Stakeholders push back against Free Zone bill

…warns bill could lead to capital flight, job losses, halt industrial growth

Nigerian Free Zone operators and other stakeholders have said that the proposed amendments to Nigeria’s tax laws are poised to significantly impact the country’s free zone enterprises, which have long benefited from key exemptions and incentives.

These changes, they say, if passed, could undermine the attractiveness of free zones to international investors, triggering capital flight, job losses, and a setback to Nigeria’s industrialization and export expansion goals.

This was according to a communique issued after an emergency stakeholders meeting of free zone operators in Abuja.

The meeting held to address the controversial Free Zone Bill, emphasized the urgent need to prevent the enactment of the bill in its current form, citing its potential to undermine the free zone scheme and harm the broader economy.

They noted that if these provisions are passed into law, they will alter/rescind decades-long tax exemptions and incentives that have historically been central to the operations of free zone enterprises and which, indeed, constitute the “offer” that was made by the FGN to international investors, and which they have accepted over the decades and have based their long-term investment decisions and models on.

“Noted that by removing exemptions from taxes contained in the existing law, as well as protections against levies, duties and foreign exchange restrictions, the amendments will destroy the attractiveness of free zones, result in massive capital flight and job losses, and stall the realization of Nigeria’s industrialization and export expansion ambitions and the other above-mentioned objectives of free zone scheme in Nigeria,”

According to Nigeria Export Processing Zones Authority (NEPZA) as of January 2024, over $300 billion in investment has been attracted to the free zones, and Over N650 billion have been generated into Government coffers through various government agencies of Nigeria Customs Service, Nigeria Ports Authority, Nigeria Immigration Service, Free Zone Regulatory Authorities, P.A.Y.E.

Also in the last 5 years, Over 100,000 direct and more than 500,000 indirect jobs have been created through free zone activities.

Free Zones Operators noted that the above provisions of the Bill, which intend to repeal Sections of NEPZA and OGFZA Acts significantly reduce the tax exemptions and incentives available to Free Zone Enterprises, “ this would amount to using a sledgehammer to kill an ant while trying to streamline the free zone provisions” they noted

The stakeholders noted also  that these provisions were inserted based on a false assertion “that the law allows for only the sale of 25% of goods into the Nigeria Customs Territory while ignoring the approval granted in 2002 by the FGN that up to 100% of the product from free zones may be sold into the Nigeria Custom Territory upon payment of appropriate Custom duties.”

A key resolution from the meeting was the adoption of a multi-pronged strategy, including leveraging media platforms to articulate the stakeholders’ position. Also, the group plans to embark on advocacy visits to the National Assembly and relevant government agencies to highlight the adverse effects the bill could have if passed into law.

“The stakeholders therefore agreed and recommended that, given the potential negative impact of the Nigeria Tax Bill, 2024 on the Free Zone Scheme, the FGN should consider the position of Free Zone Stakeholders and  expunge Sections 60, 198(2) and 198(3) of the Bill, exclude free zone enterprises from the scope of application of Section 57 of the Bill; and  delete the current Second Schedule of the Bill in its entirety.”