The Trajectory of Free Trade Zones utilizations in Nigeria

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By Martins Martins

For years, Nigeria has navigated seeking for
the stabilization of its economy through blends of conventional and
non-conventional approaches.

No doubt, the country is blessed with natural
resources which include abundant presence of solid minerals and crude oil
deposits. However, the decades of over dependence on the downstream sector has
offered the country what appears to be “blessings and curses’’.

The `blessings’ , being years of leverages and
wealth that had accrued to this acclaimed African largest economy and `curses’
which remain the negativism and pitfalls that plagued the nation over the
scramble for the exploration of crude oil and natural gas by an infinitesimal segment
of the population called “the ruling class’’.

Series of the country’s growth and economic
indices have continually shown down trends owing largely to deliberate
abandonment of the non-oil sector. Albeit, successive governments had paid lip
service to the development of the non-sector, but perhaps always retard due to
the long stretch of investment that required to be made before dividends.

Trade and Commerce remain one of age long
human activities that continue to sustain the development of the world.

It has gone from it primitive adaption to a
more lucrative and expansive mode that transcends both land and coastal borders
of countries.

Nigeria and most countries in Africa had
wished to take advantage of the economic boom and boost derivable from export
of goods and services but may have failed to rip sufficiently as a result of
incoherent trade policies and strategies.

Knowing the benefits inherent in free trade
zone model, the Federal Government of Nigeria in it official gazette published
the Nigerian Export Processing Zones Act of 1992.

The Act sets out the investment procedures,
regulations and operational guidelines for Free Zones in the country.

The Act has given rise to the establishment of
some 26 free trade zones in the country.

Free trade
zone as described by several experts is a demarcated geographic area of a
country’s national boundaries where the rules of business are different from
those that obtain in the normal country’s business environment. 

Farol, 2011,
as cited by Chris Ndibe, Executive Secretary of Africa Free Zone Association(AFTZA)
in his book titled “The Danger of Neglecting Free Trade Zones Scheme in
Nigeria says the zone’s differential rules principally deal with investment
conditions, international trade and customs.

He further
says these rules also handle issues around taxation and the regulatory
environment, whereby the zone is given a business environment that is intended
to be more liberal from a policy perspective.

Before
delving into some of the variables that inhibit the progress of free trade zone
in Nigeria, it is imperative to state the basic objective of establishing the
zone which includes attracting Foreign Direct Investment (FDI) as well as
create jobs and empowerment opportunities.

It is aimed
at also serving as “pressure value’’ to alleviate large-scale employment,
stimulate regional development and technological transfer as well as create
backward linkages among others.

Can it then
be said that Nigeria has leveraged the numerous opportunities provided by this alternative
trade model to improve on its Gross Domestic Product (GDP) typified of
“Shenzhen Miracle’’, a fishing village which got transformed into a
cosmopolitan city of 14 million as a result of successful administration of its
trade zones?

In the last
40 years, countries all over the world, particularly developing nations, have
increasingly recognized the benefit economic liberalization and greater private
sector participation in the economy could bring about. 

This becomes
even clearer when the limitation and weakness of import substitutions as a
strategy for economic development are taken into account. Many countries and
businesses are today chasing and struggling for limited FDI.

Realization
of this impelled the Federal Government of Nigeria to take far-reaching steps
to improve the environment for investment and boost the development of the
non-oil sectors of the economy.

In 1989, the
Nigerian government commissioned the United Nations Industrial Development
Organisation (UNIDO) under the auspices of the United Nations Development
Programme (UNDP) to conduct a feasibility study of the establishment of Export
Processing Zones.

On November
7, 1991, the then military president, General Ibrahim Babaginda, laid the
foundation stone of the premier export processing zones in Calabar, Cross River
State on 152 hectares of land.

It was
viewed as a landmark, a bold step by Nigeria towards improving the business
environment. Decree 34 of 1991 which initially gave legal backing to EPZ in
Nigeria was replaced with Decree 63 of 1992.

The Calabar
Export Processing Zone did not however become operational until its official
commissioning in 2001 by President Olusegun Obasanjo, when it was changed to
Free Trade Zone with a lager scope of activities than the original traditional
Export Processing Zone.

The amendment to the law guiding the
operations of export processing zones in the country has indeed liberalized the
sector thereby giving rooms for more private operations and public private
partnerships.

In the light of this, the Tinapa Free Zone
& Resort in Cross River State, an initiative of public and private
partnership set up in 2004 standing on 265 hectares was viewed as the recipe
trade zones to stabilize the shaky sector but that was soon to be eroded.

Similar fate may have befallen the Snake
Island International Free Zone Lagos privately managed by Niger dock
Plc.  Not much is happening in the trade hub that specializes in
Steel Fabrication, Oil & Gas, Sea Port

However, the Lagos Free Trade Zone appeared a
respite being the first purely privately owned free trade zone in Nigeria,
spreading over 805 hectares of land.

 The zone has several industrial zones and
offer access to an enormous consumer market across West Africa.

Initiated with the President’s approval in 2002,
the Lagos Free Trade Zone was designed to serve as an integrated hub with
active road, rail and sea links, which can open up the investment, business and
tourism potential of Nigeria to the world.

With numerous
industrial zones, well-laid plans for efficient operations and established
connectivity to regional and international routes, the Lagos Free Trade Zone
appears to be the future destination for international businesses in the
region.

A cross section of
experts have underscored the importance of free trade zones, according to them,
the effective and efficient management of the existing zone will serve as the
lead to the country’s effort towards the diversification of the economy.

Dr Ademola Alimi, an
Economist, said the country must expedite action in revamping all the free
trade zones, adding that that remained the most functional approach to
expanding the frontier of the country’s economy.

“Have you considered
the population of teeming job seekers that can be engaged in these zones?

“Why has successive
governments not considered investing in free trade zones. In fact there lies
the hope of the nation because it makes trading with other nations easier’’, he
said.

Chief Donald Okereke,
a retired National Port Authority Staff, said the country was missing out of
the gains embedded in free trade zone operations, adding that developed nations
had built strong Gross Domestic Products (GDP) from free trade zones
activities.

Aligning himself with
the above contributors, Mr Olowokere Adedeji, another Economist said a
functional free trade zones policy was the antidote to the country’s present economy
woes.

In his opinion, the
present handling of the sector was shoddy, adding that the issues around
insecurity in some of the exiting zones must be addressed.

Perhaps, the
government is fully aware of the present hiccups around the sector as aptly
captured by the Director-General of the Nigeria Export Processing Zones
Authority (NEPZA), Mr Emmanuel Jime when the Management of the Nigeria Customs
Service paid him a courtesy visit on August 2017.

In that visit, NEPZA and Customs announced the setting up a
technical committee to harmonise their operations at Free Trade Zones across
the country.

The committee was set
up by the two agencies to address concerns raised by the NEPZA in relation to
the operations of customs officers in licensed free trade zones.

 Jime, had raised
concerns on customs officers lacked of knowledge on the operations of the free
zones and called for inclusion of free trade zones in the curriculum for their
training.

Jime had said customs
officers dealt directly with investors in the free zones instead of going
through the NEPZA, which was the agency responsible for investment facilitation
into licensed free zones in the country.

Responding, the
Comptroller General of Customs, retired Colonel Hameed Ibrahim Ali, said
customs officers in Nigeria were usually caught in-between its mandates for
trade facilitation as well as ensuring security and the wellbeing of Nigerians.

From the above
conversions, it is incontrovertibly clear that a lot needs to be done to
reposition the operation of free trade zones in Nigeria.

The narratives so far
has pointed to the fact the existing provisions of the Free Trade Zone Law
requires a review for optimal performance.

It would be also not
out of place if government adequately provides the right infrastructure needed
to drive operations in the zones as the present states of most of the zones
remained appalling.

In view of the porous
nature of the zones, the authority must heighten efforts to ward off attempts
by dubious operators and investors from converting the zones into smuggling
empires.

Finally, the
government must muster political will to implement the recommendations of the
2005 Presidential Committee on the operation of Free Trade Zones Scheme in
Nigeria.

It was saddening to
see that the good and impressive recommendations made by the committee were
never addressed by Obasanjo who set it up or by subsequent administrations.

The highlight of the
recommendations was that operations of the Free Zone Scheme should be closely
linked to national objectives for industrial development.

Consequently, the
scheme should have, as its target investors, industries with potential to add
real technological value to the economy while encouraging export activities.