The Managing Director of the Nigerian Export Processing Zones Authority, Prof. Adesoji Adesugba, in this interview with AMARACHI ORJIUDE speaks on the challenges of running a Free Trade Zone
It’s been a little over a year since you assumed duties as the Chief Executive Officer of NEPZA; how would you describe the journey so far?
It seems like I have been prepared for this time throughout my whole career as a public servant – from my days in the Nigerian Customs Service where I gained my first leadership experience in supervising new recruits to the Bureau for Public Enterprise and the Nigeria Investment Promotion Commission.
It is an honour and a privilege to be called to serve in NEPZA. As one of the major parastatals contributing to Nigeria’s economic development, my appointment as the MD/CEO is an opportunity to use my experience and expertise to support the industrialisation agenda of His Excellency, President Muhammadu Buhari, who pronounced the use of Special Economic Zones as a policy tool to drive Nigeria’s industrialisation agenda.
Free Trade Zones are major instruments for the diversification of the economy and job creation. Can you take us through your strategic plans and the transformation you intend to achieve in NEPZA under your watch?
With the support of the dedicated and competent management team of NEPZA, we are focused on building Nigeria’s competitive advantage, broadening the scope of industry in order to create jobs and promote exports to facilitate economic growth.
We aim to improve the investment climate in Nigeria by providing incentives and world class infrastructure that will attract both local and foreign direct investments. We also want to Improve the perception of the authority through strategic and routine communication which is key priority for NEPZA and several strategies have been put in place since my resumption.
These have helped to provide a clearer understanding of our mandate and have improved the relationship with our stakeholders to enable us jointly work towards the success of the free trade/ special economic zone industry in Nigeria. Another key priority is to increase the number of functional and optimal SEZ’s and our strategic plan over the next three years will focus on the revitalisation of the existing zones under NEPZA’s purview.
We have 42 registered zones and only 22 are functional. So we seek to change this narrative. Our plans also include the creation of SEZ models of global best practice by establishing world class ‘plug and play’ technically driven zones and providing an enabling environment for business in the thematic areas of mining, technology, and agriculture.
Discussions are currently underway with stakeholders and potential investors for the creation of a Medical and Pharmaceutical SEZ as part of the post COVID-19 interventions. As the first medical SEZ in Nigeria, it will provide world class, in-country healthcare comparable to the standards that Nigerians seek abroad.
It will help reduce the high level of medical tourism from Nigeria and also service the African market.
You have gone on the first round of inspection tours of free trade zones in Kano, Lagos and Calabar. What are the prospects and challenges of the free trade zone scheme in Nigeria?
The free zone or special economic zones landscape in Nigeria remains one of the most attractive to investors and to date has brought in over $16bn foreign and N270bn domestic investment. Over 15,000 direct and 30,000 indirect jobs have been created.
Despite this, challenges still affect optimal operations within the zones which is a risk to current investors and could deter future investments. Poor infrastructure such as access roads, power and water are a common challenge across the zones and consideration is being given to engage in PPP arrangements to address these challenges.
Another key challenge is the lack of understanding of the concept of ‘free’ as it relates to free zone operations by some government agencies whose services affect NEPZA operations in the area of taxes, levies and charges.
Examples are the Nigerian Customs Service, Federal Inland Revenue Services and Standards Organisation of Nigeria. These have negatively affected the businesses of many zone operators and enterprises and NEPZA is currently working with the Presidential Enabling Business Environment Council to engage with the affected agencies in order to reach common ground.
How can NEPZA intensify effort to deliver on its mandate in order to speed up the industrialisation of the country?
The management of NEPZA is focused on rebranding and improving the perception of the authority in order to achieve its mandate. We will intensify efforts in stakeholder engagement and strategic communications aimed at jointly working together for the common interest of investors and the government.
The Federal Government has finally accepted to be part of the African Continental Free Trade Area. How should this agreement be implemented to give leverages to enterprises operating in free trade zones in Nigeria?
Article 23 of the ACFTA recognises the critical role of SEZs in African countries for the purpose of accelerating development. The Rules of Origin remains a key issue of concern regarding the implementation of the AfCFTA based on the debate on how to treat goods produced from Special Economic Zones/Free Zones.
The Special Economic Zone Scheme provides for liberal tax incentives and benefits that would ordinarily lower cost of production thus distorting the final market price of such products in relation to goods produced in the non SEZ area – Customs Area.
It would then be detrimental to Africa as a whole to exclude products manufactured in SEZs from benefiting from AfCFTA preferential treatment as this action would undermine industrial development and socioeconomic growth.
Nigeria is considered a lower middle-income economy with a GDP per capita of about $2,000 with industry contributing about 24 per cent to Gross Domestic Product out of which manufacturing captures approximately nine per cent. Exports in Nigeria accounted for $47bn as of 2017 when compared with South Africa having an export value worth $108bn within the same period.
It is therefore pertinent to consider the adoption of a flexible Root of Origin for Nigeria and especially for products manufactured in the SEZs in order to increase industrial capacity and boost exports.
Both China and the UAE have largely been successful with the free trade zone model. Are there partnerships with either of these nations or leapfrog strategy for NEPZA to execute from these countries’ model of free trade zones?
The Nigerian government has since 1992 envisioned the importance of the free trade zone for economic development and industrialisation of the country. It was on the strength of this that NEPZA was established to midwife the scheme.
The scheme is a global concept that allows for the creation of distinct business ecosystem where operators and enterprises within such enclaves are exempt from paying taxes, customs duties and levies.
The nature of the scheme, therefore, compels countries that operate it to regularly exchange notes and cross fertilise ideas. This, Nigeria has done very well with not only China and UAE, but also with Kenya, Ethiopia and many other countries. Nigeria through NEPZA will continue to collaborate with these nations to retool zone operations for maximum benefit for our people.
What are some of the achievements you have made since becoming the CEO of this agency?
The successes which I would prefer to credit to my wonderful team, which includes the management staff, my advisers and supporting staff have really been modest.
The task is doubtlessly daunting and, therefore, we may not have a very profound success stories to tell, but we have surely taken practical steps to inject life into the sector through my inspection tours of the zones in Kano, Lagos, Ogun and Calabar.
These visits were litmus tests to gauge the health status of the scheme and we are using the experiences from the field to reposition the zones for optimal performance.
Some of what I consider our inroads into a holistic approach to make the sector function better are improved engagement with zone operators; improved communication on NEPZA’s activities and plans; initiated discussions on the prospective partnership for power supply to Kano and Calabar zones.
We have also obtained approval in principal for the development of two new specialised special economic zones in Lagos and Kwara states. We got approval for the commencement of feasibility studies in Gombe State and Funtua, Katsina State as well as initiated discussions with key stakeholders on the establishment of the first medical and pharmaceutical SEZ in Nigeria. PUNCH