Maritime
With the final settlement of the three-year dispute between Samsung Heavy Industries Nigeria (SHI) Limited and the Lagos Deep Offshore Logistics Base (LADOL) group, which had cost the Nigerian economy substantial investments, Ejiofor Alike reports how the truce can unlock over $300. billion in foreign direct investment in the country
The joint venture between global shipbuilding giant, Samsung Heavy Industries Nigeria (SHIN) Limited and Lagos Deep Offshore Logistics Base (LADOL) was formed when SHIN won the $3.3 billion contract for the Egina vessel Floating Production Storage Offloading (FPSO). The contract had required the construction of a fabrication and integration yard to achieve the national aspect of the FPSO for the 200,000 barrels per day deepwater field, which contributed 10% of daily crude oil production from Nigeria.
Prior to the Egina project, most marine construction for African oil and gas projects took place outside of Africa. Nigeria also lacked the capacity to locally manufacture and integrate an FPSO.
But thanks to SHIN’s investment in the SHI-MCI shipyard, the shipbuilding giant has made Nigeria a manufacturing and integration hub on the African continent.
Although the Egina FPSO project was successfully executed, no other major projects were carried out at the yard due to friction between the two partners, which began in 2018. The commercial dispute had led to a complete breakdown in communications. and commitments between the two parties. resulting in legal action in Nigeria and the UK.
With the hostility of its operating environment, the shipbuilding giant has been unable to bring in more investment and technology, resulting in a huge loss of investment by Nigeria.
For the Nigerian economy to be globally competitive, foreign companies need incentives to invest in the country to create employment opportunities and boost Nigeria’s Gross Domestic Product (GDP) growth.
As Nigeria lost investment due to the dispute between SHIN and its Nigerian partner, another Korean company, Samsung Electronics unveiled plans to invest $17 billion in a new advanced chip manufacturing facility in Taylor, Texas. , in the USA.
The electronics giant, which also operates in Nigeria, is one of the world’s largest makers of electronic devices and the tiny semiconductors that power them.
The company had unveiled a plan to build a $17 billion semiconductor factory outside Austin amid a global shortage of chips used in phones, cars and other electronics.
Samsung said it would start building the Texas factory in 2022 and begin operations in the second half of 2024.
Samsung vice-chairman Mr Kinam Kim said the company chose the site based on several factors, including government incentives and the “readiness and stability” of local infrastructure.
Infrastructure is especially important for chip operations, which need a stable supply of power.
Texas Governor Greg Abbott had touted Texas’ low taxes and talent pool as major strengths for tech companies, describing Samsung’s decision to invest in the state as “a testament to the economic environment that we have built”.
Poor electricity supply, inadequate infrastructure, excessive taxation, insecurity, excessive bureaucratic bottlenecks and political interference in businesses are some of the factors that hinder the inflow of FDI into Nigeria.
The dispute between SHIN and LADOL prevented huge Nigerian FDI from foreign companies who felt that their investments would not be safe in the country, following the SHIN experience.
However, with the intervention of the Nigerian and Korean governments, as well as various federal government agencies, SHIN and LADOL have recently reached a final settlement and reaffirm their enduring partnership as shareholders of SHI-MCI.
This historic agreement, which demonstrated SHIN’s continued commitment to its subsidiary, SHI-MCI and Nigeria, also demonstrated LADOL’s commitment to consolidating and continuing the development of LADOL Free Zone to ensure that Nigeria become an African hub for industrialization.
SHIN and LADOL had signed the final settlement agreement, which would be registered as an official judgment of the High Court in London. It would also be registered with the respective courts in Nigeria, having been approved by the Nigerian Ports Authority (NPA) and the Nigerian Exports Processing Zones Authority (NEPZA).
The settlement agreement reaffirmed that the shareholders’ agreement dated July 1, 2014 between SHIN, SHI-MCI and MCI FZE Yard Development Limited (MCI) would remain valid.
The two partners also agreed that SHIN would retain 70% of the capital of SHI-MCI while MCI de LADOL would retain a 30% stake, as provided for in the shareholders’ agreement.
The settlement agreement also provides for a new sublease agreement which was signed between SHI-MCI and Global Resources Management Limited (GRML), with NPA as GRML’s lead lessor. It is important to note that the new sublease agreement is long-term and is one day less than the term of the main lease between the NPA and GRML.
Under the terms of the settlement, NEPZA, as part of its statutory duties and role as trustee of all NEPZA free zones in Nigeria, would continue to be responsible for issuing and renewing the operating license of SHI-MCI.
NEPZA previously issued an operating license to SHI-MCI in the form of a National Operating License dated October 4, 2021, valid for three years.
Attending the settlement ceremony in Abuja were stakeholders from Nigeria’s economic zones, including the Managing Director of NEPZA, Prof. Adesoji Adesugba; the Acting Director General of NPA, Mr. Mohammed Bello Koko; President of LADOL, Chief Ladi Jadesimi; outgoing general manager of SHIN, Mr. Jejin Jeon; and Chairman of the Nigerian Economic Zones Association (NEZA), Chief Oluwatoyin Elegbede.
Speaking at the event, Adesugba said the dispute had excluded investments worth more than $7 billion and 3,000 jobs, adding that the peaceful resolution would also provide direct job opportunities to more of 10,000 Nigerians.
He said: “We are very pleased to have been able to carry out the directive from the President that we must, as a national emergency, ensure that this dispute is stopped.
“We celebrate investments worth this amount being unlocked in the Nigerian economy and hope that we will continue to monitor what is happening between Samsung and LADOL to ensure they live up to the spirit. of what they signed today.
“We anticipate that we will start to see visible results in the next few months, not for another year; we will start to see jobs and different projects coming into the country.
“We were in Seoul, and they promised us that if we can solve this problem, Nigeria will have more companies coming from South Korea to invest in the Nigerian economy. We are very optimistic that this is going to be a win-win situation. -winner for investors and Nigeria.
He commended President Muhammadu Buhari for his insistence on unlocking investment in the country as well as the Minister of Industry, Trade and Investment, Mr. Niyi Adebayo, for his role and leadership in ensuring the success of intervention.
Also speaking on the occasion, Koko said the dispute, which had previously defied multiple attempts at resolution, had resulted in the loss of government jobs and revenue.
He said: “In the past three years, no activity has taken place there (economic zones). There has been a loss of economic values and a loss of jobs. So, we’re glad it got resolved today. Both parties have agreed to work together and in the future, if there are any disputes, the NPA will be involved.
“We would like to thank President Muhammadu Buhari who took the steps that led to the resolution of this dispute. Today is a happy day and it is good for the nation and it would ensure that investor confidence improves in terms of foreign direct investment in Nigeria.
Speaking in Lagos at the signing of the final settlement agreement, SHIN Managing Director, Mr. Jeon, revealed that the many years of legal proceedings had hampered SHIN’s ability to operate in Nigeria and threatened its contribution to the Nigerian economy.
He confirmed that the settlement has become a definitive statement in favor of SHI-MCI’s right to operate in the LADOL Free Zone.
“By acknowledging that Samsung Heavy Industries (Nigeria) legally owns 70% of the shares of SHI-MCI, the settlement acknowledges our extraordinary contribution to the LADOL Free Zone and its role in the economic development of Nigeria,” Jeon said.
Jeon noted that prior to the Egina project, most maritime construction for African oil and gas projects took place outside of Africa, pointing out that Nigeria could not manufacture and integrate an FPSO locally.
“Through our investment in the SHI-MCI shipyard, we have established Nigeria as a manufacturing and integration hub on the African continent. Over six years, SHIN has trained 600 Nigerians from disadvantaged backgrounds through a comprehensive welding qualification program at one of Nigeria’s most advanced welding academies. “This contributed 560,000 man-hours of training in total. In addition, SHIN has directly employed 2,500 Nigerians and another 5,000 employed by our suppliers, occupying highly specialized positions and skills.
“It changed the dial in practical terms – local contribution going from 1% to over 25%.
According to Jeon, SHIN’s focus remains on executing the plan to make Nigeria the hub for manufacturing and integration work supporting the oil and gas industry and infrastructure development and securing SHI-MCI’s participation. to future manufacturing and integration projects.
“SHIN is deeply committed to ongoing and future projects in Nigeria and as part of SHI-MCI, we plan to invest in future projects over the coming year and remain focused on creating and realizing mega deep offshore projects for Nigeria,” he added.
Commenting on the settlement agreement, LADOL Chairman Jadesimi said, “This settlement ends the dispute between LADOL and SHI Groups which has been dragging on for a little while and it has become critical that it be settled. Now, it has been completely resolved. The bottom line is that we were able to come together peacefully to cement a much stronger joint venture going forward.