The Federal Government of Nigeria is set to implement stricter regulations within the country's Special Economic Zones (SEZs) to prevent the misuse of incentives and diversion of goods into the domestic market. This move aims to restore the export-focused purpose of the scheme. The Minister of Industry, Trade and Investment, Jumoke Oduwole, announced this development at a stakeholders' meeting on SEZs.
The government's decision is driven by concerns over unsavoury practices, including the diversion of goods from free zones into the Nigerian market, mispricing of transactions between related companies, understatement of domestic sales, and the use of free-zone status by businesses operating within the Nigerian Customs Territory. Oduwole warned that these practices damage the reputation of the entire scheme and risk undermining its credibility, particularly under the new tax regime.
The Minister emphasized that compliance with regulations is a condition precedent for the scheme's success. The government will take a stricter approach to compliance, particularly with the implementation of the country's new tax regime. Oduwole explained that the competitive imbalance created when businesses operating within the Customs Territory are subjected to full domestic taxes and duties, while competing against products benefiting from free-zone concessions, is a major concern.
The proposed changes aim to reinforce the original export orientation of the SEZ regime without removing legitimate incentives available to investors. The government will provide greater clarity on the existing requirement that businesses in the zones maintain a 75 per cent export and 25 per cent domestic-sales structure. Additionally, products transferred from a free zone into the Nigerian Customs Territory will be subjected to relevant customs requirements.
The reforms will also clarify the responsibilities of government agencies involved in administering the zones. The Nigeria Export Processing Zones Authority and the Oil and Gas Free Zone Authority will oversee licensing and operations, while the Nigeria Revenue Service will handle tax administration, and the Nigeria Customs Service will retain its statutory responsibilities. Despite stronger compliance measures, the government is not seeking to discourage legitimate investment in the zones.
The Special Economic Zone scheme has attracted significant investment, with over $200 billion in foreign investment and over ₦900 billion in domestic investment. These investments have generated more than 100,000 direct jobs and over 500,000 jobs linked to supply chains, logistics networks, and host communities. The government aims to provide investors with a more predictable and sustainable regulatory environment.
The Minister highlighted recent investments, such as Health Textiles Nigeria FZE, which commenced production at the Lagos Free Zone, and the Dangote Industries Free Zone, which houses the Dangote refinery and Africa's largest granulated urea complex. The government is also seeking to expand the scheme into emerging areas, including Digital Free Zones and Digital Special Economic Zones, with revised regulations providing for new categories of licences for businesses operating in these areas.
Key points
- The Federal Government aims to reposition SEZs as platforms for expanding Nigeria's non-oil exports, attracting productive investment, and supporting the economy's growth to $1 trillion by 2030.
