1. Introduction
Establishing a business in Nigeria can be challenging, especially when navigating complex regulatory requirements and high operating costs. Now, imagine running a business in Nigeria without paying conventional taxes such as Companies Income Tax, Import Duties, or Valued Added Taxes, and at the same time you are enjoying streamlined regulatory processes and unrestricted profit returns. This is not a loophole. It is the legal advantage of operating within one of Nigeria's designated Free Zones.
In this guide, you will be walked you through what you need to know to register and operate a business in a Nigerian Free Zone, from choosing the right zone to securing your operating license and staying compliant.
2. What is a Free Trade Zone?
A Free Zone, also known as a Special Economic Zone (SEZ), Free Trade Zone, Export Processing Zone, or Industrial Development Zone, is a geographically designated area within a country that is considered to be outside the national customs territory for the purposes of trade and economic activity.1 Within this zone, the application of national regulations relating to customs, taxation, import/export restrictions, and certain bureaucratic procedures is either relaxed or selectively applied to promote investment and facilitate business operations.
Presently, there are over 20 free zones in Nigeria across the country,2 these free zones were created to encourage industrial growth, attract foreign direct investment, promote exports, and create employment. Businesses operating within these zones benefit from various fiscal and regulatory incentives, such as tax holidays,3 duty-free import of raw materials and equipment, and unrestricted repatriation of profits and capital.
3. Specific Benefits of Operating in a Nigerian Free Zone Under the Relevant Regulations
Businesses licensed to operate in a Nigerian Free Zone enjoy a wide range of incentives designed to reduce costs and encourage investment. These include:
- Full exemption from all federal, state, and local taxes, levies, rates, customs duties, and VAT—including VAT on construction and locally procured goods and services.
- No foreign exchange restrictions: Licensees can operate freely without being subject to forex regulations.
- Free repatriation of capital, profits, and dividends at any time.
- 100% foreign ownership and management of businesses is allowed.
- No import or export licenses required for goods entering or leaving the Free Zone.
- Unlimited sale of Free Zone products into Nigeria's customs territory is permitted with a valid permit and payment of duties.
- Foreign employees are not subject to Nigeria's immigration quota, provided they work within the Free Zone.
- No duties on goods used for business operations or approved special products.
- 75% import duty rebate for special products that are value-added in the Free Zone and sold in Nigeria, as long as their essential character remains unchanged.
- Duty-free storage and export of goods from the Free Zone.
These incentives make Free Zones an attractive option for both local and international investors seeking regulatory ease and cost efficiency.
4. Legal and Regulatory Framework Guiding the Operation of Free Zones in Nigeria
The legal basis for operating within Nigeria's Free Zones is primarily regulated by two key enactments: the Nigerian Export Processing Zones Authority (NEPZA) Act and the Oil and Gas Free Zones Authority (OGFZA) Act. These laws, together with supplementary regulations and administrative guidelines, govern the establishment, operation, supervision, and compliance obligations of businesses in Free Zones.
- Nigerian Export Processing Zones Authority (NEPZA) Act (CAP N107, LFN 2004)
The NEPZA Act is the principal legislation governing the establishment and administration of Export Processing Zones (EPZs) in Nigeria. It provides the legal basis for creating designated areas where commercial activities can be conducted with minimal interference from regular customs, tax, and regulatory regimes.
Under this Act, the Nigerian Export Processing Zones Authority (NEPZA) was established as a statutory agency under the Federal Ministry of Industry, Trade and Investment. NEPZA is responsible for:
- Licensing Free Zones and enterprises operating within them
- Facilitating the development and operation of Free Zones
- Regulating and supervising activities within NEPZA-designated zones
- Coordinating with other government agencies to streamline procedures for Free Zone businesses
- Ensuring that licensed enterprises comply with applicable Free Zone guidelines
NEPZA oversees several Free Zones across Nigeria, including the Lagos Free Zone, Lekki Free Zone, Calabar Free Trade Zone, and Kano Free Trade Zone, among others.
2. Oil and Gas Free Zones Authority (OGFZA) Act (CAP O5, LFN 2004)
The OGFZA Act governs Free Zones established specifically for oil and gas-related activities. It provides for the creation, designation, and operation of Oil and Gas Free Zones and establishes the Oil and Gas Free Zones Authority (OGFZA) as the regulatory body responsible for managing them.
OGFZA's primary responsibilities include:
- Approving and licensing businesses operating within Oil and Gas Free Zones
- Monitoring compliance with relevant guidelines and environmental standards
- Promoting investment in upstream and downstream oil and gas activities
- Coordinating with the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), and the Nigerian Customs Service to facilitate smooth operations within these zones
Examples of zones under OGFZA's jurisdiction include the Onne Oil and Gas Free Zone, Brass Oil and Gas Free Zone, and Warri Oil and Gas Free Zone.
3. Other Relevant Laws and Regulations
In addition to the NEPZA and OGFZA Acts, Free Zone businesses must comply with a range of other applicable legal frameworks, including:
- Companies and Allied Matters Act (CAMA) 2020: Governs company incorporation and corporate governance
- Investment and Securities Act and Nigerian Investment Promotion Commission (NIPC) Act: Relate to foreign investment and capital repatriation
- Customs and Excise Management Act: Applies to customs procedures, although often relaxed within Free Zones
- Immigration Act: Regulates employment of expatriates in Free Zones
- Environmental Guidelines and Standards: Issued by NESREA and other relevant agencies, particularly in industrial zones
- Tax enactments such as the Companies Income Tax Act
4. Business Activities That Can Be Carried Out in Free Zones in Nigeria
Permissible business activities that can be carried out in free zones area in Nigeria include:
- Construction & Light Manufacturing: Housing, Light Manufacturing & Services
- Solid Minerals & Metals: Cement, Basic Steel, Aluminum, Chemicals, Auto Assembly
- Oil & Gas: Petrochemical, fertilizer, methanol, Plastics, Refineries
- Agric business & Argo-Allied: Food Processing, Sugar, Oil Processing, Cocoa Processing, Leather Product, Rubber Product, Textiles and Garment.
Permissible industries include:
- Electrical and electronic products
- Textile product and garment
- Wood product and handcraft
- Leather product and petroleum product
- Rubber and plastic product
- Cosmetics and other chemical products
- Metal product and machinery
- Educational materials
- Printing materials, communication and office equipment
- Medical kits, optical instruments and appliances
- Biscuits, pastries and food processing business
- Pharmaceutical products
- Ship building and repairs, oil and gas, logistics
- Sport equipment
5. Activities Prohibited in the Free Zones in Nigeria
- Prohibition of retail trade: No retail trade shall be conducted within a Zone without the prior approval of the Authority and which may be subject to such terms and conditions as may be imposed, from time to time, by the Authority.4
- Prohibition of Dangerous Goods in Zones: The importation, entry, or storage of certain dangerous goods in a Zone is strictly prohibited. These include firearms and ammunition except by authorized security personnel dangerous explosives without prior approval, and flammable or hazardous materials such as petrol or oil fuels, unless permitted under specified conditions.5
6. Types of Licence Under NEPZA
- Free Zone Developers License
- Free Zone Enterprise License
- Export Processing Factory/Export Processing Farm License
7. Types of Licence Under OGFZA
- Free Zone License
- Sub-Zone License
- Free Zone Extension License
- 75 per cent Duty Rebate License
- Special Activity License.
8. Steps in Registering a Business or Company in Free Zones in Nigeria
Under NEPZA
Step 1: Complete the Application Form
Complete an application form which can be downloaded online or collect from the administration of the free zone or from NEPZA HQ in Abuja, with a non-refundable fee of US$500 or its Naira equivalent.
An approved enterprise can engage in approved activities as stipulated by the Decree and for which the Authority has granted it permission to engage in a Zone provided the approved enterprise's investment in the approved activity is of the value of at least US$500,000.00 (five hundred thousand United States dollars) and the operation of the approved activity does not cause damage to human life and property, damage the environment, constitute a threat to public peace and order or national security.6
Step 2: Submit the Form
Submit completed application form to the Zone Administration or NEPZA Office in Abuja along with required Project Plan/Feasibility Study. Application will be reviewed and either approved or returned with observations within five (5) working days.
Application to undertake an approved activity shall be considered within five working days of its acknowledgement and the applicant notified in writing of approval or otherwise.7
Step 3: Approval and License
On approval of application, an Operating License (OPL) will be issued by the Free Zone Administration. Being licensed by the Authority constitutes registration and no further registration is required with the Corporate Affairs Commission (CAC). It is at this point that the Free Zone Administration will discuss your site location and assign or reserve a space for you.
Step 4: Remit Capital
Remit your investment capital through banks located in the zones which will in turn issue a Certificate of Capital Importation.
Step 5: Prepare Building Space
Prepare your building or warehouse space. Investors who are constructing their own buildings must submit four (4) copies of full architectural drawings for approval by Zone Management according to established building codes. Built-up spaces should not exceed 70% of the leased land, and construction should start within three (3) months after execution of agreement.
Buildings and structures to be constructed by an approved enterprise shall be permanent structures built with fire resistant material in accordance with building, public health and fire regulations adopted by the Authority from time to time.8
Step 6: Move in and Operate
Government has designed the process to be as streamlined and user friendly as possible. Some companies may have some additional procedure to follow such as obtaining permission for their foreign nationals and employees which can be done at the immigration desk offices in the free zones.
NOTE: An approved enterprise shall prior to the commencement of operations apply to the Authority/Management for permit to commence operations. The Authority shall within twenty-four hours of the receipt of the application complete inspection of the factory site to ensure compliance with relevant building, factory and public health laws and regulations and shall issue permit to commence operation if there will be no breach of applicable laws and regulations within twenty-four hours of completion of the inspection.9 Where an approved enterprise has not complied with relevant regulations, the Authority/Zone Management shall in writing within twenty-four hours after the completion of inspection notify the approved enterprise of the non-compliance and direct that it be remedied within a stipulated period.10
UNDER OGFZA
STEP 1: Submit filled out copy of application to the Managing Director/CEO and pay the prescribed fee. The Authority shall notify the applicant in writing of any decision made within 30 days of the receipt of the application. An applicant for a grant of Free Zone Enterprise License (offshore company) shall produce a bond to the Free Zone Registrar, in accordance with the fees prescribed by the Authority.11
STEP 2: Submit the following documents:
- Certificate of incorporation / notarized certificate of incorporation
- Memorandum and articles of association
- Company brochure/profile
- Contact person, designation, phone numbers and address of company
- Report of the feasibility studies of the intended investment in the zone (business plan) 3–5-year business plan
- Financial profile and personal profile
- Companies last three y ears audited account (not applicable to companies less than one year in operation)
- Evidence of capital importation
STEP 3: License is issued seven (7) days from date of submission of above-listed requirements. A successful applicant for the formation of a Free Zone Enterprise shall be issued with a certificate, which shall among other things, carry the date of registration, name of the Enterprise and the seal of the Authority.12
NOTE: Once licensed under NEPZA or OGFZA, an enterprise must be registered in the Free Zone Register, and a duly executed Certificate of Registration must be issued. The name of the enterprise must end with the acronym "FZE".
9. Renewal of Licence
A Free Zone license is valid until the end of the year in which it is issued. Renewal is subject to the following conditions:
- Payment of the applicable license renewal fee;
b. Submission of any required documents, returns, or information as may be requested by the Authority; and
c. Settlement of all outstanding payments, if any, owed to the Authority.13
10. De-Registration of a Free Zone Enterprise14
A Free Zone licensee may apply for de-registration by formally notifying the Authority and submitting key documents, including a certified board resolution, proof of payment of outstanding dues, confirmation of recovered guarantees, Free Zone vehicle plates, and details of a qualified liquidator (not being a shareholder or CEO). Within 10 days of receiving these documents, the Authority will publish a 30-day notice in local newspapers to invite any third-party objections. A comprehensive audit will then be conducted to confirm that all imports/exports and customs obligations have been settled. If the license has expired for over a month, the enterprise must renew it or pay a penalty of 50% of the registration fee per month. The Authority will cancel the visas of all foreign employees and the appointed liquidator. If all requirements are met, a Certificate or Letter of Deregistration will be issued. During the notice period, the enterprise's Board may still make representations to the Authority.
11. Conclusion
Setting up a business in a Nigerian Free Zone offers a smart, strategic path for investors seeking to minimize bureaucracy, reduce tax burdens, and access global markets with ease. With the right guidance, registering, operating, and even exiting a Free Zone enterprise can be straightforward and rewarding. Whether you're a local entrepreneur or a foreign investor, Free Zones provide a legally backed opportunity to grow your business in one of Africa's largest economies, with fewer barriers and more benefits.
Footnotes
1. https://nepza.gov.ng/free-zones/ accessed 26th of May, 2025.
2. https://nepza.gov.ng/free-zones/operational-zones/ accessed 26th of Ma y, 2025.
3. Section 8 of the Nigeria Export Processing Zones Act, 2004.
4. Section 14 of the NIGERIA EXPORT PROCESSING ZONES ACT, 2004.
5. Section 16 of the NIGERIA EXPORT PROCESSING ZONES ACT, 2004.
6. Part 1 Regulation 16 of the Investment Procedures, Regulations and Operational Guidelines for Free Zones in Nigeria, 2004.
7. Part 1 Regulation 4 of the Investment Procedures, Regulations and Operational Guidelines for Free Zones in Nigeria, 2004.
8. Part 1 Regulation 8 of the Investment Procedures, Regulations and Operational Guidelines for Free Zones in Nigeria, 2004.
9. Part 1 Regulation 10 of the Investment Procedures, Regulations and Operational Guidelines for Free Zones in Nigeria, 2004.
10. Part 1 Regulation 11 of the Investment Procedures, Regulations and Operational Guidelines for Free Zones in Nigeria, 2004.
11. Part 3, Regulation 23 (3) of the Oil and Gas Export Free Zones Regulations, 2019
12. Part 3, Regulation 23 (6) of the Oil and Gas Export Free Zones Regulations, 2019
13. Part 4, Regulation 6 of the Investment Procedures, Regulations and Operational Guidelines for Free Zones in Nigeria. 2004.
14. Part 5, Regulation 21 of the Investment Procedures, Regulations and Operational Guidelines for Free Zones in Nigeria. 2004.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
