- December 20, 2016
- Posted by: OGFZA
- Category: News
INTERVIEW: How Nigeria’s ‘pathetic’ free trade zones can end recession — Ndibe
December 17, 2016
Nigeria’s quest for a way out of the current economic recession could easily be found if the federal government pays closer attention to the development of the country’s free trade zones, says the Executive Secretary, African Free Trade Zones Association, Chris Ndibe, in this interview with PREMIUM TIMES’ Business Editor, Bassey Udo. Excerpts:
PT: Most of world’s free trade zones, particularly in Africa, contribute significantly to the growth of their countries’ economies. Where does Nigeria belong?
NDIBE: I have done a lot of work on free trade zones. I retired as General Manager at the Nigerian Export Free Zones Authority (NEPZA). I am one of the founding members of the World Free Zones Organization. I have done extensive surveys on free trade zones in Africa. Therefore, I can say authoritatively that where Nigeria is today is pathetic.
In fact, our smaller neighbouring countries, especially in West Africa, are doing better. What they are doing is not far from the fact that they see Nigeria as the market for their products.
For instance, Togo, our next door neighbour is gearing up to take advantage of Nigeria’s huge market potentials. Ghana has the highest number of free trade zones in Africa at the moment. Ironically, the single factory zones scheme we frustrated in Nigeria is booming in Ghana.
The single factory zone occurs where a government confers export potential status for them to enjoy available incentives. It does not matter where the factory is sited within the country.
Even if the factory is sited in the village, but are considered to possess such potentials, they are given the free trade status. That is what Ghana and Kenya are doing to lead Africa today, with 192 and 160 free trade zones respectively, followed by Tanzania (44) and other countries. Nigeria has only 32.
The rate at which these countries are going, I am afraid, if nothing is done urgently, Nigeria will end up being the dumping ground for the products from these countries, especially from the free zones within the West African sub-region.
PT: With such awareness of the potential threat, are you not concerned enough to do something, even on a personal level?
NDIBE: With the advice of some stakeholders in Nigeria, and even my colleagues at the World Free Zones Organization, we have decided to come up with workshops to train workers of the regulatory authorities, namely NEPZA and Oil & Gas Free Trade Zone Authority (OGFZA).
We have just had the first one recently, and our plan is to ensure that it is held at least once every year. Our belief is that if you don’t know how to handle a thing, you would not get anywhere. So, we must begin to train the regulatory agencies, to empower them with the ideas on how to turn the situation around. That’s the first step.
The rate at which free trade zones is developing across the world is going higher and higher. It is getting more scientific by the day. Nigeria must not be left behind.
If you look at what is moving free trade zones all over the world today, you will find out that Nigeria does not have what it takes to cope. We are unable to move any higher. There are things we are supposed to do as a country.
When you look at the country’s economic situation today, I am yet to see any scheme that can turn around the country’s economy more than free trade zone.
You can talk about oil. But, where are we today, with the declining global oil prices? But, in terms of manufacturing, job creation and employment, backward linkages, taking care of the farmers and transfer of technology, I rate free zones higher than any other thing.
There is no better example to give. I visited Mombasa sometime last year and I found out that a factory that produces jeans material for the American market has 2,500 workers in one shift.
Compare that to our own Calabar Free Trade Zone, which has the capacity to accommodate hundreds of such factories. If 50 of such factories are employing 2,500 in one shift, we may even end up importing workers from other African countries to meet up with the volume of workforce required to keep the factories functional.
With the number of employment that free trade zones are supposed to give, I am very optimistic that if the required attention is given to it, Nigeria will go places.
By the time production is beefed up in the factories, we will be targeting the export market and making huge money from it, and nobody will mind if the value of dollar is rising or not.
If we talk about figures, the exchange rate of the Naira to a Dollar today is half the figure that South Korea is exchanging to a Dollar. But, South Korea is not bothered. This is because their production level is very high. They make the Dollar and can determine whatever exchange rate they place on it.
What I am saying is that we should give this free trade zone scheme the right attention in Nigeria, if we want to get out of the economic recession the country is in at the moment. This is also important to help escape being a dumping ground.
PT: Are there things that would need to be changed to give a fresh impetus to this call for improved attention to free trade zone?
NDIBE: The Act which the scheme is using in Nigeria today was promulgated over 20 years ago. All over the world, the practice is that the free trade zones law should be revisited every five or 10 years.
The world is moving at a very fast speed and you just have to move along with it. Free trade zones have an international complexion. So, for Nigeria to be taken seriously, it has to adapt accordingly.
Things are not done the way you want it done, but in line with how it is succeeding across the world. You are competing for foreign direct investment with other countries. If you don’t do it the way it is done globally, you cannot make progress the way your neighbours would.
Again, the level of our incentives is not attractive enough. The incentives as enshrined in the Act should be reviewed.
Besides, our services are not equally attractive. For example, NAHCO (Nigerian Aviation Handling Company) shade should be seen as a free trade zone within an international airport. It can qualify for an airport free zone.
A similar airport free zone is DAFZA, (Dubai Airport Free Zones Authority). DAFZA offers at least 250 free services to investors.
The services that we give are below international standards. The incentives need to be revisited.
Our infrastructure is at the lowest ebb today. The highest obstacle to investment in the free trade zones today is the conflict between the free zone authority and other government agencies like the Nigerian Customs.
The Nigerian Immigration Service and the free trade zones authority have tidied up their ends, but the Nigerian Customs is a very big problem.
The Nigerian Customs has not seen the free trade zones as acting outside the laws of the country. They still consider the free trade zones as part of the country, which is not supposed to be.
Everything about the free trade zone should be such that it gets the fastest approach in screening and release of goods and services.
Recently, we learnt that goods released for one of the free trade zones in the South East part of the country left Onne in Port Harcourt free trade zone, and half way, a directive was given that the consignment should go back to the port.
There is no justification for that, because it is believed that these goods are going outside the country.
Whatever must have led to the release of the goods should have allowed it to get to the zone. You can only have the power against releasing the goods when it is leaving the free zone to the Nigerian Customs zone. Clearly, the Nigerian Customs services do not recognize the free trade zones, and that is affecting free trade zones seriously.
PT: How much of a solution would the coming of the Oil & Gas Free Zone be to the problem you are talking about?
NDIBE: We are talking about two different issues here. The Oil & Gas Free Trade Zone is not new. It has always been in existence since 1996. But, anything about oil and gas has no problem, because investors are coming from everywhere to do business in the country.
But, we are talking about manufacturing and other services. Here, you are looking for investors, whereas in oil and gas investors are looking for you.
Apart from that, the management in the oil & gas sector has been doing it right. Maybe, because of the way it has been structured, with consultants and major investors (Intel services) have been guiding the industries.
The situation is different from NEPZA, with a constant change in management. The Federal Government has no room for consultants to handle their activities and guide the activities of Oil & Gas Free Trade Zone.
There must be constant education to the Nigerian Customs to understand how they should handle that aspect of their job relating NEPZA, as opposed to the one they already know.
Aside the issue of infrastructure, the relationship with Nigerian Customs is a big problem,
No free trade zone can operate without Nigerian Customs. But, the way it is structured is such that goods coming into the free trade zone have nothing to do with the Nigerian Customs.
They just bad word the goods into the free trade zone. It is either they are bringing raw materials for manufacturing or operational machines into the free trade zone.
Once it is there, they are free of any customs duty. But, what is happening is that goods coming into the free trade zone are inspected at the ports and still follow into the free trade zones and are delayed.
Of recent, they are even compelling investors to pay duty. This is funny. Other countries must not hear of it.
PT: Is the free trade zone not a threat to the federal government quest for more revenues through such revenue agencies as the Nigerian Customs?
NDIBE: Free trade zone is never a threat. You do not lose money on what does not exist. If the free trade zone is not there, some of the investors would not have been there in the first place.
Some of the foreign direct investments attracted into the free trade zones are coming because of the conditions or incentives the government provide to create an investment haven.
So, if they are being attracted to come, and at the same time saying government is losing revenue, government cannot lose what did not exist.
Ordinarily if no aspect of Abuja was declared a free trade zone, the investor may not be there in that area. Free trade zones were created to attract foreign direct investments; to do something and export, and whatever is to be sold in the Customs territory is taxed as if it was imported from outside the country.
So, government is not losing anything at the end of the day. That environment is just being created for them to come and manufacture products for export.
PT: Aside the delay, what other thing is vetting of goods by Nigerian Customs on goods causing on the free trade zone?
NDIBE: When one is talking about business, the speed with which these issues are responded to is a very serious factor.
Apart from some bottlenecks, the cost of doing the business would be increased through such delays, which should not have happened primarily.
Again, the infrastructure level, which is not meeting up to the expected standard, is a big challenge.
Or instance, when Calabar Free Trade Zone was booming and ships could berth in Calabar port, one can recall the level of business there.
But, today, almost all the investors in Calabar take their goods from Onne and Lagos at an extra cost.
Some of the goods end up not getting to Calabar, either because they were involved in accident or whatever. When the cost of production becomes high, you find out that the investor cannot come.
In that case, the delay is leading to a lot of people going off.
The one stop shop that is supposed to exist, is being hampered, either because some of the staff of the free trade zones are not knowledgeable enough to handle their responsibilities, or the interest is not there within the management echelon of the Authority.
An investors is not supposed to handle his problems from Customs to Immigrations, and police and all that. The Authority is supposed to handle all those things. That is why they are there.
Today, a lot of investors in Calabar and other places are going to the Nigerian Customs headquarters to solve their problems. This should not have been the case if the system was working well.
Go to Dubai Airport Free Zone Authority, an investor would be there doing other things, while all its problems would be solved and answers brought to him.
PT: How much would you say government is losing by failing to earn revenues if these problems are not sorted out?
NDIBE: There is no doubt, the country is losing heavily by not putting the free trade zone scheme in order.
Anything that would affect production in any country is a big loss. Today, the country has 32 approved free trade zones. But, sadly only about eight are operational.
Banky in Borno state is one of the free trade zones given approval since 1999. But, up till now it cannot come up, because the state government is not interested.
If that free trade zone had been in operation since 1999, those people being conscripted into Boko Harm today to terrorize the people for lack of jobs would not have been seen. They would have been gainfully engaged. That place is not working majorly as a result of the attitude of the state government, which got the approval.
If the state government had involved a consultant to advise it, they would have looked for investors to put the place in order.
A state government getting free trade zone in Nigeria should not involve more than 10 per cent of what is required to roll out.
Look for the private sector to do the roll out. Though it should be the public-private partnership, but their own should be to provide land and initial clearance and leave everything to the private sector.
The approval of free trade zone is not to states. Lagos states has free zones up to six – Ladol, Lekki, Lagos, Snake Island and Badagary are all in Lagos States.
There is one in Osun State, one in Ogun state, one in Abuja, (Abuja Technology Village), one in Enugu State, whose ground breaking was done recently. There is one in Koko in Delta state. Even the Calabar free trade zone that had a lot of promise, is now going down, because of the problems the investors are having. Tinapa is in Cross River state. Everybody thought this was another Dubai. But, today the story is different. That is why government must brace up and do something urgently.