Free Trade

There appears to be deep-seated and conclusive negative opinions about the modus operandi of the Free Trade Zone Scheme among individuals in and out of government in Nigeria.

This global economic system is primarily aimed at encouraging economies of scale through seamless production and manufacturing for export and local markets.

It also aims to support backward linkages; industrialisation; infrastructure development; employment generation; foreign exchange earnings, and revenue generation among others.

A Free Trade Zone remains a global economic matrix with a distinct framework which gives this business ecosystem the status of “country within a country.’’

It, therefore, behooves any nation willing to adopt the concept to run it in line with the local law that regulates its operation.

This law is enshrined in the NEPZA Act 63 of 1992 and it is within the purview of international best practice and framework.

The Federal Government, seeing the benefits of the scheme to the national economy and development, adopted it some 30 years ago.

The scheme might not be at the growth level that the government had envisaged yet, but some stakeholders say excellent milestones have been attained.

For instance, 52 Free Trade Zones have been created, with over 600 enterprises operating within those business landscapes with a cumulative USD 30 billion investment lubricating the economy.

Deborah Dada, a legal practitioner, said the primary laws regulating the FTZs in Nigeria are the Nigerian Export Processing Zone Act 1992 (NEPZ Act) and the Oil and Gas Free Zone Act (OGFZ Act).

“NEPZA has also made specific regulations over the operation of specific FTZs like the Lekki Free Trade Regulations 2016.

“NEPZA has passed a regulation over the operation of FTZs in Nigeria known as the Regulations and Operational Guidelines for Free Zones in Nigeria 2004.

“Free zones in Nigeria provide rewarding opportunities that not only attract foreign investors but also provide employment opportunities to local citizens.

Thus, businesses should take advantage of these incentives to maximise industrial growth and economic development by taking steps to set up their businesses in a free trade zone in Nigeria.”

Some stakeholders say, in spite of challenges, investors and operators have found respite in the special interest of President Bola Ahmed Tinubu, to use the scheme to upscale industrialisation.

They cited how Tinubu, then governor of Lagos State, used the free trade zone concept to reconfigure the economic landscape of the Lekki Area of the state.

He also used it to abet the catastrophic submerge of the entire Victoria Island area of the state through the conversion of the then-ruptured Bar Beach into a world-class Eko Atlantic Free Trade Zone.

Today, the Lekki area harbours the Lagos Free Zone, Dangote Refinery Free Zone Enterprise, Alaro City, Deep Sea Port, and Lekki Free Trade Zone.

To the credit of the president, these accomplishments earned him the praise of stakeholders as the “brain behind modern free trade zone in Nigeria”.

The president’s attention must again be called to the gains and prospects of the scheme through sustained promotion of the economies of scale over the temptation of listing it as a pure revenue generation hub.

The concept of economies of scale promotes long-term and sustainable dividends for the country so long as the enterprises continue to reap low production cost advantages.

This will encourage continuous inflow of Foreign Direct Investments (FDIs), Direct Diaspora Investments (DDIs) as well as Local Direct Investments (LDIs) while keeping a grip on investments already attracted.

Regardless of the loud voices of anti-free trade zone campaigners, the scheme has made modest contributions to the economy.

How is it possible for the 52 Free Trade Zones and the over 600 enterprises currently in operation have not impacted the economy significantly?

The response to the above question was provided by the NEPZA Managing Director, Dr Olufemi Ogunyemi, while alluding recently that free trade zone was, however, not a ‘free meal ticket’ for the investors.

The import of this statement is simply to help grow public knowledge on the contribution of the free trade zones to the Domestic Gross Product (GDP) and National Gross Product (NGP) respectively.

The NEPZA Chief Executive Officer was emphatic when he said: “Free Trade Zones are business anchorages that have for decades been used to generate revenues for the Federal Government.”

He explained that the widely held notions that the scheme was a ‘free meal ticket’ for the investors thereby denying government revenues were incorrect.

“The NEPZA Act provides an exemption from all federal, state, and local governments taxes, rates, levies, and charges for FZE, of which duty and VAT are part.

“However, goods and services exported into Nigeria attract duty, which includes VAT and other charges.

“In addition, NEPZA collects over 20 types of revenues ranging from 500,000 USD-Declaration fees, 60,000 USD Annually as Operation License (OPL), and 3000 USD to 500 USD Registration fees in line with extant regulations on IGR remittances to the Federation Account.

“There is also the 100 USD to 300 USD Examination and Documentation fees per transaction which occurs daily’’, he said.

According to him, there are other periodic revenues derived from Vehicle Registration, Visa among others. The operations within the free trade zones are not free in the context of the word.

For instance, the Authority’s First and Second Quarters of the 2023 Key Performance Indicator (KPI) showed that a combined total of 21.3 million dollars was generated as Foreign Direct Investment while N9.8 billion accrued as Local Direct Investment.

Conversely, a total of 28.9 million dollars was generated as International Exports and N250.5 billion was accrued to the government as Domestic Exports while 338.9 million dollars and N36.3 billion were generated as International Imports and Domestic Imports.

Furthermore, the figure that accrued to the government as Custom Duty stood at N20 billion while that of PAYEE amounted to N346.8 million, and a total of 3, 776 employment was generated within the two quarters reviewed.

In total, the Authority’s 40 per cent contribution to the consolidated revenue in naira as of November 2023 stood at N1, 800,809,1773.38 with a similar 40 per cent margin of transfer to the account in dollars amounting to USD 1, 167,122.86.

The total of the figures generated in 2023, which included figures from Tender Fee; Withholding Tax (WHT); Value Added Tax (VAT); Stamp Duty; PAYEE as well as Customs Duty stood at N38, 879, 485, 774 568.90.

The KPI for 2022 also showed excellent flashes of gains made by the scheme which attracted a total of 28 new enterprises with a total of 90 million USD value of FDI and N80 billion value of Local Domestic Investment (LDI).

The record also placed the value of both the International and Local Exports at 36.8 million USD and N450.8 billion respectively.

The 2022 key performance indicator further highlighted the value of International and Domestic imports to be 999 million USD and N188 billion.

The report stated that a total of N34.215 billion was generated as Custom Duty while the amount generated from the free trade zone in 2022 by the Immigration Service stood at N702.7 million with a total of 3,555 employment created.

A session of stakeholders urges the authority to be aware of the need to ensure a transparent listing and deductions of mandatory duties and taxes.

One of the ways to achieve that, they say, is by digitalising its process and agreeing on the best ways for a dependable free trade zone tax administration with the relevant authorities.

The scheme remains an economic development tool the country is using to leapfrog our economy and its sustainability and success should be our utmost concern.

Abuja, Nov. 28, 2023:The Nigeria Export Processing Zones Authority (NEPZA) says the country’s Free Trade Zones are business anchorages that have for decades been used to generate revenues for the Federal Government.

Dr Olufemi Ogunyemi, the Managing Director of NEPZA, said this in a statement by the authority’s Head, Corporate Communications, Martins Odeh, on Monday in Abuja.

According to him, the widely held notion that the scheme is a `free meal ticket’ for the investors and not a means for the government to generate revenue is incorrect.

Ogunyemi said this public statement was essential to clarify the misunderstanding by various individuals and entities, in and out of government, on the nature of the scheme.

He reiterated the authority’s commitment to enhancing public knowledge of the principal reason for the country’s adoption of the scheme by the NEPZA Act 63 of 1992.

“The Free Trade Zones are not hot spots for revenue generation. Instead, they exist to support socioeconomic development.

“These include but  not limited to industrialisation, infrastructure development, employment generation, skills acquisition, foreign exchange earnings, and Foreign Direct Investments(FDI) inflows,” Ogunyemi said.

The managing director said the NEPZA Act provided exemption from all federal, state, and local government taxes, rates, levies, and charges for FZE, of which duty and VAT were part.

“However, goods and services exported into Nigeria attract duty, which includes VAT and other charges.

“In addition, NEPZA collects over 20 types of revenues, ranging from 500,000 dollars-Declaration fees, 60,000 dollars for Operation License (OPL) Renewal Fees between three and five years.

“There is also the 100-300 dollar Examination and Documentation fees per transaction, which occurs daily.

“There are other periodic revenues derived from vehicle registration and visas, among others.

“The operations within the free trade zones are not free in the context of the word,” he said.

Ogunyemi said the global business space had contracted significantly, adding that to win a sizable space would require the ingenuity of the government to either expand or maintain the promised incentives.

“These incentives will encourage more multinational corporations and local investors to leverage on the scheme, which has a cumulative investment valued at 30 billion dollars.

“The scheme has caused an influx of FDIs; it has also brought advanced technologies, managerial expertise, and access to global markets.

“For instance, the 52 FTZs with 612 enterprises have and will continue to facilitate the creation of numerous direct and indirect jobs, currently estimated to be within the region of 170,000,” he said.

Ogunyemi said an adjustment in title and introduction of current global business practices would significantly advance the scheme, increasing forward and backward linkages.

“This is with a more significant market offered by the Africa Continental Free Trade Agreement (AfCTA).

“We have commenced negotiations across the board to ensure that the NEPZA Act is amended to give room for adjusting the scheme’s title from `Free Trade Zones to Special Economic Zones respectively.

“This will open up the system for the benefit of all citizens,” he said.

Abuja, Oct. 17, 2023: The Federal Executive Council (FEC) has approved the formation of two committees on industrial revitalisation roadmap and review of the Free Trade Zones in the country to improve the nation’s economy.

The Minister of Industry, Trade, and Investment, Dr Doris Uzoka-Anite disclosed this at the end of the second meeting of FEC on Monday in Abuja.

She said that the committees, to be chaired by President Bola Tinubu, would have various sub-committees to harmonise the activities of the ministry with that of other ministries and agencies relevant to it.

Uzoka-Anite said that the sub-committees would come up with a  roadmap toward the full revival of the economy in line with the  President’s eight-point agenda.

The minister explained that the sub-committees will include that of consumer credit, commodity exchange,  heavy industries, steel development, and licensing and certification of artisans.

Others are the sub-committee on trade facilitation and liberalisation, mining and solid minerals, oil and gas, aa well as the creative industry.

‘’The committee will harmonise activities of the ministry with other ministries and agencies toward  a roadmap for a full industrial revival of the economy in line with the 8-point agenda of the president.

‘’We expected a boost in investment in the industrial sector, job creation, GDP growth rate from 3.5 per cent to about 7 per cent, and a GDP base of about N1 trillion in line with Mr president’s mission,’’ Uzoka-Anite said.

She added that the committee on the Free Trade Zone would be charged with the responsibilities of charting a way forward for the zones with the aim of opening up opportunities for Nigerians to take advantage of.

‘’The Council also approved the setting up of a committee to review the free trade zone, to look at its incentive and the laws and reforms and come up with reform that will help to stimulate and catalyse the economic benefits of the free trade zones and the economic special zones for the benefit of Nigerians and other investors,’’ she said.

Minna, Sept. 27, 2023: Governor Mohammed Bago of Niger says the State Government will collaborate with the German Agency for International Cooperation (GIZ) for the creation of free trade zones in Tafa, Bida and Minna.

Bago made this known on Tuesday when he received members of the GIZ team on a courtesy visit in Minna.

This is contained in a statement issued by his Chief Press Secretary, Mr Bologi Ibrahim, on Tuesday in Minna.

He said the free trade zones would enable local entrepreneurs and farmers to have value for their products.

The governor pointed out that value chain cluster production brings about positive development.

Bago acknowledged the developmental strides of GIZ in different aspects of the nation.

He also sought for further collaboration with the development partner in the area of ICT and scholarship to enable people to develop their careers.

Responding, the leader of the team and Head of Pro-growth and Promotion of Employment in Nigeria SEDIN, who also doubles as the Coordinator, of the Sustainable Economic Development Cluster (SEDEC), Mr Marcus Wauschkuhn, said GIZ has been partnering with the state for over two decades in the areas of employment and private sector promotion.

He said the team would be focusing on economic development, improved market access and access to finance for MSMEs in the new phase of its programme commencing from 2023 to 2026.

Wauschkuhn said the project would also be extended to students to catch them young in skills acquisition.

Abuja, Aug 3, 2023: Jigawa State Government and the Nigeria Export Processing Zones Authority (NEPZA) have agreed to revitalise the state’s Maigatari Export Processing Zone.

The duo agreed when the Jigawa State Governor, Umar Namadi, visited the Managing Director of NEPZA,  Prof. Adesoji Adesugba on Wednesday in Abuja.

According to the Namadi, the Free Trade Zone(FTZ) has numerous potentials and benefits to the people and the country at large and needs to be made operational.

The governor said:“We felt that we have a free zone that has been lying fallow for some years and we need to bring it into operation.

“And the best place we should start this process is NEPZA,  so we made contacts and the managing director agreed to see us in such short notice.

“We came here to solicit for their expert advice on how we can bring our free zone into operation and to solicit for the MD’s support in terms of licences and registration fees.

“We know that we are owing the authority and we feel that he (Adesugba) should be able to allow us some leverage so we can stagger the payment and resume operations.”

According to Namadi, the free zone has a lot of potentials and it is going to contribute to the economic development of this country.

“In addition to giving lots of opportunities to our youths to get employed among other things.

“So because of that, it is necessary that we put it into operation, and you cannot do that without consulting experts and I think NEPZA  is the best place to come.

“And that is why we are here. We are happy with the discussions we had with the MD and the fact that he is so committed to make the free zone work. So we think the visit is fruitful,” Namadi said.

On time frame, the governor expressed optimism that before the end of 2023 the FTZ should come into operation as everything necessary to make it work was available.

On security, Namadi said:“Jigawa is so far the safest state in Nigeria but we are also security conscious and making sure that investors and the state is well secured.

Responding, the NEPZA boss expressed the committment of the Authority to support the state and all other states willing to drive trade and develop the country’s  economy.

Adesugba said:“We have been trying to work with the state to activate that free zone because we see it as a critical infrastructure that could do a lot for that part of the country.

“So we cannot say more than we are happy and we are going to work straight away on our first meeting to determine and structure the way forward.

“The governor has given us ultimatum that before the end of this year we should make it work but you know of course that we have a track record.

“We have done it for Kano, Calabar free zone and we are confident  that with the kind of Governor we have, working with NEPZA we will definitely  deliver this reactivation programme  within the shortest period of time. “

Some of the issues which the duo planned on discussing includes revitalisation of the zone’s infrastructure facilities and hibiscus sorting, grading and packaging.

Other areas are bulk breaking centres and warehousing facilities, payment of outstanding operational licence fees from 2017 to date  and formation of steering committee to bring up recommendations within five weeks.

The Minister of Industry, Trade and Investment, Otunba Adeniyi Adebayo has decorated 37 Special Economic Zones Security (SEZSEC) personnel to boost the security architecture of Nigeria’s free trade zones.

Adebayo said on Thursday in Abuja that the special economic zones security was to specialise in the security of investments, while complementing the services provided by other security agencies at the country’s free trade zones.

The minister said that it was a sure way to attract more Foreign Direct Investments (FDIs) “as it is natural for investment to locate where it can be secured’’.

According to him, the Federal Government approved the establishment of this security outfit which is midwifed by the Directorate of State Services (DSS).

“It is a deliberate measure to further fortify the country’s 46 free trade zones against economic sabotage and for the protection of investments domiciled in those special business areas.

“The outfit is to specialise in the security of investments and complement the wonderful services already provided by the DSS, Police, Civil Defence, the Nigeria Custom Service and the Nigeria Immigration service,’’ the minister said.

While urging them to be professional in the discharge of their duties, Adebayo pledged that hard work would be rewarded while appropriate sanctions await those who would err.

“The government will not hesitate in rewarding hard work, just as it will not relent in punishing any of you who runs afoul of the law.

“Stay focused in the delivery of your services for the attraction of the much needed investments which will create jobs and improve our GDP,’’ he said.

Earlier, Prof. Adesoji Adesugba, the managing director, Nigeria Export Processing Zones Authority (NEPZA), said that the reason for establishing the unit could not be overemphasised.

“Our ultimate aim is simply to provide adequate security to lives, properties and investments in the free trade zones.

“The issue of security and its attendant challenges have been of serious concern in our beloved nation.

“This bold step we took will help to build the confidence of investors, owners of enterprises in the zones and prospective investors alike in our management of the free zone scheme,’’ he said.

He commended Federal Government’s efforts in establishing six special economic zones in Lagos, Ilorin, Katsina, Benue, Gombe and Sokoto within seven years.

According to Adesugba, the new security structure is already providing the zones with surveillance and intel.

“Others are physical security, and procedural checks on documentations to abate economic sabotages.

“We have come to decorate these officers with their ranks and also to unveil them to the investing public and to the Nigeria public as a mark of our resolve to open up the scheme for sustainable global business exchanges and competition,’’ Adesugba said.

The NEPZA boss said that the officers were trained between May 23 and June 23 at the State Security Service Academy, Lagos.

On his part, Sen. Francis Fadahunsi, the Deputy Chairman, Senate Committee on Trade and Investment, said that the establishment of the security unit was in conformity with international best practice.

He pledged National Assembly’s commitment to carry out legislations that would improve the concept.

Fadahunsi appealed to the officers to carry out their task professionally, saying that without security, no meaningful investment would thrive. 

The House of Representatives Committee on Commerce has described the process to concession the Calabar Free Trade Zone (CFTZ) as a positive approach to unleash the full potentials of the zone and significantly boost the country’s economy.

Rep. Richard Gbande, Deputy Chairman of the committee, said this when he led members on an inspection tour of the zone in Calabar.

A statement issued on Thursday by Martins Odeh, Head, Corporate Communications, Nigeria Export Processing Zones Authority (NEPZA), reported Gbande as saying that it would stimulate industrialisation and economic growth.

The lawmaker, representing Katsina-Ala/Ukum Federal Constituency of Benue State, explained that the public must understand reason the Federal Government adopted the free trade zone scheme.

According to him, it was basically aimed at encouraging industrialisation and promoting economic growth.

He, however, said that the scheme required a long period of sustained funding to yield any significant benefit to the country.

Gbande further said that NEPZA had so far performed well within its limited resources, adding that the impact of the scheme had reflected positively on the country’s Gross Domestic Products (GDP).

“We are in the Calabar Free Trade Zone to see the progress the business ecosystem is making and I can say that NEPZA has done well so far for keeping the country’s pioneer free zone intact and working.

“The committee has noticed some of the challenges which include outside infrastructure and the dredging of the Calabar port.

“In spite of these challenges, the enterprises, most of which are foreign companies, are still functioning and helping to provide employment for the locals as well as serving the markets.’’ he said.

Gbande explained that the zone would be brought to the required optimal level of competitiveness when handed over to private investors.

Prof. Adesoji Adesugba, the Managing Director of NEPZA, expressed delight on President Muhammadu Buhari’s commitment and support in revamping the scheme to meet international standards.

The NEPZA boss restated Federal Government’s commitment to ensure stable electricity supply to the Calabar and Kano free trade zones, adding that the recent blackout in the Calabar zone had been addressed.

Adesugba said government’s approval of funds for the development of infrastructure at the two public zones and two other new ones, was an indicator of the president’s commitment to reposition the scheme.

According to him, the Authority has continued the execution of the power and other projects in Kano, Calabar, the Textile and Garment Park as well as the Medical Special Economic Zone in Lagos.

“Already, works are ongoing in these areas as infrastructure development remains the bait that can attract investors to the zones.’’ Adesugba said.