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Nigeria Free Trade Zone at 30: Milestones and prospects

By Martins Odeh and Golda Ukomadu
29 November 2022   |   2:57 am
The decision of our past governments leading to the adoption of the Free Trade Zones Scheme, a global economic model to aid widespread economic growth on November 30, 1992, has to this moment remained a legendary step toward fast

Kano Free Trade Zone

The decision of our past governments leading to the adoption of the Free Trade Zones Scheme, a global economic model to aid widespread economic growth on November 30, 1992, has to this moment remained a legendary step toward fast-tracking the country’s industrialization.

The operation of the free trade zones is deliberately incentivized to stimulate Foreign Direct Investments (FDIs); Domestic Direct Investments (DDIs); employment generation; infrastructure development; technology transfer; skill transfer to boost the country’s prosperity profile.

The scheme was first adopted through the enactment of the Nigeria Export Processing Zones Authority (NEPZA) Act 63 of 1992 and this gave the Authority the mandate to license and administer the scheme in a manner to fast track economic growth and industrialization.

The scope of the model was thoughtfully widened with the enactment of the Oil and Gas Free Zones Act, CAP 05 Laws of the Federation of Nigeria, 2004), specifically bestowed with the mandate to license, regulate and administer investments in the oil and gas free zones in Nigeria. 

These two regulatory agencies have kept to their mandates in a way that they have continued to spew the fortunes of the scheme for the growth of the economy.

e country may not have reaped bountifully from the scheme within the last 30 years, but the scheme has shown flashes of successes and achievements in providing backward linkages to the various production value chains in Nigeria.

Also, it can be seen that further milestones have been reached as a result of President Muhammadu Buhari’s unflinching commitment and support for the development of the scheme in the past seven years.

The government’s involvement in the promotion of the operations of the zones has led to the upsurge of interests of both zone owners, and enterprises alike to continually leverage the country’s huge market to boost their profits exponentially.

For instance, NEPZA now manages 44 private and two public free trade zones with 625 enterprises providing 150,000 direct jobs and an estimated 250,000 indirect jobs with a total investment put at 26 billion US dollars.

In like manner, the Oil and Gas Free Zones which have become growth centres that complement the government’s efforts by enhancing job creation, have significantly contributed to the country’s GDP through the multiplier effect of its activities.

Since its inception to date, OGFZA has attracted over 30 billion US dollars of FDI into the country. It has also created over 50,000 direct jobs and an estimated 160,000 indirect jobs. Furthermore, it has also attracted over 185 foreign and local companies to its controlled zones.

In addition, local capital investment in the free zones stands at N255.33 billion, facilitating both physical and economic developments in the locations of its free zones with 103 functional companies from 45 countries operating in the zones.

Cumulatively, the scheme as of 2021 has so far generated about 620 billion naira of Domestic Direct Investments (DDIs) and 66 billion-US-dollars worth of Foreign Direct Investments.

It is, therefore, important to state that the scheme, even with its unparalleled incentives that appear to be like comprehensive tax holidays, remains a major lubricant of Nigeria’s economy in all ramifications. 

The concept is beginning to make a lot more meaning as both NEPZA and OGFZA have resolved to seamlessly interpret the government’s vision on using variant-free zones to revamp the nation’s economy in a more expeditious manner.

Permit me, therefore, to draw an inference from one of the founding Directors of the World Export Processing Zones Association (WEPZA), Richard Bolin, who said in a 1988 conference in Flagstaff, Arizona USA, that “Free Zones were not going to disappear, but that they could only undergo changes.’’ This is, however, coming through with the diversification and multiplication of unique zones based on the services they offer.

As can be seen, both NEPZA and OGFZA have continued to seamlessly interpret the president’s vision on revamping the economy using the Special Economic Zones (SEZs), a free zone variant that allows for the licensing of specialized zones.

It will not be out of place to, therefore, commend this administration that has taken lofty steps to indeed begin genuine revamping of the economy by approving six new of those variant zones that will eventually obliterate the ugly tales of the country just being able to set up only two public free trade zones in almost 30 years.

These new special economic zones under NEPZA control are the Medical/Pharmaceutical SEZ Lekki, Agro-Allied SEZ Ilorin, and the Integrated Cotton/Textile/Garment SEZ Funtua, Katsina. The three others are to be located in Benue, Gombe and Ebonyi states respectively.

The federal government along with similar thought earmarked the Murtala Muhammed International Airport, Lagos; Nnamdi Azikiwe International Airport, Abuja; Port/Harcourt International Airport as well as the Aminu Kano International Airport, Kano; as Free Trade Zones to be managed by NEPZA.

This pragmatic approach of the government to widen the horizon of the scheme is a testament to the president’s vision to more than ever before using this global business corridor to generate employment, attract both FDIs, and DDIs, and to invigorate further the building of a production-based economy for sustainable growth.

No doubt, the scheme holds greater prospects for our nation as it provides us with the latitude to operate it in such a manner to have far-reaching positive impacts on the government and citizenry.

There is no gainsaying that the Lekki Deep Sea Port, a marquee project, at the Lagos Free Zone, that has been completed will have a huge positive impact on the Nigerian economy. 

It has the capacity to contribute significantly to boosting the economy and to also bring about the desired global competition in the country’s shipping, logistics and all associated businesses.

The project which sits on 90 hectares of land and is promoted by the Tolaram Group based in Singapore, the Nigerian Ports Authority (NPA) Lagos State Government and China Harbour Engineering Company (CHEC) is projected to generate over 170, 000 direct and indirect jobs.

Also located at the Lekki business axis, is the Dangote Free Zone Enterprise harbouring a world-class multi-billion-naira Refinery touted to be the world’s biggest single-train facility aimed at reducing the country’s oil importation and saving the government’s billions of dollars from importation. 

It will not only provide over 70,000 direct and indirect jobs. Still, it will remove the stigma of an oil-producing country that is now compelled to import refined petroleum products for domestic use.

The Lekki corridor, which equally warehouses the Lekki Free Trade Zone and Alaro City plus other zones within the supervision of NEPZA including Ogunguandong, in Ogun State, Eko Atlantic City, LADOL Free Trade Zone, Enyimba City Free Trade Zone, is ostensibly national assets with the capacity to unlock the country’s economic potentials.

So, you can see from the progress made, it isn’t just a wish for us to drive the nation’s economy using this scheme, but that the present administration has backed such a wish by taking action to raise the ante in its funding, policy support and effective management of the scheme.

To be continued tomorrow

Odeh is head, Corporate Communications, at NEPZA

Ukomadu, is head, of Corporate Communications, OGFZA