Onome Amuge
Nigeria’s Special Economic Zones (SEZs) and Free Trade Zones (FTZs) risk losing their competitiveness under recently enacted tax reforms, the Nigeria Economic Zones Association (NEZA) has warned, in a sign of mounting unease among investors and operators in the country’s most visible industrial enclaves.
In a statement issued this week, NEZA welcomed the federal government’s passage of the Nigeria Tax Act, 2025 and the Nigeria Tax Administration Act, 2025, describing the legislation as a major step towards enhancing fiscal transparency and strengthening revenue assurance across the country.
But the group, which represents operators across Nigeria’s 33 officially recognised free zones, also cautioned that the reforms pose significant risks to Nigeria’s investment climate by undermining the very incentives that underpin the free zone regime.
The reforms, NEZA argued, would leave Nigeria’s SEZs among the least attractive in Africa, jeopardising more than 100,000 jobs, threatening capital flight, and raising costs for consumers in a country where inflation remains persistently high.
At the heart of the dispute is Section 57 of the new Nigeria Tax Law, which stipulates that even companies that export 100 per cent of their products from free zones or meet the requirement of exporting at least 75 per cent outside Nigeria’s customs territory, will still be subject to corporate taxation.
“This completely undermines the free zone scheme and makes Nigeria’s free zones one of the least attractive and competitive on the continent,” NEZA said.
The move, it explains, contradicts long-standing global best practice in the operation of free zones, where tax holidays and exemptions form the backbone of their attractiveness to foreign investors. For decades, Nigeria has marketed its FTZs as tax-free enclaves designed to attract capital, promote exports and build industrial capacity.
The new minimum effective tax rules, which will apply to multinationals and larger companies operating in free zones, add a further layer of uncertainty. NEZA argued these provisions would harm these companies by effectively stripping them of their key tax incentives, even for those who do not sell into Nigeria.
According to NEZA, Nigeria’s free zones sustain more than 100,000 direct jobs, with tens of thousands more supported indirectly through supply chains, logistics and services.
“A decline in investors’ confidence would place these jobs at immediate risk, undermining efforts to drive inclusive economic growth,” the association warned.
It added that investors could shift operations to neighbouring countries such as Ghana, Kenya, Morocco and Ethiopia, all of which have strengthened their SEZ regimes in recent years. Notably, under the African Continental Free Trade Area (AfCFTA), companies that relocate could continue exporting duty-free into Nigeria’s vast consumer market, while depriving the country of the investment, technology and skills transfer the zones were designed to secure.
“Investors may choose to relocate to other African countries with more favourable free zone regimes, while still benefitting from duty-free access to the Nigerian market under AfCFTA rules,” NEZA said.
Beyond the threat of job losses and relocation, the group warned of rising prices for Nigerian consumers. By taxing domestic sales from the zones, it argued, the reforms risk increasing the cost of goods sold within Nigeria’s customs territory.
“This undermines competitiveness for Nigerian businesses and places additional burdens on consumers,” NEZA said.
The association also rejected perceptions that free zones deprive government of revenue, pointing to a range of fiscal contributions.
In 2024 alone, it said, free zones remitted more than N100 billion in customs duties and over N2 billion in Pay-As-You-Earn (PAYE) taxes on behalf of employees. Operators also pay an average of $100,000 per zone annually in licence renewal fees, container examination charges, immigration fees and other levies.
“These figures do not even begin to capture the broader economic impact of Nigeria’s free zones including infrastructure investments, deepening supply chain linkages, skills development of local talent, and the creation of over 100,000 direct jobs,” the statement said.
The policy shift comes at a sensitive time. Other African economies are doubling down on SEZ regimes to attract investment as they position themselves for AfCFTA-driven trade growth.
Morocco’s Tanger Med Free Zone, often held up as a model, has drawn more than $11 billion in combined public and private investment and now handles over 8.6 million containers annually, hosting 1,200 companies and supporting 110,000 jobs. Ethiopia has leveraged its zones to become a continental leader in textiles, while Kenya and Rwanda continue to expand their industrial parks with generous incentives.
“While Nigeria is debating on how to narrow the scope of its zone incentives, other African countries are moving in the opposite direction. If Nigeria weakens its Free Zone scheme, investors may simply relocate to these competitor economies, produce there, and still export duty-free into Nigeria under AfCFTA,”NEZA said.
NEZA’s central demand is for structured consultation and a moratorium on the implementation of the new tax provisions affecting free zones. It proposes transitional measures such as grandfathering existing enterprises or phasing in reforms gradually, to protect ongoing investments and maintain stability.
“The recent tax reforms, however, were introduced with insufficient engagement with key zone stakeholders. This lack of structured dialogue risks creating policy misalignment, where the reforms may inadvertently erode the very industrialisation, job creation, and export diversification objectives that government seeks to achieve,” the group said.
It urged the Presidency, the Federal Inland Revenue Service, the Nigeria Export Processing Zones Authority (NEPZA) and the Oil and Gas Free Zones Authority (OGFZA) to open transparent consultations with operators.
“With proper consultation and policy design, both [manufacturers in customs territory and free zone enterprises] can thrive, creating a more diversified, competitive Nigerian economy,” it stated.
