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China and Nigeria Building Huge Free Trade Zone in Lagos

China and Nigeria are building one of Africa's largest free trade zones in the commercial capital, Lagos. Chinese companies will use the facility to manufacture goods for export throughout Africa.

On the tip of the Lekki Peninsula in Lagos, Nigeria and China are building a 16,000 hectare free trade zone to develop local manufacturing and reduce Nigeria's dependence on imported consumer goods.

It is one of the fastest growing areas in Lagos State and will soon have a new deep water port, an international airport and new hotels as part of a 60-40 partnership between the Chinese government and Lagos State.

Adeyemo Thompson is deputy managing director of the Lekki Free Zone Development Company. He says construction is on schedule for Chinese shareholders that include the China Railway Construction Corporation and the China-Africa Development Fund.

"In accordance with the master plan and the projections that we have made, I think, the first phase of the zone, that is the 3,000 hectare zone, will probably be close to a $5 billion investment, that is inclusive of the infrastructure we going to put on the ground, the roads, the power plants, the water plants," Thompson said.

The global financial crisis has reduced demand for Chinese goods in the United States and Europe. Thompson says the Nigerian free trade zone gives Chinese companies greater access to growing African markets for consumer goods, electrical equipment, and industrial products.

"Part of the reason why Lekki Free Zone is so attractive to the Chinese is that, the Chinese government is encouraging those companies which are shutting down in China to move out," he added. "There are funds which the government has provided for these companies to encourage them to move out to come and set up their factories in other parts of the world. We have that market. Now the Nigeria government is also encouraging investors to go to China and probably buy those factories, which are shut down, maybe at a quarter of the price and bring them into Lekki, set it up and manufacture those goods which you know you have 100 percent market right here."

Lagos State Governor Babatunde Fashola says the free trade zone will help develop Nigeria's manufacturing sector while cutting prices for consumers.

"There is a huge market immediately waiting, when you look at the how much our people spend importing goods from across the world, or for how much they pay in excess baggage at major airports, bringing this here is like bringing home prosperity," said Fashola.

Nearly 90 percent of products used in Nigeria come from outside the country. The free trade zone will allow Nigerians to buy many of the same products now produced in China without the cost of importing them, while creating jobs for Nigerian workers.

Chinese firms gain both more immediate access to African markets and far cheaper routes to ship their "Made in Nigeria" exports to Europe.