About Ninety-eight (98) Nigerian Free Zone operators and other stakeholders have requested some sections of the New Tax Bill 2024 should be expunged to prevent the investment community from either withholding or withdrawing their investments due to reneging on tax incentives policy.

This is the outcome of a communique Issued at the end of an emergency stakeholders meeting of Free Zones Operators held recently in Abuja, at the behest of the Nigeria Economic Zones Association, to take a position on the Nigeria Tax Bill, 2024 as it affects free zone entities in Nigeria.

The Free Zones Operators believes that Free Zones thrive on incentives to invest in the economies of nations and the withdrawal of the bait through the repeal of section Sections 8 and 18 (1)of NEPZA and OGFZA Acts and significant reduction in the tax exemptions and incentives available to Free Zone Enterprises is against the good spirit of global investment.

The communique noted that, “by removing exemptions from taxes contained in the existing law, as well as protections against levies, duties and foreign exchange restrictions, the amendments will destroy the attractiveness of free zones, result in massive capital flight and job losses, and stall the realization of Nigeria’s industrialization and export expansion ambitions and the other above-mentioned objectives of the free zone scheme in Nigeria.

“The above provisions of the Bill, which intend to repeal Sections 8 and 18 (1)a of NEPZA and OGFZA Acts and significantly reduce the tax exemptions and incentives available to Free Zone Enterprises, would amount to using a sledgehammer to kill an ant while trying to streamline the free zone provisions”.

It also faults the arm twisting of the truth to justify removal of such incentives by even getting the president to give approval, unknowingly to those advancing this unpatroitic route of discouraging investment at a time they are needed the most.

“These provisions were inserted based on a false assertion that the law allows for only the sale of 25% of goods into the Nigeria Customs Territory while ignoring the approval granted in 2002 by the FGN that up to 100% of the product from free zones may be sold into the Nigeria Custom Territory upon payment of appropriate Custom duties.

“The sudden and abrupt withdrawal of the incentives and concessions, despite the volume of FDI brought into the country based on the fiscal incentives promised by the FGN is very harsh and has the potential to create a negative impression of Nigeria as an investment destination.

“Without waiting for the passage of the bill at the National
Assembly, the Chairman of FIRS hurriedly raised a memo to Mr. President based on some inaccurate claims to portray the Nigeria Free Zone Scheme
in bad light, upon which Mr. The President granted approval of his prayers.

“Noted that the sudden withdrawal of the incentives would lead to significant international legal actions with consequent backlash of sharp reduction in foreign investment, drop in the global ranking for ease of doing business and diversion of investment meant for Nigeria to neighboring countries with friendlier incentives”.

While the communique acknowledged the need for reforms, it posited that removal of these incentives is counter-production.

“Nigeria is in the process of economic reform, but also noted that pulling the rug off the feet of free zone entities through this bill will amount to self-sabotage on the part of FGN and it will stand out as a classic example of policy somersaults in Nigeria, significantly damage the country’s image within the global investment community, erode investors’ confidence, impair Nigeria’s credibility to keep investment promises and attract foreign direct investment (which is currently very low), and send a strong negative signal to potential investors that Nigeria is not ready for business.

“A key policy decision of this magnitude should have been made with due consultation and consideration of all relevant stakeholders involved. In this particular case, the free zone community was not consulted to afford them a fair and impartial forum to raise their concerns and debate the impact of such a change on their businesses and
investments as well as wider economic implications”.

Similarly, the communique as part of the recommendation urged the President to take necessary actions to reverse the gains already made in the Free Zones.

“The stakeholders therefore agreed and recommended that, given the potential negative impact of the Nigeria Tax Bill, 2024 on the Free Zone Scheme, the Federal Government of Nigeria should consider the position of Free Zone Stakeholders as follows;

i.
expunge Sections 60, 198(2) and 198(3) of the Bill;
ii.
exclude free zone enterprises from the scope of application of Section 57 of the Bill; and
iii.
delete the current Second Schedule of the Bill in its entirety.

“The stakeholders mandated the Nigeria Economic Zones Association (NEZA) to present this position to the National Assembly as well as the Hon. Minister of Industry, Trade and Investment. The Stakeholders also mandated NEZA to write a memorandum of appeal, on behalf of free zone investors, to President Bola Ahmed Tinubu, GCFR to kindly:

i.
withdraw his approval of the prayers contained in the memorandum dated 20th October, 2024 and titled ‘Operations of Free Trade Export Processing Zones’ written by Dr Zacch Adedeji. This is because the prayers were premised on false and misleading claims by the author; and
ii.
convene a high-level summit on Nigeria Free Zone Scheme where
stakeholders, lawmakers and experts will be given the opportunity to examine all existing parameters and chart a bright pathway for the Scheme as a hub for sustainable economic development”.

Meanwhile, the communique resolved that it shall explore various channels including the media space, to present the position of the stakeholders on the bill. It also agreed to embark on advocacy visits to the National Assembly and relevant Government Agencies, to enlighten them on the need of not enacting the bill as it is, into law, due to the debilitating effect it will have on the free zone scheme and the wider economy.