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OSUN STATE

STATE OF LIVING SPRING

Even with such a large income-sensitive population, few markets in Africa offer the potential scale and consumer base as Nigeria, which makes the country a natural destination for manufacturers and industrial firms looking to gain a foothold in the region. High operating costs and cheap unregulated imports have traditionally made it difficult for producers to ensure cost-efficiencies and have dampened growth. However, state governments are taking increasingly aggressive measures to attract labour-intensive and value-added activities – in a bid to increase internally generated revenue (IGR) and expand employment opportunities.

The state’s geographical location, only four hours by road from the country’s single largest consumer market, along with plans for improved rail links and a designation by the federal government of Nigeria as a national industrial centre mean it offers a host of comparative advantages. Several large firms already have a presence in the state, but given the large size of the agricultural sector, agro-processing should also see a significant uptick in the near future, while prospects are good for commercial mining across the state.

By far Osun’s largest employer and biggest contributor to IGR, International Breweries is the single biggest manufacturing operation in the state. Located in Ilesa and publicly listed on the Nigerian Stock Exchange, the company recorded N10bn ($61m) in revenues in the second quarter of 2014, up more than 16% from the second quarter of 2013.

 

Other major firms present include Integrated Steel, Nigeria Machine Tools and the Omoluabi Garment Factory. Integrated Steel began life as Osogbo Steel Rolling Mills, established by the federal government in the 1980 as part of a national steel development scheme, but it was privatised in 2002, acquired by Dangote Industries. In 2010 it received a N7.5bn ($45.8m) injection from Dangote Industries to expand capacity and upgrade equipment, and the firm now produces steel rods and bars with a capacity of 400,000 tonnes per year. Nigeria Machine Tools is located in Osogbo, consisting of four assembly and heavy machine shops, three light machine shops, one foundry, casting shops and a training school. The manufacturer of machine tools and mechanical components, which was partly privatised in 2007 – the federal government and HMT India have a combined 30% stake – has over 200 direct employees. Located in Osogbo, the Omoluabi Garment Factory commenced operations in 2013 and has recently has seen a jump in activity following the rollout of the state’s O-UNIFORM scheme for education. Under the programme – a part of the state government’s efforts to expand local sourcing for domestic initiatives – the factory serves as the official provider of 750,000 uniforms to all public school students in the state, employing 3000 workers in the garment industry.

Osun state governments have significant latitude in determining their investment promotion policies, and to a lesser extent, their business regulations. Osun State has sought to take advantage of this, allowing the use of pioneer status for specific investors at its discretion, and granting tax holidays to new industrial investments for a maximum of five years.

The state is also home to free-trade zones, which in Nigeria are licensed by the Nigerian Export Processing Zones Authority, a federal government agency under the Ministry of Industry, Trade and Investment. The agency is responsible for promoting and facilitating local and international investments into licensed free zones in Nigeria, and stimulating export-oriented activities under an enabling environment. The Omoluabi Free Trade Zone, formerly called the Living Spring Free Trade Zone, is located in the State of Osun and is one of 25 such zones in the country. The state government has set aside 1600 hectares for the project, which is currently under construction. Certain infrastructure like asphalt, roads, street lights, water and some office buildings have already been put in place, while an assembly plant for motor vehicles is also under construction.

In addition, the state is looking at service sectors as potential tenants for zones, including tourism. Osun is attempting to create a tourism enterprise zone and has already signed a memorandum of understanding with financiers Thomas & Thomas of the US. This 8000 hectares zone centred around a man-made lake 15 minutes from Osogbo has the potential to bring in an estimated $100m in the medium term.

Osogbo, the capital of the State of Osun, has long been a commercial centre for trading and distribution for the markets of the south-west, often drawing buyers from the east and middle-belt regions of Nigeria for locally manufactured goods. In order to strengthen its positioning and attract new activity, the current government has introduced the Osun Hub programme (O-HUB). The initiative seeks to improve market linkages for manufacturers, farmers and consumers by combining logistical planning, bulk warehousing, a wholesale hypermarket and retail mega-stores into a single organised facility.

ERIN IJESA WATERFALLS

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The facility, when completed, will also connect with rail spurs from the nearby town of Dagbolu to the national network, which will help facilitate regional freight access. To date, approximately 200 ha of land has been acquired for the market. Construction has yet to begin, but the government is now looking to attract private sector operators for the logistics and warehousing components of the project.

While oil has traditionally been king in Nigeria, falling prices and dwindling international demand has spawned pressure across the country to exploit other resources, notably solid minerals.