By Felix Khanoba
A coalition of 98 operators from Nigeria’s Export Free Zones has raised strong objections to certain provisions of the President Bola Tinubu-led Federal Government’s proposed Tax Reform Bill.
They cautioned against repealing sections of the laws that govern the Nigeria Export Free Zones Authority (NEPZA) and the Oil and Gas Free Zones Authority (OGFZA), which currently grant tax exemptions to free zone enterprises.
In a communiqué issued after an emergency stakeholders’ meeting, the operators warned that removing tax exemptions, along with protections from levies, duties, and foreign exchange restrictions, would significantly undermine the appeal of free zones to investors.
The group expressed concern that such amendments would trigger large-scale capital flight, massive job losses, and derail Nigeria’s aspirations for industrialization and export expansion. They highlighted that as of January 2024, over $300 billion had been invested in the free zones, generating more than N650 billion in revenue for the government over the past five years.
According to the stakeholders, the free zones have created over 100,000 direct jobs and more than 500,000 indirect jobs.
“Stakeholders equally deliberated on the effect of the Nigeria Tax Bill, 2024 on Nigeria’s free zones, and: noted that while the intention of the Federal Government of Nigeria (FGN) to consolidate and modernize the tax framework in Nigeria via the Bill is salutary, some of the sections are a significant departure from the existing tax framework for the operation of Nigeria’s free zones and will have a grave impact on the survival of the free zone scheme.
“This is particularly evident in Sections 57, 60,198(2), and 198 (3) of the Bill and the Second Schedule to the Bill.
“Noted that by removing exemptions from taxes contained in the existing law, as well as protections against levies, duties and foreign exchange restrictions, the amendments will destroy the attractiveness of free zones, result in massive capital flight and job losses, and stall the realization of Nigeria’s industrialization and export expansion ambitions and the other above-mentioned objectives of free zone scheme in Nigeria,” the operators said.
They also criticized the proposed repeal of Sections 8 and 18(1)a of the NEPZA and OGFZA Acts, which would drastically reduce the tax incentives for free zone enterprises. According to the operators, this move would be akin to “using a sledgehammer to kill an ant” in an attempt to streamline the free zone framework.
The operators argued that claims justifying the amendments were based on a “false assertion” that only 25% of free zone goods could be sold into the Nigerian Customs Territory. They pointed to a 2002 Federal Government approval that allows up to 100% of goods from free zones to enter the Customs Territory upon payment of applicable duties.
In response, the stakeholders recommended that the Federal Government revise the proposed bill to safeguard the free zone scheme. They called for Sections 60, 198(2), and 198(3) to be removed and for free zone enterprises to be excluded from the application of Section 57. They further urged the government to delete the Second Schedule of the bill entirely.
“Finally, the stakeholders mandated the Nigeria Economic Zones Association (NEZA) to present this position to the National Assembly as well as the Hon. Minister of Industry.
“Trade and Investment. The Stakeholders also mandated NEZA to write a memorandum of appeal, on behalf of free zone investors, to President Bola Ahmed Tinubu, GCFR to kindly: withdraw his approval of the prayers contained in the memorandum dated 20th October, 2024 and titled ‘Operations of Free Trade Export Processing Zones’ written by Dr Zacch Adedeji.
“This is because the prayers were premised on false and misleading claims by the author: and convene a high-level summit on Nigeria Free Zone Scheme where stakeholders, lawmakers and experts will be given the opportunity to examine all existing parameters and chart a bright pathway for the Scheme as a hub for sustainable economic development,” they said.
