Lingering infrastructure deficit, legal disputes, failure to raise capital, insecurity and the general harsh economic environment are leading reasons why a significant number of Free Trade Zones (FTZs) in Nigeria have remained moribund, the Nigeria Export Processing Zones Authority (NEPZA) – the agency in charge of licensing these zones says.
At least 19 of such zones across the country are inactive due to the inability of investors to develop and commence business activities, BusinessDay learns. However, the Authority informs that it cannot take action on the zones which are mostly private-owned because their land lease and licences are still valid.
The World Bank defines free trade zones as “in, duty-free areas, offering warehousing, storage, and distribution facilities for trade, transshipment, and re-export operations.”
Free-trade zones are also seen as labour-intensive manufacturing centers that involve the import of raw materials or components and the export of factory products, as well as service industries such as software, back-office operations, research, and financial services. Such zones usually enjoy some customs-related advantages as well as exemptions from state and local inventory taxes.
Martins Odeh, head, corporate communications, NEPZA, who spoke on behalf of the Authority, says this has spurred the Federal Government to set up more zones that will be owned, funded, and controlled by it to efficiently drive the industrialization process, which is the intent of the free trade scheme.
“The Federal Government is not happy about these inactive zones because it is truncating the industrialization process. Once given a licence, it is expected that economic activities would begin and failure of that is resulting in investment and value chain losses and all the things that would affect the GDP positively.
“But since their licences are still valid, you cannot just take them unless they expire without renewal. Leases for these zones are not short, they usually last 20-25 years. All we can do at NEPZA is to encourage them to begin operations even though the economy is harsh and investors are complaining. But the Federal Government does not have control over these zones,” he states.
BusinessDay had exclusively reported that three new trade zones are expected to kick off this year to add to the already existing 45 FTZs including two public zones in Nigeria.
Odeh says the government plans to inject sufficient funds to ensure that these zones do not end up moribund. Currently, the Federal Government only owns two zones since 1992 when the scheme took off; the Kano Free Trade Zone and the Calabar Free Trade Zone.
The approved zones set for launch this year are the Medical Free Trade Zone (FTZ) Lekki, Lagos State; Agro-Allied/Medical FTZ Ilorin, Kwara State, and Integrated Cotton/Textiles FTZ Funtua, Katsina State.
Odeh decries that the failure of the government to provide infrastructure around the active zones is crippling the potential of the zone. For instance, a bad road network has posed a big challenge to investors in the Guangdong Free Trade Zone, Ogun State; while insecurity has driven investors away in the northern zone such as the Banki Border Free Zone, he notes.
Also, the Abuja Technology Free Trade Zone has not taken off due to lingering legal disputes around the registration and constitution of the Board of Trustees and other challenges.
Economic experts have stressed that these zones must be monitored to document their performance and contribution to the Nigerian economy. They note that the lack of reliable data on the performance of the economic zones has been a lingering hurdle, which has caused governance operators to work in the dark.
Read also: Nigeria’s free trade zones crawling 29 years after
Meanwhile, the NEPZA in 2021 struck the long-awaited partnership with the National Bureau of Statistics (NBS) in ensuring that data from zones and the Authority’s headquarters are collated, computed, and inputted into the national growth indices regularly.
Adesoji Adesugba, managing director, NEPZA, explains that the partnership with NBS is aimed at assisting the Authority at robustly re-defining the import and export data points for analysis and for decision making through the free trade zone gateways.
Adesugba says the synergy is also directed at sharing relevant data between the two agencies in order to regularly highlight the zone scheme’s contribution to the country’s Gross Domestic Product (GDP), Foreign Direct Investment (FDI) and employment generation outlook.
But, there is still no verifiable data on the contribution of FTZs to get the Nigerian economy working better.
