While FDI into Nigeria as a whole declined in 2012, foreign investment into Lekki Free Zone grew to $1.1bn from 48 investors, according to Tara O'Connor, managing director of political and economic risk analysis firm Africa Risk Consulting (ARC). Although Nigeria’s GDP growth could decline next year, the expansion of Lekki Free Zone – which is located in the country's largest city, Lagos – could offset this economic slowdown. 

“According to our research, up until August 2012, Lekki attracted $1.1bn in commitments and a lot of that went into oil and gas investments,” said Ms O’Connor, who spoke as a panellist at an ‘Investing in Lekki Free Zone’ investment event in London in late October, organised and hosted by fDi magazine. “Nigeria, like everywhere else, is being affected by a slowdown in FDI in certain areas; however Lagos has had two successive governors who have actively built the infrastructure to improve the city.”

A significant source of Lekki’s FDI is from Chinese companies, as many firms have benefited from the Chinese government’s support when establishing an initial presence in Lagos. “When we looked at the origin of this FDI, we found that Chinese companies are really leading the way into Lekki,” said Ed Hobey, a briefing Africa analyst at ARC. “This is partly driven by the state’s financial backing.”

Even if the relative size of China’s FDI into Nigeria still trails those of the country’s traditional trading partners, ARC expects China to become a significant trading partner in the near term. According to greenfield investment monitor fDi Markets, China ranks 13th when it comes to greenfield investments into Nigeria, as between 2003 and 2013 it invested in $2.5bn-worth of projects. The US and UK were the top two leading investors, accounting for $17.8bn-worth of greenfield investments.

In Ms O’Connor’s view, although the Lekki Free Zone is one of 26 free zones in Nigeria, its strategic location in Lagos, home to 17.5 million people, means that it will remain an FDI hotspot for investors looking to tap opportunities in Nigeria and the wider west African region. Ms O’Connor said that investment will accelerate into the free zone in 2018 once the first phase of the new Lekki International Airport is complete, which is part of the government’s efforts to tackle a lack of integrated road, electricity and port infrastructure across the city. 

“Lagos has always been the commercial capital of Nigeria, so it is very logical that this free zone should be situated there,” explained Ms O’Connor. “Its creation was part of a series of commercial reforms by the governor, Babatunde Fashola, to create the associated infrastructure. The airport will reduce congestion in Murtala Muhammed airport.”

Investors operating in Lekki Free Zone are expected to press ahead in their expansion strategies, and data from ARC reveals that they have been at the forefront of driving demand for imports entering Lagos. ARC estimated that imports passing through Lagos’ ports increased by 25% between 2011 and 2012, partly due to increasing activity within the free zone. However, Lagos is a stronghold of one of Nigeria’s opposition parties, and Mr Hobey said that investor optimism will become increasingly tempered by risks that elections in 2015 may bring.

“While Nigeria is no longer the kind of country where contracts get torn up with changes of administration, anyone interested in Lekki needs to be aware that Nigerian politics is in a state of flux and Lagos is in opposition heartland,” explained Mr Hobey. “As we move towards 2015, the government’s amnesty agreement with [militants] in the Niger Delta region will end. That is an unhappy coincidence, and [we] expect to see a rise in militant activity. Yet given these challenges, Nigeria has immense opportunities and investment in the country is a no-brainer.”