NEPZA: Enhancing Free Trade Zones to attract foreign investment
But it is to be a cautious celebration, if we are to look at the causes for such brilliant performance. The rising commodity prices (oil in case of Nigeria) and a relatively positive economic outlook for other sub-Saharan African countries were among the factors that contributed to the turnaround in the FDI inflow in Africa […]
But it is to be a cautious celebration, if we are to look at the causes for such brilliant performance. The rising commodity prices (oil in case of Nigeria) and a relatively positive economic outlook for other sub-Saharan African countries were among the factors that contributed to the turnaround in the FDI inflow in Africa as pointed out in the report. With oil contributing up to 95 per cent of Nigeria’s foreign exchange earnings the question arises: is relying on sole commodity to attract FDI sustainable in the long run? Certainly, it is not.
It is true recent data from Central Bank of Nigeria (CBN) has shown that in 2011 the overall balance of payment (i.e. balancing what the country pays for imports and it is paid for exports) swung from a deficit position in 2010 to a surplus one of N47 billion. But again the gains were primarily because of high price of Nigeria’s crude (Bonny Light grew on annualized basis from an average of US$81.6 per barrel in 2010 to US$113.8 in 2011).
Such reliance only exposes the country to the high risks of volatile economic fluctuations common with oil prices. Clearly, for Nigeria to take advantage of what foreign investment has to offer, we must first improve our economic policies, political climate and the vexing security situation.
Improving our economic policies starts firstly with diversifying our foreign exchange earning sources. Improving our export drive in the non-oil sectors readily comes to mind. And this is what Nigeria Export Processing Zones Authority (NEPZA) was established, way back in 1992, to promote. Secondly, we need to improve our infrastructure. While it is true that most of the infrastructures in the country are largely publicly owned, and thus poorly maintained, recent transformative steps taken by President Jonathan administration is addressing these problems squarely. For example, the Federal Government is pushing ahead with deregulation of the power sector; and already a significant privatization of the telecommunication industry has been achieved in the country. It is in line with these reforms agenda that the Federal Government needs to pay more attention to diversifying the non-oil exports, which NEPZA is positioned to provide leadership for.
This is imperative because the concentration of FDI in the oil and gas industry limits technology transfer and consequently inhibits job creation, due to the capital-intensive nature of the extraction process. We should use NEPZA effectively to attract FDI in other sectors, including manufacturing, tourism and consumer products. These new sources of FDI could generate greater employment and create more balanced economic growth across the length and breadth of the country.
The incentive regime put forward by NEPZA are quite attractive to investors except for other greater concerns such as fear of security breaches. Some of these incentives include: complete tax holiday for all federal, state and local government taxes, rates, customs duties and levies; One-stop approvals for all permits, operating licences and incorporation papers; 100 per cent foreign ownership of investments and repatriation of capital, profits and dividends.
Exports outside the oil and gas industry pay handsomely for those companies, foreign and indigenous, who took the advantage of the available opportunities. Consider the figures released by the National Bureau of Statistics on revenue generated through exports in 2011. Olam Nigeria Limited was ranked first in 2011 as the company made $444 million exporting sesame seeds and cocoa bean to Japan. Bolawale Enterprises Nigeria Limited came second with $146 million earnings exporting cocoa bean to the Netherlands, while Unique Leather took third position after making over $124 million through export of leather products to Italy.
No doubt NEPZA is critical to Nigeria’s economic development on near and long term basis; thus it needs all the moral and financial support to achieve the much needed diversification of the revenue earning base of the country. As of today NEPZA has created direct employment for over 9,000 people and contributes N630 million to Nigeria Customs as duties. And the agency is poised to achieve more.
Interestingly, the new leadership at NEPZA is proving that. If within the short period of time he has been in acting capacity as Managing Director of NEPZA, Engineer Terhemba David Nongo, is now close to sealing a deal with Kia Motor Corporation, that giant South Korean car manufacturer to relocate their assembly plant from Mali to Nigeria, then sky is the limit of what NEPZA can achieve moving forward. It will not be surprising if henceforth such goodies (attracting high net worth foreign investors) come to Nigeria going by the experiences of Engineer Nongo both inside and outside NEPZA and his combined knowledge of private and public sector operations.
NEPZA is proud of its 25 Free Trade Zones (FTZs) dotted across the country but these are at different stages of development and operations. Clearly there is the need to scale up the infrastructural development of the FTZs, double their number in the short term, to adequately diversify both the distributions of the FDI we receive and widen base of our foreign exchange earnings in the non-oil sectors.
Empirical research has established a bi-directional relationship between economic growth and FDI inflows to Nigeria showing that as FDI encourages our growth, more growth will also encourage more FDI, hence establishing a kind of positive-feed-back relationship between FDI and economic growth in Nigeria. And it goes without saying NEPZA is the critical upside of this valued relationship.
Bashir Ibrahim Hassan (mnipr), Theodak Plaza, Opposite National Hospital, Abuja