By Modupe Gbadeyanka

The need for critical stakeholders to have a constructive dialogue on the impact of the tax reforms on the free zones in the country has been emphasised by the Nigeria Economic Zones Association (NEZA).

In a statement signed by the executive secretary of NEZA, Toyin Elegbede, it was pointed out that certain provisions of the Nigeria Tax Act 2025 and the Nigeria Tax Administration Act 2025 affect Special Economic Zones (SEZs) and Free Trade Zones (FTZs), posing significant risks to Nigeria’s investment climate.

It was noted that without careful engagement and strategic interventions, these reforms risk eroding investor confidence, jeopardising over 100,000 jobs, triggering capital flight to competing African countries, and increasing costs for Nigerian consumers.

At a time when Nigeria should be consolidating its leadership under the African Continental Free Trade Area (AfCFTA), policies that weaken the free zone scheme could inadvertently shift competitive advantage to neighbouring economies.

The new tax provisions affecting SEZ and FTZ operators have created deep uncertainty among investors and for the first time, have created a situation where even companies that export 100 per cent of their products from the free zone can be subject to taxation, completely undermining the free zone scheme and making Nigeria’s free zones one of the least attractive and competitive on the continent, a part of the note made available to Business Post stated.

NEZA said investors may choose to relocate to other African countries with more favourable free zone regimes, while still benefitting from duty-free access to the Nigerian market under AfCFTA rules, depriving Nigeria of the very investments, skills transfer, and employment opportunities the zones were designed to secure.

It stressed that by taxing domestic sales from the zones, the reforms risk raising the cost of goods in the customs territory, undermining competitiveness for Nigerian businesses and places additional burdens on consumers.

“The perception that the FTZs operating with 100 per cent export orientation or complying with the 75 per cent export outside the custom territory would be exempt has been nullified by Section 57 of the Nigeria Tax Law, 2025 which stipulates that every company meeting these conditions will still be subject to taxation. It is concerning especially as FTZs have been beneficiaries of Foreign Direct Investment (FDI) and thereby including more entities irrespective of the exemptions stated in the second schedule.

“The unprecedented minimum effective tax rules that will apply to multinationals or companies generating above a certain revenue threshold within the free zones significantly harm these companies by effectively stripping them of their key tax incentives, even for those who do not sell into Nigeria.

“Although aimed at increasing tax collection, the reforms could shrink Nigeria’s overall revenue base if zones collapse or investors shift operations to more favourable environments, resulting in long-term losses that outweigh short-term gains,” it stated.

The group stated that these risks are not hypothetical; current and prospective investors are already expressing concerns and actively reassessing Nigeria’s competitiveness relative to other countries in the region.

“Contrary to the pronouncements of the Presidential Fiscal Policy and Tax Reforms Committee, the Nigeria Tax Law, 2025 made fundamental and adverse changes to the Enabling Acts of the Free Zones Regulatory Authorities (NEPZA & OGFZA). Despite repeated assurances, the Nigeria Tax Law provisions are not consistent with the Enabling Acts; instead for the first time, free zone enterprises who do not sell into Nigeria custom territory will be subject to taxation in an unparalleled and aggressive encroachment into Nigeria’s free zones.

“Again, contrary to perceptions that Free Zones deprive government of revenue, the reality is that zones already make substantial contributions to Nigeria’s economy and fiscal system. Under the supervision of the Regulatory Authorities, free zone operators pay an average of $100,000 per zone (25 fully operational zones under NEPZA and 8 under OGFZA) annually in Operating Licence (OPL) renewal fees excluding additional renewals by FZEs, and pay an additional $100,000 per zone annually in container examination charges.

“In 2024 alone, free zones contributed over N100 billion in customs duties and remitted over N2 billion in PAYE taxes on behalf of employees. They also meet numerous other obligations, including immigration fees, authority administrative fees, and levies.

“These figures do not even begin to capture the broader economic impact of Nigeria’s free zones including infrastructure investments, deepening supply chain linkages, skills development of local talent, and the creation of over 100,000 direct jobs. Beyond fiscal contributions, world-class infrastructure is the backbone of any successful free zone programme. A compelling example is Morocco’s Tanger Med Free Zone, a state-led public-private partnership (PPP)-driven complex where total investment reached about $11.2 billion by 2022 ($ 4.3 billion from public sources and $ 6.9 billion from private investors).

“In 2023, the port handled 8.61 million TEU, with its industrial zones hosting about 1,200 companies, generating 110,000 jobs and $15 billion in exports. It is now on track to exceed its nominal capacity of 9 million TEU. This is what strategic, coordinated investment combined with policy stability can deliver. Nigeria has the potential to replicate and even surpass such success, but only if the free zone framework is protected and strengthened, not undermined,” it stated.

NEZA warned that if Nigeria weakens its Free Zone scheme, investors may simply relocate to these competitor economies, produce there, and still export duty-free into Nigeria under AfCFTA. This would not only erode Nigeria’s investment attractiveness but also expose domestic manufacturers to greater external competition, the very concern MAN has raised.

The solution, therefore, is not to stifle or weaken the free zone scheme but to establish fair and transparent rules that balance the interests of manufacturers in the customs territory with the export-driven mandate of FZEs. With proper consultation and policy design, both can thrive creating a more diversified, competitive Nigerian economy.

It posited that the recent tax reforms were introduced with insufficient engagement with key zone stakeholders, limiting the depth required for a holistic, workable and balanced outcome. This lack of structured dialogue risks creating policy misalignment, where the reforms may inadvertently erode the very industrialisation, job creation, and export diversification objectives that government seeks to achieve.

NEZA reaffirmed its unwavering commitment to supporting operators across Nigeria’s SEZs and FTZs. We remain dedicated to working collaboratively with the government to ensure that the reforms achieve their goals of transparency, fairness, and revenue assurance without destabilising a scheme that has generated billions in revenue, created thousands of jobs, and helped positioned Nigeria as an investment destination.

It called on President Bola Tinubu, the Federal Inland Revenue Service, NEPZA, OGFZA, and other key stakeholders to engage in a structured and inclusive dialogue with operators.

NEZA urged the government to consider a moratorium on the implementation of the new tax provisions for FZEs. A phased approach, whether through a transition period, a temporary extension of existing incentives, or the “grandfathering” of enterprises already operating under earlier frameworks, will provide investors the certainty needed to protect jobs, honour financing commitments, and complete long-term projects. This will also give government the necessary space to conduct impact assessments and design an orderly framework that balances revenue objectives with Nigeria’s trade and economic competitiveness.