The figures peddled by Nigeria’s export processing zones regulator are quite exciting. On the face of it, one could conclude that Nigeria has made landmark milestones on its economic development frontiers. However, the underlying ratios in terms of well-known Nigeria’s comparative advantages – or yet-to-be-developed advantages – do not give a picture of commensurate progress compared to other countries EPZs.
Officially, Nigeria’s 40 Export Processing Zones have attracted over US$30 billion in Foreign Direct Investment, though the net value is not stated, and over N620 billion in local investment. These are milestone achievements when added to more than 25000 jobs created by 580 enterprises operating within the zone corridors. However, viewed from the perspective of sectoral investments in the zones and the nature of activities of operating companies, the country is certainly, not creating any advantages for its economy. Whereas agriculture contributes about 24% to GDP, it attracted only 1% of investment to the trade zones.
Though government targets a US$100 billion export from the special economic zones, the figures of current export earnings from the zones, as the second major policy thrust, are visibly absent from statistics rolled out by Nigeria Export Processing Zones Authority.
Impressively, the manufacturing sector attracted the largest investment at 45% followed by services at 30% while Oil & Gas and trading have 11% and 10% investments respectively. Logistics at 3% is followed by agriculture. This is the picture of the federal government’s EPZ policy so far. And when drilled further down, the nature of manufacturing activities driven by kinds of pasta, biscuits and so much else that are not export-oriented but inward market-driven, the position becomes clearer.
With weak infrastructures and lax labour practices, the zones have only conceded the competitive advantage to certain foreign players who among other economy-hurting practices, import labour that could have been supplied locally. The immigration waiver on expatriate quota, duty-free imports and other incentives for zone enterprises are to be blamed for the influx of foreign nationals into the zones. Therefore, when all these are discounted, it may be glaring that job creation and exports, the main accruing net values for the zones and country are lost.
Agriculture and agribusiness as priorities for export-driven zones
Agriculture is largely most African countries’ mainstay and including Nigeria. Nigerian exports consist mainly of raw materials to developed countries. In return, the country imports the finished products at a cost which surpasses the earnings from its exports. Hence the huge trade deficits it records Year-on-Year against its trading partners. For instance, Nigeria’s 4-year (2016–2019) cumulative agricultural imports at N3.35 trillion were four times higher than the agricultural export of N803 billion within the same period.
Since African leaders discovered that their countries would continue to rely on finished products from developed countries and remain disadvantaged and remaining competition minnows in world trade, they came up with African Continental Free Trade Area (AfCFTA) to increase trade amongst themselves and thus transform their economies for bloc competitiveness.
The AfCFTA business is one major transformational initiative that can strengthen the trade negotiating powers of the continent and the individual countries viz-a-viz other supranational trading groups. For this piece, the focus in on Nigeria’s export processing zones which incidentally, is the incubation lab for its continental competitiveness.
Nigeria adopted Free Zones in the country to create an “enabling environment aimed at enhancing economic growth and development of export-oriented manufacturing in the non-oil sector of the economy, as well as the propagation of the Nigerian content policy in the oil & gas sector”. The overall benefit of the policy is to diversify the economy, “attract Foreign Direct Investment (FDI), generate employment, increase foreign exchange earnings, enhance technology transfer, skill acquisition and upgrade as well as create backward linkages.”
The Nigeria Export Processing Zones Authority (NEPZA), an agency under the supervision of the Ministry of Industry, Trade and Investment is the major implementer of this federal government’s initiative to diversify the Nigerian economy. It focuses on attracting investors with attractive investment packages which include tax havens and 100% profit repatriation.
Typically, the export zones are located in the vicinity of seaports and airports, thus making the import and export process more convenient. The main lure for developing countries is the possibility of increased foreign exchange and job creation. However, without clear oversight by the regulator within the zones, investors take advantage and make the objectives unrealizable. On this, the World Bank warns that the adoption of EPZs should not replace sound economic reforms.
Rethinking incentives, AfDB interventions
It is still possible to rethink the investment priorities in the export-free zones through a balanced waiver and tax incentives regime for companies investing in economic growth sectors like agriculture and manufacturing. For the manufacturing sector, the export-import ratio of the zones enterprise should determine the incentives to be offered. A blanket offer of incentives without any clear match to the export orientation of the zone enterprise will continue to weaken the policy objective and to a larger extent, the economy.
With a declaration that “there is no reason for anyone to go hungry in Nigeria,” Nigerian-born President of African Development Bank (AfDB), Dr Akinwunmi Adeshina flagged off late last year, an investment of US$520 to a Special Agro-industrial Processing Zones (SAPZ). This could be seen as an emergency intervention in the face of food shortages across the world.
Faced with the stark realities of vastly impoverished and starving populations worsened by the disruption of grain supplies from Russia and Ukraine, urgent action became imperative to save lives in Africa. About 30 metric tons of wheat, soybeans and maize have been short-circuited due to the war in both countries. For this reason, the AfBD and other participating institutions, IFAD and the Islamic Development Bank launched the SAPZ programme aiming to empower “100,000 direct beneficiaries including smallholders, small processors, traders and service providers with a strong focus on youth and women.
To achieve its overall objective, SAPZ will “develop value chains for selected strategic crops in Nigeria, including maize, cassava, rice, soybean, cocoa, poultry, and livestock products. They will also create millions of quality jobs, especially for youth and women.
“Our empowerment strategy aims to equip farmers and smallholders to take advantage of the markets created by the SAPZ to sustainably enhance their income through income-generating activities, household food security and nutrition, and resilience to climate change,” states Meighan of Islamic Development Bank.
The AfDB envisages that “SAPZs will help feed Nigeria, transform rural economies, expand fiscal space, fully unlock Nigeria’s agricultural potential, and create millions of jobs.”
The first phase of the program will include seven States of Nigeria namely, Cross River, Imo, Kaduna, Kano, Kwara, Ogun, Oyo, and the Federal Capital Territory, Abuja. On paper, this looks too good, but hitting the ground running in view of the near-crisis situation in food supplies is another matter because of Nigeria’s lethargic response to the implementation of programmes such as this.
Reversing the high food import bill
Five major crops – maize, cassava, guinea corn, yam, beans, millet and rice – possess the highest yield opportunity for a quick turnaround to a productive economy from the prevailing consumptive economy. With some 70.8 million hectares of agricultural land area holding highly competitive cultivable landmass for the crops as mentioned earlier, the country can become a net exporter of these crops while also satisfying its local demands.
Africa accounts for the world’s 64% cassava production with Nigeria leading with 63 million metric tons in 2021. It is estimated that the country also suffers a shortfall of about 3 million metric tons in its rice consumption requirements. As a staple food, this holds an advantage for large-scale farm investment. The Nigerian government needs to seize the massive agricultural investment opportunity offered by AfDB and its partners for improved production in the crops identified as high-yield revenue earners.
We can also learn from the past mistakes of crude oil dependency which weakened the productive capacity of palm oil and other agricultural produce some decades ago. Today, Nigeria is not a leading producer of palm oil it was number one in the 60s and early 70s. The same may happen in maize, cassava and other crops which it has a comparative advantage if it does not pick the gauntlet and rev up. Economic intelligence shows that some Asian economies are studying and experimenting with the potential of cassava and maize economies and may one day dump Nigeria by the wayside in producing these crops.
The Government has implemented several initiatives and programmes to address the situation including the Agriculture Promotion Policy (APP), and Nigeria–Africa Trade and Investment Promotion Programme. The Presidential Economic Diversification Initiative, Economic and Export Promotion Incentives and the Zero Reject Initiative are other initiatives that suffered the same poor implementation and priority failures. In addition, Reducing Emission from Deforestation and Forest Degradation (REDD+), Nigeria Erosion and Watershed Management Project (NEWMAP), and Action Against Desertification (AAD) Programme count among numerous other initiatives that are only alive in reports.