Availability of tax rebates, both Federal and State, as well as infrastructure to support business operations, are the key attraction to businesses and residents who are flocking the Lekki Free Zone (LFZ), experts have said.
The LFZ, spanning across 16,500 hectares and widely acclaimed as the most ambitious project in Lagos State, has received remarkable attention this year; partly due to the several milestones celebrated by major investors in the zone in the past few months. This attention, as well as the fact that the Lekki-Epe axis has emerged as the most prolific development corridor in Nigeria, has resulted in an increased scramble by residents and businesses for real estate in that axis.
One of the critical attractions for them, according to experts, is the tax rebates available in the zone. Businesses in the LFZ are exempt from all federal, state and local government taxes, levies and rates while operating in the zone. Some of these taxes include: Value Added Tax (VAT), Withholding Tax (WHT), Company Income Tax and Custom/Import Duties.
“These investors are attracted by, among other things, the tax breaks available with operating in a free trade zone,” said Bidemi Olumide, Partner and CEO of Taxaide, a tax management firm.
“For your company to be operating in that territory, you have a significant rebate in taxes; and that’s a conservative way of putting it. You have zero to no income taxes; you have no transactions taxes; etc. Then on the regulatory side, you are not dealing with multiple regulators; you are dealing with one regulator, which is the Nigeria Export Processing Zones Authority (NEPZA), who then organises all the relevant regulators under one umbrella so that you have only one port of call for all regulatory matters which significantly reduces your compliant costs. Similar to others across the globe, the free zone is the place to be for all businesses that seek to add value.”
Dangote Group, one of the biggest investors in the LFZ, is investing billions of dollars in the construction of a petroleum refinery, a fertilizer processing plant, a gas pipeline project and a petro-chemical plant in the South East Quadrant of the zone. While all these are still in construction phase, an estimated 120 companies are already providing goods and services valued at N148 billion at the sites. According to the company’s Group Executive Director, Strategy, Portfolio Development and Capital Projects, Devakumar Edwin, a daily estimate of 126 trucks rumble around the site, while 37,500 people are directly or indirectly involved in various construction activities on the site.
In the South West Quadrant of the zone, the Lekki Free Zone Development Company (LFZDC), a joint venture between China-Africa Lekki Investment and the Lagos State Government, has already attracted such investors as Sinotruck, Bollore, etc. The presence of these companies, as well as ongoing construction of facilities in the quadrant, has resulted in thousands of direct and indirect jobs; as well as increased activity in the zone.
In the North West Quadrant of the zone, Rendeavour, the largest new city developer in Africa, is the major investor. The company, in a partnership with the Lagos State Government, is building Alaro City, a planned 2,000-hectare mixed-use satellite city that has been widely hailed as the next phase in the evolution of Lagos.
Launched in January, Alaro City has already attracted some investors who have commenced construction of their facilities in the city. Ongoing construction of supporting infrastructure in the city, as well as facilities being built by investors, have already created hundreds of jobs.
All these, and such critical supporting infrastructure as the largest deep-sea port in West Africa and proposed airport in the area have resulted in the LFZ attracting more foreign and local investors at a fast pace.
Businesses are not the only ones seeing the value in the LFZ. Lagos residents, spurred by the high real estate appreciation rates in the state, look to take advantage of the mixed-use integrated design of Alaro City which provides for well-planned residential areas within the city. They are also benefiting from the advantages of building in a free zone; benefits which include and cheaper construction costs resulting from tax and duty incentives.
“Residents within the LFZ will benefit from a single regulatory body that manages levies,” said Mr. Olumide. “Businesses producing and selling with free trade zones enjoy significantly less operational costs.”
The level of interest in the zone, according to realtors, will further increase as appreciable progress is made on such strategic supporting infrastructure as the Lekki Deep Sea Port, the proposed Lekki-Epe International Airport and the expansion/completion of the Lekki-Epe Expressway. The prospect of these, as well as other proposed infrastructure upgrades along that axis have already pushed real estate investments in the area, in some cases, to a 100% annual appreciation rate. According to the president of Perfection Real Estate Investors’ Cooperative Society, Niyi Adeyeye, a plot of land in Ibeju-Lekki, near the LFZ, sold for N1 million five years ago is now valued at N6 million.
However, as interest surges, calls for the government to invest in surrounding infrastructure have increased. Recently, the Lekki Estates Residents and Stakeholders Association, during a pre-inaugural dinner for Vice President Yemi Osinbajo and Lagos Governor Babajide Sanwo-Olu, asked both federal and state governments to improve infrastructure in the Lekki-Epe corridor to enable the area to realise its potentials and contribute its quota to the development of Lagos.
“The government cannot avoid providing alternative roads to Lekki,” said James Emadoye, the president of the association. “We’ve been told there is going to be a new airport, Dangote Refinery, deep seaport and so on in this area. There is no way you will make these things work without providing better roads, alternative transport system like rail and waterways.”
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