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Can Nigeria’s free trade zones drive industrialisation?

Can Nigeria’s free trade zones drive industrialisation?
  • PublishedOctober 22, 2020

Free Trade Zones in Lagos and other major cities are attracting a growing number of companies. Will these areas help Nigeria achieve its ambitions to diversify the economy away from oil? Dianna Games reports.

A number of free trade zones can be found on the edge of the teeming commercial capital, Lagos.

The Lagos Free Trade Zone, 65km east of the city, is a private sector initiative developed and managed by a Singaporean firm, the Tolaram Group. About 16 companies have invested more than $150m in the zone, providing nearly 1,000 jobs. These include Raffles Vegetable Oil, Kellogg’s Cereals, Dano Milk and a Colgate toothpaste factory.

The zone is integrated with a massive new deep sea port development, scheduled to be completed in 2022. 

Adjoining this is the Lekki Free Trade Zone along the peninsula, a collaboration between the Lagos State government and China, which is home to the Dangote Group’s new 650,000m barrel-per-day oil refinery and fertiliser factory.

The investment by the 36 companies there is valued at $432m, with well over 1,000 jobs created. The zone is designed to be not just an industrial reserve, but a self-contained satellite city of Lagos, for companies wishing to move out of the centre.

The two are part of a cluster of free zones around the Lagos Lagoon, which also include the Snake Island Integrated Free Trade Zone, the Eko Atlantic zone and the Lagos Deep Offshore Logistics Base (LADOL).

Catalyst for industrialisation

The newly appointed managing director of the Nigerian Export Processing Zones Authority (NEPZA), Adesoji Adesugba, says the cluster of zones, when fully developed, will be an important catalyst for the industrialisation of the country. 

Although the free zone scheme is not new to Nigeria – it dates back to 1992 – it has failed to yield the intended result of driving industrialisation and creating jobs. But it is being revitalised as part of the government’s drive to diversify exports away from oil, with Adesugba brought in from the private sector this year to give the scheme renewed momentum.

Only 15 of the 42 special economic zones that fall under NEPZA are operational, with the rest in various stages of development. Collectively, there are more than 400 registered enterprises operating in these areas, of which about 25% are foreign companies from countries including China, the US, UK, South Korea, Singapore and Russia.

The Calabar Free Trade Zone, one of the two government-owned free zones, based in Cross River State, was a pioneer zone, established in 2001. It has attracted more than $50m-worth of investment in the past two decades. The 36 companies operating in the zone include Combination Industries (food), Skyrun Industries (electronic and electricals) and Bao Yao Iron & Steel Industries.

The LADOL zone is a private sector-driven initiative focused on maritime and shipbuilding activities. One of its success stories was the integration of the $6.3bn floating production, storage and offloading vessel for Total Nigeria in the Engina offshore oil field, completed in 2018. It was the first indigenous oil vessel to be integrated in Nigeria and is currently processing about 200,000 barrels of oil per day.

The Onne Oil and Gas Export Free Zone is another example of how the zones can drive industrialisation in Nigeria. Based in Rivers State, the Onne zone is part of the large port complex that services the country’s oil and gas industry and is home to more than 200 domestic and foreign companies. 

Says Adesguba, “The free zone scheme is still very much in its infancy and its impact on the economy is yet to bear tangible outcomes as many of the projects are still at a developmental stage.”

He says the combination of tax-free incentives and the waiver of customs duties, among other things, are increasingly attractive to business and NEPZA is busy upgrading its investment promotion unit into a fully fledged department to attract companies in selected sectors.

He says challenges in leveraging the benefits of the scheme include outdated legislation, which has not kept pace with developments globally, inadequate infrastructure in some of the zones, and a lack of inter-agency co-operation.

However, new legislation is before the National Assembly – the Special Economic Zone (SEZ) Bill. There are numerous infrastructure projects under way to support these zones, including a plan for dedicated power lines to SEZs to alleviate the major electricity deficits which have seriously affected the country’s ability to industrialise. 

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Written By
Dianna Games

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