The FG moves to close gaps in the free zone and protect legitimate investors

The federal government has moved to tighten the regulatory framework governing Nigeria’s special economic zones (SEZs), assuring legitimate investors that existing incentives will be protected while loopholes that allow abuse of the free zone system are closed.

The Minister of Industry, Trade and Investment, Dr. Jumoke Oduwole, provided the assurance as the Special Economic Zones Legislative and Regulatory Reform Committee embarked on a dedicated drafting retreat to translate ongoing consultations into revised legislative and regulatory instruments.

Blueprint reports that the retreat brought 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 from the Nigeria Economic Zones Association (NEZA), National Single Window, Customs and NRS opened the withdrawal, with issues raised during the September 17 stakeholder engagement now being developed.

Oduwole said the reform was not aimed at dismantling the free zone regime or withdrawing incentives that have historically attracted investors to Nigeria.

It said legitimate incentives, including duty-free import of capital goods, tax exemption on qualified export profits, 100% foreign ownership and unrestricted repatriation, will remain central to the framework.

“A free zone cannot become an alternative route to enter the Nigerian domestic market on terms not available to manufacturers operating in the customs territory,” the minister said.

“But this is not an argument against free zones. It is an argument for their protection. Legitimate investors who have invested capital in Nigeria deserve certainty. The rules must be clear. Institutional responsibilities must be clear. Customs and tax treatment must be predictable. And legal incentives must remain defensible.”

The reform follows renewed scrutiny of the integrity of the free zone system following recent enforcement actions by the Nigeria Customs Service involving allegations that goods entered under free zone concessions were subsequently diverted into the domestic market.

According to the minister, the government’s objective is to address these weaknesses without weakening investors and operators who have complied with existing rules.

“The choice before Nigeria is not between preserving the free zone system and dismantling it. But it is whether we can preserve what works, fix what doesn’t work and build a framework that can serve the economy we are becoming,” Oduwole said.

The minister said the participation of Customs and NRS as core members of the drafting committee was deliberate, especially since the two institutions will play a key role in the implementation of customs and tax provisions in the new framework.

Issues under consideration include the treatment of existing investments and transition arrangements for current licensees; the proposed 75/25 framework for exports and domestic sales and its possible phased implementation; customs coordination and joint inspections; simplified customs exit procedures; currency and tax reporting; and the processing of services provided within the Free Zones.

The reform also aims to reduce multiple regulatory interfaces, with NEPZA and OGFZA maintaining their coordination responsibilities under 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 areas.

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

The reform also marks a significant expansion of the free zone framework to accommodate digital businesses.

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

The development follows President Bola Ahmed Tinubu’s directive to implement the Digital Free Zones initiative, with a roadmap for full rollout within 180 days.

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

Oduwole said Nigeria’s export ambitions must extend beyond physical goods.

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

“Nigerian businesses increasingly export technology, financial and professional services, creative products, intellectual property and other digitally delivered services. A modern special economic zone regime must be able to attract such businesses as aggressively as it has historically sought to attract manufacturers.”

The minister said the reform is in line with the Renewed Hope Agenda and the federal government’s efforts to expand Nigeria’s manufacturing base, increase non-oil exports and create jobs.

Furthermore, NEPZA President Hadi Mutallab said the reform will strengthen the integrity of the system while ensuring the protection of legitimate operators during the transition.

Likewise, Executive Secretary of the Association of Economic Zones of Nigeria, Toyin Elegbede, welcomed the consultative process, saying operators want reforms that address real regulatory gaps without creating uncertainty for existing investments.

The federal Ministry of Industry, Trade and Investment said consultations will continue until the legislative and regulatory framework is completed, with the government also acknowledging the support of the National Assembly, including the House Committee on Commerce chaired by the Hon. Ahmed Munir.