The longstanding debate over Nigeria’s Free Trade Zones (FTZs) has escalated into a full-blown battle, with the Federal Government, the Manufacturers Association of Nigeria (MAN), and the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) locked in a fierce dispute over tax reforms. At the heart of the controversy is the proposed Nigeria Tax Bill 2024, which aims to impose new tax obligations on businesses operating within FTZs, a move that has triggered strong opposition from key stakeholders.
The Minister of Industry, Trade, and Investment, Dr. Jumoke Oduwole, while speaking at the third Special Economic Zones (SEZ) annual meeting in Lagos, highlighted the economic contributions of FTZs, stating that they have attracted over $30 billion in investments and contributed more than N650 billion in revenue to the government. However, she noted that despite these gains, the zones have not reached their full potential due to regulatory misalignments and policy inconsistencies.
Oduwole emphasized that Nigeria, alongside Morocco, leads Africa in the number of Special Economic Zones, with over 200 active zones and 70 ongoing projects. However, she acknowledged that Morocco’s 12 Free Trade Zones have outperformed Nigeria’s in attracting Foreign Direct Investment (FDI). She attributed Morocco’s success to its strategic location, political stability, and targeted industrial policies that have positioned the country as a hub for the automotive and aerospace industries.
To improve Nigeria’s competitiveness, the minister called for better coordination between the Federal Inland Revenue Service (FIRS), the Central Bank of Nigeria (CBN), and the Nigerian Export Processing Zones Authority (NEPZA) to ensure that fiscal, monetary, and trade policies align with global best practices.
However, NACCIMA has strongly opposed the proposed tax reforms, warning that they could lead to an exodus of $200 billion in foreign investments and the loss of 600,000 jobs. In a statement, NACCIMA President, Dele Oye, described the proposed amendments—particularly Sections 57, 60, 198(2), and 198(3)—as a direct threat to the incentives that have sustained FTZ investments since the enactment of the Nigeria Export Processing Zones Act in 1992.
“Stripping away established tax exemptions is a drastic measure that will diminish investor confidence and jeopardize Nigeria’s standing in the global investment community,” Oye warned.
On the other hand, the Director-General of MAN, Segun Ajayi-Kadir, has expressed support for aspects of the proposed reforms, particularly those that seek to clarify the tax obligations of FTZ operators when selling to Nigeria’s customs territory. He argued that tax exemptions for FTZ businesses should apply strictly within the zones and not extend to sales within Nigeria’s domestic market.
“Our concern as manufacturers is fairness and competitiveness,” Ajayi-Kadir stated. “Where does the tax exemption enjoyed by FTZ companies leave over 2,500 manufacturers outside the zones? They find themselves at a disadvantage and are rendered less competitive.”
Ajayi-Kadir stressed that the proposed reforms are not a reversal of FTZ incentives but rather a necessary clarification to ensure a level playing field. He cited Ghana’s FTZ model, which limits customs territory sales to 30% and imposes corporate taxes after a 10-year exemption period, compared to Nigeria’s indefinite tax relief for exports.
As the battle over FTZ taxation rages on, the question remains: Can Nigeria strike a balance between protecting its tax base and maintaining the investment-friendly policies that have fueled the success of its Free Trade Zones? The coming months will determine whether the government prioritizes tax reforms or heeds the warnings of the private sector to prevent a mass investor exodus.
Stay informed, Stay ahead with The Ameh News
Discover more from Ameh News
Subscribe to get the latest posts sent to your email.
