Nigeria: Free Trade Zones around international airports

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The Nigerian government has recognized the need for increase earnings and as such says plans have reached an advanced stage for the establishment of viable Free Trade Zones (FTZ) within the country’s major international airports.

 

This is in respect to the criticisms by stakeholders concerning the earnings over the years from Nigeria’s airports.

According to stakeholders, the earnings which is about 96 per cent have been restricted to aeronautical businesses like passenger service charges as well as Value Added Tax, landing and parking charges paid by local and international airlines.

Incomes from non-aeronautical businesses like hotels, eateries, car parks, banking, bookshops, shopping malls, among others from Nigerian airports have been minimal owing to the failure to make the required investments at the airports to attract patronage on these non-aeronautical services.

Minister of State for Aviation, Mr. HadiSirika, who spoke at the stakeholder’s forum in Abuja explained that the decision to establish Free Trade Zones in Nigerian airports was in line with the Aviation Road Map developed in 2016 by the Muhammadu Buhari government for the sector.

Sirika said top officials in the Federal Ministry of Transport, Ministry of Trade and Investment and Nigerian Export Processing Zones Authority had already commended work on how to establish the FTZ even as he expressed the optimism that the project would come on stream before the end of 2019 in some of the airports.

The international airports where the FTZ are scheduled to be established include the Nnamdi Azikiwe Airport Abuja; Murtala Muhammed Airport, Lagos: Akanu Ibiam Airport, Enugu; as well as the Malam Aminu Kano Airport in Kano and the Port Harcourt International Airport.

What are free trade zones 

Free Trade Zones (FTZs), also referred to as foreign trade zones, are chosen areas where finished goods and raw materials can be purchased, sold, manufactured, imported and exported without the barriers to trade that are ordinarily imposed by customs authorities.

Free trade zones are commonly located in close proximity to airports, or seaports and national borders.

The absence of interference and regulation by customs authorities in these zones reveals several distinct benefits for consumers, businesses, manufacturers, importers and exporters. The removal of export duties allows goods and materials to be imported to the zones and then exported without being taxed. For example, raw materials or components could be shipped to a manufacturer located in the free trade zone without incurring customs duties.

The manufacturer then incorporates the materials or components in the building of finished products. The products can then be exported without being taxed. To an extent, many of the world’s leading FTZs are located immediately next to airports, facilitating international transportation for the incoming and outgoing movement of goods, particularly those with high-value.

Benefits

Sirika made it known that the establishment of the FTZ would go a long way to unlock the inactive potential in Nigeria’s aviation industry for national growth.

He also listed the following as benefits of setting Free Trade Zones at international airports in Nigeria.

He said “Free Trade Zones will create duty-free areas within international airports and provide warehousing, storage and distribution facilities for trade, trans-shipment and re-export operations”.

He added that“This free trade zones that we will be established will grant exemptions from national import and export duties on goods that are re-exported from Nigeria. And Free Trade Zones at airports will also decrease business transaction costs.

“But above all, siting of Free Trade Zones at airports will promote investments, facilitate trade, and create hundreds of jobs for Nigerians”.

It must also be noted that the establishment of FTZs within airports will also facilitate technology and knowledge transfer through the creation of forward and backward linkages.

Employment creation which is one of the main objectives for establishing zones by governments can help increase the income of people and encourage domestic savings and investments into industries. FTZs, for the most part, have led to creation of jobs.  Today, it is estimated that there are about 3,000 free trade zones in 136 countries accounting for 68 million direct jobs and over $500 billion of direct trade-related value.

Industry preparedness 

The Nigerian Aviation Handling Company (NACHO) and Skyway Aviation Handling Company (SAHCO) Plc however are on the lead in making the required investments to take advantage of the Free Trade Zones to be established in Nigerian airports.

According to Mallam Suleiman Yahyah, a former Chairman of NAHCO, the establishment of a FTZ at Nigeria’s busiest airport, the Murtala Muhammed Airport Lagos would improve the country’s economy with up to $500 million in investments expected to be attracted over the next five years into the FTZ.

According to him, the FTZ, when in full operation, would create jobs and enhance the country’s economy.
On his part, the Managing Director/CEO of the Nigeria Aviation Handling Company (NAHCO) Free Trade Zone, Mr. Baba Yusuf described the airport free trade zones as critical platforms for quick access to domestic and international market that will provide standard, quality and competitive products and services.
Demerits

There is nothing that has an advantage without a disadvantage. Beyond doubt, free trade zones at airports also come with its own disadvantages for which the Nigerian government must be prepared to handle.  One of such disadvantage is for goods to be sneaked into the free trade zones to avoid the payment of taxes. And some of these goods may also be of substandard or low quality value.

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