REVEALED ! Billions of dollar investments threatened in Nigeria’s free zones planned reforms

…Investors say remodelling out of sync with their business interest

…Plan to commence divestment

…Huge job losses expected; to add to 33.3% national unemployment rate

…NEPZA boss calms restive workforce over fear of their employment

…So far, only 17 out of 34 free trade zones are active

Ben Eguzozie, in Port Harcourt

Billions of dollar investments are threatened with closure in Nigeria’s free trade zones (FTZs) scheme following ongoing misconceptions about remodelling of the scheme between the leading free zones investors, the Federal Ministry of Industry, Trade and Investment (FMITI), and the FTZs regulator, Nigerian Export Processing Zones Authority (NEPZA).

The leading investors in the FTZs have threatened to commence divestment from the scheme, unless the board of the regulatory agency, Nigerian Export Processing Zones Authority (NEPZA) summons a stakeholders’ meeting.

A leaked draft report from the Federal Ministry of Industry, Trade and Investment (FMITI) proposes to transfer supervision of such private sector investments from the NEPZA to the Oil and Gas Free Trade Zones Authority (OGEFZA) which regulates mainly the Onne Oil & Gas Free Zones (OGFZ) limited so far in Onne and Okpokiri Rivers State, a territory in which Integrated Logistics Services (Intels) linked to former Vice President Atiku Abubakar owns major shares.

According to the FTZ investors’ representative, Yusufu Abdullahi, Director of Snake Island Integrated Free Zone, Lagos, the proposed reform is “a ploy to destroy multi-million-naira private investment in the free trade zones.” They call on NEPZA to call a meeting of stakeholders and investors on the subject.

According to the World Bank, FTZs are duty-free areas, offering warehousing, storage, and distribution facilities for trade, trans-shipment, and re-export operations. They are designated locations in a geographical area where enterprises can operate without trade barriers, bureaucratic bottleneck and customs interference, in order to attract new businesses and foreign participation. Goods in FTZs may be landed, handled, manufactured or reconfigured and re-exported without the intervention of the customs authorities. Goods or services become subjected to customs duties only when they are moved to consumers outside the FTZs but within the country in which the FTZs are located (the customs territory.

In 1999 about 3,000 FTZs, spanning 116 countries, producing clothes, shoes, sneakers, electronics, and toys employed 43 million workers. In Africa, the ILO said in 2003, there were 66 economic zones in 32 African countries – ranging from large land areas with a wide range of economic activities to very small, geographically localized, industry or activity specific zones.

Nigeria as of date has 34 FTZs in 17 of the 36 states and Federal Capital Territory Abuja, employing several thousands of workers. Hundreds of companies operate within the country’s FTZs. However, only 17 of these FTZ are active, leaving the rest non-functional. Eleven of the FTZs are in Lagos alone, with three sited in the FCT Abuja, a city whose most flourishing businesses are politics and bureaucracy. Not a single FTZ is sited in the entire South-East, a region exuding in fabrication, manufacturing and light industries – with cities like – Nnewi, Onitsha, Aba – operating as self-made industrial hubs. The so-called Imo Guangdong FTZ licensed in 2007 is only listed as ‘under construction’ 14 years after.

Nigeria took plunge into FTZ scheme in 1991, when the Babangida administration joined other countries who were already operating FTZs by establishing the Nigeria Export Processing Zones Authority (NEPZA), vide the NEPA Act 63 of 1992. However, it took nine years after establishing NEPZA before the first EPZ in Calabar commenced operations in 2001. Today, more than 300 companies are operating in the FTZs.

The leading FTZs investors argue that the “Governing Board of NEPZA should meet with the stakeholders to listen to our concerns on this issue, and collate coordinated views and inform FMITI before going to the Federal Executive Council with a memo. The course of action is to prevent possible disinvestment in the Free Zones scheme, because the affected FTZs are all Private Direct Investments without a single government grant.”

They contend that for such FTZ remodelling report to be genuine, it should be processed through the NEPZA and Free Zone Developers cum-Zone Sponsors, Zone Management and selected Free Zone Enterprises under the regulatory authority of NEPZA, which constitute the stakeholders.

Further extract from their statement reads: “The genesis of the evaluation of FTZ Licensees was NEPZA’s refusal to comply with FMITI letter Ref. No T/FAL/1164/210 dated 30^th April, 2020, directing the transfer of selected free zones regulated by NEPZA to OGFZA whose primary focus was oil and gas activities; and were affected by the interpretation of the Hon. Min. of Justice and Attorney General on Section 5 and 25 of OGEFZA Act, in 2008.

“And that the following Private Direct Investments in Free Zone development and Zone Management should be transferred to OGFZA to regulate: Dangote Industries Free Zone, LADOL Free Zone, Snake Island Integrated Free Zone, Tomato Industrial Park, and Olokola Oil & Gas Free Trade Zone.”

Accordingly, NEPZA replied to FMITI vide its letter Ref. NEPZA/LS/SF/22/IV dated 20^th May, 2020, notifying the Minister that the announcement and directive of the President that Steve Oronsanye Presidential Committee report on Rationalisation of the Government Agencies which recommended that OGEFZA be reverted to the Nigeria Export Processing Zones Authority (NEPZA) should be executed. NEPZA also drew the minster’s attention on the pending court case before a Federal High Court instituted by a Private Zone Operator against the OGFZA, Ministry of Justice and FMITI, seeking judicial determination of the regulatory powers of OGFZA over SIIFZ, the later having been licensed to operate under the NEPZA Act.

The complainant seeks the court to interpret the directive FMITI was relying upon.

NEPZA further told the Minister the solemn fact that, at the time the promoters of all the listed Free Zones commenced the process of setting up their businesses in the country, they were aware of the existence of OGEFZA; yet in recognizing the limitation in scope of approved activities and geographical constraints (Onne/Ikpokiri area of Rivers State) under OGEFTZA Act, they chose to register under NEPZA, as the authority with statutory powers to regulate all activities across all parts of Nigeria, the investors noted.

They call on NEPZA’s governing board to collate and coordinate all their views, and inform the FMITI before going to the FEC with a memo, accordingly, concluding as follows: “It is not possible for private sector investment to be transferred into an unknown, unlegislated institution OGEFZA.  Government White Paper cannot substitute the National Assembly constitutional powers and authority to legislation. The only recognized Free Zones Authority legally recognized is NEPZA. However, the report intends to execute the failed effort of the FMITI in his letter Ref. No T/FAL/1164/210 dated 30^th April, 2020, directing NEPZA to transfer five free trade zones being regulated by it to OGFZA, which they declined to do from legal point of view.”

The FTZs investors are of the business opinion that the reason should be to prevent disinvestment in Nigeria’s Free Zones sector, because the affected FTZs are all private sector direct investments with no government grant. They also view membership of the government FTZs remodelling committee as political office holders and public servants who do not have investment stakes in the FTZs; without understanding the frustrations that would attend destruction of billions of dollars of private investment collaboration in the scheme. To them, the committee is not ready to advance Nigeria progress via FTZs.

If this happens, billions of dollar investments mainly by the private investors would go down the drain, exacerbating the poverty situation in the country, as well as throwing up thousands of workers into the unemployment market, already strained by 33.3% national unemployment rate by Q4 2020.