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LAGOS STATE

CENTRE OF EXCELLENCE

Lagos (meaning lakes) was created on May 27th, 1967 and consists of four islands; Lagos Island, Victoria Island, Ikoyi and Iddo . It has 57 local government areas, and was the capital of Nigeria until 1976. It is known as the ‘centre of excellence’, as it is the commercial nerve-centre of Nigeria, having more than half of its industrial investments. It is a Yoruba speaking, south-western state, but the population consists of people from all tribes in the country and many different nationalities.

If taken as a country on its own, Lagos would be amongst the largest economies in Africa. It has been able to diversify its economy and to considerably reduce its dependence on oil allocations. But its potentials are still huge.

Lagos has a rich history of economic growth and transformation. Although it covers only 0.4th of Nigeria’s territorial land mass, making it the smallest state in the country,0% of industrial and commercial activities in the nation. Lagos is financially viable, generating over 75% of its revenues independent of federal grants derived from oil revenues. It generates the highest internal revenue of all states in Nigeria.

If taken as a country on its own, its 2015 GDP of $131 billion made it the 5th largest economy in Africa. Lagos has emerged as a major hub for the headquarters of national and global companies and the complex business and professional services that support them. With a population well over 16 million, Lagos is the seventh fastest growing city in the world, and the second largest city in Africa. Lagos is not only a “megacity” in terms of population but it is a global city with a substantial and growing foreign-born population and non-stop flights to hundreds of destinations around the world.

While the economy of metropolitan Lagos has enormous competitive assets, it faces challenging trends in rapid population growth, urbanisation, relentless demands for infrastructure as well as macroeconomic pressures from the national level. The city’s expansion is estimated to continue over the next couple of decades. As it is, the economic growth of Lagos – the industrial, financial and commercial nerve centre of Nigeria – has been unable to keep pace with the geometric increase in the population size. And although the city’s internally generated revenue (IGR) is high relative to other Nigerian states, it is not sufficient to meet the increasing social welfare, infrastructural and environmental needs of the city.

Despite these challenges, Lagos has managed to generate revenue from a variety of sources, including manufacturing, transport, construction and wholesale and retail, which together account for a bulk of its GDP. The economic diversification of Lagos contrasts with the larger Nigerian economy which is heavily reliant on profits from the oil and gas industry.  The oil sector accounts for 85% of Nigeria’s foreign exchange earnings, 14.85% of the nation’s GDP in the first quarter of 2014, and 4% of total employment in the country. Presently, oil prices have dropped to about $60 per barrel in comparison with $110 of June 2014, a scenario which places more pressure on the Lagos economy as citizens migrate from economically distressed states in search of employment and the central government considers new ways to capture more tax revenue from Lagos.

Concerned about the sustainability of Lagos’ economic success in the face of population and infrastructural challenges, its government in December 2014 articulated the Lagos State Development Plan (LSDP) for 2012-2025. T(LSDP) for 2012-2025. The plan aims to transform Lagos into a model megacity that is productive, secure, sustainable, functional and safe.  The main “pillars” of the vision are economic development, infrastructural development, social development, security and sustainable growth.  Clearly, how the state supports the development of its manufacturing sector and engages its vast informal economy will determine whether this vision comes to light.

Manufacturing in Lagos forms a significant part of Nigeria’s economic landscape and could, propel Nigeria into the manufacturing big leagues along with BRICs countries such as China and India. Metropolitan Lagos accounts for over 53% of manufacturing employment in Nigeria, significantly contributing to the 7% of national GDP constituted by manufacturing. Manufacturing is estimated to have contributed $35 billion to the national economy. Manufacturing industries in Lagos State include food, beverages and tobacco, chemicals and pharmaceuticals, rubber and foam, cement, plastic products, basic metals and foam, steel and fabricated metal products, pulp and paper products, electrical and electronics, textile manufacturing, furniture and wood products, motor vehicles and miscellaneous assembly.

The Manufacturers Association of Nigeria (MAN), indicates that the sub-sectors dominating the manufacturing industry in Lagos are food and beverage, pharmaceutical and automobile assembly. The motor vehicle and miscellaneous industry has seen expansion in the past year with corporations such as Volkswagen of Nigeria, Nissan and the Stallion Group – producing Hyundai – setting up facilities for vehicular and motor parts assembly. More automobile factories such as Tata and Toyota are expected to set up soon. Overall, manufacturing contributes 29.6% of the GDP of the Lagos State.

Lagos State population assures a ready labour pool for production and ready markets for consumption. Also, metropolitan Lagos features relatively superior infrastructure and is strategically located with land, air and sea connections to markets in central and western Africa region, Europe and the rest of Nigeria, easing the flow of both raw materials and processed goods. The high import bill and growing population give room for more locally-produced goods. Assuming that the growing middle class increase consumption, there is room for expansion in all the sectors.  Capacity utilisation for the Lagos industrial zone was about 53.85% in the 1st half of 2014, also indicating potential for growth. While these factors support local manufacturing, there are real challenges presented by human capital needs, poor regulatory enforcement, power supply deficits, aging infrastructure, multiple taxation and low industrial productivity.  Lagos has a golden chance to deal decisively with these manufacturing sector challenges over the next decade so as to unlock the full potential of the city.

There is scope to improve labour and capital productivity in Lagos manufacturing by investing in upgrading urban infrastructure such as transport facilities, power supply, water supply and waste management facilities. Infrastructure affects the entire process of production – from raw material supply to product distribution. Poor energy supply for example is a major infrastructural challenge that has an immense effect on production output in Lagos. Manufacturers spent an average of N57.72 million monthly to provide alternative sources of energy in the form of diesel or gas generators for production.

The Lagos State Government, through its Energy Board agency, embarked on an energy reform strategy and has successfully commissioned five Independent Power Plants (IPPs) over the last five years. Due to power regulations, this energy generated by these IPPs can only be distributed to government agencies, public institutions such as hospitals, and street lights.  Infrastructural interventions and the exploration of renewable energy options would lead to improved capital productivity in environmentally sensitive ways, and the Lagos’ manufacturing sector would become an engine of inclusive growth and prosperity for the whole country.

Currently, Lagos accounts for about 15% of Nigeria’s population which is in excess of 170 million people. Although there is no lack in numbers, there is a definite shortfall with regards to skill levels, and the availability of skilled personnel is important to the expansion of manufacturing. Labour productivity in Lagos manufacturing would benefit from large-scale investment in skills training to enhance managerial roles in industry and build the productivity of machinists, maintenance engineers, welders and other industrial workers. Lagos manufacturers lag behind their global peers in production planning, supply chain management, quality, and maintenance—areas that account to their lower productivity.

Manufacturing already accounts for 30% of the state’s GDP; but the aim of the Government is to increase this to 40% over the next 10 years.The manufacturing production value of the Lagos industrial zone was N126.01 billion in the 1st half of 2014. This figure accounts for almost half of the production value for the whole country.

With growth driven by vital reforms in state service—taxation, transport services and waste management—Lagos state remains the economic hub of Nigeria twenty five years after it was replaced as the country’s official capital. The state’s potential to generate revenue has now been boosted even further by confirmation of oil production. Targeted investment is expected to follow the state’s oil production activities and under the terms of Nigeria’s resource control, as an oil-producing state, Lagos will become entitled to a 13% cut of revenues generated by Nigeria’s government through its oil and potentially earning millions of dollars.

Lagos’ success has set it apart as a benchmark for other states in Nigeria. Internally generated revenue (IGR), mainly through taxes stood at $1.3 billion in 2015—three times more than the state with the second most IGR and 39% of the total IGR by Nigeria’s 36 states. But Lagos’ success looks even better compared to other African nations.

With GDP in 2014 pegged at $90 billion, Lagos’ economy stands as the 5th largest in Africa- bigger than Cote d’Ivoire and Kenya, two of the continent’s most promising economies.

A finely tuned IGR model and a growing economy has made Lagos into Africa’s leading city and one of the world’s fastest growing megacities. Now with oil production, it will grow even quicker. Remarkably, Lagos’ immense commercial potential belies its size. The smallest state out of Nigeria’s 36, Lagos’s size area is dwarfed in comparison with Africa’s biggest economies.

Eko Atlantic City:

This is a planned 21st century city, currently being built on reclaimed land along the coastline of Lagos bordering the Atlantic ocean. It is estimated it will attract 400,000 residents and 250,000 daily commuters into the island.