$27.2bn Deal: FG Grants 4 Airports Special Economic Zones 

Minister of State for Aviation, Hadia Sirika
The Minister of Aviation, Senator Hadi Sirika

…Rejigs NEPZA Act

…Abuja, Lagos, Others to Enjoy Tax, Duty Waivers

June 13, (THEWILL)- With over $13.6 billion investments attracted into various Free Trade Zones in April, 2012, it is estimated that the value of investments till date may have doubled up to $27.2 billion.

THEWILL recalls that the Federal Government in 1991 joined other countries operating Free Trade Zones (FTZ) by taking the first step toward establishing the Nigeria Export Processing Zone Authority (NEPZA or the Authority), vide the NEPZ Act. However, it took the first EPZ in Calabar nine years after the birth of NEPZA to commence operations in 2001.

A decade after, and in its desire to address issues concerning taxation, custom duties and fiscal issues in the Nigerian Aviation industry, the Minister of Aviation, Alhaji Hadi Sirika, has requested NEPZA to designate four major international airports as special economic zones, based on the NEPZA Act. Under the Act, a Free Trade Zone is equally a category of the Special Economic Zone in Nigeria.

The four international Airports concerned are the Murtala Muhammad International Airport, Lagos; Nnamdi Azikiwe International Airport, Abuja; Port-Harcourt International Airport, Port Harcourt; and the Mallam Aminu Kano International Airport, Kano.

With the status of Special Economic Zones, the four airports are entitled to enjoy some benefits, such that they are seen as areas where goods may be landed, manufactured, handled, stored, or perhaps reconfigured and re-exported under specific customs regulation.

Also goods processed for export from FTZ are not subject to customs duty and they are often set up around major seaports, international airports and national frontiers, as well as areas with many geographical advantages for trade. In addition, goods or services become subjected to customs duties only when they are moved to consumers outside the FTZ, but within the country in which the FTZ is located (the customs territory).

The Investment Procedures, Regulations and Operational Guidelines For Free Zones in Nigeria 2004 (IPROG2004) issued pursuant to section 10 (4) Nigeria Export Processing Zones Act (NEPZ Act) defines FTZ as export processing zones created under the NEPZ Act.

At present, there are about 33  functional and active FTZs in Nigeria. They include Airline Services FTZ, Ladol FTZ, Lagos FTZ, Lekki FTZ15, Nigeria Aviation Handling Company (NAHCO), Nigeria International Commerce City (Eko Atlantic), Snake Island Integrated Free Zone in Lagos State16, Sebore Farms FTZ in Adamawa State, Alscon FTZ in Akwa Ibom, Calabar FTZ in Cross River, Maigatari Border Free Zone in Jigawa State, Kano FTZ in Kano State, Ogun Guangdong Free Trade Zone in Ogun State and Onne OGEFZ in River State.

These enterprises, THEWILL gathered, can operate without trade barriers, bureaucratic bottlenecks and customs interference in order to attract new investments, business and foreign participation. The ministry’s request therefore, is coming, following the approval granted by President Muhammadu Buhari to that effect.

With the move, aviation experts are of the belief that there are enormous benefits of the designation and operation of the airports as special economic zones.

As Special Economic Zones, the benefits can also be accorded to all airlines, airport operators, aviation support companies and others that reside within the zones, which the President noted and approved.

Some of the benefits, according to the Ministry of Aviation, include harnessing the socio-economic benefits derivable from civil aviation, generating revenues for the government and creating avenues to mobilise local and foreign direct investment for overall growth of the economy.

The designation is also expected to attract more international and domestic airlines and world class organisations into the Nigerian aviation industry, thereby fast tracking the upgrade and development of new infrastructure/facilities at the airports.

“The Special Economic Zones would also help to reduce the tax burden on aviation companies to enable them compete internationally and create a more efficient and business-friendly trade environment around the airports, comparable to other countries with less bureaucratic red tape because of the associated fiscal incentives and packages.

“The operation of the airports as Special Economic Zones would also help to generate employment opportunities and human capital development and improve the overall ease of doing business in Nigeria, which is in line with the Federal Government’s commitment towards national economic development,” a statement signed by the Director of Public Affairs at the ministry, James Odaudu, stated.

In terms of revenue, the Special Economic Zones will generate additional non-aeronautical sources of revenue for the aviation industry.

The ministry added, “As promised at the inception of the Muhammadu Buhari administration, the government remains committed to the development of an investment-friendly aviation sector that will not only make Nigeria a regional hub for air transportation, but increase its contribution to the national Gross Domestic Product.”

The aviation minister, therefore, appealed for the cooperation of all relevant stakeholders in the new development in order to achieve the desired goals.

The government agency overseeing the activities in the free trade zones in Nigeria is the Nigeria Export Processing Zones Authority (NEPZA) established under the Nigeria Export Processing Zone Act Cap N107 Laws of the Federation of Nigeria 2004 (the Act).

Approved activities in the FTZs, include manufacturing of goods for export, warehousing freight forwarding and customs clearance, handling of duty free goods (trans-shipment, sorting, marketing, packaging, etc.), banking, stock exchange and other financial services; insurance and reinsurance and import of goods for special services.

Others are exhibitions and publicity, International Commercial Arbitration Services activities relating to integrated zones and other activities deemed appropriate by NEPZA.

Meanwhile, the FTZ scheme is yet to achieve its intended purpose completely. Although the aim was for the FTZ scheme to attract foreign direct investment, generate employment, enhance trade and industrialisation, encourage technology transfer to Nigerians and generally contribute to national economic growth and development, there are several challenges facing the Nigerian FTZ scheme.

Some of these challenges include lack of infrastructure, power supply, poor road networks and logistic bottlenecks, among others, which has made the FTZs unattractive to investors, a situation that has resulted in the scheme not delivering investments at the expected level.