In order to lessen the difficulties caused by the various import restrictions, the free trade zone idea was initiated.
Free trade zone is an enclave and not considered part of the country to which it is contiguous as far as import regulations are concerned. A free trade zone can receive shipment of goods for importation to be stored or processed without paying the required import duties until they leave the free trade zone area.
The idea of free trade zone is a well-developed system of attracting foreign direct investment {FDI} into a country that has been in practice in advance economies around the world and was introduced into Nigeria with the establish of the Nigeria Export Promotion Zone Authority { NEPZA}, which has led to the establishment of different free trade zones across the country.
The idea of free trade zone is meant to encourage world trade, limit trade restriction and promote employment.
In the oil and gas industry, Onne oil and gas free zone, Ladol free zone, Brass LNG free zone and Olokola free zone stands out as the free trade zone that specializes on oil and gas. Some of the companies above are not operational yet.
Nigerian Oil and Gas Industry have continued to play a key role in the country’s economic growth and development. The sector generates about 95 percent of total export revenue and 80 percent of her total national income.
In addition, it expends about $8 billion annually in servicing its operations. Sadly, a significant proportion of this amount is paid to foreign contractors for services like fabrication and engineering procurement; resulting into capital flight and leaving very little to developing the country’s industrial base.
With the passage of the Local Content Act, aimed at championing the course for higher indigenous participation in the sector and the opportunities available from operating in a free trade zone, Nigerian entrepreneur is better positioned to domesticate most of the contracts in the oil and gas industry in Nigeria.
The investor can fabricate, process and package products in the zone before they leave for the domestic market or re-export.
Some of the benefits of doing in any of the free trade zones in Nigeria include
No import or export license required.
Unrestricted remittance of profit and dividends earned by investors in the zone.
100% foreign ownership of enterprises in the zone allowed
100% export of goods produced in the zone to any destination
Rent – free land during construction of factory space
Free trade zones stimulate export by giving the exporter who produces his product a hedge against duties on the raw materials used in the production.
Some of the business opportunities available in the free trade zones include
Supply of raw material
Provision of cleaning services
Freight Forwarding Services
Provision of warehouse facility
Provision of security services
Investors interested in locating in one of Nigeria ‘s Free Trade Zones are only required to follow a few simple steps:
1. Pick up your application form online or from the administration of the Free Zone where you wish to locate or from the office of the Nigeria Export Processing Zones Authority (NEPZA) in Abuja . This application form costs N50,000 (non-refundable) or its US Dollars equivalent.
2. Fill out the application and submit it to the zonal administration or the NEPZA office in Abuja along with the required feasibility study. Your application will be reviewed and either approved or returned with observations within five working days.
3. If your application is approved, the required Operational Licence can be obtained from the Free Zone administration and from there on you contact your Zone of choice.
As soon as your company possesses an Operating Licence, it is officially incorporated in Nigeria and does not require any additional paperwork. It is at this point that the Free Zone will discuss your location on site with you and assign and reserve a space for you.
4. Remit your investment capital through banks located in the Zone which will in turn issue a Certificate of Capital Importation.
5. Prepare your building or warehouse space. Investors who are constructing their own buildings must submit four copies of the full architectural drawings of their building for approval by the Free Zone according to established building codes. Built-up area should not exceed 70% of the leased land, and construction should start within 3 months after execution of the agreement.
6. Move in and operate! The process is just that easy! The Government has designed the process to be as streamlined and user-friendly as possible.
Some companies may have some additional permits and procedures to follow such as obtaining permission for your foreign national and employees which can be done on-site as immigration offices are in the Free Zones.
For comparison purpose, bonded warehouses are similar to free trade zones in concept only that they are usually smaller.
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