The Nation Newspaper

Tag: free trade zones

  • Free trade zones: How not to take advantage of government’s enabling environment

    Free trade zones: How not to take advantage of government’s enabling environment

    • By Perching Hawk

    It is globally accepted that meaningful national socio-economic development is hinged among others on the ability of governments to provide enabling environments for the private sector to thrive, particularly in free market economies like Nigeria through policy initiatives, incentives and robust regulatory regimes supporting consumer and environmental protection among others.

    Such environments are aimed at stimulating increased local and foreign direct investment in manufacturing, innovations, competitiveness and other market driven economic activities to engender increase in capacity utilization by existing industries, generate new job opportunities, create more wealth, and promote citizen welfare, thus alleviating poverty.

    One initiative in Nigeria was the creation of Special Economic Zones (SEZs) or Free Trade Zones (FTZs), which are critical components of contemporary economic strategy and part of a broader strategy to diversify the economy, reduce dependency on oil revenues, stimulate local businesses and encourage sustainable development in order to foster economic growth, attract investments, create jobs and substantially reduce poverty.

    These zones often benefit from tax incentives, streamlined regulations, and infrastructural support, making them appealing for businesses looking to establish operations in emerging markets like Nigeria.

    One significant incentive is the corporate tax holiday available to eligible enterprises for a period usually ranging from three to five years, and potentially extendable based on performance and compliance with specific conditions.

    Duty exemptions on imported goods are another attractive incentive that allows businesses within FTZs to import raw materials and equipment without incurring customs duties. Value-added tax (VAT) waivers, reduced utility costs, grants for setting up businesses, duty deferral, exemption and reduction, one-stop approvals for permits, operating licenses, and incorporation papers, provision of infrastructure that meet international standards as well as supportive regulatory frameworks, are others aimed at boosting investment in FTZs.

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    Challenges of managing free trade zones in Nigeria

    As globalization continues to define economic progress of nations and the relevance of FTZs continues to grow, so do the challenges relating to assuring standards, effective regulatory oversight and achievement of the objectives for which the zones were created. The standards, oversight, and regulations governing FTZs have not kept pace with global developments, allowing illicit actors sabotage the economy by taking undue advantage of the government incentives, thus defeating the noble objectives of setting up the zones.

     Stakeholders at different forums have expressed concerns on the activities of some operators in the FTZs infringing on the movement of goods and sometimes raw materials from the zones to the customs territory, thus creating unfair competition with similar businesses in the latter. Others include gross under prizing of raw materials and semi processed products into the territory as well as the export into the customs territory without the required value addition. Such activities deny the nation of due revenue and create economic imbalances while the perpetrators smile to the banks.

    The FTZs dilemma

    While the President Bola Tinubu-led federal government has placed premium attention to plugging financial leakages leading to significant and unprecedented improvement in the nation’s income, stakeholders are raising serious concerns on the activities of some operators in the FTZs.

    Such concerns range from trading in unapproved items, inadequate and under disclosure of trade volumes of approved products, under invoicing, use of wrong description and HS codes, trading with related entities in the customs territory without full or any disclosure, to using the FTZs as conduit for trading of imported raw materials and goods without any value addition.

    These untoward activities for which examples abound are fraudulent, criminal, and rub the nation of valuable income. For instance, discreet investigations conducted at the Ogun and Calabar Free Trade Zones in the last few months on the steel sector showed that while international market price of wire rods obtained from World Steel news was about $480 per metric tonne, an operator in Calabar FTZ imported 6,027 metric tons valued at $67,250 which implies a ridiculous FOB price of $11 per metric ton.  Such gross under valuation and under declaration of import volume denies the nation of correct import duties collection, creates price distortions in the market and the attendant danger posed to competitors in the Customs territory.

    An operator in Ogun FTZ imported 3000 metric tons of steel coil for the production of steel sheet and 4,000 metric tons of galvanized steel coils for the production of roofing sheets from which a supposed 2000 metric tons of waste/scrap was generated and exported to a related entity about the same time. A production process that generates so much as 2000 metric tons of waste/scrap from 7,000mt of steel coils is unheard of and seems impossible.

    This suggests importation of raw materials with all the incentives offered by government and export of same as waste/scrap to a related entity also enjoying incentives, including monetary, tax and legal provisions with the aim among others of paying import duty only on 5,000 mt.

    What next?

    Regulations relating to imports from other parts of the globe to Nigeria should apply to imports from the FTZs e.g. the Standards Organisation of Nigeria Offshore conformity assessment programme (SONCAP).

    There is need to apply regulations on financial crime preventive measures such as reporting large value currency transactions and suspicious transaction reports (STRs) to financial institutions and businesses operating in the FTZs.

    Mechanisms for stricter monitoring of raw materials imported into FTZs, the attendant value addition and export of the final products as well as waste/scrap are also essential.

    The federal government under President Bola Ahmed Tinubu need to extend its reforms to the operations within the FTZs especially focusing on plugging income leakages in order to avert taking negative advantage of the government’s incentives.

    •Hawk writes from Lagos.

  • How operators at free trade zones undermine local businesses

    How operators at free trade zones undermine local businesses

    A dangerous trend is emerging in the real sector, especially in the manufacturing sector as free trade zones operators, who are required by regulation to export their products now sell large part of the commodities in the open market. With free trade zones operators exempted from taxes, selling their products in open market provides unfair competition to domestic manufacturers outside the zones, reports Assistant Business Editor, Collins Nweze

    The gains meant to be derived from the establishment and effectively functional Free Trade Zones (FTZs) are being eroded by bad practices and weak regulations within the sector.

    The FTZs model, adopted from the Chinese model over three decades ago to drive industrialization, diversify the economy, increase foreign direct investment (FDI) and forex inflows is now a big threat to domestic manufacturers.

    Nigeria adopted the free trade zone model in 1992 following the enactment of Nigeria Export Processing Zones Act 63 in 1989, after China achieved rapid, inclusive and sustainable industrialization, job creation, and diversified export earnings on the back of Special Economic Zones. China has been able to use the model to control the world’s markets, logistics and services.

    The reverse is the case for Nigeria. Findings showed that sharp practices, weak regulations and corruption may be undermining the economic benefits of FTZ across the country.

    The special business areas, which are designated as export processing zones (EPZs), and exempted from tax payment are not sticking to set regulations, including ensuring that products manufactured within the zones are exported to earn forex for the country and support economic growth.

    An operator within the manufacturing sector, said the FTZs manufacturers import their raw materials for used in production, with such raw materials exempted from taxes because of regulations, but with a caveat: “The goods produced must be exported.”

    The authorities are to ensure compliance in order not to jeopadise domestic manufacturers outside the zones, who pay heavy taxes on their own raw materials.

    “What Nigeria loses annually due to duty wavers to the FTZ operators are supposed to be gained through forex earnings from export. But instead of the operators at the FTZ to export, they turn around to sale their products in the open market. This is making the country to lose billions of naira through duty wavers and endangering the operations of local manufacturers through undue competition,” the source said.

    Other sources added: “ Some of those who operate in the free trade zone that ought to focus on exporting their finished goods, end up selling them in the local market, thereby denying the government the necessary revenue. Besides, this creates unfair competition and unfair trade in the market place.”

    For instance, manufacturers outside the FTZs that import raw materials for their production are charged Customs duties which range between 10 percent and 25 percent, depending on the item they are bringing into the country. After this, they bear the cost of production associated with the country’s harsh business environment before processing these raw materials into finished goods and they are sold to the market.

    For those who are into export business, they are made to pay the relevant duties and levies. However, those that have their plants located within the FTZs, when they bring in their raw materials, they don’t pay duties on the assumption that whatever they produce would be exported 100 per cent.

    Therefore, after production, if they then decide to move their goods to the Customs areas, they ought to pay duties on the finished items. But unfortunately, due to alleged lapses and corruption on the part of some regulators, these manufacturers now bring in their raw materials, process them, and instead of exporting these finished items as expected, they end up selling their products in the country.

    Nigeria would be losing billions of naira yearly to duty waivers enjoyed by the operators as stipulated by the extant laws. The losses in duty waiver are ordinarily not a problem as the country is expected to recover the losses through job creation and export gains.

    The source said: “The law requires that processed products are to be exported either to other countries or Nigeria, during which duties would apply as an EPZ is considered as a country within a country. Sadly, the FTZ operators circumvent relevant laws to smuggle the finished goods into the Nigerian market where they compete unfairly with homogenous goods manufactured by local companies that pay full duties on inputs and raw materials.”

    Findings revealed that foreigners are the biggest operators in the FTZs and their anti-market practices are said to be aided by politically exposed Nigerians with interests in the companies.

    Multiple sources said the Nigeria Customs Service (NCS), need to do more in their oversight role at the FTZs.

    The regulations allow operators to sell 25 per cent of the produced goods to the market while 75 per cent are to be exported, but it’s not being followed.

    This may cost the government billions of naira yearly. Operators who are informed about the companies’ production, marketing and under-declaration said the government can significantly increase its earnings if it blocks the leakages.

    Leading the list of imported inputs by companies operating in the special economic zones are palm oil, ethanol and many other raw materials used for chemical and allied industries. According to data, ethanol ranks high on inputs with a substantial local capacity gap.

    Industry statistics put the local yearly consumption of ethanol at 1.2 billion litres with local capacity estimated at 30 per cent. Of 840 million litres imported yearly, about 20 per cent is said to be brought into the country by FTZ operators.

    Ethanol attracts a duty of 10 per cent, which is waived for FTZ operators. At $0.8 per litre of ethanol, the government forfeits $16.8 million or N25.2 billion yearly to sustain ethanol utilisation at FTZ.

    Industry data showed that in 2023, Nigeria imported 475,000 metric tonnes of palm olein (palm oil). The volume was significantly higher than 425,000 metric tonnes imported in 2022.  However, sources said it is substantial as the operators leverage waiver to import rather than source the commodity from the local market.

    At about $1000 per metric tonne of palm, a 25 per cent import by FTZ operators last year alone suggests the government lost over $40 million to the companies operating in FTZ last year on palm oil, which attracts 35 per cent duty.

    Apart from revenue losses, the practice has increased the odds against competitors who would be forced to accept losses in some cases to be able to compete with the FTZ firms who get inputs cheaper following the duty waivers.

    There has been a proposal for reforms of the FTZ legal framework. Some experts have suggested import duties should apply uniformly and refunds are only given to FTZ operators for the volumes of goods they eventually export to achieve fair competition.

    An operator who pleaded anonymity said a proposed multi-billion processing plant by a major player is stalled owing to sharp practices at FTZ.

    There has been overwhelming economic rationalism in the operation of the zones. Recently, the Minister of Trade and Investment, Dr Jumoke Oduwole, played up the justification when she said FTZ schemes have attracted over $300 billion in investments and contributed over N650 billion to government revenue since their establishment.

    The Federal and state governments, which operate a number of the zones, consider them as pet projects and treat them with utmost care for the perceived economic injection, increasing the risk of condoning misconduct and negligence by regulatory agencies.

    The NCS claimed it is working hard and professionally with other agencies to ensure that business entities in the zones play by the rules.

    The situation worsened when the Comptroller General of the NCS, Adewale Adeniyi, accused companies in the zones of violating the law regulating their operations.

    Adeniyi stated this during the House of Representatives public hearing on the tax reform bills organised by the Committee on Finance. His statement was in response to an allegation by the Nigerian Chambers of Commerce, Industries, Mines and Agriculture (NACCIMA) that tax and levies are imposed on companies operating in FTZ by Customs.

    “The sticky issue over the years has been the compliance of free trade zone operators with the provisions of the law. The law allows them to import every manufacturing input they need, 100 per cent sometimes, including things that are prohibited into the customs territory…

    “I think there was a need to produce all the services we can provide to the local markets. From the local market to the federal market the regulations of change allow them to export 25 per cent of volume and factory into the local market, into the local customs territory and subject to extant laws affecting goods that are imported into Nigeria. I cannot stand here and tell you that this has been observed absolutely at full compliance,” Adeniyi told the lawmakers.

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    Understanding the FTZs

    In Nigeria, FTZs, also known as Export Processing Zones (EPZs) are geographically designated areas that offer special privileges to businesses, including tax benefits and reduced customs regulations for activities like importing, manufacturing and exporting goods. FTZs in the country include the Calabar Free Trade Zone, Kano Free Trade Zone, Lekki Free Trade Zone, Ladol Logistic Free Zone, Ogun Guangdong Free Trade Zone, and Snake Island Integrated Free Zone. These zones were created to support the development of industries focused on exports and also to encourage businesses to operate with as low government interference as possible.

    The primary purpose is to assist companies in the manufacturing, processing, and export of goods from Nigeria as they are exempted from payment of import and export duties thereby lowering their operational cost. Presently, most of the companies operating in FTZs in Nigeria have a significant foreign interests.

    Way forward

    Experts advised the Federal Government needs to take action to guarantee the continuous survival of businesses outside the FTZs by ensuring that operators abide by the rules of the game to save jobs.

    Beyond the lamentation by the Customs CG, Adeniyi, there is also a need for increased supervision and monitoring by the NCS and other government agencies saddled with the responsibility of ensuring adherence to regulatory requirements and compliance by those operating within the FTZs.

    Besides, some of these challenges can be dealt with through the use of technology tracking devices. The Federal Ministry of Trade and its counterpart, the Federal Ministry of Finance should deploy technological devices to track the importation of raw materials and follow through till they are processed into finished goods and exported, to address inefficiency and laziness on the part of some of the regulatory agencies and eliminate corruption.

    The choice is clear: It is either the government protects these businesses outside the FTZs or watch them vanish. We cannot afford to let these economic saboteurs thrive. Therefore, its time to defend our entrepreneurs in order to build a truly resilient Nigerian economy.

    According to the Nigeria Export Processing Zones Authority (NEPZA), the lingering infrastructure deficit, legal disputes, failure to raise capital, insecurity and the general harsh economic environment are also threatening FTZs in the country

  • ‘Nigeria generated N650b revenue through free trade zones in January’

    ‘Nigeria generated N650b revenue through free trade zones in January’

    Operators of Nigeria’s free trade zones have said the nation generated over $300 billion investment in January this year while the free trade zones generated over N650 billion into Federal Government’s coffers through its agencies.

    The agencies are: the Nigeria Custom Service (NCS), Nigeria Ports Authority (NPA), Nigeria Immigration Service (NIS), Free Zone Regulatory Authorities (FZRA), Pay As You Earn (PAYE), among others.

    A communiqué issued yesterday in Abuja after an emergency stakeholders’ meeting of the free zone operators said over 100,000 direct and more than 500,000 indirect jobs had been created through free zone activities with stakeholders deliberating on the effect of the Nigeria Tax Bill, 2024 for Nigeria’s free zones.

    The communiqué reads: “Stakeholders have critically re-appraised the government objectives and philosophy for the establishment of Special Economic Zones (Free Trade Zones) and noted that the objectives have been largely met in terms of Foreign Direct Investment (FDI), capital growth, technology, skills transfer and acquisition.

    “It has also been met through fulfilment of government’s constitutional duty to observe the fundamental objectives and direct principles of state policy under Chapter II of the Constitution which has impacted positively on the development of MSMEs through development of both backward and forward supply chains, which are the engines of growth for any economy, as well as employment generation to the Nigerian teeming population.”

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    The stakeholders mandated the Nigeria Economic Zones Association (NEZA) to present this position to the National Assembly as well as the Minister of Industry, Trade and Investment.

    They also mandated NEPZA to write a memorandum of appeal, on behalf of free zone investors, to President Bola Ahmed Tinubu to withdraw his approval of the prayers contained in the memorandum, dated October 20, 2024 and titled: Operations of Free Trade Export Processing Zones, written by Dr. Zacch Adedeji. This is because the prayers were premised on false and misleading claims by the author.

  • FROM DELOS TO NEPZA (The story of Free Trade Zones)

    From available records, the world’s First Free Trade Zone (FFTZ) dates back to 166 BC, when Greece made the island of Delos a Free Port.

    The succeeding Roman Empire followed up with its Civitas Libera or Free Cities which were exempted from paying the annual tribute the reigning emperor, and allowed to mint their own coins and make their own laws.

    In the 12th Century, the Hanseatic League (a confederation of trading cities chartered and loosely governed by the Holy Roman Empire) revived the FTZ innovation, with the establishment of trading colonies in Northern Europe, among these Hamburg.  However, the closest innovation to the modern FTZ was the Steelyard in London, the UK, in the sense that it was a classic country within a country: separate, walled city, independent warehouses on the river as well as its own weighing house, Church, counting houses (banks) and residential quarters.

     

    ANCESTORS OF MODERN FTZS

    According to available records, the modern era of Free Zones appeared with European colonial outposts, formed as “quasi-sovereign sub-governments with unique trading privileges,” among them Macau (1557),Hong Kong (1842) and China, having over 80 Free ports or Port Treaties. The world has now about 4000 Special Economic Zones (SEZs).

     

    ENTER THE MODERN FTZs & NEPZA

    Although many people trace the advent of modern FTZs to the US with its launching of its Foreign Trade Zone (FTZ) program in 1934, the consensus is that the credit for the modern SEZ movement goes to Ireland, which set up the Shannon FTZ in 1959. The Irish innovation was so successful that other nations soon followed: Kandla FTZ in India (1960); Kaohsiung Export Processing Zone (KEXP) in Taiwan (1967); and an explosion of FTZS in China. In fact, China had moved from 0 special jurisdictions in 1980 to at least 300 today. For Nigeria, the dawn of FTZs came in 1992, with the enactment of Nigeria Export Processing Zones Act 63.

     

    NEPZA ATTRACTS ABOUT $80BN INTO ECONOMY

    From 1992 till April 2017, NEPZA had 34 FTZs spread across the country – two of the Federal Government-owned i.e. the Calabar Free Trade Zone (CFTZ) and the Kano Free Trade Zone (KFTZ). And under Jime’s one-year stewardship, the number of FTZs has climbed to 37.

    So, with 37 FTZS and well over 300 licensed Free Zone Enterprises (FZEs), NEPZA has attracted about $80billion into the national economy; and contributed to over 60 percent of the entire Foreign Direct Investment that Nigeria attracts.

    Some of the licensed FTZs include: the Nigeria International Commerce City also known as Eko-Atlantic ($38bn), with targeted job-creation put at one million; Centenary City ($18bn), with envisaged job opportunities at 70, 000; Ogidigben Industrial Park in Delta State ($15bn), estimated to create 800, 000 jobs; LADOL i.e. Lagos Deep Sea Logistic Base ($3.5bn), jobs targeted, 150, 000;   Maritime Economic Badagry City ($2.8bn), targeting 250, 000 jobs; Nasco Town Free Zone ($2,086bn), estimated to provide 15,000 direct jobs0; and the Badagry Creek Integrated Industrial Park ($1.3bn), target of 23, 000 jobs.

    Still others include: General Electric (GE) of the US ($1bn), hoping to employ 1000 people; Tomaro Industrial Park in Lagos ($450m); Quits Aviation Services Free Zone ($215m), and is estimated to provide jobs in their thousands; Ogogoro Industrial Park ($160m), estimated to employ 30, 000; and NAHCO FTZ ($22m), which plans to employ over 5000 upon completion.

     

    EMMANUEL JIME TAKES OFFICE

    Upon assumption of office on 19th April, 2017, the MD met some daunting challenges on ground, to wit:  Low staff morale, delayed promotions, inter-agency rivalry, poor investor-confidence, a dysfunctional governance structure, etc. Although his governmental experience was more on the legislative side, he knew he had to add value; and that, urgently. In other words, he had to hit the ground running.

     

    LOW STAFF MORALE: 

    Immediately upon assumption of office, Jime undertook a cross-country tour of all the FTZS in the country in order to get first-hand information on NEPZA operations from both investors and staff. And one of the recurrent themes in the mouths of staff was poor staff welfare. A welfarist at heart, Jime’s understanding of labour relations is that if you do not motivate a worker properly then you only waste your time in expecting that he’s going to be performing at the optimum capacity. As he tells people: “If there is welfare in the house, there would be no warfare.”

    So, what he did was to look within the limit of what was available in the office of the managing director and move quickly with the best advice from his management team.

    So, within a short time, NEPZA staff began to feel the impact of a staff-friendly leadership and one year after, the consensus is that NEPZA has turned the bend as far as staff welfare is concerned.

     

    DELAYED PROMOTIONS: 

    An integral part of staff-welfare is promotions as at when due. As at April 2017 when Jime took over at NEPZA, some people, who had been due for promotion, were stagnated, in some cases, for more than three years. What he did was to ensure that whoever was due for promotion was promoted. One year after, even the arrears that necessarily go with promotions have been cleared. As he told a distinguished audience lately: “We are not owing a single staff arrears arising from promotions or accumulated allowances, some going back to six years!”

     

    INTER-AGENCY RIVALRY:

    The next critical challenge was cementing the tenuous, and sometimes acrimonious relationship that exists between the Authority and sister-agencies of government like the Nigerian Customs Service (NCS), the Nigeria Ports Authority (NPA), Federal Airports Authority of Nigeria (FAAN) and the Nigeria Immigrations Service (NIS). It may not be public knowledge, but the successful operation of a Free Trade Zone depends on the synergy between it and other agencies of government operating therein, especially Customs. And the life-blood of NEPZA is Free Zones which she licenses and regulates.

    Something had to be done, and Jime did it: the Comptroller-General of the NCS, Col. Hameed Ibrahim Ali (retd), had paid a courtesy visit to NEPZA on November 2, 2015. Jime returned the courtesy on August 22, 2017, almost two years after!   He followed up with courtesy visits to all the Customs formations operating in all the Free Zones; he also paid working-visits to other sister-agencies like FAAN, the NPA and the like.

    Although NEPZA (and, by extension, the Free Zones), now has a seamless working relationship with the Customs in such a way that the zones are beginning to declare more profits, plans are advanced to hold an Inter-Agency Round-Table that will bring together all the industry stakeholders for a thorough inter-face on the Free Zone innovation.

     

    BUILDING INVESTOR-CONFIDENCE.

    Another thorny issue was surmounting the challenge of poor investor-confidence in the Zones. It was imperative, if not urgent, to get investors to have confidence in NEPZA’s Free Zones by way of a basket of incentives or a regime of tax holidays.

    Within a week of coming into office, the NEPZA CEO took a familiarization-tour of the Free Trade Zones, and discovered that although NEPZA had 34 FTZs, only about 12 or so were actively operating. And the chief reason for this was the dearth of infrastructure in the Zones.

    A Free Trade Zone essentially is actually a platform that is created so that companies can take advantage of the prevailing incentives that are offered by NEPZA in order to enable them function therein profitably.

    And one of the things that a FTZ is meant to provide, the world over, is a deliberately-incentivized environment wherein businesses can be run at less cost. And doing business at less cost means having world-class infrastructure in place: regular power supply, water, good roads, security of men, materials and investment in addition to a basket of incentives. If these infrastructural facilities do not obtain in a Free Trade Zone, then, it is not a Free Trade Zone. As Hon.  Jime said lately: “Capital is discriminatory, so it doesn’t go where it’s not wanted or welcome. You need to look beautiful to attract it. And this is why we intend to make our Zones world-class in terms of infrastructure.”

     

    REJIGGING NEPZA’S ADMINISTRATIVE & GOVERNANCE STRUCTURE:

    To drive his vision of turning NEPZA around and to take NEPZA in the direction of that vision, the MD realized that he had to rejig the administrative and governance structure of the Authority he met on ground. Some management staff had been in a place for close to 10 years without any movement. Of course, he effected massive transfers and reorganizations within the system. And today, the Authority is better for it.

    Jime speaks on this: “We have placed everybody appropriately, and we are better off in terms of competence, capacity, ability, value-adding, efficiency, productivity and organizational targets.” He adds: “In transferring, promoting or placing people appropriately, I didn’t look at faces or sentiments – I only looked at records and capacity.  And that is what I am still doing.”

    Elsewhere, where the concept has been clearly understood, it is changing the economic landscape in leaps and bounds. For instance, do you know that the whole of Dubai, in the United Arab Emirates, is a Free Trade Zone? Do you understand that Shenzhen, in China, which started just over 30years ago, with a population of less than 50, 000 people, right now has over 12 million residents? The reason for this is because the moment the government decided to give Shenzhen the cover of a Free Trade Zone, the incentives that were available, ensured that it took off, and it has now moved from less than 50, 000 people to over 12 million. And because of the runaway success of Shenzhen SEZ, the Chinese government is replicating the miracle in Xiongan, with plans to inject a whopping $580billion into the new SEZ in the next 20 years. This is how it is done.

    Most of us want to go to Dubai or Shenzhen on holidays, but nobody likes to ask the question: How did these cities get to where they are? So, the issue of investor-confidence is the one thing that is seriously riveting our attention.

     

    UNPRECENTED CAPITAL INJECTION OF N50BN:

    From Mr. President’s policy pronouncement and actions, it is evident that he is determined to leave Nigeria better than he met her. And one way he is doing this is via the Free Zones concept; with eyes on economic diversification, industrial growth, job-creation, local content development, technology transfer and acquisition etc. So President Muhammadu Buhari is not just concerned with kick-starting Nigeria’s long delayed industrial march, but interested in squarely putting her on the industrial map of the world.

    Prior to Emmanuel Jime’s appointment, Buhari had travelled to China in April 2016 and visited the FTZs in China, and returned with the zeal to boost Nigeria’s Trade Zones too. In the 2017 budget, therefore, Mr. President directed, for the first time in the history of NEPZA, for a massive capital injection of N50billion into NEPZA for the development of world-class infrastructure in the nation’s FTZs as well as for the creation of six new industrial parks in each Geo-Political Zone. Before now, the highest amount of money given to NEPZA was about N2billion.

    Work on infrastructural development, renewal and upgrading has started and the Calabar Free Trade Zone (CFTZ) as well as Kano Free Trade Zone (KFTZ), which are the two, publicly-owned FTZS, have already started seeing massive capital interventions towards the into the development of infrastructure.

    It is gratifying that in this 2018 too, from the budget estimates, the same amount of money has been provided for the Authority.

    With these ambitious plans to reposition the Free Zones to meet world-class standards, the hope is that, all things being equal, when we are done with our work in the Free Zones in Calabar and Kano by the end of 2018, investors in the CFTZ and would have no issue as far as power supply is concerned.

     

  • ‘Only 14 of 34 free trade zones functional’

    ‘Only 14 of 34 free trade zones functional’

    The Managing Director, Nigeria Export Processing Zones Authority (NEPZA), Mr. Emmanuel Jime, has said only 14 out of 34 free trade zones in the country are functional.

    Speaking with reporters in Abuja yesterday, he blamed this on the dearth of infrastructure in the country.

    Jime said the President Muhammadu Buhari’s led administration was determined to change the fortunes of the free trade zones in the country.

    The NEPZA chief lamented that most foreign investors preferred Ghana to Nigeria because of the shortage of infrastructure in the country.

    He called on Nigeria to develop its infrastructure in order to attract foreign investors.

    According to him, Nigeria’s huge population alone is not enough to attract foreign investors.

    “When I came into office, I took a tour of all the free trade zones in the country. As at the last count, we have 34 free trade zones , but in truth less than 14 of those free trade zones are operating maximally,” he said.

    He said  for Nigeria to complete with other countries, adequate amenities must be provided at the zones.

    “One of the things a free trade zone is meant to provide is an environment in which business can be done at a less cost. For you to do business at a less cost, it means there ought to be things in the free trade zone that are not found elsewhere. “We are talking about infrastructure. There has to be power for 24 hours, otherwise it is not a free trade zone. There has to be water. We have got have road network.

    “Most of the investors, who want to come to Africa, the first thing they think about is Ghana. That must call for a great concern for us. I hear a lot of people say Nigeria has a huge market. We are getting to 200 million.

    “We keep talking about how big Nigeria market is, but we have to recognise that there are partnerships and platforms that have been put in place that will enable a businessman put up his factory in Accra and still access the Nigerian market,” he said.

    Jime cited the United States’ African Growth and Opportunity Act (AGOA) and the Economic Community of West African States (ECOWAS) as examples of platforms, through which goods manufactured in Ghana could get into the Nigerian market.

    The NEPZA boss said that since assumption of office, the relationship between the authority and other agencies such as the Nigeria Customs Service and the Nigerian Immigration Service had improved.

    Jime stated that there was no way free trade zones could function effectively if there was no “good synergy between NEPZA and relevant government agencies.”

    Jime said that Tinapa in Cross River, which ordinarily ought to be one of the best free trade zones in the world, was not functional because of the misunderstanding of the roles of NEPZA and customs.

    He stated, “Right now, there is a particular zone in Cross River, called Tinapa. If you have been to Tinapa many years ago, go there now, it is literally dead. It is a big stain on our country and our capacity to do things the right way.

    “There is simply no reason why Tinapa should not be at its best as other free trade zones, but here, because of Customs’ intervention, which most of the time arose from misunderstanding of how the two agencies are supposed to work, Tinapa is literally dead.”

    He faulted a claim that free trade zones were being used as conduit for smuggling. According to him, free trade zones have customs formations.

    Jime said no goods could leave any free trade zones without the awareness of customs.

    The NEPZA boss said the morale of workers of the authority had been boosted through the payment of the arrears of their allowances.

    “As of 2017, no single member of NEPZA staff is owed promotions. Nobody is owed arrears of salaries and allowances,” he stated.

    He added: “We have not reached the point where we should be, but we can say we are moving in the right direction.

    “We will not be guided by sentiment. I don’t look at faces. I look at capacity. What we have done in terms of structure in NEPZA right now is to move people around.”

  • Buhari urged to promote free trade zones

    President Muhammadu Buhari has been urged to pay more attention to the free zones for growth of the economy.

    A maritime lawyer, Mr Slomon Adelaja, who made the call in Lagos, said well developed free zones would generate millions of jobs for the youth.

    Importers, exporters and other stakeholders in the maritime value chain, Adelaja said, would benefit immensely from well developed free trade zone.

    “If free trade zones are adequately promoted and proper incentives given, investors will be encouraged to invest in the zones, which will in turn provide more jobs for Nigerians as many importers and exporters would be willing to use the zone based on low tariffs that would be introduced,”he said.

    He decried low level of awareness in the public about free trade zones, adding that promotion of the zone by President Buhari’s administration is important to their development.

    “If Dubai, as developed as it is, still advertises the free trade zones and Turkey is also doing same, why can’t we do same under the current administration?

    “I cannot remember when last I saw any advert on the Nigerian  free trade zone on the television. I cannot remember how many times I have seen the distribution of in-house journals about free trade zones. I cannot remember how many times seminars and workshops were organised about free trade zones for stakeholders to know that this thing exists.

    “If you don’t take promotion seriously and be ready to give incentives that can bring investors into the country, then, your guess is as good as mine,”he said.

     

  • Free trade zones not free-for-all 

    The Nation newspaper of February 7th, 2017, featured an interesting piece on the despicable degeneracy plaguing the regulation of Free Trade Zones (FTZs) in Nigeria. At the heart of the brouhaha is the all-important question of which agency has authority to superintend over the specialised free zones, namely, the Oil and Gas Free Zones, as against the general purpose free zones.

    A Free Trade Zone is a specially delineated territory within a country where economic activities carried out therein are not covered by the fiscal and monetary policies that prevail in the host country, referred to in trade parlance as the Customs Territory. Such exemptions generally cover taxes, import duties and foreign exchange regulations, among others.  Irrespective of the nomenclature in use—nomenclature varies from one jurisdiction to another— free zones have become incubators of economic growth and development and with their attractive package of incentives, they constitute a veritable means of attracting foreign direct investment and enhancing national competitiveness. In a nutshell, the overarching objectives of a FTZ are enhanced foreign exchange earnings, cultivation of export orientation and employment generation.

    It is obvious from the extant laws that a centralised regulatory regime exists in Nigeria under Nigeria Exports Processing Zones Authority (NEPZA), with a 1992 establishment law. The government, however, deemed it fit to establish another free zone authority in 1996 to regulate the only specialised oil and gas free zone in Nigeria then, Onne/Okpokiri Oil and Gas Free Zone. Hence the name of the authority, by force of law was, and remains,” Oil and Gas Export Free Zone Authority” (OGEFZA), without any need to pluralise the word, zone.

    The immediate source of the raging battle to control the second generation oil and gas free zones is traceable to an alleged Executive Order of 2014 and the impending amendment to the law establishing the Oil and Gas Export Free Zone Authority. The first question that comes to mind is whether the principal law contains a provision, omnibus or otherwise, to accommodate recourse to executive orders. The second question relates to the economic benefits of the proposed amendment as against territorial supremacy between regulatory agencies. And yet the third issue concerns the need for a transitional arrangement, in the event that territories would be ceded either by force of law or expediency of an executive order.

    First, it is obvious that the NEPZA law is an encompassing law whose mandate covers licensing and regulation of integrated free zones as specified in schedule 3 of the law. Interestingly, from the newspaper article referred to in the opening paragraph of this piece, two of the free zones vociferously opposed to being subsumed under the authority of OGEFZA, are integrated free zones, namely, Snake Island Integrated Free Zone (SIIFZ) and Lagos Deep Offshore Logistics (LADOL) Free Zone.

    On the other hand, it appears that the OGEFZA law was intended to licence and regulate operations in a solitary free zone, the Onne/Okpokiri Oil and Gas Free Zone. It is, presumably, for this reason that the law provides for a representative of the host state government, Rivers, to serve on the Board of the Authority. On the other hand, the NEPZA law does not provide for a Board representation for the Cross River State government for playing host to the premier free zone in Nigeria, Calabar Free Zone.  Another proof that OGEFZA is intended to cover a specific zone in a specified geographical location can be gleaned from the required wordings of the trade documents in case of imports and exports. Section 17 of the December 2003 subsidiary legislation requires the relevant Bill of Lading to be marked, “Oil and Gas Free Zone, Onne, Port Harcourt, Rivers State.” If the specificity of the OGEFZA law is water-tight, one may wonder at the effrontery of its management in making a foray into NEPZA’s mandate, a situation akin to seeking to milk the cow fattened by another. It is, however, regrettable that the law in question seems to suffer from a lack of internal consistency.  This is because section 5(2) mandates the authority to take over the functions of NEPZA as they relate to export of oil and gas. Even at that, the power conferred on OGEFZA under the said section is explicit on exports, with a loud silence on imports. The law is indeed an ass!

    Here lies the remote source of the audacity of OGEFZA, beyond the two reasons alluded to earlier. But which of the regulatory options confers optimum economic benefit to Nigeria? Broadly speaking, we are faced with three models, namely, Unified Regulation which brings all free zones under one authority irrespective of specialisation; Decentralised Regulation along specialisations irrespective of location; Decentralised Regulation defined by geographical contiguity.  Without putting a finger on numbers, the objective criteria for optimum economic benefit should include ease of doing business in order to cultivate and retain investors’ confidence; minimum administrative cost; balance between geographic contiguity and streamlining free zone services; strategic complementarity, among others.

    Thus, the National Assembly must be wary of unwittingly entrenching, in the course of amending the law, the alleged monopolistic hold of a certain maritime service provider, as insinuated in the article under reference. On the contrary, the legislature will do well to leverage on the amendment process to open such services to competition.

    In the meantime, the supervising ministry of the warring agencies, the Ministry of Industries Trade and Investment (MITI), must hasten to arrest the ugly altercation, poignantly dubbed a “free-for-all”, arising from the precipitate action of the OGEFZA as this portends grave damage to the confidence of investors. Even if the government is inclined to give force to the rather ambiguous provision of section 5(2) of the relevant law, it should tarry awhile, in deference to the impending amendments.

    In any case, any change in policy that is not preceded by transitional arrangements can only be implemented in fits and starts, depicting the dysfunctional state of our institutions.  And this is what holds sway at the moment, a situation whose remedy lies on the rigour, diligence and patriotism the legislature brings to bear on the process of amending the laws in question.

     

    • Shettima is a retired Deputy Director of CBN
  • Free-for-all over free trade zones

    Free-for-all over free trade zones

    Barring any last minute hitch, the Senate will pass a bill amending the 1996 Act setting up the Oil and Gas Export Free Zone Authority and give it wholesome powers. But chances that there will be bad blood if the amendments are allowed are very high, writes OLUKOREDE YISHAU

    Umana Okon Umana and Anwar Jarmakhani are two Nigerians who share opposing views on a bill to amend the 1996 Oil and Gas Export Free Zone Authority Act (OGEFZA). The law setting up the authority was a military decree signed by the late Gen. Sani Abacha. Twenty-one years later, the law is set to give way to a new one, which is a radical departure from the old. The proposed changes are the points of disagreement between Umana, who heads the agency, and Jarmakhani, whose conglomerate, Jagal Group, owns SIMCO Free Zone Company which runs the privately-owned free trade zone – the Snake Island Integrated Free Zone (SIIFZ).
    He acquired Snake Island from five banks which took it over as a result of debts. Since the inception of SIIFZ in 2005, private investment in the zone is put in excess of $550,000,000. It is regulated by the Nigeria Export Processing Zones (NEPZA), which came into existence as a result of Act No 63 of 1992.
    Like Jarmakhani, the promoters of the multi-million dollars Lagos Deep Offshore Logistics Base (LADOL) are not in sync with Umana, who has an ally in the sponsor of the bill, Senator Ibrahim Gobir. Gobir, who chairs the Senate Services Committee, believes the amendments will remove “all imperfections” in the 1996 Act.
    If the bill becomes law, the coast of the Umana-led agency, Oil and Gas Free Zones Authority (OGFZA) will be enlarged. Unlike now when its activities are largely restricted, more than 10 free trade zones are to be annexed.
    They are: Oil and Gas Free Zone, Eko Support Services, Terminals I, If & lll, Apapa Lagos, Oil and Gas Free Zone, DeIta Port in Warri, Delta State, Oil and Gas Free Zone, Snake Island, Lagos State, Oil and Gas Free Zone, LADOL, Lagos State, Oil and Gas Free Zone, Olokola, Ondo/Ogun states, Oil and Gas Free Zone, Iwokiri, Rivers State, Oil and Gas Free Zone, Ibaka, Akwa Ibom State, Oil and Gas Free Zone, Brass, Bayelsa State, Oil and Gas Free Zone, Ogedengbe, Warri, Delta State and Oil and Gas Free Zone, ImgbegbeAma Rivers State. The Onne/Ikpokiri Oil and Gas Free Zone, Rivers State, Oil and Gas Free Zone, Owuogono, Rivers State and the Oil and Gas Free Zone, Terminals I, II & III, Warri, Delta State will still be controlled by it.
    Umana, in a paper presented at the public hearing on the bill in Abuja on January 26, said OGFZA needed to be strengthened to achieve more. He added that the free zones grew by only 2.11 per cent before OGFZA came on board.
    The positive impact of OGFZA’s management and regulatory control of the oil and gas free zones, he said, was manifest in all aspects of the country’s economy from shipping traffic at the ports to inflow of foreign direct investments and revenue to government.
    Umana said the Customs Service generated N143.2 billion in revenue from the oil and gas free zones alone between January 2010 and December 2015, and the Nigeria Ports Authority (NPA) raked in $2.1 billion and N19.3 billion within the period.
    The OGFZA chief added that oil and gas business from the free zones dominated the nation’s export trade last year, recording 89.53 per cent of export in the first quarter, 89.65 per cent in the second quarter and 85.34 per cent in the third quarter.
    He told the public hearing that shipping traffic in and out of the oil and gas free zones in Onne and Warri in 2015 accounted for 23.66 per cent of gross tonnage of total ship for the country.
    He said: “These statistics underline the tremendous positive contribution to Nigeria’s trade balance, with attendant huge revenue for the Federal Government.”
    According to Umana, there was no merit in the calls for the merger of OGFZA with the Nigerian Export Processing Authority (NEPZA). His reason: It will be out of place to scrap OGFZA since Nigeria pioneered the concept of special free zones for oil and gas business and other countries have copied the concept.
    His other reason centered around the Federal Government White Paper gazette of March 2014 on the Restructuring of Federal Government Parastatals and Agencies, which rejected the merger of OGFZA and NEPZA, as well as the opinions of two ex-Attorneys-General of the Federation on the Acts establishing OGFZA and NEPZA, both of which affirmed the legal status of OGFZA as an autonomous agency.

    Before now

    Umana, in a November 17, 2016 letter to LADOL’s and SIIFZ managing directors, “decided to carry out the full implementation of the law and (Federal Government) directives” on oil and gas free zones in the country.
    Before Umana’s letter was a March 28, 2014 letter, which SIIFZ received on April 10, 2014. The letter was to intimate it about the licensing and regulatory functions of OGFZA and to inform SIIFZ of its intention to it take over from NEPZA. The following day, SIIFZ replied the letter saying: “We cannot comply”. It referred OGFZA to NEPZA. SIIFZ also wrote NEPZA on the issue. The firm said it headed for the court and obtained a court injunction staying any further action on the matter.
    On April 29, 2014, NEPZA replied SIIFZ, advising it to ignore the letter from the sister agency. Not long after that, SIIFZ said it was informed of a “Bill to amend the OGEFZA Act”. This made it petition the Senate on November 14, 2014. By May 2015, SIIFZ said it obtained a court injunction staying any further action on the Bill.
    It was all quiet until Umana took the saddle at the agency following the exit of the Dr. Goodluck Jonathan administration and wrote the November last year letter, which prompted SIIFZ to write NEPZA on December 2, last year. NEPZA’s reply, which came four days later, advised it to maintain the status quo. And nine days later, SIIFZ obtained another court injunction staying any action by OGFZA.

    From the other side

    A former desk officer for free zones in the Federal Ministry of Commerce, Yusufu Abdullahi, believes OGFZA’s acts, such as name change and expansion of scope, are not in tandem with the law. To him, until the Act is amended and assented to by President Muhammadu Buhari, the changes it has made are against the law setting it up.
    His views as posted on this newspaper’s website last week read: “A law is a law. As it is, OGEFZA operations are limited to Onne/Ikpokiri area of Rivers State period. OGEFZA is an export of oil and gas free zone as specified in the law. Section 5(2) refers export of oil and gas free zones established by NEPZA. The two free zones in contention (SIIFZ and LADOL) are not exporter in oil and gas. They are integrated free zones with various free zone enterprises and none deals in oil and gas export. At the time the two integrated free zones sought and obtained declarations by President Obasanso (former President Olusegun) and licensed by NEPZA, OGEFZA was physically around.
    “The Federal Government had taken a decision to establish Nigeria Free Zones Authority (NIFZA) where both NEPZA and OGEFZA Acts would be repealed to have a single Free Zones Authority. This is the contention. The only beneficiary in OGEFZA would not bear to see that happening in Nigeria because he owns the brand name of ‘oil and gas free zone Authority’.
    “The Attorney-General and Minister of Justice cannot interpret an Act as its administrator. The Constitution resides that power to the judiciary. It baffles me to see and hear lawyers and SAN for that matter saying that the AGF has interpreted Section 5(3) of the OGEFZA Act and consequently went ahead in declaring Warri and Calabar ports as free zones. Is it also the power of AGF that made OGEFZA to mutilate its title and name? ‘Export’ is removed and ‘s’ is added to zone to evoke ‘zones’. Legislation is the function of legislators. Has the National Assembly review or amend the Act? NO.
    “The Federal Executive Council (FEC) took a decision on 2002 for change of concept from Calabar Export Processing Zone to free trade zone. The second region is to have a single Authority. OGEFZA was later added to benefit from the decision. NEPZA, the parent of Calabar free trade zone, did not tamper with its name or title, waiting for the implementation of NIFZA Bill, which approved it. How come OGEFZA is claiming now that that decision was the source (of its name change and expansion of scope) but merger is not acceptable? If NIFZA is allowed, all these rubbish should not be thrown to Nigerians.”
    The documents submitted by SIIFZ to the public domain accused the agency of encroachment on another government agency in a manner akin to a “tail wagging the dog”. It accused the agency of self-empowerment without mandate for its neither actions, adding that SIIFZ is not an Oil and Gas Export Free Zone.
    SIIFZ said: “In order to set the tone for its illegal activities, OGEFZA has deceitfully altered its title as conferred by an Act of the National Assembly from Oil and Gas Export Free Zone Authority to Oil and Gas Export Free Zones Authority. The word ‘Export’ was deliberately deleted in its attempt to broaden its scope beyond export of oil and gas, which was the only major, differentiator between OGEFZA and NEPZA.
    “The word “Zone” was pluralised to ‘Zones’ in order to exceed its statutory mandate in fulfilling its ambition to unlawfully exert oversight over other free Zones in excess of its powers under the OGEFZA Act.
    “Through the proposed amendment OGEFZA’s objectives include: Unilaterally expanding OGEFZA’s mandate in furtherance of a desperate plot to entrench the Intels/Orlean Invest monopoly; furtherance of the expansionist agenda of Intels/Orlean Invest in a strategy to capture other Free Zone territories duly licensed and regulated by NEPZA; to acquire ownership and exercise jurisdiction over another agency that manages over 30 separate free zones; to forcefully take over the administration of certain NEPZA licensed free zones; and to subject integrated multi-function free zones to the authority of a single purpose single geographical area free zone.”
    It added that the amendment would destroy investor’s confidence and remove competition “not only in the handling of oil and gas export but provide for limitless empowerment over any business even remotely connected to the oil and gas industry” and subject investors, operators and clients to “the mercy and exploitation of a single operator”.
    Abdullahi and SIIFZ also have a problem with an aspect of the amendment, which forbids vessels meant for some free trade zones from coming directly to Lagos. The section reads: “In consideration of the substantial investment in Oil and Gas Free 19 Zones, all oil and gas-related cargoes must be handled only at approved oil and gas concessioned ports, however, investors are free to choose ports of discharge of their cargoes within the designated port terminals at Onne, Warri and Calabar “.
    Abdullahi, in an article on the issue, said: “Nobody told the industry how the extra cost of round trips would be covered which the Office of the Chief Economic Adviser considered as sabotage. The reason for this roundabout trips by ships, going to Onne, Calabar and/or Warri before offloading its cargo say, in Lagos, was because of the out- sourcing of the statutory responsibility of the Nigeria Ports Authority in awarding Managing Agent Contract to the same private operator in Onne, Calabar and Warri to monitor and supervise support vessel movement in the compulsory pilotage districts within the exclusive economic zone of Nigeria – both eastern and western districts,” he said.

    Extra-ordinary gazette
    versus 1996 Act

    The Umana-led agency was set up by a 1996 Act, which the Senate is trying to amend. There is also an Extraordinary Government Gazette No. 12 (vol. 101) of February 2014, entitled “Free Zones (Monitoring & Regulations) Order 2014”.
    Section 1(a) and (b) of the gazette, states: “As from the commencement of this Order, the Authority (OGFZA), in addition to its functions under the Act, shall be responsible for the: (a) licensing of all Oil and Gas Free Zones located within the Customs territory; and (b) publication of all operating standards to be observed in the Free Zone from time to time.”
    The 1996 Act states, among others that: “The Head of State, Commander-in-Chief of the Armed Forces hereby, designates the Onne/lkpokiri area of Rivers State as an export free zone, (in this Decree referred to as ‘the Oil and Gas Export Export Free Zone’).
    “The Export Free Zone established pursuant to subsection (1) of this section, shall be operated and managed by the Oil and Gas Export Free Zone Authority established by section 2 of this Decree.
    “2.-(1) is hereby established for the Export Free Zone, an authority to be known as the Oil and Gas Oil Export Free Zone Authority (in this Decree referred to as “the Free Zone Authority).”
    An explanatory note in the 1996 Act reads: “The Decree empowers the Head of State, Commander-in- Chief of the Armed Forces, to designate the Onne lkpokiri Areas of Rivers State as an Export Free Zone. The Decree also establishes the Oil and Gas Export Free Zone Authority to manage, control and co-ordinate all activities within the Zone.”
    The issues for resolution here are: Which is superior between the 1996 Act, which sets up the agency and the 2014 Gazette? Can the Federal Government alter an Act without recourse to the Senate, which is now amending the Act? Can the agency without legislative amendment now answer Oil and Gas Free Zones Authority? With the 1996 Act designating Onne lkpokiri as its zone can it operate outside without amendment to the law? Should the agency not have waited for the amendments to sail through before seeking to take over LADOL and SIIFZ?
    Certainly, the last has not been heard of this matter. Even when the bill is passed, there will still be reverberations for a long time to come.

  • Banks in free trade zones to get tax, duty waivers

    Banks in free trade zones to get tax, duty waivers

    The Central Bank of Nigeria (CBN) has said it would henceforth grant tax and duty waivers to banks operating in the Free Trade Zones (FTZs).

    The incentives, contained in the guidelines for banking operations in FTZ include freedom to move funds in and out of the zone on all eligible transactions, exemption from stamp duties on all its documents, exemption from withholding tax deductions on interest payable on deposits, dividends and royalties and exemption from corporate and capital gains taxes.

    According to the CBN circular on FTZ, the lenders operating in the zones will also get exemption  from payment  of  duties  on  imports of  furniture,  office equipment and other facilities necessary for its operations; and exemption from payment of value added tax and any other incentives as may be approved by the Authority, from time to time.

    CBN circular said the incentives will further the apex bank’s mandate for the development of banking operations in the country.

    It said only banks or financial holding companies licensed under the Banks and Other Financial Institutions Act (BOFIA), or licensed foreign banks, shall qualify to apply to the authority for approval to establish presence to carry on banking business in Nigeria’s FTZs.

    The CBN said the provisions of the Nigerian Export Processing Zone Authority (NEPZA) Act, Oil and Gas Free Trade Zone Act, BOFIA, CBN Act, and Nigeria Deposit Insurance Corporation  Act and all guidelines and regulations issued pursuant to these Acts shall apply to banks operating in the FTZs.

    “Without prejudice to the powers of NEPZA to grant Licenses, no enterprise shall carry on banking business in any FTZ in Nigeria without a prior approval granted to the parent bank and banking license granted to the subsidiary by the CBN. The required minimum paid-up capital to operate in FTZ of Nigeria shall be $10 million, or such other amount as the CBN may from time to time prescribe. In addition, a bank in the FTZ shall meet all the prudential requirements as may be specified from time to time by the CBN,” it said.

    It said a bank in the FTZs shall disclose to the CBN, the equity interests of its directors and key officers in any enterprise in the zones within 14 days of acquisition of such interest.

    He said a licensed bank in the FTZ may accept deposits; grant to any person, advance, loans, or credit facility, or give any financial guarantee, or incur any other liability on behalf of any person; make remittances of funds abroad or to Nigeria Customs Territory on behalf of any non-resident; undertake any other foreign exchange transaction as may be prescribed by the CBN, from time to time; and carry out any other activity that may be approved by the CBN.

  • Govt urged to pay attention to free trade zones

    The Federal Government has been urged to develop the free zones for the economy’s growth.

    The Executive Secretary, African Free Zone Association (AFZA), Mr Chris Ndibe, who made the call in Abuja, said well developed free zones could generate millions of jobs for the youth.

    “If free zones are adequately promoted and proper incentives given, investors will be encouraged to invest in the zones which will in turn provide more jobs for Nigerians.’’

    He decried the low level of awareness in the public about free zones, adding that promotion was very important to their development.

    “If Dubai, as developed as it is, still advertises the free zones; Turkey also doing same, why can’t we do same.

    “I cannot remember when last I saw any advert on the Nigerian free zone on the television; I cannot remember how many times I have seen the distribution of in-house journals about free zone.

    “I cannot remember how many times seminars and workshops were organised about free zones for stakeholders to know that this thing exists.

    “If you don’t take promotion seriously and be ready to give incentives that can bring investors into the country, then, your guess is as good as mine.”

    Ndibe said the level of investment was very low, considering that Nigeria currently had about 27 free zones in the country with only about eight being functional while all others had become moribund.

    He said there were a number of zones that had existed for many years without recording a single investment because they were never advertised.

    “I have always said it that, give the free zone the incentives that it requires, people will be falling on themselves to establish in this country because we already have power distribution challenge.

    “If you establish free zone that is power efficient, water efficient with all the state-of-art facilities in place and importation of raw materials and operational machinery tax-free, people will cash in.

    “This is because the return on investment in this country is very high but if they have the backing of government in what they are doing, the sky is the starting point,” he said.

    According to Ndibe, a lot of investors come to Nigeria to invest, but they leave because they are not encouraged by what they see.

    He said the free zones in Dubai were not better than those in Calabar or all others in the country.

    “Yet, people invest heavily in them.’’

    Ndibe urged the Federal Government to make adequate budgetary provision for the training and retraining of officers to take the free zones to the next level.

    He called for encouragement and assistance of the General Electric (GE) which had invested in the Calabar free zone last year.