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Understanding industrialisation and free zones in Nigeria

From Dr. Akinwumi Adesina CON; President of the African Development Bank Group, to Ngozi Okonjo-Iweala GCON; Director General of the World Trade Organisation, to Hon. Dr. Doris UzokaAnite MD, CFA; Nigerian Minister of Industry, Trade, and Investment, to Sergio Pimenta; Regional Vice President for Africa at the International Finance Corporation, the message is clear: an industrial revolution is crucial for Nigeria’s overall transformation.

Our national focus on economic development has become imperative, and industrialisation is emerging as a compelling strategy for sustainable growth and inclusive fiscal prosperity.

This is reinforced by our country’s abundant endowment of a labour surplus, scarce raw materials, growing consumer markets, and an economy in dire need of diversification.

With industrialisation as the desired outcome, prominent among effective approaches is the establishment of Free Zones.

A Free Zone (FZ), also referred to as a Special Economic Zone (SEZ), Foreign or Free Trade Zone (FTZ), Enterprise Zone (EZ), Industrial Development Zone (IDZ), or Export Processing Zone (EPZ), is a geographically defined area offering differentiated legal and regulatory framework compared to the rest of the nation, specifically designed to enhance investment attractiveness. By addressing weaknesses in the broader business environment, FZs aim to compensate for potential risks and create a more conducive climate for foreign direct investment (FDI).

Policy goals of FZs include export promotion by providing a duty-free platform for calculated importation of raw materials and machinery, as well as tax breaks for the export of finished products. They also target import substitution by increasing domestic production to reduce attendant reliance, and job creation, through attraction of businesses that generate employment opportunities within the zone. In addition, FZs facilitate foreign direct investment to leverage capital and technology transfer.

The Nigerian Export Processing Zone Authority (NEPZA) lists permissible activities in FZs as construction and light manufacturing; solid minerals & metals; oil & gas; and agribusiness & agro-allied, covering various industries: from electronics to textile, to plastics, to cosmetics, pharmaceutical products, food processing, and more.

Building and maintaining the highest quality infrastructure within Free Zones demands substantial investment in logistics networks, operations and maintenance utilities, warehousing and distribution facilities, as well as communication technology. Businesses need a clear and predictable regulatory environment, accordingly, streamlined bureaucratic processes and consistent implementation of regulations are crucial. Perhaps the most pressing challenge lies in equipping its workforce with skillsets needed to thrive in these dynamic zones. Investing in technical and vocational education programs will be essential to ensure a talent pool that can meet the required demands.

According to 2021 data from the African Economic Zones Outlook (AEZO) and the United Nations Conference on Trade and Development (UNCTAD), more than 200 SEZs are operational in Africa while 73 projects have been announced for completion in 47 countries. Kenya had the largest number of SEZs numbering 61, while Nigeria and Ethiopia followed with 38 and 18, respectively.

South Africa launched its SEZ program in 2007, and with strong institutional frameworks and a clear vision, subsequently grew to 11 designated SEZs by 2021. Gabon has three SEZs, managed by Gabon Special Economic Zone (GSEZ) which was launched in 2010 and brings together 144 companies from 17 countries operating in 22 industrial sectors, including a cluster dedicated to wood processing. Based on available 2023 data, Gabon experienced impactful growth as its forestry economy grew by almost 400% between 2010 and 2021, jobs in the sector increased from 8,400 in 2010 to 30,000 in 2022, and contribution to the national GDP from the timber sector rose from 116 billion FCFA to 444 billion FCFA in 11 years. These achievements generated by GSEZ – a public-private-partnership entity between ARISE Integrated Industrial Platforms (IIP) and the Government of Gabon – have underscored the country’s transition from a mere log exporter to a leading global producer and exporter of veneer.

Armed with this knowledge, it gives some relief to see the Nigerian Government’s push for the establishment of thriving industrial zones in every part of the country. Most recent amongst those approved is Industrial Platform Remo Free Zone (IPRFZ), a public-private partnership between ARISE IIP and the Ogun State Government of Nigeria.

IPRFZ is superbly located within the ~5000-Hectare Remo Economic Development Cluster in Ogun State, which also comprises an AfDB Designated Special Agro-Industrial Processing Zone (SAPZ) and an aerotropolis; Gateway International Airport – the second international airport in South-West Nigeria. The zone’s plans are quite extensive; targeting agro and non-agro industries and including industrial, commercial, residential & logistics areas; a vocational training centre; natural gas supply for electricity and other uses; storage solutions, operations & maintenance facilities; and other key utilities.

IPRFZ sure cracked the code in meeting the first of four Dos listed by the World Bank for SEZs – choose the right location. Ogun State is aptly named ‘Gateway to Nigeria’ thanks to its prime positioning interconnecting Lagos State, the rest of Nigeria, and West Africa, making it a manufacturer’s dream spot with regards to distribution. The business mind begins to buzz when you add to that the State’s 1.2 million hectares of arable land and deposits of natural resources primarily limestone used for cement, blocks, glass and more.

With its construction ongoing, IPRFZ is projected to generate 40,000 direct and indirect jobs in its first phase. This and other much-needed surges in employment opportunities expected from the sector will empower Nigerians and contribute significantly to the nation’s economic growth.

Industrialisation presents a plethora of opportunities for Nigeria and Free Zones like IPRFZ are catalysts for the country’s transformation. With necessary investment and a supportive regulatory environment, Nigeria can replicate the success of other African countries that have embraced Free Zones to diversify their economy and boost job creation through sustained local production and foreign trade.


Source: Naijaonpoint.com.

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