The Federal Government has expressed concern over the increasing diversion of goods produced within Free Zones into the Nigerian Customs Territory whilst continuing to enjoy fiscal incentives designed primarily for export-oriented activities.

It noted that this development has created an uneven competitive environment for manufacturers operating within the Customs Territory who remained subject to the full domestic tax regime.

Consequently, the government has begun a major regulatory overhaul of Nigeria’s Special Economic Zones (SEZs) in order to restore their original export-oriented purpose, provide greater certainty for investors and address concerns over the treatment of goods entering the domestic market.

Minister for Industry, Trade and Investment, Dr Jumoke Oduwole who stated this at the Special Economic Zones (SEZS) Stakeholders meeting, said the reforms were the product of a “whole-of-Ministry” process and were being implemented through a whole-of-government approach involving the relevant agencies and stakeholders.

Oduwole recalled that during the Third Special Economic Zones Annual Meeting in February of 2025 , she made a commitment: that the Ministry would work to align fiscal, monetary and trade policy so that our zones remain globally competitive.

She said. “At assumption of office in November 2024, we identified the ongoing tax reform process as a critical policy development with significant implications for Nigeria’s Special Economic Zones (SEZ) ecosystem. I also stated the policy direction of the Tinubu Administration with regard to Free Zones. This stakeholder engagement forms a part of that delivery process which has been ongoing since then.

Oduwole noted that after the February 2025 engagement and recognising the need to preserve Nigeria’s competitiveness as an investment destination while strengthening fiscal accountability, the Ministry commenced extensive engagements with the Legislative and Executive arms of government, and private sector stakeholders throughout the development of the tax reform process to ensure that the impact of the tax legislations on the special economic zones scheme are aligned with President Bola Ahmed Tinubu’s Renewed Hope Agenda on the diversification of the economy through the increase of non-oil exports.

According to her, the process began in February 2026 with the inauguration of the Special Economic Zones Legislative and Regulatory Reform Committee, comprising officials from the ministry’s Legal Services and Commodities and Export Departments, the managing directors of the Nigeria Export Processing Zones Authority (NEPZA) and the Oil and Gas Free Zones Authority (OGFZA), as well as their respective teams.

Three key regulatory instruments are at the centre of the reform: the Nigeria Export Processing Zones Authority Regulations and Operational Guidelines for Free Zones in Nigeria, 2025; the Nigeria Export Processing Zones (Domestic Sales, Fiscal Alignment and Customs Treatment) Regulations, 2026; and the Oil and Gas Export Free Zones (Domestic Sales, Fiscal Alignment and Customs Treatment) Regulations, 2026.

The minister said the reforms were designed to bring greater clarity to the legal and fiscal framework governing free zones without undermining the incentives that make the zones attractive to investors.

Oduwole noted that public discussion around free zones had increasingly centred on taxation, arguing that such a focus did not fully reflect the contribution of enterprises operating within the zones to Nigeria’s economy.

She pointed out that intend to grow production, exports, investment and employment across the scheme as evidence of the broader economic role of the zones.

Among recent investments is Health Textiles Nigeria FZE, which began production at the Lagos Free Zone in August 2026. The company, a wholly owned subsidiary of Vestergaard, is producing dual active-ingredient insecticide-treated mosquito nets, with the facility recognised by the World Health Organization as a Vestergaard production site.

At full scale, the facility is expected to produce about 10 million nets annually and employ more than 600 Nigerians. About 80 workers have already been recruited and are undergoing training in manufacturing, quality control and regulatory compliance.

Oduwole also cited the Dangote Industries Free Zone at Lekki, which hosts the Dangote refinery and Africa’s largest granulated urea complex. The refinery, according to the minister, was debottlenecked in February to between 650,000 and 700,000 barrels per day.

She said, “The refinery also recorded a significant increase in aviation fuel exports, reaching a reported 158,000 barrels per day in April 2026.The Lagos Free Zone has similarly attracted institutional capital, with the International Finance Corporation taking an equity position of up to $50 million in Nigeria’s first deep-sea-port-based private special economic zone.Across the wider free-zone scheme, the authorities record more than $200 billion in foreign investment and over N900 billion in domestic investment, alongside more than 100,000 direct jobs and an estimated 500,000 jobs when supply chains, logistics networks and host communities are included”.

She acknowledged criticism from domestic manufacturers who import similar inputs, employ Nigerian workers and pay applicable duties and taxes while competing with goods entering the Nigerian market under concessional arrangements associated with the free-zone regime.

Oduwole argued that the reforms will address these concerns while preserving the investment incentives and export benefits for which the zones were established.

One major objective is to reinforce the export orientation of the scheme through a clearer 75 per cent export and 25 per cent domestic-sales framework, while ensuring that domestic sales receive tax treatment consistent with applicable Nigerian law.

The reforms will also establish a clearer hierarchy between primary legislation and administrative directives.

The minister stressed that administrative circulars cannot amend Acts of Parliament and that historical concessions or practices inconsistent with primary legislation could no longer form the basis for investment or regulatory decisions.

The reforms also seek to clarify how goods moving from free zones into the Nigerian Customs Territory are treated, including the applicable customs framework and the valuation of finished goods.

Oduwole reaffirmed government’s commitment to protecting free-zone investments, the minister warned operators against practices that could undermine the integrity of the scheme.

These include diversion of goods, mispricing of related-party transactions, understating domestic sales and using the free-zone framework to disguise businesses that are effectively operating in the customs territory.

The minister observed that such practices,, could damage the reputation of the entire free-zone system, particularly under Nigeria’s evolving tax regime adding that the government therefore intends to combine investment protection with stronger compliance requirements.