Understanding Nigeria’s Free Trade Zone scheme
When the federal military government established the Nigeria Export Processing Zones Authority (NEPZA) in Nigeria on November 19, 1992, it was hoped that it would accelerate the pace of economic growth in the country. Clay-footed from the onset, it took another nine years before the Calabar Export Processing Zone was commissioned in 2001. On March 29, 1996, the Federal Government also established the Oil and Gas Free Zone at Onne (OGFZ). Despite the potential gains of the free trade zone scheme, very little is known about the operations of NEPZA and OGFZA.
More than 23 years after the programme was introduced in the country, however, there is no literature to guide stakeholders, prospective investors, police makers and implementers on the viability or otherwise of the scheme. The book, A Review of Nigeria’s Free Trade Zone Scheme (Kachifo Limited, Lagos, 2015) by Chidi Nzerem and Oche Obe is undoubtedly the first step in bridging the gap between the programme and stakeholders. The six-chapter book highlights the potential benefits of the free trade zone scheme and reviews the various efforts made by the federal government and other agencies to reform it. While Chapters two and three are on the review of concepts and issues and and experiences of six other countries respectively, chapter four evaluates Nigeria’s Free Trade Zones scheme, just as chapter five has the authors’ views and recommendations on how to reposition the program for greater efficiency.
Has the free trade zone scheme achieved its targets in Nigeria? The ultimate aim was for the free trade zone scheme to attract foreign direct investment, generate employment, enhance trade and industrialization, promote exports, enhance foreign exchange earnings, encourage transfer of technical know-how to Nigerians and contribute to the economic growth and development of Nigeria. In their analysis of key data on the impact of Nigeria’s Free Trade Zone Scheme covering 1996 to 2012, the authors discovered that the overall performance fell below expectations.
On FDI, for instance, the book highlights conflicting figures: whereas the Ministerial Committee for the Reform of Free Trade/Export Processing Zones claims an annual average of $200 million FDI inflow into the country, the International Labour Organization (ILO) claims that only $1.2 million trickled into the country in 2007. The authors also showed that domestic involvement in the scheme has been disappointing and as they found out, eleven out of the 27 free trade zones already licensed are still inactive.
On the stated objective of promoting exports, the authors concluded, “the free trade zone programme is presently not contributing in any significant way to exports from the country”. The authors also showed that the free trade zone earned a paltry $8.3 million in foreign exchange and contributed only N58.4 million annually to government coffers through fees charged by the Free Export Zones and the Nigeria Immigration Service. In the same vein, the authors also noted that the free trade zones accounted for only 40, 000 out of the 148, 363 jobs created in 2012, just as only 250 companies, at the rate of ten in each zone, were operational in the free trade zones.
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