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Boosting industrial devt through Free Trade Zones

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Boosting industrial devt through Free Trade Zones

Boosting industrial devt through Free Trade Zones
Photo credit: Modamo Photography

Revamping ailing economies presents huge challenges of industrialisation. Development of Free Trade Zones remains an attractive option, writes George Okojie.

Proliferation of Free Trade Zones (FTZs) in the country is part of renewed commitment towards realising the importance of an industrial economy in creating jobs and improving standard of living of the people. Thus, Brazil, Russia, India and China known as (BRIC) nations took cover in the platform provided in FTZs as a buffer to economic meltdown particularly in the wake of the most recent financial and economic crisis.

Amid the core of the growth attributed to emerging markets, maximum opportunities offered by the FTZs ameliorated the negative effects of the economic downturn of 2007-2009 leaving the BRIC nations to grow at the rates of seven per cent to 13 per cent.

Free Trade Zones Operations In Nigeria

FTZs establishment in Nigeria dates back to 1991. It was an industrial initiative embraced by economic pundits at that time to diversify nation’s export activity that had been dominated by the hydrocarbon sector. Available statistics showed that by 2011, there were nine operational zones; 10 under construction; and three in the planning stages.

Although Zones could be managed by public or private entities or a combination of both under supervision of the Authority, the governing legislation resides with the Nigeria Export Processing Zones Act (NEPZA) and the Oil and Gas Export Free Zone Act (OGEFZA). The FTZs idea has continued to blossom because Nigeria has a number of strength on which to build including the relatively large market. Exploring the FTZs initiative to boost its economic prosperity, the Lagos State Government established the Lekki Free Trade Zone.

The industrial cluster development started in May 2006 when the Chinese consortium in the name of CCECC-Beyond International Investment & Development Co., Ltd (CCECC-Beyond), now China Africa Lekki Investment Ltd (CALIL) as the majority shareholder, entered into a joint venture with the Lagos State government and the Nigerian partner “Lekki Worldwide Investment Ltd.” to establish the Lekki Free Zone Development Company (LFZDC FZC) in Lagos, Nigeria.

The initiative was authorised by both the Nigerian federal government and the Lagos State government as the sole and legally competent entity to develop, operate and manage the Lekki Free Zone project. Lekki Free Zone Development Company FZC (LFZDC) was registered in October 2006 under the NEPZA Acts and embarked on the Phase I Development of the zone.

Lekki Free Zone Nigeria

One-stop Business Hub

As an emerging international market, the Lagos State government knew that the initiatives come with transfer of technology from the trans-national corporations (TNCs) and minimise capital flight, just as it would make the state a one-stop global business haven. It was designed to have a refinery, an international airport, seaport and high grade residential quarters, among other features that make free trade zones thick.

To realise its objectives, construction work has commenced at the development of Lekki Seaport located within the free trade zone. According to Lagos State Governor, Mr Babatunde Fashola, “Lekki Free Trade Zone is beginning to take shape. The Master Plan is being realised, investors are trouping in. Tank farms and major refineries are springing up to service the demands of the country and make room for export.

“The refineries create a major selling point and release of the opportunities that lie ahead in this zone, create opportunities for the local people and the potentials for Lagos and the Nigerian economy”. Fashola stressed that the speedy completion of the project is subject to availability of funds, while soliciting for the cooperation of the investors to ensure that the overall objective is achieved.

He said, “I cannot tell you the date when that port will be finished but work has started at the port and the contractor is on site. There are still a few issues in terms of getting funding and commitment from the private sector because clearly both the management and the private sector own the zone. They are not government-owned but government has an enabling role to play in the regulation of the Zones”, he said.

The governor said plans are on to effectively drive the zone on water transportation system considering that it is bonded on the side of Atlantic and lagoon. “This zone is located on a peninsula. That is why we are considering the need to transport our goods on the water. We have put the cart before the horse. This is peninsula that sits so strategically that it has access to its own transportation which is water transportation.

“That was why we have decided to fast track the plan of accessing the zone and evacuation of cargo by using the lagoon. This lagoon goes as far as Ondo State. Most logs come into the state through water. I do not know any country where the haulage of its industrial cargo are transported by road. “It is not sustainable. The roads will not last. The water ways would be our immediate and short term focus. And before the end of the year, we would ensure the possibility of water transportation in the zone”.

He said the design for the construction of airport on the zone is also ready, adding that soonest the bid will be sent to the public for investors who want to build to indicate interest. According to him, the state was strategically positioned, citing the advantage of population and proximity to Europe, Middle East and South America, all of which the development of the airport would benefit.

He said the management would source private capital to develop Lekki International Airport, noting that the airport would be of international standard according to the plan already approved. “We have shortlisted bid for people who want to build the airport, for me my responsibility is that you want an airport through which you can run your business but I don’t have the money to build it but I can provide the land which is what we have done. It will be an airport that would drive business at all point like we have seen all over the world.”

He assured that the state government remained truly committed to providing infrastructure needed to make Lekki Free Trade Zone (LFTZ) functional as soon as possible. The Governor advised local manufacturers especially agro-based sector and investors to tap into the Lekki Free Trade Zone initiative phased into four quadrants, on a land mass of about 16,500 hectares.

FTZs As Job, Poverty Alleviation Solution

Giving credence to the fact that creating jobs and income is one of the foremost reasons for the establishment of FTZs, president of the Dangote Group of Companies, Alhaji Aliko Dangote said the Lekki Free Trade Zone would be the biggest of such zones in the African continent. The business mogul said, “By bringing this here, I can assure you that this is going to be the biggest free trade zone in the African continent and I know that the people will begin to show their appreciation”.

Expressing confidence that the Zone holds enormous economic benefits for Lagos State and the country, Dangote declared, “For instance, there is no way we can put down over $9 billion of our money here without making sure that the zone is going to work”, adding that his Group was going to work at a very high speed. Dangote assured that the communities stand to benefit enormously as over 8,000 engineers would be trained while jobs would be created for youths of the communities.

Challenges In Actualisation of Projects

For the Commissioner for Commerce and Industry, Mrs Sola Oworu, establishing a refinery in the zone has opened up enormous economic opportunities not only for Lagos but for Nigeria, adding that only about 35 per cent of the goods to be produced in the zone would be consumed in Lagos while the rest would be exported.

To accelerate development of the LFTZ, Lagos State government and the NNPC in collaboration with a consortium of Chinese investors known as China State had before now sealed a deal for the establishment of the refinery which capacity is put at 300,000 barrels of crude oil per day under a public private partnership (PPP) arrangement within the Lekki Free Trade Zone (LFTZ).

On completion it will in addition to the above crude output, produce 500,000 metric tons of liquefied petroleum gas (LPG) per annum and hopefully trigger the formal switch of domestic household fuel in Lagos and environs from firewood, charcoal and kerosene, to LPG if properly harnessed.

LEADERSHIP Sunday gathered that the proposed date for realisation of the $8 billion Greenfield refinery project may not be possible due to the challenges posed by national policies and frequent changes in the top management of the Nigerian National Petroleum Corporation (NNPC) by the federal government. Also said to be posing a challenge to the early take-off of the refinery is the continued delay in passing the controversial Petroleum Industry Bill (PIB) which is expected to redefine the operations of the oil industry in the country.

International investors that have showed strong interest in the project LEADERSHIP Sunday learnt are watching to see what becomes of the PIB which is now politicised and even polarising the national assembly. The investors in Lekki Free Zone as the state’s new business hub in the making have not been enjoying good relationship with the people of Idasho community in the Lekki area.

So many stakeholders before the last peace accord brokered with the community leaders had appealed to them to allow investors whose aim is to set up businesses at the Zone to commence the process of building industries that would provide employment for the people. They noted that there is no way an investor who has been driven away and has his equipments damaged can create or provide jobs.

The state governor specifically said, “The people in Idasho have not been receptive and have driven investors from the site, they have damaged investors’ equipments yet they want work. If the investor cannot build his factory, how does he create work? If there are issues with government, let us sit down and continue to engage. Let development start in the zone. That is the only way to prosperity”.

Imperative of Incentives In Free Trade Zones

To encourage investment in the zone, the state Commissioner for Energy and Mineral Resources, Engr Taofiq Tijani, said the state government will liaise with other arms of government to offer a number of policies and incentives such as complete tax holidays from all Federal, State and Local government taxes, rates, customs duties and levies to all investors patronising the Lekki Free Trade.

The waiver, according to him, will cover import and export licences, duty-free capital goods, consumer goods, machinery, equipment and furniture, duty-free, tax free import of raw materials and components for goods destined for re-export or permission to sell 100 per cent of manufactured, assembled or imported goods into the domestic market.

He said the present administration led by Mr Babatunde Fashola will continue to provide a thriving environment with exponential potentials to attract both local and foreign direct investment in the area of manufacturing, real estate, tourism, oil and gas. It is the belief of many economic pundits that if the potentials inherent in Free Trade Zones are fully tapped, the nation would experience rapid economic growth.

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