Nigeria may lose capital — both foreign and domestic — to neighboring African countries as the new tax reforms strip free trade zones off waivers that have made them attractive to investors, according to the Nigeria Economic Zones Association (NEZA).
“These reforms risk eroding investor confidence, jeopardising over one hundred thousand jobs, triggering capital flight to competing African countries, and increasing costs for Nigerian consumers,” said Toyin Elegbede, executive secretary, NEZA in a statement released on Monday.
Elegbede noted that current and prospective investors are already expressing concerns and actively reassessing Nigeria’s competitiveness relative to other countries in the region who have a clearer policy framework and incentives.
He argued that the provisions of the Nigeria Tax Act are not consistent with the Enabling Acts of the FTZs; stressing that for the first time, free zone enterprises who do not sell into Nigeria custom territory will be subject to taxation “in an unparalleled and aggressive encroachment into Nigeria’s free zones.”
“The new tax provisions affecting SEZ and FTZ operators have created deep uncertainty among investors and for the first time, have created a situation where even companies that export 100% of their products from the free zone can be subject to taxation, completely undermining the free zone scheme and making Nigeria’s free zones one of the least attractive and competitive on the continent,” he said .
The new tax rules which aim to introduce a minimum tax rate and scrap the longstanding exemptions that were previously granted by the the Nigeria Export Processing Zones Authority (NEPZA) and the Oil and Gas Free Zones Authority (OGFZA) would take effect next January.
But a moratorium has been granted to operators under the Free Trade Zones (FTZs) and Special Economic Zones (SEZs) till 2028, according to Taiwo Oyedele, chairman of the Presidential Committee on Tax Reform.
NEZA argued that Nigeria may lose out on the revenues from the zones as operators pay an average of $100,000 per zone (25 fully operational zones under NEPZA and 8 under OGFZA) annually in Operating Licence (OPL) renewal fees excluding additional renewals by FZEs, and pay an additional $100,000 per zone annually in container examination charges.
According to the statement, free zones contributed over N100 billion in customs duties and remitted over N2 billion in PAYE taxes on behalf of employees in 2024. They equally employ over 100 thousand workers.
Elegbede noted that with the tax policies, investors’ interest in the country may begin to wane thereby exerting pressure on the jobs and revenues the zones contribute to the development of the economy.
Reacting to concerns over uneven playing ground by the Manufacturers Association of Nigeria, NEZA’s chief emphasised that free zones are not created to displace local manufacturers, urging the government “to establish fair and transparent rules that balance the interests of manufacturers in the customs territory with the export-driven mandate of FZE”.
“If Nigeria weakens its Free Zone scheme, investors may simply relocate to these competitor economies, produce there, and still export duty-free into Nigeria under AfCFTA,” Elegbede said.
“This would not only erode Nigeria’s investment attractiveness but also expose domestic manufacturers to greater external competition, the very concern MAN has raised.”
He however called on the government to consider a moratorium on the implementation of the new tax provisions for FZEs, stressing that Nigeria must leverage free zones to attract foreign direct investments and grow the economy.
“A phased approach, whether through a transition period, a temporary extension of existing incentives, or the “grandfathering” of enterprises already operating under earlier frameworks, will provide investors the certainty needed to protect jobs, honour financing commitments, and complete long-term projects,” Elegbede said.
“This will also give the government the necessary space to conduct impact assessments and design an orderly framework that balances revenue objectives with Nigeria’s trade and economic competitiveness.”
