The Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) has cautioned the federal government against implementing new taxes on Free Trade Zones (FTZs).
NACCIMA warned that such measures could drive away $200 billion in foreign investments and cost the country 600,000 jobs.
The contentious provisions in the Nigeria Tax Bill 2024 propose introducing minimum tax rates and eliminating long-standing tax exemptions for businesses in FTZs, contradicting policies that have attracted investors for over three decades.
In a statement on Sunday, February 23, NACCIMA National President Dele Oye condemned the proposed amendments, particularly Sections 57, 60, 198(2), and 198(3), which he said threaten the incentives that have sustained FTZ investments since their establishment under the Nigeria Export Processing Zones Act of 1992.
“Stripping away established tax exemptions is a drastic measure that will diminish investor confidence and jeopardize Nigeria’s standing in the global investment community,” Oye, who also chairs Nigeria’s Organised Private Sector (OPS), stated.
He noted that of Nigeria’s 50 FTZs, 48 were developed through private-sector investments, contributing over ₦650 billion to the government in Customs duties and other revenue streams.
The tax-free status of these zones, he said, has been crucial in attracting foreign direct investment, stimulating job creation, and fostering industrialisation.
Oye criticised the lack of stakeholder engagement before the tax reforms were announced, pointing out that FTZ associations and businesses were not consulted until February 20, when Fiscal Policy and Tax Committee Chairman Taiwo Oyedele revealed the planned amendments at the Nigerian Economic Zones Association conference.
According to Oye, the new tax measures could trigger capital flight, with companies relocating to more investment-friendly countries such as Ghana and Angola.
He warned that removing tax incentives could also undermine Nigeria’s economic diversification agenda, particularly at key zones like the Lagos Free Zone, home to the Lekki Deep Sea Port.
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“The port’s recent achievements, including the docking of the largest container vessel in Nigerian history, underline the need to maintain an environment conducive to further investment and growth,” he said.
He also pointed to global competition, noting that other nations, such as the UAE, offer zero corporate tax in their FTZs, making Nigeria less attractive if the new policies take effect.
In response to mounting concerns, Oye called on the National Assembly to reconsider the amendments, urging policies that promote long-term investment rather than deter it.
“As NACCIMA, we urge the National Assembly to reassess the implications of the proposed Nigeria Tax Bill 2024 on the Free Trade Zone Scheme.
“The Bill represents a potential policy shift that could undermine decades of progress in attracting FDI and cultivating a dynamic, diversified economy.
“Protecting Nigeria’s FTZ framework is not just about retaining tax incentives; it’s about ensuring sustained economic growth, job creation, and enhancing Nigeria’s competitiveness on the global stage,” he stated.
He further warned that the policy could lead to legal disputes between investors, financial institutions, and government agencies such as the Nigerian Investment Promotion Commission, which previously granted tax incentives to attract investment.
“While not asking the government to completely reverse the vehicle, the government can also delay the application of the proposed amendments to enable investors to recoup their investments and set a new financial and business model,” Oye suggested.
He cautioned that if not handled carefully, the policy shift could disrupt the economy, slow down FTZ activity, and discourage new investments.
“This policy somersault through legislation is bound to shake everything in Nigeria if not carefully handled, as it has already slowed down activities in the FTZs, while potential new investments are held,” he warned.