Leveraging Special Economic Zones for African Industrialisation and Integration

Adesoji Adesugba

By Adesoji Adesugba

Free Trade Areas are special creation that propel the growth and advancement of many economies worldwide. The FTZ has been successfully deployed from North America to Europe to Asia. Africa’s embrace of the model is now more than critical in view of the advent of the Africa Continental Free Trade Zone. Agressive adoption of free zone model and its best practices are compulsory for Africa to realize the contient’s desire to advance industrially.

Free Zones are forms of economic integration wherein all barriers of trade are eliminated; however, each country is allowed to retain its own barriers with non-members otherwise known as third countries. Generally speaking, there are various kinds of economic integration ranging from free trade areas to customs union, common markets and economic unions. The practice is for countries to start with the lowest form and graduate to higher stages over time.

There are expected benefits to a Free Trade Area formation. Nations are likely to receive benefits through increased competition, economies of scale, stimulus to investment and better utilization of resources.

In Nigeria, the Free Zone Program was introduced in 1992 through the enactment of Act No. 63 of 1992 which provided for the establishment of Special Economic Zones in Nigeria. The Act empowered the Nigeria Export Processing Zone Authority as the sole government agency responsible for establishing, licensing, regulating and monitoring of Free Zones/Export Processing Zones in Nigeria.

The main goal for establishing the Special Economic Zone scheme in Nigeria is to improve the investment climate by providing a competitive incentive regime, streamline administrative procedures and offer world class infrastructure aimed at attracting capital investment for industrial development.

Other Objectives include;

•Job creation

•Attraction of foreign direct investment

•Technology/skills transfer

• Export development

• Encourage backward linkages and

• Socio-economic development of the immediate host community.

The Federal Government of Nigeria identified the Special Economic Zone scheme as a key policy instrument in the realization of the industrialization agenda following a visit by President Muhammadu Buhari, GCFR to the Peoples Republic of China in 2016. This is in the context of the experience in China where the deployment of SEZs in 1980 propelled her GDP from $191 billion at the time to $11 trillion in 2016, a staggering increase of 5,764%.

SEZ’s and the Industrialization Agenda

Regarding industrialization in Nigeria, the SEZ model is being sought to accelerate implementation of the Nigerian Industrial Revolution Plan (NIRP), a four (4) year road map on industrialization in order to create jobs and promote exports, which in turn will facilitate economic growth. The aim is to build Nigeria’s competitive advantage, to broaden the scope of industry, and to accelerate expansion of the manufacturing sector. Specifically, the plan sets out to increase the contribution of manufacturing from current 4% of GDP to over 10% in the next 5 years which translates to about N5 trillion annually.

In 2017, the Federal Government initiated Project Made in Nigeria for Export (MINE) in 2017 to develop and upgrade existing Free Trade Zones to Special Economic Zones aimed at contributing to meaningful industrial and export development in Nigeria.

The Role of NEPZA

As the agency with the mandate to establish and oversee the operations of all zones in Nigeria, NEPZA has a total of 42 zones under its purview. Whilst a few have recorded relative success in operations, most have not operated at their full potential due to several challenges such as a lack of adequate funding, poor infrastructure, accessibility, inconsistent power supply and management.

In continuation of the President’s agenda of industrialization using the SEZ model, NEPZA has recently revised its strategic plan to include “to increase the number of functional and optimal SEZ’s” as one of its key goals targeted at developing the SEZ sphere in Nigeria. In this regard, NEPZA seeks to establish world class “plug and play” technically driven zones that will attract foreign direct investments

Stakeholder discussions are currently underway for the creation of SEZ’s in the following thematic areas;

• Medical and Pharma Industrial Parks

• Mining and Minerals Special Economic Zone

•Agric and Food Parks

• Information and Technology Parks

Implications of AFCTA on SEZ’s Across Africa

The Rules of Origin (ROO) debate remains a key discussion point regarding the implications of the AfCTFA on SEZ operations in Africa. There must be ways to accommodate the SEZ’s within the Rules of Origin (ROO) to support the objectives of the AfCFTA. Consideration should be given to regional and specific country objectives during the negotiation process to ensure industrialization agendas of each country is achieved.

Market access and the ROO value criteria are some of the issues that have implications on the operations of SEZ’s.

In relation to market access, the law on free zones allow up to 100% importation of inputs and raw materials which negates the principle of origin. Most African countries have a low-level industrial base making accessing inputs from African nations difficult, resulting in the need to import from third countries hence the case for a flexible ROO.

Cross Border SEZ as Vehicles for Regional Integration

Experimentation with cross border free zones for regional Integration is a smart route for Africa. For Nigeria, various scenario are reviewed below:

Nigeria-Benin Regional Cooperation

At the moment, Nigeria does not have any SEZ cooperation with the Republic of Benin. However, there are efforts from the FGN to formalize border trade. Focus discussions are on infrastructure development and the setting up of relevant government border agencies.

Three borders have been identified for this purpose which are:

• Idiroko Transnational Border Market – Ogun State

• Okerete Transnational Border Market – Oyo State

• Bafana Transnational Border Market – Niger State

However, it is important to note that the Ogun-Guangdon Free Trade zone one of the eight (8) China- Africa co-operation zones, focused on manufacturing, lies in close proximity of Idiroko and could potentially service the Benin Republic market.

Nigeria-Niger Regional Cooperation

The Maigatari Border Free Zone, Jigawa State, was licenced in the year 2000, at the border town of Maigatari / Niger. The zone covers 220 hectares. To date, there are three (3) Free Zone Enterprises (FZE) operational.

• Tricycle Assembling Machine FZE

• Gum Arabic Testing Laboratory & Warehousing FZE

• WACOT Sesame Seed Processing Company FZE.

Nigerian – Cameroon Regional Cooperation

Sharing so long a border, Cameroon and Nigeria potentially have a lot to gain by extending cooperation through free trade zone. While such bilateral creation has not occurred, the Calabar Free Trade Zone in Cross River state can serve that purpose.

Regional Cooperation as Key Response to the COVID-19 Implications

The coronavirus 2019 (COVID-19) pandemic has taken a toll on the economies and healthcare systems of even the most developed countries. Despite the low level of cases and death in Africa, the pandemic showcased the lack of infrastructure, expertise and manpower required to deal with the fallout of a major surge should it occur. The closure of international borders also highlighted the need for Nigeria and Africa as a whole to look inwards and become self-sufficient in the provision of services to its citizens especially as it relates to healthcare.

Nigerian Response

The recently released NIGERIA ECONOMIC SUSTAINABILITY PLAN OF 2020 (NESP) was created to address the health and economic emergencies caused by the COVID-19 pandemic through the granting of many incentives including support to the development of the healthcare sector in Nigeria. The private sector, with these incentives are being mobilized to support infrastructure development.

NEPZA seeks to play its role in the development of the healthcare sector by establishing a fully equipped and functional Medical SEZ in Nigeria that will provide world class, in-country healthcare comparable to the standards that Nigerians seek abroad. The zone will help to reduce medical tourism from Nigeria and also service the African market.

•Prof. Adesugba, Managing Director of NEPZA, delivered this paper at the 3rd AU Symposium on Special Economic Zones and Green Industrialisation held on September 28th. His presentation was under session 2 with the theme: “SEZ’s and Regional Cooperation in Africa: State of Play and Major Guidelines.”