By Martins Odeh Ph.D.
There appear to be deep seated and conclusive negative opinions about the modus operandi of the Free Trade Zone Scheme among individuals in and out of government in Nigeria.
First, we have to understand that this global economic system is primarily aimed at encouraging economies of scale through seamless production and manufacturing for export and for local markets.
It also aims at supporting backward linkages; industrialization; infrastructure development; employment generation; foreign exchange earnings, revenue generation among others.
For the umpteenth time, free trade zone remains a global economic matrix with distinct framework which gives this business ecosystem a status of “country within a country.’’
It therefore, behooves on any nation willing to adopt the concept to run it in line with the local law that regulates its operation as enshrined in the NEPZA Act 63 of 1992 as well as within the purview of international best practice and framework.
The Federal government, seeing the incontrovertible benefits of the scheme to national economy and development adopted it some 30 years ago.
Truth be told, the scheme might not be at the growth level which the government had envisaged yet, but some excellent milestones have been made with the 52 Free Trade Zones and over 600 enterprises operating within those business landscapes with a cumulative USD 30 billion investment lubricating the economy.
The new NEPZA management led by Dr Olufemi Ogunyemi is not oblivious of the calculated attacks of the Anti-Free Trade Zones Campaigners, all of whom are representatives of a section of the economy that constitutes business individuals that are afraid of fair competition posed by free zone investors.
Even with this loud anti-free trade zone distraction which simply sums up as biliousness of the few, the NEPZA management, investors, operators, as well as well-meaning stakeholders; have found respite in the special interest of His Excellency, President Bola Ahmed Tinubu, GCFR to use the scheme to upscale industrialization.
No one, therefore, is in doubt on how the President, then Governor of Lagos State, used the free trade zone concept to reconfigure the economic landscape of the Lekki Area of the state and by abetting the catastrophic submerge of the entire V/Island Area of the state through the conversion of the then ruptured Bar Beach into a world-class Eko Atlantic Free Trade Zone.
Today, the Lekki area of the state harbours the Lagos Free Zone, Dangote Refinery Free Zone Enterprise, Alaro City, Deep Sea Port, Lekki Free Trade Zone, all to the credit of the president with these accomplishments earning him the praise of stakeholders as the “Brain Behind Modern Free Trade Zone in Nigeria.’’
The president’s attention must again be called to the gains and prospects of the scheme through sustained promotion of the economies of scale over the temptation of listing it as a pure revenue generation hub.
The concept of economies of scale promotes long term and sustainable dividends for the country so long as the enterprises continue to reap low production cost advantages.
This will encourage continuous inflow of Foreign Direct Investments (FDIs), Direct Diaspora Investments (DDIs)as well as Local Direct Investments (LDIs) while keeping grip on investments already attracted.
Regardless of the loud voice of these anti-free trade zone campaigners, the scheme has made modest contributions to the economy.
How is it possible for the 52 Free Trade Zones and the over 600 enterprises currently in operation not to have impacted the economy significantly?
The response to the above rhetoric, was aptly provided by the NEPZA Managing Director while alluding recently to the fact that the free trade zone was however, not a `free meal ticket’ for the investors.
The import of this statement is simply to help grow public knowledge on the contribution of the free trade zones to the Domestic Gross Product (GDP) and National Gross Product (NGP) respectively.
The NEPZA Chief Executive Officer was emphatic when he said: “Free Trade Zones are business anchorages that have for decades been used to generate revenues for the Federal Government.’’
He explained that the widely held notions that the scheme was a ‘free meal ticket’ for the investors thereby denying government revenues were incorrect.
“The NEPZA Act provides exemption from all federal, state, and local governments taxes, rates, levies, and charges for FZE, of which duty and VAT are part. However, goods and services exported into Nigeria attract duty, which includes VAT and other charges.
“ In addition, NEPZA collects over 20 types of revenues ranging from 500,000 USD-Declaration fees, 60,000 USD Annually as Operation License (OPL) and 3000 USD to 500 USD Registration fees in line with extant regulations on IGR remittances to the Federation Account.
“There is also the 100 USD to 300 USD Examination and Documentation fees per transaction which occurs on a daily basis. There are other periodic revenues derived from Vehicle Registration, Visa among others. The operations within the free trade zones are not free in the context of the word,’’ Dr Ogunyemi said.
For instance, the Authority’s First and Second Quarters of the 2023 Key Performance Indicator (KPI) showed that a combined total of 21.3 million USD was generated as Foreign Direct Investment while N9.8 billion accrued as Local Direct Investment.
Conversely, a total of 28.9 million USD was generated as International Export and N250.5 billion accrued to the government as Domestic Export while 338.9 million USD and N36.3 billion were generated as International Import and Domestic Import respectively.
Furthermore, the figure that accrued to government as Custom Duty stood at N20 billion while that of PAYEE amounted to N346.8 million and a total of 3, 776 employment was generated within the two quarters reviewed.
In total, the Authority’s 40 per cent contribution to the consolidated revenue in naira as at November 2023 stood at N1, 800,809,1773.38 and with similar 40 per cent margin of transfer to the account in dollar amounting to USD 1, 167,122.86.
The grand total of the figures generated in 2023, which included figures from Tender Fee; Withholding Tax (WHT); Valued Added Tax (VAT); Stamp Duty; PAYEE as well as Customs Duty stood at N38, 879, 485, 774 568.90.
The KPI for the 2022 also showed excellent flashes of gains made by the scheme which attracted a total of 28 new enterprises with a total of 90 million USD value of FDI and N80 billion value of Local Domestic Investment (LDI).
The record also placed the value of both the International and Local Exports at 36.8 million USD and N450.8 billion respectively.
The 2022 key performance indicator further highlighted the value of International and Domestic Import to be 999 million USD and N188 billion.
The report stated that a total of N34.215 billion was generated as Custom Duty while the amount generated from the free trade zone in 2022 by the Immigration Service stood at N702.7million with a total of 3,555 employment created.
In conclusion, the Authority has always been aware of the need to ensure transparent listing and deductions of mandatory duties and taxes, and has also ensured the sustenance of the process by digitalising its process as well as agreeing on the best ways and means for a dependable free trade zone tax administration with the Federal Inland Revenue (FIRS) and the Nigeria Customs Service (NSC) respectively. The scheme remains an economic development tool the country is using to leapfrog our economy and its sustainability and success should be our utmost concern.
Odeh, is the Head Corporate Communications, NEPZA.
