The free-trade zone is key to the revival of the country’s economy, argues Olawale Rasheed
Nigeria is systematically and fundamentally responding to new economic challenges through a coordinated revival and expansion of special economic zones (SEZ) across the country. A renewed attention is being paid to the reform of SEZ to cope with demands of post-pandemic recovery and requirements of African Continental Free Trade Area (AFCTA). A feverish acceptance of SEZ’s critical role is pervading federal and states governments including associated federal agencies.
Nigeria is challenged on several fronts with economic handicaps as the most biting of them all. For long, development and expansion of manufacturing capacities was neglected even with more than 40 free-trade zones in the country. The lapses range from non-adherence to international best practices in the running and management of free-trade zones (FTZs) to a dysfunctional legal framework. More instructive is the lack of deeper understanding of what SEZs stand for as well how strategic the model is to ramp up development of industrial capacities, creation of employment and expansion of national earnings.
The pandemic was however a game changer as it jolted government leaders to an economic emergency requiring as one of the most potent tool responses the revival of the FTZs. The paralysis of world economic and the hard impact on oil-based economies promoted a fresh look into the FTZs, starting with the appointment of a true investor service professional, Prof Adesoji Adesugba, as the new Managing Director of the Nigerian Export Processing Zones Authority (NEPZA). Implementing the overall economic reform agenda of Buhari administration, Nigeria through NEPZA is driving Nigeria’s response to post-pandemic recovery and demands of AFCTA.
The FTZ is key to revival of Nigerian economy on two main grounds. First is the capacity of the FTZ to generate direct and indirect jobs at a time unemployment is threatening the corporate existence of the nation. Industry analysts predicted that a well- functioning FTZS in Nigeria can generate almost 300,000 direct jobs and over 350,000 indirect jobs. Second gain is Nigeria meeting her export capacity needs under AFCTA. Goods of Nigerian origin from the FTZs will ensure Nigeria’s maximum gain from the AFCTA.
All stakeholders now accept that Nigeria’s quick gain ahead of the expected AFCTA regime is a revival, reform and expansion of the SEZs. Guided by Presidency and the minister, the Adesugba leadership has repositioned the management of NEPZA as an investment facilitating team, launched action programme to make inactive FTZs functional while ensuring removal of bottlenecks in the operations of currently active SEZs. An advocacy initiative is enlightening all about the FTZs and its importance if Nigeria is to cope with the AFCTA.
At a time South Africa, East Africa and North Africa are ramping up their FTZs in anticipation of the AFCTA, Nigeria as the biggest economy on the continent is compelled to have a rethink on its FTZs. If Nigeria’s FTZs are not allowed to function in line with standard practice, the country under AFCTA will be flooded with goods from FTZs based in South Africa and other regions of Africa. This fact is now adopted as a strategic reality within the Nigerian Presidency and associated MDAs such as the Customs service, the tax agency, among others, hence a new lease of life for investors and prospects across Nigeria FTZs.
As part of strategic response, Nigeria is expanding her FTZs. New zones are springing up covering niche areas like knowledge FTZ, health FTZ, solid minerals FTZ, agriculture FTZ among others. Partnerships are being forged with international investors with involvement of international finance bodies including the World Bank, among others. Efforts are also on to ease the red-tapism under a new system that prioritises expansion with guaranteed security of investment. The reform message is permeating the state levels of state administration. Several states are keying into the FTZs model, accepting the model as the quickest route to enhancing industrial production capacity and create jobs for millions of agitated youths.
Much more dramatic and encouraging is the response of sister federal agencies. There are positive signals from federal agencies to comprehend the whole essence of FTZs. “A free-trade zone (FTZ) is a class of special economic zone. It is a geographic area where goods may be landed, stored, handled, manufactured, or reconfigured and re-exported under specific customs regulation and generally not subject to customs duty”, so is a generally accepted definition of FTZ.
It is exciting that the Nigerian Customs Service is gradually realising that FTZ all over the world is duty free territory. The earlier the customs service fully endorses the FTZ as an international model ,the better for Nigeria that has little time in view of mounting pressure from the AFCTA and the imperative of post-pandemic recovery. The Federal Inland Revenue Service (FIIRS) has moved a step further to sign an MOU with NEPZA to allow for smooth management of tax issues. Sister agencies are yielding ground and hopefully, comprehensive synergy will emerge, placing SEZs at the heart of Nigeria’s economic revival agenda.
But it is not yet uhuru. The Buhari administration should support further reforms in the area of renewed legal framework to create a single FTZ authority. Multiple agencies competing with NEPZA create impediment for foreign investors. In any case, the new trend is to have a single authority as a coordinating platform for licencing FTZs. Investors need certainty of legal order and safety of existing investment in functioning FTZs.
Nigeria also needs to act further by regulating security arrangement within her FTZs. There is an urgent need to create an FTZ police with dedicated personnel to regularise security arrangement. This is the standard requirement worldwide. Additionally, the question of offshore banking should be addressed urgently by the Central Bank of Nigeria. Offshore banking is a major component of FTZs worldwide. Fast tracking decision on this matter by the apex bank will complement ongoing efforts to attract investors into Nigerian FTZs.
On a last note, Nigeria can learn from China in the area of SEZs. Despite her rapid economic strength, the Chinese administration is widening her SEZ through enhanced benefits for investors and generous state support for her SEZ authority. SEZ is the backbone of Chinese economic miracle; same can happen here in Nigeria.
Rasheed is Director, Policy Advocacy Centre (PAC), Abuja Chamber of Commerce and Industry