Nigerian Export Processing Zones Authority: Boosting Economic Growth and National Exports

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When shopping for goods and services, a one-stop shop that offers customers the convenience of having multiple needs met in one location instead of driving all over the town to attain related services at different stores is a blessing.

The Nigerian Export Processing Zones Authority (NEPZA) is the one-stop-shop service for businesses within and outside Nigeria.

The NEPZA is the federal agency responsible for establishing, licensing, regulating and operating highly efficient Free Zones by providing a highly competitive incentive scheme, excellent support facilities and services to create an enabling environment for export manufacturing and other commercial activities.

What You Should Know

The NEPZA was established in 1992 following the enactment of the Nigeria Export Processing Zones Act 63, 1992, with the strategic mandate of promoting and facilitating local and international investments into Nigeria’s Free Trade Zones/Special Economic Zones.

Over an extended period, Nigeria’s economy has relied on oil exports, and because oil has its challenges, depending on this resource has made the nation vulnerable. Thus, Nigeria adopted a model of development that uses Free Trade Zones to diversify its economy.

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 regulations. Generally, such goods are not subject to customs duty.

The FTZ is usually organized around major seaports, international airports, and national frontiers areas with many geographic advantages for trade.

Nigeria’s FTZ scheme was envisioned to diversify the nation’s economy away from oil, fast-track her industrialization, stimulate export-oriented business enterprises and manufacturing, strengthen strategic national economic policies, and streamline administrative approval processes.

The scheme provides incentives for foreign direct investment in a way that is not found elsewhere in Nigeria. For example, raw materials are imported tax-free, and finished products are exported tax-free. In addition, foreigners are permitted to retain 100% ownership of their companies without the participation of Nigerian nationals or firms.

The idea is to develop FTZ to a level where it can compete with other such zones worldwide. Presently, there are 42 licensed FTZ, of which 17 are functional and operational. The others are either under construction, awaiting declaration, or physical development yet to commence.

Some of the well-known functional FTZs in Nigeria include the Calabar Free Trade Zone, Kano Free Trade Zone, Tinapa Free Zone and Resort, Lekki Free Zone, and the Lagos Free Trade Zone.

Free Trade Zones: A Veritable Source of Economic Development

FTZ are critical to revenue generation for the Nigerian economy and can also help improve Nigeria’s fiscal position, especially given the volatility of oil prices.

The Managing Director of NEPZA, Professor Adesoji Adesugba, recently disclosed that policy development to drive novel digital technology is ongoing to open up the Free Trade Zones, FTZs, space for operators of the critical multi-trillion-dollar blockchain technology businesses.

The NEPZA boss also said that the decision to fully promote the blockchain technology hinged on its fast rate of revenue turnovers and the unlimited job space the technology had for the teeming youth.

He explained that the country’s tax net would be exponentially enlarged if the investment came alive. According to him, Nigeria is currently rated as the 6th largest player globally in the crypto and blockchain trade, especially amongst the youths.

On his part, Nigeria’s Minister of Industry, Trade and Investment, Otunba Richard Adeniyi Adebayo, recently revealed that Nigeria had received a cumulative investment of $20 billion from Free Trade Zones over 30 years.

The Minister said over N250 billion was generated in foreign direct investment and local direct investment; N35 billion in Customs duty payments; N65 billion in Local Import/backward linkage; N500 million in Pay as You Earn 25,000 in new employment and 5,000 transfer of skills.

The contributions of the hundreds of enterprises applying the free zone concept dutifully in the various zones to the nation’s economy cannot be overemphasized.

Some enterprises paving the pathway for the country’s economic growth and development include Dangote Petrochemical Enterprise; Eko Atlantic; Ogun Guangdong; Snake Island Integrated Free Trade Zone; Quit Aviation Services; Sky Chefs Things to Remember; and Alaro City, among others.

Emerging from the Lekki FTZ, the Dangote Refinery is an integrated refinery and petrochemical complex, a multi-billion-dollar project that is expected to create a market for $11 billion per annum.

The refinery is a 650,000 barrels per day, single-train crude oil integrated refinery project. With a single crude oil distillation unit, the refinery will be the largest single-train refinery globally and Africa’s biggest oil refinery.

At full production, the complex will have an annual refining capacity of 10.4 million tonnes of gasoline and 4.6 million tonnes of diesel and 4 million tonnes of jet fuel.

The complex also includes a fertilizer plant, which uses by-products from the refinery as raw materials. These huge outputs will also immensely benefit the local market and grow the economy.

With a greater capacity than the total output of Nigeria’s existing refining infrastructure, the refinery will meet 100 per cent of the Nigerian requirement for all refined products and have a surplus of each of these products for export.

A Game Changer

The Dangote Petroleum Refinery and Petrochemical Project will reinforce Nigeria’s standing on the global oil and gas map and serve as a game-changer for Nigeria’s dwindling economy.

While touring the facility, Nigeria’s Information and Culture Minister, Alhaji Lai Mohammed, said the coming on stream of the Dangote Petroleum Refinery and Petrochemicals and the Dangote Fertilizer Plant would also help to ensure energy and food security in the country.

According to the Minister, “we must not fail to appreciate the fact that it’s not just that we will be self-sufficient in terms of food security and energy security, but the quality of our refined products and fertiliser will be world-class.’”

The Minister added that the refinery would generate employment, contribute to the GDP, and conserve foreign exchange.

“Dangote Refinery, as of today, employs 35,000 people every day. There will be huge value addition that will contribute to the increase in GDP. There will be no more importation of petroleum products, generation of foreign exchange through export of finished product, availability of petroleum products, thus ending petrol queues, and attraction of foreign capital investments.”

The President of the African Development Bank, Dr Akinwumi Adesina, described the refinery as the best-industrialised project to happen to Africa, adding that the project will positively affect the economic growth and development of not only Nigeria but Africa as a continent.

Adesina stated that “I see a company that I will proudly call Africa’s growth accelerator company. With this project, we see an acceleration in how to reduce imports. We see acceleration on how to have an outbound on export; a value chain development and how to compete regionally and globally”.

Commenting on the Fertiliser complex, Adesina said: “This is a company producing three million metric tonnes of urea, which will make Nigeria self-sufficient. Nigeria will become a net exporter of fertilisers. It will drive productivity growth in Nigeria, prices will come down, and the quality will also improve.”

According to a GlobalData report, the completion of the Dangote Fertiliser plant has made Nigeria the third-highest country in terms of capacity additions, with a capacity of 11.58 million tonnes per annum by 2030.

The Ugly Side of the Free Trade Zones’ 30-year Saga

The FTZ scheme aims to attract foreign direct investment, generate employment, enhance trade and industrialization, encourage technology transfer to Nigerians, and generally contribute to national economic growth and development.

However, stakeholders and economic experts say Nigeria’s FTZ is crawling 30 years after and is yet to achieve its intended purpose. The description of a crawling FTZ is not farfetched after the revelation that the scheme’s operation cumulative investment stood at about $20 billion, with only 25 000 jobs generated against the scheme’s projected capacity for 300 000 direct jobs.

According to the experts, lack of infrastructure, power supply, poor road networks and logistic bottlenecks, among others, has made the FTZs unattractive to investors. This has resulted in the scheme not delivering investments at the expected level.

While Nigeria pushes to join its peers in the international community to benefit from the opportunities of an FTZ, Economic experts stressed that these zones must be monitored to document their performance and contribution to the Nigerian economy.

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