Recently, The Punch newspaper, in its October 24, 2024 publication, reported that four of Nigeria's free trade zones (FTZs) have attracted a combined investment of $8 billion during their years of operation (The Punch, 2024). This milestone underscores the zones' critical role in boosting local economic activity and strengthening international trade relations.
The special privileges that accompany FTZs, such as tax incentives, access to strategic markets, ease of doing business, and promotion of market diversification, have proved to be a magnet for attracting foreign businesses and companies, increasing job opportunities for locals within Nigeria, and fostering economic growth within the country. Currently, Nigeria operates about 42 free trade zones, creating an enabling environment for companies to thrive and offering opportunities for businesses to engage in unrestricted trade (NEPZA, 2023). Over the years, these trade zones have contributed to several organizations' success stories, with foreign and local investors leveraging the advantages of these zones to achieve remarkable growth and profitability.
Benefits of Operating in Nigeria's Free Trade Zones
Key benefits of operating in Free Trade Zones include:
- Tax Incentives: Companies operating in Free Trade Zones enjoy significant tax incentives, including exemptions from taxes like corporate income tax, value-added tax, and import/export duties. This is in line with Section 8 of the Nigerian Export Processing Act 1992, which states that "approved enterprises operating within a Zone shall be exempted from all Federal, State, and Government taxes, levies, and rates" (Federal Government of Nigeria, 1992).
- Ease of Doing Business: Free Trade Zones were established to eliminate the bureaucratic bottlenecks often associated with regulatory procedures and approvals in Nigeria. Designed as one-stop centers, these zones allow companies to obtain all necessary permits, licenses, and operating documents in a single location (NEPZA, 2023). This streamlined process enables organizations within Free Trade Zones to operate more efficiently and cost-effectively.
- Access to Strategic Markets: Free Trade Zones give businesses strategic market access, making it easy for them to access both domestic and foreign markets. By offering lesser trade restrictions, preferential access to global supply chains, and close proximity to important transportation hubs, these zones frequently enable enterprises to effectively reach their target markets while reducing logistical and regulatory obstacles (World Bank, 2023).
- Technology Transfer and Skill Development: Businesses that operate in Free Trade Zones have access to programs for skill development and technology transfer. These areas draw in foreign investors who bring cutting-edge technologies and creative methods, which promote capacity growth and knowledge exchange (UNCTAD, 2023). As a result, firms improve their operational efficiency and competitiveness, local workers acquire specialized skills, and long-term economic growth is facilitated.
Success Stories of Investors
The Lekki Deep Sea Port and Dangote Refinery, situated in Nigeria's Free Trade Zones, are transformative projects that have significantly advanced economic growth and industrialization.
The Lekki Deep Sea Port, located in the Lekki Free Trade Zone, was developed through a joint venture of the China Harbour Engineering Company (CHEC), Tolaram Group, Lagos State Government, and the Nigerian Ports Authority (Lekki Port LFTZ Enterprise, 2024). The port spans 90 hectares and is projected to create over 170,000 jobs while contributing $250 billion to the government's revenue. The port enhances Nigeria's global competitiveness in shipping and logistics, reduces port congestion, and attracts foreign investment (NPA, 2023).
The Dangote Refinery, although owned by the Dangote Group, is another organization worth mentioning. The refinery, located in the southeast area of the Lekki Free Trade Zone, is the world's largest single-train refinery. It is projected to create over 135,000 permanent jobs and contribute to increasing Nigeria's GDP, saving billions in oil import costs, and ensuring energy self-sufficiency (Dangote Group, 2024). The refinery will eliminate Nigeria's dependence on imported refined petroleum products, boosting industrial growth (NNPC, 2023).
In both cases, the companies have effectively leveraged Free Trade Zone incentives to tackle critical economic challenges, delivering significant benefits to the host regions while creating substantial value for the investors.
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