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Viewing cable 08LAGOS486, NIGERIA: OGUN STATE ATTRACTS BUSINESSES WITH LAND, LABOR,

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Reference ID Created Released Classification Origin
08LAGOS486 2008-12-03 07:19 2011-08-25 00:00 UNCLASSIFIED Consulate Lagos
VZCZCXRO7070
RR RUEHMA RUEHPA
DE RUEHOS #0486/01 3380719
ZNR UUUUU ZZH
R 030719Z DEC 08
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC 0349
INFO RUEHUJA/AMEMBASSY ABUJA 9990
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUEHZK/ECOWAS COLLECTIVE
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
UNCLAS SECTION 01 OF 02 LAGOS 000486 
 
SIPDIS 
 
DOE FOR GPERSONS, CHAYCOCK 
TREASURY FOR DPETERS, RHALL, RABDULRAZAK 
COMMERCE FOR KBURRESS 
USDOC FOR 3130/USFC/OIO/ANESA/DHARRIS 
STATE PASS USTR FOR LISER, AGAMA 
STATE PASS USAID FOR NFREEMAN, GBERTOLIN 
STATE PASS OPIC FOR ZHAN, MSTUCKART 
STATE PASS TDA FOR LFITTS, PMARIN 
STATE PASS EXIM FOR JRICHTER 
 
E.O. 12958: N/A 
TAGS: PGOV PHUM KDEM NI
SUBJECT: NIGERIA: OGUN STATE ATTRACTS BUSINESSES WITH LAND, LABOR, 
AND LEADERSHIP 
 
Ref. A)Lagos 429 
B)Lagos 268 
C)Lagos 7 
 
1. (U) Summary: Governor Gbenga Daniel has branded Ogun "The Gateway 
State", increased Ogun State's internally generated revenue eight 
fold since taking office in 2003, and attracted over 100 new 
manufacturing companies to the state.  Ogun's land, labor, and 
transportation are all less expensive than in Lagos State while the 
state benefits from proximity to Lagos' ports, industries, and 
markets.  Shell Nigeria Gas provides natural gas via pipelines to 
power over 40 industries; three independent power projects are 
planned for the state; and the Ogun State Government plans to set up 
a power distribution company to service businesses and communities. 
The state believes it will generate jobs by mandating local content 
in its three free trade zones. The Governor is credited with making 
Ogun "business-friendly", and is promising to develop the state 
before handing over to his successor in 2011. End summary. 
 
Government Brands Ogun "Gateway State" 
-------------------------------------- 
 
2. (U) Yosola Akinbi, Economic Adviser to the Governor, told EconOff 
October 29 that since Daniel's assumption of office in 2003, the 
state's internally generated revenue (IGR) had increased eight fold, 
from Naira 100 million (USD 850,000) per month to N800 million (USD 
6.8 million) per month. Before 2003, Ogun state's economy had been 
dominated by the civil service, with no industries and businesses. 
Over 90 percent of the state's revenue at that time went toward 
recurrent expenditure. By 2006, over 100 factories had opened.  In a 
bid to position Ogun as "The Gateway State" and a 
commercially-viable alternative to Lagos State, the Ogun State 
Government (OSG) is aggressively pursuing major infrastructure 
development projects, including a cargo airport, the Olokola Free 
Trade Zone (FTZ) and Deep Sea Port (Note: The location of the 
Olokola liquefied natural gas LNG project. End note), the Kajola 
Specialized Railway Industrial FTZ, and the Ogun-Guangdong FTZ. 
 
Proximity to Lagos Key 
---------------------- 
 
3. (U) Cheap labor and inexpensive, abundant land are drawing 
businesses from Lagos to Ogun State.  Dimeji Owofemi, Executive Vice 
Chairman of Multi-Trex Investment Ltd, said Ogun has more unused 
land then does Lagos, and fees for acquiring land are only around 15 
percent of the costs in Lagos. Salaries in Lagos are higher, and the 
costs associated with employee accommodation are five times higher 
in Lagos, he noted.  According to Ade Popoola, Managing Director of 
Reals Confectioneries Ltd, operating in Ogun cuts the company's 
production costs by 35 percent and transportation costs by 25 
percent.  Both business executives emphasized that Ogun's 
comparative advantage in lower land and labor costs alone would not 
draw businesses out of Lagos; instead, it is Ogun's geo-strategic 
position as Lagos' neighbor, allowing businesses to have easy access 
to Lagos' ports, roads, industries, and market, that makes Ogun 
attractive. 
 
Pro-Business Leadership Boosts Investor Confidence 
--------------------------------------------- ----- 
 
4. (U) Governor Daniel's pro-business attitude had been pivotal in 
attracting businesses and investments into Ogun State. According to 
Owofemi and Popoola, Daniel has made a point of meeting directly 
with potential investors and of attending opening ceremonies to 
demonstrate his commitment to companies' growth and well being.  His 
effort alone had transformed Ogun into an investor-friendly state, 
the interlocutors said. 
 
Local Content Required in FTZs 
------------------------------ 
 
5. (U) Economic Adviser Akinbi said the Ogun State Government (OSG) 
has signed a memorandum of understanding (MoU) with developers, 
requiring that they employ Nigerian workers for 40 percent of 
mid-skilled jobs and 70 percent of low-skilled jobs in the state's 
several FTZs. (Note: The use of local content in FTZs is a sticky 
issue for state governments and foreign developers, including the 
Chinese, who often source manual labor from their home countries. 
 
LAGOS 00000486  002 OF 002 
 
 
End Note) Unlike other states, said Akinbi, OSG believes that 
stipulations can be negotiated that will protect local communities 
and generate local employment opportunities. 
 
IPPs, Transformers, Gas to Improve Power 
---------------------------------------- 
 
6. (U) Three independent power projects (IPPs) are planned for Ogun. 
According to Akinbi, once the IPPs go on stream, OSG plans to form a 
public-private power distribution holding company to buy back from 
the national grid the power generated from the state's IPPs, and to 
distribute it to industries and communities. OSG has budgeted in 
fiscal year 2009 to buy transformers to service social facilities 
such as schools and hospitals.  The transformers are already in 
country and will be installed starting in September 2009. 
Reportedly, the OSG has signed an MoU with Shell Nigeria Gas to 
supply natural gas to additional industries. (Ref A)  Shell has 
connected over 40 business customers to its gas distribution network 
within Ogun State since 2003. 
 
Daniel Pushes Projects Before Term Ends 
--------------------------------------- 
 
7. (U) With less than three years left in his second term, Governor 
Daniel needs to get key infrastructure projects going before a 
change in administration in 2011 will likely make them fall by the 
wayside, Economic Adviser Akinbi emphasized.  Tri-Dex's Owofemi 
believes that, while projects tend to disappear with a change in 
administration, economically viable projects will survive changes in 
governments and political parties. Owofemi noted another concern to 
businesses, namely the lack of inter-state planning.  Pointing to 
the natural gas pipeline that runs along the Lagos-Ibadan Expressway 
where his factory is located, Owofemi said his factory was built 
after the pipeline was laid, and, as a result, could not afford the 
costs of getting connected to the pipeline.  His factory runs on 
generators, which is more expensive than natural gas. 
 
8. (U) Comment: Daniel is working hard to turn Ogun's comparative 
advantage into jobs for the state's citizens.  It remains to be seen 
how far he can develop the state before handing over to his 
successor in 2011. End comment. 
 
9. (U) This cable was cleared with Embassy Abuja. 
 
BLAIR