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Free Trade Zones
May 28, 2003, 18:34
The Free Trade Zones (FTZ) scheme was conceived in 1992 to facilitate a friendly climate for local and foreign investments. The plan promotes the creation of industrial and commercial activities in clearly defined zones. These zones are governed by special regulatory and fiscal rules, which allow for freedom of operations at competitive costs.
The FTZ scheme, when fully operational, is intended to encourage:
Insurance and re-insurance
International stock, commodities and mercantile exchanges
Commercial industrial research
Agriculture and agro-allied industry
International tourist resort development and operations
The Nigeria Export Processing Zone Authority (NEPZA) is responsible for the regulation of Free Zone operations. Its tasks involve policy formulation, licensing and monitoring, investment facilitation and promotion of the Free Zones. Overall, NEPZA exercises authority over Export Processing Zones (EPZs), Border Free Zones (BFZs), Free Trade Zones (FTZs), Export Processing Factories (EPFs) or Free Sub-Zones (FSZs) and Export Processing Farms (EPFs).
Benefits to Investors
Under the FTZ plan, industries and businesses are to be set up within specific business Zones for the prime purpose of exporting the goods and services they produce. Free Zone investors are free to import required equipment, raw materials and semi-finished goods as long as their end products will be exported. These investors are also exempt from:
Local taxes, levies and rates
Foreign exchange restrictions
Laws that prevent profits from being remitted overseas
According to the Nigeria Free Zone Act, the investors also enjoy the following incentives:
Tax holiday relief
Unrestricted repatriation of foreign capital investments along with capital appreciation of such investments
Non-compulsory import or export licences
Rent-free land during construction of factory premises
Up to 100% foreign ownership of enterprises in Export Processing Zones (EPZs)
Sale of up to 25% of products permitted in domestic market
No quotas on products to the European Economic Community (EEC) and the United States (US)
Made-in-Nigeria goods are entitled to preferential tariffs in the EEC and the US as a result of the US-initiated African Growth and Opportunities Act (AGOA)
No strikes or lockouts
One stop approvals by NEPZA for interested investors
Relative proximity to major export markets of Africa, Europe and the Americas.
Location of the Free Zones and their statuses
There are currently five Free Trade Zones in Nigeria. They are:
The Calabar Free Trade Zone
The Kano Free Trade Zone
The Onne Oil and Gas Free Trade Zone
The Maigatari Border Free Trade Zone
The Banki Border Free Trade Zone
These Zones have large expanses of land and easy access to international airports and seaports. They are also equipped with police posts for security, pre-built warehouses for warehousing and storage of raw materials and good internal and external road networks. Other infrastructure that has been made available to these Zones includes efficient telecommunication facilities, uninterrupted electricity and water supply, and central transit warehousing at major ports.
Calabar Free Trade Zone
This is the first and most functional FTZ. It was established in 1992 in Calabar, capital of Cross River State in the southeast. It has the capacity to accommodate between 80 and 100 industrial firms. At the moment, 76 investors have received licenses to operate in this Zone. 53 have actually commenced the production and exportation of goods.
In order to cope with the upsurge of investors in the Zone, the Cross River State Government has granted additional 63 hectares of land for further development.
Facilities available in this Zone include a free port which has an estimated annual capacity of 1.5 million metric tonnes of cargo, serviced plots, built up standard factories for immediate occupation by prospective investors, banking services and digital telecommunication systems.
Kano Free Trade Zone
This Zone was established in 1998 in Kano, capital city of Kano State in the northwest. Measuring about 200 hectares, it is located in Panisau village near the Mallam Aminu Kano International Airport.
Although this Zone had been established earlier, it was not until 2001 that the sum of N640million was appropriated for the provision of infrastructure to the site. Construction is still in progress.
The Onne Oil and Gas Free Trade Zone
This Zone is dedicated to oil and oil-related products. It is situated in Onne, near Port Harcourt, capital city of Rivers State in the south. The Zone is currently functional and is still admitting new investors. Since January 2000 a total of 122 vessels have passed through the Onne Port conveying a total gross freight of 14.4 million tonnes, which have generated revenue of up to $1.2million.
At the moment, more than 85 registered Free Zone investors are utilising the Onne Port Complex. A number of multi-national oil service companies have also indicated interest in investing in the Port as a trans-shipment distribution centre for the sub-Saharan and West African regions.
Maigatari Border Free Trade Zone
Located in Maigatari, which is a town at the borderline between Jigawa State in the northwest and the Republic of Niger, this Zone is still under construction by the Jigawa State Government.
Banki Border Free Trade Zone
This Zone, which is located between the borders of Borno State in the northeast and the Republics of Chad and Cameroon, is still under construction by the Borno State Government.
Export Processing Factory
This Export Processing Factory (EPF) scheme is a variant of the Free Trade Zone scheme. It allows for foreign large, medium and small-scale export-oriented and manufacturing concerns to benefit from the incentives of FTZs. A precondition for benefiting from this scheme is that a prospective beneficiary must show proof that 75 percent or more of its products will be exported.
The EPF scheme is designed to reduce the cost of production in order to make locally manufactured products competitive in the international market. There are seven such factories in operation at the moment in Ondo, Akwa Ibom and Kano States. Twelve others are under construction in Lagos, Bauchi and Yobe States.
Export Farms Development
The NEPZA has been authorised to confer selected medium and large export-oriented horticultural and agro-based farms with Free Zone status. This is intended to minimise losses that farmers incur when exporting perishable farm products.
The scheme therefore seeks to circumvent tough regulations, eliminate administrative delays and provide easy access to export channels for farmers. Government agencies like the Nigeria Customs Service and the National Drug Law Enforcement Agency (NDLEA) will be situated at designated farm sites.
Already, a number of farms with high export potentials have been selected for this scheme. They are:
Sebore Farms in Adamawa State
Heelena Farms in Jos, capital city of Plateau State
Savannah Integrated Farms in Gombe, capital city of Gombe State
Niyya Farms in Kaduna, capital city of Kaduna State
Pineapple farms in Edo and Cross River States
Private Free Zones
Private Free Zone developers are being encouraged to invest in the country. In February 2002, Government approved the Lekki Free Zone, which is the private initiative of a Singaporean holding company. The developers have already invested about $169million in FTZ facilities
Procedure for Investment
All companies wishing to invest in any Free Trade Zone in Nigeria are expected to obtain and complete an investors application form, which costs $500 or its naira equivalent. They shall also submit, for discussion, a feasibility report, which should be a maximum of two pages. The report will contain the socio-economic, financial and marketing strategies to be employed by the company. It will also show the location, layout, area, manpower requirement, technological transfer and nature of the industry, as well as its proposed utilisation of the Zone in question.
The application will be directed to: the Managing Director, Nigeria Export Processing Zones Authority, PMB 037, Garki, Abuja, Nigeria. Enquiries can also be made through the following email address: email@example.com.
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