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The Trajectory of Free Trade Zones utilizations in Nigeria



By Martins Martins

For years, Nigeria has navigated seeking for the stabilization of its economy through blends of conventional and non-conventional approaches.



No doubt, the country is blessed with natural resources which include abundant presence of solid minerals and crude oil deposits. However, the decades of over dependence on the downstream sector has offered the country what appears to be ``blessings and curses’’.


The `blessings’ , being years of leverages and wealth that had accrued to this acclaimed African largest economy and `curses’ which remain the negativism and pitfalls that plagued the nation over the scramble for the exploration of crude oil and natural gas by an infinitesimal segment of the population called ``the ruling class’’.


Series of the country’s growth and economic indices have continually shown down trends owing largely to deliberate abandonment of the non-oil sector. Albeit, successive governments had paid lip service to the development of the non-sector, but perhaps always retard due to the long stretch of investment that required to be made before dividends.


Trade and Commerce remain one of age long human activities that continue to sustain the development of the world.



It has gone from it primitive adaption to a more lucrative and expansive mode that transcends both land and coastal borders of countries.


Nigeria and most countries in Africa had wished to take advantage of the economic boom and boost derivable from export of goods and services but may have failed to rip sufficiently as a result of incoherent trade policies and strategies.


Knowing the benefits inherent in free trade zone model, the Federal Government of Nigeria in it official gazette published the Nigerian Export Processing Zones Act of 1992.


The Act sets out the investment procedures, regulations and operational guidelines for Free Zones in the country.


The Act has given rise to the establishment of some 26 free trade zones in the country.

Free trade zone as described by several experts is a demarcated geographic area of a country’s national boundaries where the rules of business are different from those that obtain in the normal country’s business environment. 


Farol, 2011, as cited by Chris Ndibe, Executive Secretary of Africa Free Zone Association(AFTZA) in his book titled ``The Danger of Neglecting Free Trade Zones Scheme in Nigeria says the zone’s differential rules principally deal with investment conditions, international trade and customs.


He further says these rules also handle issues around taxation and the regulatory environment, whereby the zone is given a business environment that is intended to be more liberal from a policy perspective.


Before delving into some of the variables that inhibit the progress of free trade zone in Nigeria, it is imperative to state the basic objective of establishing the zone which includes attracting Foreign Direct Investment (FDI) as well as create jobs and empowerment opportunities.


It is aimed at also serving as ``pressure value’’ to alleviate large-scale employment, stimulate regional development and technological transfer as well as create backward linkages among others.


Can it then be said that Nigeria has leveraged the numerous opportunities provided by this alternative trade model to improve on its Gross Domestic Product (GDP) typified of ``Shenzhen Miracle’’, a fishing village which got transformed into a cosmopolitan city of 14 million as a result of successful administration of its trade zones?


In the last 40 years, countries all over the world, particularly developing nations, have increasingly recognized the benefit economic liberalization and greater private sector participation in the economy could bring about. 


This becomes even clearer when the limitation and weakness of import substitutions as a strategy for economic development are taken into account. Many countries and businesses are today chasing and struggling for limited FDI.


Realization of this impelled the Federal Government of Nigeria to take far-reaching steps to improve the environment for investment and boost the development of the non-oil sectors of the economy.

In 1989, the Nigerian government commissioned the United Nations Industrial Development Organisation (UNIDO) under the auspices of the United Nations Development Programme (UNDP) to conduct a feasibility study of the establishment of Export Processing Zones.


On November 7, 1991, the then military president, General Ibrahim Babaginda, laid the foundation stone of the premier export processing zones in Calabar, Cross River State on 152 hectares of land.

It was viewed as a landmark, a bold step by Nigeria towards improving the business environment. Decree 34 of 1991 which initially gave legal backing to EPZ in Nigeria was replaced with Decree 63 of 1992.


The Calabar Export Processing Zone did not however become operational until its official commissioning in 2001 by President Olusegun Obasanjo, when it was changed to Free Trade Zone with a lager scope of activities than the original traditional Export Processing Zone.


The amendment to the law guiding the operations of export processing zones in the country has indeed liberalized the sector thereby giving rooms for more private operations and public private partnerships.


In the light of this, the Tinapa Free Zone & Resort in Cross River State, an initiative of public and private partnership set up in 2004 standing on 265 hectares was viewed as the recipe trade zones to stabilize the shaky sector but that was soon to be eroded.


Similar fate may have befallen the Snake Island International Free Zone Lagos privately managed by Niger dock Plc.  Not much is happening in the trade hub that specializes in Steel Fabrication, Oil & Gas, Sea Port


However, the Lagos Free Trade Zone appeared a respite being the first purely privately owned free trade zone in Nigeria, spreading over 805 hectares of land.


 The zone has several industrial zones and offer access to an enormous consumer market across West Africa.

Initiated with the President's approval in 2002, the Lagos Free Trade Zone was designed to serve as an integrated hub with active road, rail and sea links, which can open up the investment, business and tourism potential of Nigeria to the world.


With numerous industrial zones, well-laid plans for efficient operations and established connectivity to regional and international routes, the Lagos Free Trade Zone appears to be the future destination for international businesses in the region.



A cross section of experts have underscored the importance of free trade zones, according to them, the effective and efficient management of the existing zone will serve as the lead to the country’s effort towards the diversification of the economy.



Dr Ademola Alimi, an Economist, said the country must expedite action in revamping all the free trade zones, adding that that remained the most functional approach to expanding the frontier of the country’s economy.



``Have you considered the population of teeming job seekers that can be engaged in these zones?



``Why has successive governments not considered investing in free trade zones. In fact there lies the hope of the nation because it makes trading with other nations easier’’, he said.



Chief Donald Okereke, a retired National Port Authority Staff, said the country was missing out of the gains embedded in free trade zone operations, adding that developed nations had built strong Gross Domestic Products (GDP) from free trade zones activities.



Aligning himself with the above contributors, Mr Olowokere Adedeji, another Economist said a functional free trade zones policy was the antidote to the country’s present economy woes.



In his opinion, the present handling of the sector was shoddy, adding that the issues around insecurity in some of the exiting zones must be addressed.



Perhaps, the government is fully aware of the present hiccups around the sector as aptly captured by the Director-General of the Nigeria Export Processing Zones Authority (NEPZA), Mr Emmanuel Jime when the Management of the Nigeria Customs Service paid him a courtesy visit on August 2017.



In that visit, NEPZA and Customs announced the setting up a technical committee to harmonise their operations at Free Trade Zones across the country.

The committee was set up by the two agencies to address concerns raised by the NEPZA in relation to the operations of customs officers in licensed free trade zones.

 Jime, had raised concerns on customs officers lacked of knowledge on the operations of the free zones and called for inclusion of free trade zones in the curriculum for their training.

Jime had said customs officers dealt directly with investors in the free zones instead of going through the NEPZA, which was the agency responsible for investment facilitation into licensed free zones in the country.

Responding, the Comptroller General of Customs, retired Colonel Hameed Ibrahim Ali, said customs officers in Nigeria were usually caught in-between its mandates for trade facilitation as well as ensuring security and the wellbeing of Nigerians.

From the above conversions, it is incontrovertibly clear that a lot needs to be done to reposition the operation of free trade zones in Nigeria.

The narratives so far has pointed to the fact the existing provisions of the Free Trade Zone Law requires a review for optimal performance.

It would be also not out of place if government adequately provides the right infrastructure needed to drive operations in the zones as the present states of most of the zones remained appalling.

In view of the porous nature of the zones, the authority must heighten efforts to ward off attempts by dubious operators and investors from converting the zones into smuggling empires.

Finally, the government must muster political will to implement the recommendations of the 2005 Presidential Committee on the operation of Free Trade Zones Scheme in Nigeria.

It was saddening to see that the good and impressive recommendations made by the committee were never addressed by Obasanjo who set it up or by subsequent administrations.

The highlight of the recommendations was that operations of the Free Zone Scheme should be closely linked to national objectives for industrial development.

Consequently, the scheme should have, as its target investors, industries with potential to add real technological value to the economy while encouraging export activities.