Free Zones Generate N650 Billion, Operators Warn on Tax Bill
By Patience Ikpeme
Investments worth $300 billion flowing through Nigeria’s export processing free zones have generated N650 billion in revenue for the government as of January 2024, alongside creating 100,000 direct and over 500,000 indirect jobs.
The revenues, remitted through designated government agencies such as the Nigeria Customs Service, Nigeria Ports Authority, Nigeria Immigration Service, and Free Zone Regulatory Authorities, also include tax collections such as Pay As You Earn (PAYE).
These figures were confirmed in a communiqué issued after an emergency stakeholders’ meeting of free zone operators. The meeting was convened to deliberate on pressing issues, including the proposed tax reform bills currently pending before the National Assembly.
According to the communiqué, the revenue data was supplied by regulatory authorities—the Nigeria Export Processing Zones Authority (NEPZA) and the Oil and Gas Free Zone Authority (OGFZA).
The meeting, held on Monday, November 11, 2024, was organized by the Nigeria Economic Zones Association and had 98 free zone operators and other stakeholders in attendance, both physically and virtually.
The communiqué highlighted the government’s objectives in establishing Special Economic Zones (Free Trade Zones), noting that these goals have largely been achieved. These include foreign direct investment (FDI), capital growth, technology and skills transfer, the development of micro, small, and medium enterprises (MSMEs), and job creation.
Stakeholders emphasized the critical role free zones play in driving Nigeria’s economic growth, particularly through the development of supply chains that benefit MSMEs, which are engines of economic expansion.
Operators raised alarm over several sections of the Nigeria Tax Bill, 2024, describing the proposed changes as a significant threat to the survival of free zones. They noted that while the Federal Government’s intention to modernize Nigeria’s tax framework is commendable, certain provisions of the bill—specifically Sections 57, 60, 198(2), 198(3), and the Second Schedule—would severely undermine the existing tax framework for free zones.
“These provisions, if passed into law, will alter decades-long tax exemptions and incentives that have been central to the operations of free zone enterprises,” the communiqué stated. “These incentives were part of the federal government’s ‘offer’ to international investors, forming the foundation of their long-term investment decisions.”
Stakeholders warned that repealing Sections 8 and 18(1) of the NEPZA and OGFZA Acts and reducing the tax exemptions would have severe consequences. They argued that removing protections against taxes, levies, duties, and foreign exchange restrictions would erode the competitiveness of free zones, leading to capital flight, job losses, and the stalling of Nigeria’s industrialization and export ambitions.
The operators expressed concern that the proposed reforms could sabotage Nigeria’s economic reform efforts. “Pulling the rug out from under free zone entities will amount to self-sabotage on the part of the federal government,” the communiqué noted. “This would not only damage Nigeria’s image within the global investment community but also erode investor confidence.”
The stakeholders urged the government to reconsider the bill, warning that its enactment would be a classic example of policy inconsistency in Nigeria. They called for a more measured approach to streamline free zone provisions without jeopardizing the investments and economic benefits these zones have generated over the years.
As Nigeria navigates its economic reform journey, stakeholders stressed the need for policies that enhance, rather than hinder, the country’s ability to attract and retain foreign and domestic investments in strategic sectors.
