilled labour.


The LFZ could, however, be a major boost for the sector as it addresses many of the challenges of operating in Nigeria, thereby enabling companies to focus on their core business. Tolaram aims to position the LFZ as a manufacturing hub for the Western African region. Seventy per cent of the zone is allocated to industrial concerns, 20% to logistics and support services, and the remaining 10% to mixed-use real estate projects.


The zone’s infrastructure includes warehouses, standard factories, a truck park, a power plant, roads, streetlights, drainage systems, and essential facilities such as a medical centre, a fire station, and a police station. Additionally, there is an industrial skills training centre that upskills young people from the surrounding area, serving both as a corporate social responsibility initiative and a source of potential workers for companies in the zone.


The LFZ also extends various fiscal benefits to its tenants, including exemptions from government taxes, levies, and rates; duty-free imports for goods from outside the country; the ability to export finished products into the Nigeria Customs Territory; and tax-free remittance of profits and dividends. Furthermore, companies benefit from seamless movement of goods to and from the Lekki Deep Sea Port.


Tata International, the trading and distribution arm of India’s Tata Group, last year agreed to lease a 6,000m2 facility in the LFZ to assemble light commercial vehicles, a significant move considering the recent exit of multinationals from the country. German chemicals manufacturer BASF has also set up shop in the zone. It started out with a small factory before expanding to a larger premise. Another tenant is Sana Building Systems, a Middle Eastern manufacturer of prefabricated building materials. In total, the zone has over two dozen registered entities, including companies with which Tolaram has joint ventures, such as Colgate-Palmolive, Kellogg’s, and Arla Foods.


The LFZ has also attracted financial institutions, with Stanbic IBTC, a subsidiary of South Africa’s Standard Bank, already operating a branch, and other lenders such as FCMB, UBA and First Bank currently in the process of establishing their own. These bank branches will serve clients both within the zone and in the surrounding area.


The LFZ forms part of what is known as the Lekki Industrial Corridor, envisioned as the future economic epicentre of West Africa. Nearby is the Lekki Free Zone, which hosts Nigerian billionaire Aliko Dangote’s new petroleum refinery and fertiliser manufacturing complex. Although the Lekki Free Zone stands as a competitor to the LFZ, being situated within a broader industrial corridor is advantageous for the LFZ as its benefits from overall enhanced transport and infrastructure in the vicinity. Additionally, the proximity of other businesses could make the LFZ more appealing to prospective tenants, as these entities could serve as potential suppliers or clients.


A new era for Nigeria’s shipping industry

Rathi describes the Lekki Deep Sea Port as a “game changer” for Nigeria’s maritime industry. He says that the nation’s ports previously could only berth vessels carrying 5,000 to 6,000 containers while the new port has the capability to accommodate ships up to three times larger.

Tolaram also seeks to position the port as a transshipment hub, handling cargo in transit for other destinations, particularly neighbouring countries. It started with transshipment activities about six months ago. Rathi observes that previously, Nigeria was not seen as a viable transshipment location due to its inadequate infrastructure.


The development of the port is proceeding in stages. Its container terminal, with a capacity to manage 1.2 million containers annually, is now fully operational and under the management of the French shipping company CMA CGM Group. Rathi says that the subsequent phase involves constructing the dry bulk and liquid terminals. The third phase will aim to double the capacity of the existing container terminal.


Playing the long game

Nigeria has recently faced a series of economic challenges. Since assuming office in May last year, President Bola Tinubu has implemented several reforms. While investors see these measures as necessary for Nigeria’s long-term stability, they have had an adverse impact on the economy. Tinubu’s elimination of a longstanding fuel subsidy has led to soaring transportation costs, and the relaxation of foreign currency controls has contributed to a significant depreciation of the naira.


The World Bank forecasts Nigeria’s GDP will grow by 3.3% in 2024, up from an estimated 2.9% in 2023, driven by sectors such as agriculture, construction, services, and trade. Inflation is expected to gradually ease as the effects of the previous year’s foreign exchange reforms and the removal of fuel subsidies diminish.


Rathi says that while Tolaram is not immune to Nigeria’s current economic difficulties, the company maintains a long-term commitment to the country. He acknowledges the government’s efforts to address the issues of foreign exchange and inflation, expressing confidence that once these are resolved, the country will be on the right trajectory. “We have always looked at business in Nigeria from a five to 10 year horizon rather than quarter to quarter,” he notes.


* A version of this article was originally produced for the NTU-SBF Centre for African Studies at the Nanyang Business School in Singapore.