Platforms for Economic Growth
As the federal government makes effort to diversify Nigeria’s economy from oil, if well harnessed, revenue generated from free trade zones could surpass what the country currently earns from the hydrocarbon and sustains the economy. This position was articulated and reinforced by the immediate past Managing Director of the NAHCO Free Trade Zone, Mr. Baba Yusuf, when he speaks with Chinedu Eze. Yusuf, who is a member of and knowledge contributor to the Geneva-based World Free Zones Organization (World FZO), also believes, aviation, being a catalyst for economic development, if fully exploited as window for export, could translate to exponential growth of airport free trade zones. Excerpts:
Many people read about the Free Trade Zone but they don’t really know what it is and what are the benefits and what is all about, what can you tell us about it?
I will speak about the free trade zone from two perspectives. First of all, I will talk about it from the general perspective and also from the aviation perspective. A free trade zone is a designated area within a country either at the border or within the country so designated free trade zone or special economic zone set up to promote international trade foreign direct investments. So, in essence they are specially designated to encourage economic development and growth. Investors can invest, set up industries, light assembly platforms, real estate, logistics hubs and systems, or other types of businesses in the designated free trade zones and benefit from various business incentives therein. So typically, you have tax holidays, you have waivers of custom duties as ways of triggering or catalysing economic activities within that zone especially with benefits and impacts for the free zine companies, the immediate communities and the country at large. Examples of free trade zones in Nigeria are the likes of Onne Free Trade Zone, which is an oil and gas free zone, the upcoming Dangote Refinery, Lekki Free Trade Zone in Lagos. There are other free trade zones and other special economic zones across Nigeria.
Now brining it to aviation, the airport free trade zones are the same platforms, but they are within airports. Examples of airport free trade zones are the Dubai Airport Free Trade Zone (DAFZA), the Shannon Free Zone in Ireland, the Singapore Changi Free zone, etc., which are located within and around major international airports. In Nigeria, NAHCO Free Trade Zone (NFZ) happens to be the first airport free trade zone in Nigeria. And for us, it is to leverage this opportunity of a free trade zone to provide efficient logistics platform for international trade. It provides warehousing services especially for transshipment, light assembly platforms, and other logistics support services for telecommunications pharmaceuticals, fast moving consumer goods (FMCGs), information technology (IT), Luxury items, etc.
How far has NAHCO gone in terms of patronage?
The NFZ project has progressed from start-up phase in 2014 to a full operational phase when I took over as MD/ CEO, seven months ago. Since I resumed, we have focused on growing the business whereby, the phase one warehouses of NFZ will soon be 100 per cent occupied. We also secured land from FAAN for the development of NFZ Phase 2 located also within the cargo section of the Murtala Mohammed International Airport, Ikeja, Lagos. We also already started preparation for the development, which will commence soon. We also undertook some expansion initiatives that have yielded positive results.
Within the last seven months, the NFZ has been more visible. We have also prepared the zone for growth and development by achieving over 90 per cent performance across key performance indicators (KPIs) for the financial year ended 2018 over and above 2017 financial year.
Looking at the volume of export and the volume of import, what do you think would be the exponential growth of the trade zone in the next five years to 10 years?
Aviation is a catalyst for economic development. Because the aviation platforms, that is, the airports, give quick access to market, the nature and transactions of businesses have drastically changed and improved globally in the past 20 years. Usage of aviation as a logistics platform is increasing by the day, and to that extent, we expect exponential growth for NFZ, the airport free trade zones and indeed, the Nigerian aviation sector going forward, especially in terms of exports. The opportunities that the airport free trade zones present to international and local businesses are legion. One of the critical examples of such opportunities is trans-shipment, where major logistic companies or major organisations that do global businesses can use Lagos as their trans-shipment hub for the entire sub-Saharan Africa or for West Africa. So, for example, you bring in all your goods and locate them at the Nahco Free Trade Zone warehouse within the airport, which is less than one hour away from Ghana, 30 minutes away from Lome and six hours away from London. And then you move these items on demand with compliance with regulations. This reduces logistics timelines, enables operational excellence, provides cashflow efficiencies and savings with consequent impact on profitability.
It is worthy to note that the Free Trade Zones are highly regulated, and therefore compliance with regulations of the Nigerian Exports Processing Zone Authority (NEPZA) and the Nigerian Customs Service are key. This is to safeguard the abuse of the Free Trade Zones lest they become hubs for economic sabotage. Therefore, compliance with the regulations is very critical. Non-compliance with any of the regulations of NEPZA and the Nigerian Customs and in the case of Airport Free zones, the Nigerian Civil Aviation Authority (NCAA), international conventions like Annex 17 of ICAO are also key amongst others could lead to forfeiture of operating licences and probably prosecution and therefore compliance is very important.
Let us go back to the question of how NFZ will grow, or to that extent how it will add value to the economy? I mean it is just the beginning because for us we expect rapid growth for the free zones industry in the next five years and beyond, in terms of aviation logistics, value addition and exports with significant impact on the Nigerian GDP.
You are knowledgeable about NFZ at the airport, but we learnt that you’ve left the company. What are your reasons?
You know as the saying goes, “The only constant thing in life is change.” NAHCO is a company I love, I appreciate the board, management and staff for the opportunities given to me to serve. However, my perspective and outlook in the past two to three months started changing to looking at how I can increase the scope of my contribution and impact across industries, especially; aviation, free trade zones and agriculture. That is what informed my decision to voluntarily resign as MD/ CEO, NFZ so that I can focus on how we can influence and drive positive narratives, influence conversations and policies in ways and means that they will impact the economy of Nigeria; supporting government and private sectors to trigger economic growth, of course my beloved NAHCO is a member of the aviation community. So, you can look at it from the perspective of me trying to add value to the larger community not losing sight of my constituency.
NAHCO is now collectively a group of companies, how do you look at its future?
Well, NAHCO is a 40-year-old company if I am right, and companies that are 40-year-old companies, I think, you can safely call them institutions. Nahco has become an institution and I think with the right vision and strategy, it can only go from strength to strength. Examples like Coca Cola, Marriott and our dear First Bank are companies that have endured over time, evolving and reinventing themselves and I think that is what is happening with NAHCO. At this point NAHCO is poised for reinvention and I think for NAHCO it is going to go from strength to strength. We can see that some key players in the aviation sector are at the helm of affairs to take NAHCO to greater heights. I use this opportunity to wish the new leadership of NAHCO well. Also, I pray and hope that NAHCO will continue to grow from strength to strength, I will continue to support NAHCO and indeed the aviation industry growth.
Nigeria is import dependent but there have been recent efforts to increase exports of quality goods and services from Nigeria especially agricultural produce to other parts of the world, how do you see the success of government efforts so far? And what do you think may be the inhibitions and what do you suggest could be a way forward?
Given the current global economic realities, diversification is the way forward for economies; in Nigeria, today, it has become imperative for us to look at options and alternatives to hydrocarbons for economic sustainability and growth. One of the critical success factors is for us to create platforms and systems, whereby, we can promote diversification of the economy, trigger additional or improved economic activities and at the same time facilitating the enablement of these businesses in ways and manners that they will be successful and impact the economy, short to long term. It’s been the past three to four years that this has been happening and we have seen how it has been impacting our economy and more importantly, how it has impacted the common man. Go to villages across the Nigeria and you will see how agribusiness is growing and people are really flourishing and it now brings to reality the need for us to upscale our infrastructure, standardisation and global competitiveness.
From agribusiness, to movement of fast-moving consumer goods, regional hubbing, promoting regional and international trade. The airport free trade zone will be a key factor in the success of changing the game of our economy. Nigeria is geographically and strategically positioned for quick access to key markets by air, therefore the airport free trade zones are veritable platforms of economic development and prosperity.
The way we have seen the recent progress and improvement at the passenger terminals of our airports in Nigeria, leveraging the Presidential Executive Order on Ease of Doing Business, the airports and other relevant policies, we need to as a matter of urgency, execute same on the cargo terminals of the airports. The cargo terminals remain critical platforms for economic growth.
Talking about inhibition, the cargo terminals of the airports so far remain the weakest links as far as the current aviation reforms are concerned. We therefore, need to quickly close those gaps and improve those platforms from environmental to infrastructural, policy, systemic, process, security, standardisation and regulation challenges.
On regulations, the Nigerian Export Processing Zones Authority, the Nigeria Customs Service, Federal Airport Authority of Nigeria (FAAN) and the Nigerian Civil Aviation Authority (NCAA) are key stakeholders to the success of the airport free trade zones. Compliance to regulations is critical to the operation and sustainability of Free Trade Zones.
The laws are there, the regulations are there and the platforms are there; are there rooms for improvements? The answer is yes, especially in the area of infrastructure.
I believe that it is time that we the players in the private sector synergise and strategise and ensure that we fully leverage existing policies to better our current situation. We will collaborate with other stakeholders to support policy improvement especially in the next dispensation, which will commence in the next two months.
One of the takeaways is for us to progress by leveraging extant laws and regulation. Government has done a lot in the last two to three years to provide the framework and the enablement for business improvement. The Presidential Executive Order, the single window, one-stop-shop model are very key to removing the multiple pain points that elongate processes with adverse impact of our businesses and international trade.
We need the buy-in of critical stakeholders in ensuring the success of this with positive impact to the economy. And I believe that more need to be done to that effect in terms of execution. And we believe that, it is not the sole responsibility of government but rather a collaboration between private and public sector in trying to see how we can boost our export in terms of agribusiness, and in terms of the local manufacturing industry.
Let’s look at the volume of passenger movement in Nigeria, inbound and outbound. And let’s look at the fact that airlines dictate to handling companies, do you see the strengthening of aviation handling companies in Nigeria viz-a- viz inbound and outbound passengers and airlines coming in and the domestic airlines?
Well I think it is not just about Nigeria, it is a global economic reality because globally, the airlines are also looking at their economic realities. They are trying to cut down operational cost, increase efficiencies and make more profits. The new airlines global template, in terms of pricing and service demands, is hitting the ground handling companies really hard. But I still believe that the ground handling companies can grow and add value because they are still critical to the airlines. The ground handling companies need to innovate with better survival strategies based on efficiencies and innovation. They need to review their own strategies by reviewing the framework of services and see how they can now recalibrate their service structure.
Now that you have left NAHCO, what do you intend to do?
I will answer you by adding to the answer, I gave you earlier, and that is I am looking at how we can impact a wider aviation constituency, the Nigerian free trade zones industry and indeed the Nigerian economy. So, we are going to look at how we can do that, by bridging gaps within value chains across some industries and sectors.
We will also provide support trying to ensure that those little things that matter are brought to the fore, because, it is those little things, the little details that matter, because when they add up, they can sometimes take down a super structure. We will foster synergies and collaborations for positive outcomes for stakeholders and ultimately for Nigeria.