Nigeria is slowly crawling out of one of its biggest recession in its history that eclipses the gains made since 2008 when the global economic crisis hit. The hiccups have been traced to many factors by several commentators. However, it is baffling that many commentators barely talk about the huge potentials Nigerian Free Zones legislation hold for the country.
Ten years after the 2008 crisis, it is glaring that Nigeria is still burdened by the volatility in oil prices. Economic advisers are just beginning to realise that the knowledge economy is indeed more resilient than an oil-dependent one. It is accepted that the underlying ramifications of 2015 elections has indirectly bogged the pace of development. As a matter of fact this continues to be the argument of the government in power (and rightly so).
There are many justifications for the establishments of free trade areas or zones around the world. Key among these is the need for resources to move seamlessly for investment. Free Zones (FZs) are also meshed into the tax regime of countries that implement the scheme. It should not be mistaken that FZs are a vehicle for tax free transactions in the specific areas they operate. Rather FZs guarantee that, among other things, the burden of unemployment on the government is lighter. Rising unemployment leads to social tensions which splinters societies.
The Nigerian Export Processing Zones Authority is conferred with powers to approve the establishment of FZs. The foresight of Nigeria’s then military administration in setting up pockets of FZs was responsible for leapfrogging Nigeria to its status as the Giant of Africa. The military government did not stop there. Investors were allowed to freely conduct their operations devoid of the fiats that characterised successive governments till date.
ECOWAS’ free movement of people and goods along borders was effectively at play in the concept of FZs even if it was not as envisaged under the guiding Treaty. The similarity in ECOWAS and FZs approach to attracting rapid investment closely mirrors that of the European Union and HE European Economic Area.
Back to the recession in Nigeria. The country’s finance ministry has been aggressive on tax collection. This by itself is commendable but not enough to plug the gap in corresponding borrowings by the government that now runs into billions of U.S. Dollars.
More FZs should have been floated by the government – in place of huge borrowings – where international investors can establish their base in Nigeria. The country could have raised a minimum of $2-3 billion for each FZ established including the overriding benefit of exploding unemployment, especially youth unemployment.
It is not too late for the government to explore this route considering that the price of oil is not expected to hit past highs of $100 and above. As Nigeria’s Ease of Doing Business ranking improves, its government should take the path of wisdom to urgently liberalise the FZs space. This, in addition, to the inevitable actions required to ensure the safety of lives and property so that investors can confidently operate.
Ajibola Oyelade Esq. advises companies in Nigeria’s Free Zones.