How Not to Reform Nigeria’s Free Zones

Abdulahi Ibrahim

On-going controversy within the Nigeria special economic zones is an uncharitable distraction occasioned by failure of those in authority to place national interest above selfish agenda of a few. Reading all the news and after interactions with local and international stakeholders, it is crystal clear the ministerial committee converted itself into a tool for an hatchet job to dismantle and destroy the thriving Nigerian Free zones worthy over 30 billion US$.

Nigeria has always had plans to reform its free zones despite the status quo being considered one of the best in Africa. Yet, striving for perfection is a great aspiration. And in the free zone sector, two contending trends manifest for the past two decades. The first is the agitation for a single free zone authority for Nigeria under the Nigeria Export Processing Zones Authority (NEPZA) This is in tandem with international best practice and this position has being upheld and projected by successive federal government reports and white papers. There is the second trend, the push by a group to get son to supplant the father by having an Onne oil and gas free zone to take over the responsibility of NEPZA which presently manages about 45 zones in the country.

The crux of the matter prior to now is about legality and best practice. Onne zone ( OGFZA) is by law restricted to its locality and mandate but a private cabal has been pushing without legal backing to illegally expand its coverage . Relying on induced government reports and without amendment to its enabling legislation, Onne zone, a public private partnership body, has historically embarked on territory grabbing, changing its name outside its act and even issuing orders that has resulted in ongoing litigations. Stakeholders had resisted the push by Onne zone all along and a bill is actually pending within the legislature to ensure a single free zone authority for Nigeria under NEPZA.

That was the genesis of ongoing assault on private sector investment in Nigerian Free Trade Zones at a time Nigeria is struggling to expand dwindling foreign direct investment. It all started last year when the private cabal re-launched its drive to subvert the free zones deploying the Minister of Trade and Investment as a willing tool. Apparently, the Minister appears not to be acting alone; it seems the cabal has the backing of the board and managing director of NEPZA itself. A ministerial report has unilaterally without consultation unashamedly recommended that Onne Zone takes over NEPZA mandate against the laws, interests of investors in the zone, the drive to reduce cost of governance, Nigeria’s readiness for AFCFTA regime and international best practice.

The report though a draft has elicited strong reactions from various quarters. There are even reports that the Trade Minister backed out in a backlash. A business group in Kano called Arewa Business Forum was the first to raise alarm over alleged plots to destroy Kano Free Trade Zone and other upcoming zones in northern part of the country by some forces within the Federal Ministry of Industry Trade and Investment. In a statement issued in Kano and signed by its Secretary, Babayako Abdulahi, the forum alleged that there is a plot to stop the ongoing upgrade of the Kano Free Trade zone while a directive has reportedly been issued to stop issuance of licences for the proposed new free zones in Katsina, Jigawa, Kebbi, Kwara and Taraba states. The forum alleged that a cabal within the Federal Ministry of Trade has engineered plots to weaken efforts of the North to industrialise in her areas of strengths by transferring the free zone agency from Abuja to the South-south in addition to reviewing all ongoing activities in northern free zones.

The statement titled; “A Plot Against the North’” reads as follows: “We have discovered a ground plot to hide under current national crisis to deprive the north of her rights especially in the area of domestic industrialisation within the agricultural value chains. From late last year to date, the Arewa region has embraced the concept of free zones to address issues of job creation within the North. Suddenly from nowhere, we heard story that a South-south group is plotting to stop this advances by the North. We first did not take it serious until it was revealed that the Federal Ministry of Trade is putting together a report to hand over control of free zone to a south South body based in Cross River state. The national body based in Abuja which has supported the north in its drive for domestic industrialisation is proposed for scrapping while the South-south body is to take over the national assignment. In pursuance of that agenda, the Ministry stopped issuance of free zone licences especially the more than five that northern state governments and private sector people have applied for. Till now, the ministry has not allowed the issuance of the said licences.

This is a serious plot to decapitate the north at a time her leaders are struggling to attend to issue of job creation to tame insecurity”, the northern group from my state Kano alleged.

Soon after the Arewa statement, investors in the free zones also responded, threatening to commence divestment from the zones and calling on the board of Nigeria Export Processing Zones Authority (NEPZA) to summon a stakeholders’ meeting. In a statement on behalf of the Investors signed by Yusufu Abdullahi, Director, Snake Island Integrated Free Zone Lagos, the proposed reform was described as “a ploy to destroy multi-million naira private investment in the free zones”, calling on NEPZA “to call a meeting of stakeholders and investors on the subject”

Further extract from the statement are as follows: “The genesis of the Evaluation of FTZ Licensees was NEPZA refusal to comply with FMITI letter Ref. No T/FAL/1164/210 dated 30th April, 2020 directing the transfer of selected free zones regulated by NEPZA to OGEFZA whose primary focus was oil and gas activities and were affected by the interpretation of the Hon. Min. of Justice and Attorney General on Section 5 and 25 of OGEFZA Act, in 2008. It was NEPZA refusal to comply with the FMITI letter Ref. No T/FAL/1164/210 dated 30th April, 2020 directing the Authority to transfer ‘the free zones currently regulated by NEPZA whose primary focus was oil and gas activities and were affected by the interpretation of the Hon. Min. of Justice and Attorney General on Section 5 and 25 of OGEFZA Act, in 2008. NEPZA replied to FMITI vide its letter Ref. NEPZA/LS/SF/22/IV dated 20th May, 2020 notifying the Hon. Minister that the announcement and directive of Mr. President that Steve Oronsanye Presidential Committee Report on Rationalisation of the Government Agencies which recommended that “the Onne Oil and Gas Export Free Trade Zone (OGEFZA) be reverted to the Nigeria Export Processing Zones Authority (NEPZA) should be executed.

“NEPZA also drew the attention of the Hon. Minister on the pending Court Case on the same interpretation the FMITI was relying upon was before Federal High Court instituted by a Private Zone Operator against OGEFZA, Ministry of Justice and FMITI which seeks judicial determination of the regulatory powers of OGEFZA over SIIFZ, the later having been licensed to operate under NEPZA Act. NEPZA further told the Hon. Minister the solemn fact that, at the time the promoters of all the listed Free Zones commenced the process of setting up their businesses in the country, they were aware of the existence of OGEFZA, yet in recognizing the limitation in scope of approved activities and geographical constraints (Onne/Ikpokiri Area of River State) under OGEFTZA Act, they chose to register under NEPZA, the Authority with statutory powers to regulate ALL activities across ALL parts of Nigeria”, the investors had noted.

The staff union took the matter to another level when it petitioned President Muhammadu Buhari, accusing the Minister of Trade and Investment, the Board Chairman and Managing Director of free zone Authority of desperate attempt to destabilise the free trade zones. In a petition signed by Alade Bashir Lawal, its Secretary-General, the ASCSN) said it “forward to you the memorandum on the “Desperate Attempt by the Honourable Minister of Industry, Trade and Investment, Otunba Niyi Adebayo to subvert the activities of the Free Zones Scheme in Nigeria.

The union further Accused the NEPZA Board and the Managing Director of the agency of complicity: “We are very suspicious of the role of the Chairman of the Board, Alhaji

Adamu Fanda since he is a close political associate of the Honourable Minister, Otunba Adeniyi Richard Adebayo, and the Managing Director, Prof. Adesoji Adesugba in all these according to the Union,”It appears that they were brought to NEPZA as “Undertakers” that is, to supervise the dismembering of the Authority as a body. Few days after their resumption, they, with their cohorts in the Ministry made attempts to transfer some zones to OGFZA. The attempt failed woefully.”

The minister may have realised the extent and implications of the report when another news surfaced that the Minister has rejected the recommendation of the committee on the proposed transfer of NEPZA mandate to OGFZA. According to the news reports, the Trade Minister reportedly rejected the committee report over emerging reports linking former Vice President Atiku Abubakar to the reform proposals as well as alleged bribery allegations rocking the committee.

Stakeholders in the free zones however opened the lid on the whole deal when they alleged in their response that the Minister and the ministerial committee are serving the interest of Atiku’s company INTELS. This was reported to have embarrassed the Minister who reportedly queried the committee for lack of due diligence on the ownership structure of OGFZA. The disclosure was followed by another damaging revelation that the committee report was allegedly induced by an alleged N700 million naira bribe from an oil and gas interest pushing for the transfer of NEPZA mandate to OGFZA.

In the ensuing confusion, the Managing Director of NEPZA was forced to respond to allegation and indictment of the minister, the board and himself by the staff Union. According to news reports, NEPZA MD, Prof Adesoji Adesugba stated that “It is important for us to realize that NEPZA was set up by an Act of the National Assembly. The reformation of NEPZA is definitely not within the competence of NEPZA’s management. However, NEPZA is aware that there had been discussions on the remodeling of government and government agencies for efficiency from the time of the Steve Oransaye’s Panel recommendations.

“These discussions as far as we are aware are still ongoing and no decisions have been made nor the enabling laws to effect such changes enacted. With respect to the said report of the committee from the Ministry of Industry Trade and Investment, such report has not been officially communicated to NEPZA and at the right moment, the position of NEPZA will be conveyed by its board to the authorities”, the Managing Director, Prof Adesoji Adesugba said.

But how should the free zone sector be reformed. Here, certain basic national interest must be considered germane. First, Onne zone is a PPP body which by law is restricted to Onne oil and gas zone. Two, investors’ deals in the free zones were made under NEPZA and cannot be transferred to a body not legally empowered. Three, investor’s confidence in Nigeria is shaking by that anti-business unilateral decision despite ongoing litigation on the subject. Four, the committee report failed on logic and facts as it relied on incomplete, doctored data on NEPZA and the 42 free zones. Fifth, Nigeria’s preparedness for AfCFTA is threatened as divestment from the free zones is now a real possibility. And more strategically, the ministerial committee’s move threw spanners in the ongoing reforms within NEPZA under its new management.

In the last few months, NEPZA under Adesugba, an investor service professional, has witnessed series of reforms such as innovative steps to revive moribund zones, infrastructural injection to address investors’ concerns, operational re-alignment to put zones on efficiency footing, new partnership on revenue generation, new design to boost job creation, alignments for niche medical and Agric zones, new plan on backward integration within the zones, partnership with states for cluster zones and forging of new relationship with sister agencies. Significant progress is being recorded even as the legislature is processing a bill designed to address loopholes in existing laws. With such track records, it will be surprising if the NEPZA Board Chairman and the MD are part of the plot as alleged by the staff union. This is more so as even investors had expressed confidence in their performance.

To effectively reform the free zone, my advice to the Minister of Trade and Investment is to engage stakeholders, that is, those who trust Nigeria as to invest their monies in the zones. Niyi Adebayo as Minister of Investment should engage and consult investors to prove that Nigeria is ready and open for business. The job is made easy for him as the stakeholders are reachable and supportive of Nigeria’s efforts to strengthen her manufacturing capacity. More importantly, the bill in the National Assembly proffers a path that both satisfy the national interest and investment interest of stakeholders.

The Ministerial Technical Working Group report should be dedicated to where it belongs- the dustbin. And to the Board and Management of NEPZA, they should remain undeterred by recent happenings. Otunba Adebayo will surely not allow the derailment of ongoing reforms within NEPZA.

●Abdulahi Ibrahim sent piece from Kano and he can be reached on dankanoabdul@gmail.com.