The Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) has raised alarm over the Federal Government’s proposed tax reforms targeting Free Trade Zones (FTZs), warning that the move could deter over $200 billion in foreign direct investments (FDIs) and put more than 600,000 jobs at risk.
FTZ stakeholders have expressed concerns over the Nigeria Tax Bill 2024, which seeks to amend key sections of the Nigeria Export Processing Zones Authority (NEPZA) Act and the Oil and Gas Free Zones Authority (OGFZA) Act. The bill proposes the removal of long-standing tax incentives for businesses operating within Special Economic Zones (SEZs)—a decision many see as a direct contradiction to Nigeria’s industrialization and investment strategies.
Key Concerns Over the Tax Reforms
The proposed amendments in the Nigeria Tax Bill 2024 introduce minimum tax rates and eliminate tax exemptions that have historically attracted investors to Nigeria’s 50 Free Trade Zones, 48 of which are privately developed. These changes threaten to erode investor confidence and disrupt economic growth.
NACCIMA, in a statement by its National President, Dele Oye, strongly opposed the amendments, particularly Sections 57, 60, 198(2), and 198(3), which undermine crucial incentives that have supported FTZ investments since the scheme was introduced in 1992.
“Stripping them of established tax exemptions is a drastic measure that will diminish investor confidence and jeopardize Nigeria’s standing in the global investment community,” said Dele Oye, who also serves as the Chairman of Nigeria’s Organised Private Sector (OPS).
“With special tax incentives, these zones were designed to attract investment, promote job creation, and foster industrialization. Sections 8 and 18 of the NEPZA Act explicitly exempted approved enterprises from all federal, state, and local government taxes, creating an attractive investment environment.”
FTZs’ Contribution to Nigeria’s Economy
NACCIMA emphasized that FTZs have played a crucial role in job creation and revenue generation, contributing over N650 billion to the government through Customs duties and other economic activities. The proposed tax amendments, it warns, could stifle growth and lead to capital flight.
The backlash over the bill has prompted calls for the National Assembly to reconsider the amendments, ensuring that policies foster long-term investments rather than deter investors.
“This policy summersault through legislation is bound to shake everything in Nigeria if not carefully handled, as it has already slowed down activities in the FTZs, while potential new investments are on hold,” Oye warned.
FTZ Stakeholders Call for Dialogue
In response to these concerns, FTZ stakeholders have urged the government to pass tax laws that sustain both local and foreign investments within the SEZ ecosystem. Their stance was outlined in a communique issued at the end of the Special Economic Zones Annual Meeting organized by the Nigeria Economic Zones Association (NEZA) in Lagos.
The communiqué, signed by NEZA’s Executive Secretary, Toyin Elegbede, commended the Chairman of the Presidential Committee on Fiscal and Tax Reform, Taiwo Oyedele, for his willingness to engage stakeholders in discussions about the tax bill’s implications on the SEZ scheme.
Additionally, stakeholders acknowledged the progress made by the Ministry of Foreign Affairs in repositioning the Economic Desk in Nigeria’s Foreign Missions to align with national economic priorities and attract more FDIs into SEZs.
Way Forward: Maximizing SEZs for Economic Growth
The communiqué urged SEZ operators to capitalize on their improved collaboration with the Nigeria Customs Service (NCS) to boost the production of export-oriented goods for the African market. It also encouraged them to leverage opportunities presented by the African Continental Free Trade Area (AfCFTA) agreement to enhance Nigeria’s export earnings.
Furthermore, the stakeholders called on the leadership of NEZA, NEPZA, and OGFZA to collaborate with the Central Bank of Nigeria (CBN) to finalize guidelines for implementing offshore banking within SEZs.