Fed Govt Won’t Scrap Free Zone Incentives, To Close Loopholes–Minister

The federal government has moved to tighten the regulatory framework governing Nigeria’s Special Economic Zones (SEZs), assuring legitimate investors that existing incentives would be protected while loopholes capable of undermining the integrity of the Free Zones scheme are being closed.

Minister of Industry, Trade and Investment, Dr. Jumoke Oduwole, gave the assurance yesterday in Abuja as the Special Economic Zones Legislative and Regulatory Reform Committee commenced a dedicated drafting retreat to translate ongoing consultations into revised legislative and regulatory instruments.

The retreat brings together the Federal Ministry of Justice, the Federal Ministry of Industry, Trade and Investment (FMITI), the Nigeria Export Processing Zones Authority (NEPZA), the Oil and Gas Free Zones Authority (OGFZA), the Nigeria Customs Service and the Nigeria Revenue Service (NRS).

Stakeholder presentations by the Nigeria Economic Zones Association (NEZA), the National Single Window, the Nigeria Customs Service and the NRS opened the retreat, with issues raised during the September 17 stakeholder engagement being taken into the drafting process.

Oduwole said the reform was not intended to dismantle the Free Zones regime or withdraw the incentives that have historically attracted investment into Nigeria.

She said incentives including duty-free importation of capital goods, tax exemption on qualifying export profits, 100 per cent foreign ownership and unrestricted repatriation would remain central to the framework.

“A Free Zone cannot become an alternative route into the Nigerian domestic market on terms unavailable to manufacturers operating in the Customs Territory,” the minister said.

“But this is not an argument against Free Zones. It is an argument for protecting them. Legitimate investors who have committed capital to Nigeria deserve certainty. The rules must be clear. Institutional responsibilities must be clear. Customs and tax treatment must be predictable. And lawful incentives must remain defensible,” he added.

The reform comes amid renewed scrutiny of the integrity of the Free Zones scheme following recent Nigeria Customs Service enforcement actions involving allegations that goods entering under Free Zone concessions were subsequently diverted into the domestic market.

Oduwole said the government’s objective was to address such weaknesses without undermining investors and operators who had complied with the existing rules.

“The choice before Nigeria is not between preserving the Free Zones scheme and dismantling it. It is whether we can preserve what works, correct what does not and build a framework capable of serving the economy we are becoming,” she said.

The minister said the participation of the Nigeria Customs Service and NRS as core members of the drafting committee was deliberate, particularly because the two institutions would be responsible for implementing key customs and tax provisions under the new framework.

Among the issues being examined are the treatment of existing investments and transition arrangements for current licensees; the proposed 75/25 export-to-domestic-sales framework and possible phased implementation; customs coordination and joint inspections; simplified Customs exit procedures; foreign exchange and tax reporting; and the treatment of services provided within Free Zones.

The reform is also seeking to reduce multiple regulatory interfaces, with NEPZA and OGFZA retaining their coordinating responsibilities within their respective statutory mandates.

A key principle emerging from stakeholder discussions is the call for “one authority, one visit, one record” to reduce regulatory friction for businesses operating in the zones.

Oduwole described the principle as a useful test for the final implementation framework.

The reform also proposes a significant expansion of the Free Zones framework to accommodate digital businesses.

For the first time, the draft Regulations expressly recognise Digital Free Zones and Digital Free Zone Enterprises, with proposed licence categories including Innovator and Sandbox licences for businesses that may not require a conventional physical presence.

The development followed President Bola Tinubu’s directive to move the Digital Free Zones initiative into implementation, with a roadmap for full launch within 180 days.

NEPZA has licensed Itana as Nigeria’s first Digital Free Zone, while the Africa Finance Corporation is backing the $500 million Itana Innovation project at Alaro City.

Oduwole said Nigeria’s export ambitions must extend beyond physical goods, noting the growing importance of technology, financial and professional services, creative products, intellectual property and other digitally delivered services.

“Nigeria’s future exports will not only leave our ports in containers,” she said.