FG’s Plan to Suspend Airport FZ Licences Will Discourage FDI, Experts Warn

Chinedu Eze

Investors and aviation experts have warned that the recent pronouncement by the Federal Airports Authority of Nigeria (FAAN) that it would suspend issuance of licences to investors who wish to establish businesses at the airport free trade zones (FZ), would hinder the flow of Foreign Direct Investment (FDI) and discourage the berth of capital intensive manufacturing concerns that want to operate there.

With proximity to the airports and insulated from taxes and other hazards faced in operating from the open market locations, there are indications that more businesses have completed plans to open at the airport free trade zones.

But last week, the Managing Director of FAAN, Captain Rabiu Yadudu announced that his management had suspended issuance of new licenses to intending free trade zone applicants at the airport areas.

Already, existing companies at the airport free trade zones include Execujet, Caverton, some airline catering companies and others.

THISDAY learnt that talks have been going on between lessors and their local representative to establish aircraft spares depot at the free trade zone at the Lagos airport and this would help the airlines to save the waiting time for such spares to be brought from overseas.

Free trade zones are expected to provide benefits to investors, which include duty exemption, duty referral, duty reduction or inverted tariff, merchandise processing free (MPF) reduction, streamlined logistics, quota avoidance and other benefits.

A former Director in the Nigeria Export Processing Zones Authority (NEPZA), however, told THISDAY that FAAN does not have the right to issue any licence to anyone, adding that it is the duty of NEPZA to do so.

But earlier report indicated that FAAN had with immediate effect suspended the issuance of licenses to applicants on the free trade zones at the nation’s airports until the conflicts in the regulatory framework between it and the Nigeria Export Processing Zones Authority were resolved.

While justifying the decision, Yadudu noted that at the Lagos Airport alone, there are presently two free trade zone operators, while additional two companies have applied.

He explained that as “it stands today”, all the five international airports in the country have been designated as free trade zones and warned that if not well regulated, it may be a big challenge for the country in the future.

Confirming Yadudu’s fears, industry operator and Managing Director of King Airlines Limited, Senator Musa Adede, who served in various business committees relating to aviation, such as NEPZA and maritime when he represented Cross River North in the Senate between 1999 and 2003, told THISDAY that “there is proliferation of free trade zones in the country, so it is being abused by those who site their businesses there to avoid paying taxes.”

Senator Adede said that if the free trade zones were effectively regulated, companies operating there would be producing goods and services purely for export. According to him, “If you sell such goods in Nigeria or provide services to Nigeria, you must pay duties.”

In a recent proposal to establish aviation free zone at the Murtala Muhammed International Airport, Lagos, former General Manager, Business Development, FAAN and currently, the Managing Partner, TMSS Logistics, Nuhu Adam, described free trade zones as special economic enclaves, “a country within a country” with the privilege of enjoying some remarkable incentives not available in the other parts of the host country – with the intention of encouraging rapid growth, industrialization and development of that region.

“Specifically, free zones are geographic areas in which a governmental authority offers incentives, different from the host country’s regular policies, to companies operating in the region. Given the nature of these incentives, designated zones are often said to function as ‘growth poles’ for the region, or even beyond. They are used to attract foreign investors and boost industrialization. The pioneering role and status of the MMIA, Ikeja-Lagos as a foremost airport of repute in Nigeria and its support stature for the neighbouring states in the South-Western part of Nigeria (and her neighbouring countries) stands it out as one which will engender rapid growth of the South-West region of Nigeria and indeed the sub-Saharan African region,” Adam said.

He stated that another formidable feature of all free economic zones (including the proposed MMIA, Ikeja-Lagos Free Zone) is the favourable investment climate – customs, tax, financial privileges and administrative concessions compared to the general regime operating in the rest of the economic area or customs territory. 

“Owing to these special benefits and privileges, free zones encourage Foreign Direct Investment and the transfer of skills and knowledge from the different countries establishing their presence with the zone. It is our considered opinion that, besides serving as an Aviation Hub for our nation’s fledging aviation industry, it will certainly provide a hub base for the establishment of companies that will provide spare servicing parts and sundry support services for the crafts operating within the African region,” he added.

At the recently concluded Federal Airports Authority of Nigeria (FAAN) National Aviation Conferences (FNAC) in Abuja, the General Manger, Vicven Integrated Services, Obinna Umeazo, who spoke on free trade zone, lamented the massive rots in Tinapa, a planned free trade zone for investment and export by the Cross River State government, which he said was simply abandoned due to government policy summersaults and lack of infrastructure.

Emeazo complained that the change in policy by the government had negatively impacted on the country’s Gross Domestic Product (GDP), especially in the area of exports.

“Tinapa Resort started well and so many investors were attracted by the benefits, but along the line, there was policy changes, which led to the dwindling of the growth of the resort. Everyone especially tourists go to Tinapa for shopping and enjoy their holidays. So, it is inconsistency on the part of the government. You brought out policies that attracted investors and in mid-way, you change such policy. If they have to focus on the special economic zones, we have to make it right. NEPZA must stand its feet and make it strong. The regulations must be strong. If you cannot manufacture, you cannot export. How much are you able to attract? When last did you hear about Tinapa? It is still at the elementary stage and one would have expected that it would have gone beyond that,” he said.