NEPZA, Caught In The Web Of Unproductive Free Trade Zones

To say that the Nigerian economy is already feeling the negative impact of the coronavirus pandemic would be stating the obvious. The coronavirus pandemic had led to unprecedented disruptions to global supply chains, sharp drop in global crude oil prices, turmoil in global stock and financial markets, lockdown of large swaths movements of persons in many countries, among others

These outcomes have had severe consequences on households’ livelihoods and business activities, resulting from drop in global demand, decline in consumer confidence and slowdown in production.

Experts say that the overall medium-term outlook for the global economy remains uncertain with increased deterioration in financial market conditions and weak global output growth.

Some of the major threats to the current projection for global economic growth include disruption to the global supply chain arising from the COVID-19 pandemic; oil price downturn as a result of subdued global demand and vulnerabilities in major financial markets.

Others are rising corporate debt in the advanced economies and public debt in some emerging market and developing economies; as well as broad uncertainties leading to adverse shocks to foreign investment flows.

In view of the foregoing, experts say there is no better time than now for Nigeria to diversify the economy away from over-dependence on oil revenues to mitigate the negative effect of COVID-19 and declining oil revenues on the economy.

When the idea of Free Trade Zones was conceptualized by the Federal Government through the creation of the Nigerian Exports Processing Zones Authority in 1992, the objective was to diversify the nation’s economy away from oil, and fast-track its industrialization.

The plan was also to stimulate export-oriented businesses and manufacturing, strengthen strategic national economic policies, streamline administrative approval processes as well as provide a one-stop-shop service for businesses both within and outside Nigeria.

Other strategic goals of the Free Zones concept are the promotion of the Nigerian Content Policy in the oil and gas sector, attract Foreign Direct Investment, generate employment, increase foreign exchange earnings, enhance technology transfer, promote skills acquisition as well as create backward linkages.

But after 29 years of existence, the Federal Government is reviewing the operations of the zones for the rapid industrialization of the Nigerian economy by facilitating the development. This is anchored on the Nigeria Industrial Revolution Plan.

Developed and developing economies have increasingly utilized the Free Trade zones as an economic tool to stimulate foreign capital through foreign direct investments, to develop and diversify exports.

Experts say the creation of Free Trade Zones is one of the fastest ways to boost industrialization. For instance, Mauritius and Ghana have also utilised the instrumentality of the FTZ to attract FDIs, increase export and capital flows, create jobs and upgrade into the global value network.

Data from NEPZA showed that in 29 years, the Authority had licenced 40 free trade zones and Industrial Parks as well as over 400 Free Zone Enterprises.

The Federal Government owns the Calabar Free Zone and the Kano Free Zone while the rest are privately owned.

There are about 20 inactive free trade zones in the country according to NEPZA. Some of the inactive free trade zones in the country according to NEPZA are Abuja Technology Village Free Zone, Ibom Science and Tech Free Zone located in Akwa Ibom State, Olokola Free Trade Zone in Ondo amd Ogun State, Living Spring Free Zone in Osun State.

There is also the Centenary City in Abuja, Enugu Industrial Park, Tomaro Industrial Park located in Lagos, Ogogoro Industrial Park in Lagos, Oluyole Free Zone in Oyo and Kwara Free Zone, among others.

To attract investments in the free trade zones, stakeholders said there is need for an amendment of the act setting up the agency.

They explained that the Act setting up NEPZA, which was enacted about 29 years ago should be amended to reflect current realities in the export processing zones.

A Developmental Economist Afeez Balogun said that it had become imperative for the amendment of the Act to boost business activities at the free trade zones and promote economic diversification.

Apart from boosting business activities at the free trade zones, he said the amendment of the Act would also help NEPZA to be self sustaining, create jobs, and generate wealth.

He said, “We need to amend the NEPZA act to enable us attract the needed investments for the free trade zones. The current act that set up NEPZA is about 29 years and there are many areas that the act did not look into.

“The amended act will bring in investments in terms of infrastructure and boost businesses in the free trade zones. We will work with government to achieve this.”

He said new innovations in free trade zones and special economic zones are excluded in the act, a development hampering the activities of the Authority.

He also said there is need for the agency to address the issue of power supply at the Calabar Free Trade Zone.

According to findings, about N5bn would be needed to construct Independent Power Plant to service activities at the Calabar Free Trade Zone while about N10bn would be enough to complete all infrastructural projects in Kano Free Zone.

Based on official statistics, the Federal Government is targeting to attract investments of $76.25bn from some of its newly licensed free trade zones.

In line with the Nigeria Industrial Revolution Plan, the government is looking towards using industrial zones to attract requisite investments that would develop sectors in which the country enjoys significant comparative and competitive advantages.

Findings also revealed that approval had been given by the government to set up seven new industrial parks to support the Nigeria Industrial Revolution Plan of the government.

The industrial parks would be located in each of the country’s six geopolitical zones.

The construction of each zone is expected to cost between N50bn to N80bn, and the projects are expected to be completed within two years.

An Abuja based financial expert, Mr Yinka Adewonise said that Nigeria’s quest for industrialization may not be achieved without massive investments in free trade zones

He said that while the government had set aside funds to reposition the free trade zones in the country, there is need to get more investors to boost the level of economic activities at the zones.

He said that the country has great potentials to be among one of the best in the world if properly harnessed.

He said, “We have great land and resources in this country and time has come for the potentials to be harnessed through the free trade zones scheme.This country can only transform economically from the free trade zone scheme.”

He said some investors granted licence to develop Free Zones may not have the financial capability and needed experience to develop them.

He added that private-sector led Free Zones are capital intensive as the developer would have to invest heavily in basic amenities to be able to attract other investors for the proper take-off of the Zone.

While calling on NEPZA to review ownership of licensed Free Trade Zones in the country, he tasked the Federal Government to raise a team to understudy the operations of Free Trade Zones in other countries such as China, Singapore and Dubai on how they have been able to make them viable.

The Managing Director of the Nigeria Export Processing Zones Authority, Prof. Adesoji Adesugba, called on the Organized Private Sector, to patronize the country’s Free Trade Zones to ward-off widespread business uncertainty brought about by the Covid-19 pandemic.

Adesugba argued that Nigeria’s industrialization can be achieved faster if the government and the private sector worked together.

Adesugba said, “NEPZA holds a double status as a facilitator and promoter of investments, free business environment, and a regulator that ensures compliance to standards.

“The organization that I head was set up to manage and regulate free trade zones. The free trade zone is the only business enclave now that guarantees nearness to markets dislocated by a strain in global transportation and logistics against the devastating effects of the Covid-19 pandemic.

“The pandemic, as we are aware, continues to distort business logistics globally, and global investors are looking for workable free trade zones to move into. Doing so would guarantee the preservation of the supply chains and their investments.”

He, therefore, urged the business community to consider patronizing the 42 free trade zones with a view to reducing the negative impact of the pandemic on their businesses.

“The supply chain management is going to be critical, as Covid-19 has changed business logistics, but if we can take advantage of the various incentives, which include tax holiday, absence of Customs duty, and absence of several other multiple taxes charged outside of the zones then our businesses can stay afloat,” Adesugba said.

He further said the Authority was working assiduously to introduce a variety of Economic Special Zones, adding that medical, solid minerals, agriculture and technology would be considered.

He disclosed that the establishment of Constituency Industrial Parks in the over 300 Federal Constituencies were also being contemplated, adding that these can only be achieved with the active participation of the private sector.