How Nigerian Government can cut cost using Steve Oronsaye Rationalization Report

By Dr Adesina AGBOLUAJE & Mr. Yusuf ABDULLAHI

Towards the end of April, 2020, the Honorable Minister of Finance said the government had commenced the implementation of the recommendations of Steve Oronsaye panel report as part of its strategy to raise money to finance the huge deficits in the 2020 budget.

Similar effort had taken place when the civilian dispensation came into effect in 1999. Federal Government constituted the Ahmed Joda Presidential Panel Report on the Review, Harmonization and Rationalization of Federal Parastatals, Institutions and Agencies.  The panel report put Oil and Gas Export Free Zone Authority (OGEFZA) under the Nigeria Export Processing Zones Authority (NEPZA) with intention of having a single Free Trade Zones Regulatory Authority which is also recommended in Steve Oronsaye panel report and is major issue of discussion in this piece.

This piece is written because of the potential of free trade zones scheme to have in quickly transforming a region and absorbing a good number of work force.  Shannon Free Trade Zone in Republic of Ireland was established in 1957 from manufacturing consumer’s goods to computer chips to aerospace engines manufacturers. Dubai in UAE started in 1987 to diversify from crude oil production, trading and fishing to value chain deports to manufacturing to a megacity travel destination in a desert.  Nigeria joined in in developing the concept in 1992. Where is Dubai today from a fishing village to a mega city while Nigeria is still struggling with legal frame works on free trade zones scheme?

The Asian Tigers scored successes in development through free trade zones schemes producing cheap consumer goods and appliances.  China, Korea, Malaysia, Singapore you name them are using this development concept in providing employment opportunities and adoption of latest technology as free trade zones are regarded as laboratory incubators.

With the current crisis in global crude oil price coming tumbling down, I believe as the Honorable Minister of Finance said “to find strategy to raise money to finance the huge deficits in the 2020 budget” free trade zones concept is one of the better paths the government to follow to diversify the economy to maximize the benefits of the huge raw resources we have and the teaming well educated unemployed youth.

My name is Yusufu Abdullahi former Director, Planning, Research and Statistics, former Federal Ministry of Commerce and the desk Officer on free trade zones in Nigeria from 2000 to 2005. It was during my tenure as a Director that the strategic restructuring of free trade zones schemes took place.  During same period the first premier, Calabar Free Trade Zone was commissioned and the foundation stone for and fencing of Kano Free Trade Zone took place.  Private Sectors and State Governments free trade zones were declared and licensed by the Nigeria Export Processing Zones Authority (NEPZA). Director SIMCO, Consultant Snake Island Integrated Free Zone, Lagos.

I was on the Boards of NEPZA and Onne Oil and Gas Export Free Trade Zone (OGEFZA).  I was the Chairman of the Technical Committee to Ministerial Committee set up by the Federal Executive Council on the strategic restructuring of free trade zones from 2000 to 2005.  I was also the Chairman, Ministerial Committee on the Reform of Free Trade Zones/Export Processing Zones from 2012 to 2013.

Unless Government is serious in correcting the imbalance of its inflow revenue sources for economic development, it should be consistent with its strategic development policy or Nigeria will continue to kick the can down the road and loss focus on development.  I gave an example above that Dubai started its development with Jabel Ali Port and Free trade Zone in 1987.  But my main point here was that Nigeria also started with the same concept in 1992, five years gap.

This is what UNIDO said in its concluding remarks on EPZ in Nigeria in 1991, research indicates that “the general agreement amongst all those interviewed during this research, both domestic and overseas, show that Nigeria offers one of the best chances for industrial investment in Africa because of its large domestic market, central location, low wage structure, availability of raw materials, membership of ECOWAS and the fact that it is English speaking country.”

Why Nigeria is struggling with free trade zones concept that started in 1992 while Dubai that started five years earlier has become travel destination for Nigerians.  I was asked this question at Senator Odo Udoma Committee on Tariff and Waiver at Nicon Hotel as to what was the reason for it with all the blessings UNIDO narrated in its report. ATTITUDE was the answer. This attitude is reflected and demonstrated by the Honourable Minister of FMITI just after the Honourable Minister of Finance announced the commencement of the implementation of Oronsanye panel report, and also one of the reasons for this article.

The Honorable Minister of Industry, Trade and Investment have just demonstrated the negative attitude of Nigerians towards economic development in Nigeria by pre-empting Government policy pronouncement on the verge of merger of OGEFZA into NEPZA. The Honourable Minister of FMITI prefers promoting coercive monopoly; in fact, illegal coercive monopoly by issuing an edict to a lawful Regulator NEPZA to release Private Investment worth billions of dollars, not Government funding to another equal level free trade zone but Government funded, OGEFZA who is not a lawful national free trade zone regulator by law.

The reason the Honourable Minister gave was a solicited private opinion between school mates, the Attorney General and Dr. Noble Abey, both graduated from the University of Maiduguri. Honourable Minister of FMIFI was not told that late President YarAdua debunks the opinion because it is not consonant with the law. The Solicitor General chaired the Presidential Committee on Free Trade Zones where Federal Government approved the establishment of a single Free Zones Authority. Honourable Minister of FMITI picked the worst course of action and left behind Federal Government Conclusion, decisions and policy, to work with it.

Honourable Minister FMITI has given himself power that he does not have by undermining the Presidential declaration and designation of these free trade zones. He is annexing to OGEFZA Private Investments without recourse to the approving Authority, Mr. President. The opinion of the Attorney General is not higher and cannot be the opinion of the Authority; it is personal opinion like any opinion in the market place. It is disheartening for an Honourable Minister FMITI to use personal opinion to destabilize private investment worth billions of dollars in the development and operation of the zones without Government funding. He however disowned Federal Government decisions and policy to rot.

The issue started with Stakeholders forum called by OGEFZA to amend its legal Act to give it more power where the subsidiary Act did not, the sole power to designate and declare oil and gas free trade zone in Nigeria.  Stakeholders under the NEPZA Regulatory umbrella who were not give the opportunity to speak because it was the third time OGEFZA is embarking on this journey since both Ahmed Joda and Steve Oronsaye panels Reports on Rationalization of Parastatals and Government Agencies report recommended putting OGEFZA under NEPZA, it has been making efforts to tarnish and stop the merger.  The attitude of the Honorable FMITI on 4th May, 2020 is now finally revealed in disallowing Stakeholders to speak at the Forum because the stage has been compromised and the Honorable Minister of Finance broadcast that Government was going to implement the
Oronsaye report merging the two Authorities has forced the Honorable Minister of FMITI to show his hand of shame like the Federal Minister of State for Transportation did in 2008 when he willingly reversed Government policy on oil and gas activities sector.

When the Stakeholders read the mind of the Minister of FMITI they met to advise NEPZA to informed the Honourable Minister of FMITI that the current exercise by the Ministry to amend and change OGEFZA Act is the third attempt because the proposed amendment goes against and contrary to Federal Government Policy of fair play and equal level playing field and investment opportunities.  The Federal Ministry of Industry, Trade and Investment are the custodian of fair play and level playing fields in the Nigeria economy.

Stakeholders further directed that NEPZA should call the attention of the Honourable Minister to the fact that similar action of going against the Federal Government Policy had occurred in 2008 when the Honourable Minister of State for Transportation was deceived by an entity from OGEFZA to issue Policy Circular that “importers of oil and gas cargo” should only patronize Onne, Warri and Calabar. The Circular was issued contrary to and against Presidential directive that “importers of oil and gas cargos should be free to choose port of preference” to open up competition in the sector.

The Minister, in an effort to extricate himself from Presidential query, caused Bureau of Public Enterprises (BPE), the umpire to Port Concessions Exercise, to pad the Port Concessions Index to include concept of oil and gas cargoes as part of the index.
President YarAdua Administration disagreed and made the Minister to reverse and reinstated the policy in the freedom of importers of oil and gas cargos to choose port of preference in national interest.  Attached letter  ref T.4316/S.35/T3s24 of 7th August, 2008.

Stakeholder further said that when the effort through the Ministry of Transport failed to give OGEFZA coercive monopoly through edict, they turned over to Nigeria Customs Service (NCS) for self-help which led NCS to issue Circular NCS/T&T/I&E/092/S.3/VOL.111/STMS dated 20th November, 2008.  The target companies were listed as 1 & 2, however knowing the implication of its circular the NCS hurriedly explained its position with regards to Free Trade Zones at paragraph 7 which was the norms in the sector.

President Jonathan, at the wee hours of his departure, took the position of INTELS that Onne, Warri and Calabar ports were the only dedicated ports of discharge in the loading and discharge of oil and gas cargo contrary to the previous Government policy.  The Administration also went a step further in accepting the amendment of the Onne Oil and Gas Export Free Zone Act to insert Onne, Warri and Calabar as being the only ports where importers of oil and gas cargo should make the choice in the country to receive oil and gas cargoes which the current OGEFZA Bill proposal wants to achieve.

Stakeholders, after the Senate had passed the bill twenty four hours to the end of Legislative term, objected and went to Federal High Court and secured court injunction to stop the House of Representatives from reading the Bill and President Jonathan from signing the Bill into law.  The court injunction is still pending.

Jonathan Administration had allowed OGEFZA to overreach its legal jurisdiction in expanding its operations into Warri, Calabar and now Apapa ports by approving its operations while the enabling law did not give OGEFZA such power of designating an area in Nigeria as an Oil and Gas Export Free Zone but the enabling law limits its operations to Onne/Ikpopiri area of Rivers State only.

The current proposal is the third time that OGEFZA and INTELS are trying to amend the Act to muzzle out competition in the sector.   INTELS used its surrogate OGEFZA to pursue Senators in the 8th National Assembly  to reopen the bid to amend the OGEFZA Act to achieve, this time, two objectives:- to absorb the stubborn Private Sector Free Zones operators in oil and gas logistics services into its fold and under the regulatory framework of OGEFZA and secondly to make Onne, Warri and Calabar ports as being the only ports importers of oil and gas cargos can choose in discharging and loading of cargoes. Stakeholders sniffed the attempt to amend the Bill with good arguments and positions at Senate Public Hearings at National Assembly.

Stakeholders exposed the brazenly acts of OGEFZA with INTELS in the facilitation that usurped the legislative powers of National Assembly in altering its Corporate title to Oil and Gas Free Zones Authority.  “EXPORT” was deliberately deleted and the word “Zone” was deliberately pluralized in direct contravention of an extant Act of the National Assembly without a formal amendment of same.

OGEFZA constituted itself into an extra arm of the Nigerian Legislature and by a stroke of pen unilaterally amended an Act of the National Assembly which is not only unconstitutional but also illegal. OGEFZA’s actions are manifestly in variance to due process as it has acted in excess of its express statutory authority.  All its purported actions to “create” new Free Zones, “take over” privately funded Free Zones, and to oversee oil and gas logistics operations within Free Zones scheme that are outside its statutory mandate.  Federal Ministry of Industry, Trade and Investment should not be seen to facilitate OGEFZA activity in acquiring coercive monopoly in oil and gas sector of the economy.

President Mohammadu Buhari, through NPA letter to LADOL, one of the Stakeholders, Ref. MD/17/MP/VolXX/484 of 10th May, 2017, on Conveyance of Presidential Approval:- Report on Concessioner Terminals in the Ports, that the President has conveyed his approval on 24th April, 2917 to Honourable Minister of Transportation, on right of importers of oil and gas to choose terminals or port for discharge of their cargoes, and the recognition  of the company’s right to operate.  That Federal Government remains guided by the general global practice in the designation of Terminals/Port operations are put into three broad categorizations of bulk cargo, container cargo and multi-purpose cargo.  Federal Government rejects the categorization of oil and gas multipurpose as is alien to the concession agreements and inconsistent with global shipping practices.

Mr. President further stated that the non- designation of Onne Oil and Gas Export Free Zone Terminal as an’Oil and Gas Multi-Purpose Cargo Terminal’ does not in any way legally obstruct or compromise the operations of the free zone as an Oil and Gas Export Free Zone, but rather, it merely indicates that all cargo (including oil and gas cargoes) meant for the free zone may continue to be discharged at the Onne Port for use in the zone.  Here again the Presidency is confirming that OGEFZA Act is thus geographically confined at Onne/Ikpokiri and does not give powers for any further or other designation/declaration of any area as an oil and gas free zone.

OGEFZA BILL PROPOSAL IS COERCIVE MONOPOLY IN OIL AND GAS SECTOR.

Stakeholders have opposed the current third proposal of OGEFZA amendment of its Act because it is contrary to Government policies in the freedom of importers of oil and gas cargos to choose port of preference in national interest.  It is also in contradiction to Government policy that Onne, Warri and Calabar ports are the only ports importers of oil and gas cargos can choose in discharging and loading of cargoes.  President Buhari has emphasized on the right of importers to choose terminals or port for discharge of their oil and gas cargoe.  Third, the proposal is in contrast to Government policy that OOGEFZA Act 1996, in Section 1(1) is for designation of Onne/Ikpokiri area of Rivers State as an export free zone.  OGEFZA Act is thus geographically confined to Onne/Ikpokiri.  Fourth, the 1996 OGEFZA  Act  does not give it powers for any further or other designation/declaration of any area as an oil and gas export processing zone. This has been reconfirmed in Presidential letter of 2017 through NPA to LADOL that all cargo (including oil and gas cargoes) meant for Onne free zone may continue to be discharged at the Onne Port for use in the zone.

To prevent coercive monopoly in the oil and gas sector, Federal Government had taken various major decisions and policies, one of which was in the Ministry of Transportation where importers of oil and gas cargos are allowed to choose port of preference in national interest further expatiated by President Buhari on the right of importers of oil and gas to choose terminals or port for discharge of their cargoes. The second major decision was a single Free Zones Authority in the country.  Federal Government has taken the following decisions towards harmonization of free trade zone sector:-

a)  Federal Government had taken a strategic change in concept from export processing zone to the new free trade zones scheme to attract private sector participation in the strategic development of free trade zones in Nigeria.

b)  Federal Government has allowed private sector participation in free trade zone development to attract and anchor core manufacturers, fabricators,refineries, products assembling plants, housing estates and logistic service providers instead of exporting commodity in its raw form and importing the end products for merchandising. Federal Government approved additional incentives to facilitate the attraction and anchorage of investors, this proposed amendment is against it. The Honorable Minister of FMITI has now abuse this policy by coercive monopoly edict which he issued after the Ministry of Finance has made the announcement for the implementation of Oronsanye report making the Circular baseless and illegal.

c)  Federal Government took decision to amend the NEPZA Act 63 of 1992 and it also replaced export processing zone (EPZ) strategy with free trade zone strategy because of its inhibit nature, this proposed amendment is in variance to it. The Minister of FMITI is ignoring the Government decision.

d)  Federal Government approved the Nigeria Free Zones Authority (NIFZA) as amended, to be enacted into law to replace the Nigeria Export Processing Zones Authority Act No. 63 of 1992; this proposed OGEFZA amendment is against it.
As far as the current Minister of FMITI is concerned there should be two Regulatory Authorities in one economic sector.

e)  Federal Government also directed Federal Ministry of Justice “to prepare the relevant instrument for the enactment of NIFZA Bill into law by the National Assembly” in its FEC Conclusion 4, EC (2002) 27th Meeting, to only regulate and monitor, to allow for the participation of the private sector in the free trade zone development in Nigeria, this proposal in amending OGEFZA is negatively working to stop it. The Minister of FMITI is in full support of OGEFZA in contradicting Government policy.

f)  Presidential Committee on Free Zones report, as approved by Mr. President, was sent to Federal Ministry of Commerce vides ECD/P/338/11/526 of 17th October, 2006, now Federal Ministry of Industry, Trade and Investment, for implementation. The President states that “there shall be only (1) Free Zone Authority to regulate and harmonize the operations of other zones. To be known as the Nigeria Free Zones Authority, it will be responsible for policy formulation for and general supervision of free zones in the country (including oil and gas free zones activities), set general standards of operation and arbitrate disputes between the free zones where they occur.” OGEFZA did not like the policy and had been working tiredness to prevent its implementation. They have deceived the Honourable Minister or the Honourable Minister is deceiving himself by refusing to implement the Presidential directive.

g)  Federal Government approved the role of “the new Free Zones Authority, which is consistent with the Council Conclusion on the Harmonization and Rationalization of Parastatals, to only  a regulatory and monitoring to allow for the participation of the private sector in the free trade zone development.” OGEFZA has been fighting this Government policy and the proposal is to kill it to give OGEFZA coercive monopoly in oil and gas sector. The action of the Minister today is his intention of doing that without recourse to Federal Executive Council.

Federal Government free trade zones in Calabar and Kano are therefore to be privatized to run as an independent free trade zones similar to  Onne Oil and Gas Export Free Zone, Lekki Free Trade Zone, Lagos Free Trade Zone, LADOL, Snake Island Integrated Free Zone to name a few.  But the Honorable Minister is against it contrary to the Government policy and decision.

The Free Trade Zones are destined to compete amongst themselves for attracting free zone enterprises, value added chains suppliers and manufacturers.  OGFEZA had refused to pick operation license from NEPZA when the First Executive Order on Free Zones Tariff was gazette in 2002.  Picking the license will make OGEFZA freely to operate like any other free trade zone in Nigeria with a single Regulator.  The Honorable Minister of FMITI prefer to empower OGEFZA whose primary Act did not give it that power and worst nationalizing Private Sector Operation through Circular.

Federal Government also approved that Private Sector should be the Driver in Zones Development and Operation because
the growing trend for privately owned, developed and operated free trade zones is to enhance economic development and employment opportunities to free public funds for public projects than having public owned, developed and operated free trade zones..

It was a shock to learn that Federal Government budgeted N50 billion for the establishment of six geopolitical Special Economic Zones when private sector, with good policy and a single Regulator will be willing to participate in the development and operation of free trade zones in Nigeria as a profitable ventures releasing for example the N50 billion to other areas of public needs.  But the attitude of the Honorable Minister of FMITI has shown that the Administration prefers Government funding to do it alone as his latest action is tailored to drive away foreign and domestic investment in Nigeria.

Federal Government has realized that Free Trade Zone facilities can be profitably operated and its success is linked to location, development and management.  Management is enhanced when operated on cost-recovery, market oriented and customer-focused enterprises.  Best practice policy and incentive framework is encouraging free zones to compete on the basis of facilitations, facilities and services rather than provision of government incentives regimes. But the Honorable Minister of FMITI does not like it.  He prefers public funding of free trade zones.

Privately operated zones offer better facilities and amenities, command higher prices from tenants and attract high value added investors. Private zone is ran on cost-recovery basis and responsive to tenant needs, and provides wider range of properly management services and amenities including health clinics, day care centers, onsite housings and business support services. It is better for Nigeria free trade zone to stay stagnated without foreign investment.

Federal Government encourages fair competition amongst free trade zones by promoting a single Free Zones Authority as a Regulator to provide private sector operators confidence with further investment.  The current OGEFZA Bill proposal is to stifle fair competition envisaged by Government and cripple investors’ confidence in the free trade zone sector.  This is not in the philosophy of the current Honorable Minister of FMITI who is expected to promote trade and investment not to stifle and cripple it illegally.

In fair play competition, as best practices, is the  difference a free zone can provide between “hardware and services” by a free trade zone and “software” of incentives and privileges offer by government.  All types of zones shall be permitted, offering customized infrastructure, facilities, and services tailored to specific needs of target industries.  As far as possible, all zones shall have a common set of incentives and privileges, rather than duplication and overlapping regime resulting in government revenue loss, which the current OGEFZA Bill proposal is negatively aiming at. The Honorable Minister of FMITI is in tandem OGEFZA because of his compromised position.

Where Government ran zones exist in Nigeria, legal framework shall ensure competition among private and public zones on a level playing field and public zones do not have unfair advantages -such as subsidies, and coercive monopoly which undercut private projects as being promoted by the Federal Ministry of Industry, Trade and Investment in the current OGEFZA Proposed amendment of its Act of 1996 and his directive of nationalizing Private Sector Investment. With his latest edict to annex private investments to Government side has definitely confirmed where his knowledge is with respect to ensuring competition among private and public zones on a level playing field and public zones do not have unfair advantages, which he gave OGEZA by annexing private free trade zone to it without recourse to Mr. President,

Rights, responsibilities, and obligations of government and private sector are defined to enable partnership for zone development not monopoly.  It is the highest bidder rights and obligation should be respected according to the act of the Honorable Minister of FMITI issuing illegal Circular annexing Private Sector Investment.

Stakeholders are therefore advising Federal Ministry of Industry, Trade and Investment to conclude the above decisions of Federal Government by implementing the Presidential directive for a single Regulator, responsible for policy formulation for and general supervision of free zones in the country (including oil and gas free zones activities).  The current OGEFZA proposed amendment Bill is not different from the previous two attempts in acquiring power where the prime Act has not provided the power it requires.  Custodial for fair play and level playing field for competition in the economy, the Federal Ministry of Industry, Trade and Investment, cannot be seen and should not be seen to be an actor for coercive monopoly by promoting the proposed OGEFZA amendment of its Act because it is contrary to Federal Government policy in free trade zone sector.  Nigeria Free Zones Authority (NIFZA) Bill should be the appropriate Bill to be promoted by the Federal Ministry of Industry, Trade and Investment for Free Trade Zone Sector in the Nigeria economy.

Honourable Minister of FMITI to withdraw his Letter Circular to NEPZA in directing it to transfer Private Investment to OGEFZA as unnecessary act without legal basis.

Yusufu Abdullahi
Former Director
Planning, Research and Statistic, Officer on Free Trade Zones from 2000 to 2005.
Director SIMCO, SIIFZ, Lagos.

Endorsement by:

Dr. ADESINA A AGBOLUAJE
EX MD/CEO NEPZA
CONSULTANT TO ECONOMIC ZONES
SINOLAT COMPANY
DATE; 05 /MAY 2020.
HOW NIGERIAN GOVERNMENT CAN CUT COST USING STEVE ORONSAYE RATIONALIZATION REPORT.

Towards the end of April, 2020, the Honorable Minister of Finance said the government had commenced the implementation of the recommendations of Steve Oronsaye panel report as part of its strategy to raise money to finance the huge deficits in the 2020 budget.

Similar effort had taken place when the civilian dispensation came into effect in 1999. Federal Government constituted the Ahmed Joda Presidential Panel Report on the Review, Harmonization and Rationalization of Federal Parastatals, Institutions and Agencies.  The panel report put Oil and Gas Export Free Zone Authority (OGEFZA) under the Nigeria Export Processing Zones Authority (NEPZA) with intention of having a single Free Trade Zones Regulatory Authority which is also recommended in Steve Oronsaye panel report and is major issue of discussion in this piece.

This piece is written because of the potential of free trade zones scheme to have in quickly transforming a region and absorbing a good number of work force.  Shannon Free Trade Zone in Republic of Ireland was established in 1957 from manufacturing consumer’s goods to computer chips to aerospace engines manufacturers. Dubai in UAE started in 1987 to diversify from crude oil production, trading and fishing to value chain deports to manufacturing to a megacity travel destination in a desert.  Nigeria joined in in developing the concept in 1992. Where is Dubai today from a fishing village to a mega city while Nigeria is still struggling with legal frame works on free trade zones scheme?

The Asian Tigers scored successes in development through free trade zones schemes producing cheap consumer goods and appliances.  China, Korea, Malaysia, Singapore you name them are using this development concept in providing employment opportunities and adoption of latest technology as free trade zones are regarded as laboratory incubators.

With the current crisis in global crude oil price coming tumbling down, I believe as the Honorable Minister of Finance said “to find strategy to raise money to finance the huge deficits in the 2020 budget” free trade zones concept is one of the better paths the government to follow to diversify the economy to maximize the benefits of the huge raw resources we have and the teaming well educated unemployed youth.

My name is Yusufu Abdullahi former Director, Planning, Research and Statistics, former Federal Ministry of Commerce and the desk Officer on free trade zones in Nigeria from 2000 to 2005. It was during my tenure as a Director that the strategic restructuring of free trade zones schemes took place.  During same period the first premier, Calabar Free Trade Zone was commissioned and the foundation stone for and fencing of Kano Free Trade Zone took place.  Private Sectors and State Governments free trade zones were declared and licensed by the Nigeria Export Processing Zones Authority (NEPZA). Director SIMCO, Consultant Snake Island Integrated Free Zone, Lagos.

I was on the Boards of NEPZA and Onne Oil and Gas Export Free Trade Zone (OGEFZA).  I was the Chairman of the Technical Committee to Ministerial Committee set up by the Federal Executive Council on the strategic restructuring of free trade zones from 2000 to 2005.  I was also the Chairman, Ministerial Committee on the Reform of Free Trade Zones/Export Processing Zones from 2012 to 2013.

Unless Government is serious in correcting the imbalance of its inflow revenue sources for economic development, it should be consistent with its strategic development policy or Nigeria will continue to kick the can down the road and loss focus on development.  I gave an example above that Dubai started its development with Jabel Ali Port and Free trade Zone in 1987.  But my main point here was that Nigeria also started with the same concept in 1992, five years gap.

This is what UNIDO said in its concluding remarks on EPZ in Nigeria in 1991, research indicates that “the general agreement amongst all those interviewed during this research, both domestic and overseas, show that Nigeria offers one of the best chances for industrial investment in Africa because of its large domestic market, central location, low wage structure, availability of raw materials, membership of ECOWAS and the fact that it is English speaking country.”

Why Nigeria is struggling with free trade zones concept that started in 1992 while Dubai that started five years earlier has become travel destination for Nigerians.  I was asked this question at Senator Odo Udoma Committee on Tariff and Waiver at Nicon Hotel as to what was the reason for it with all the blessings UNIDO narrated in its report. ATTITUDE was the answer. This attitude is reflected and demonstrated by the Honourable Minister of FMITI just after the Honourable Minister of Finance announced the commencement of the implementation of Oronsanye panel report, and also one of the reasons for this article.

The Honorable Minister of Industry, Trade and Investment have just demonstrated the negative attitude of Nigerians towards economic development in Nigeria by pre-empting Government policy pronouncement on the verge of merger of OGEFZA into NEPZA. The Honourable Minister of FMITI prefers promoting coercive monopoly; in fact, illegal coercive monopoly by issuing an edict to a lawful Regulator NEPZA to release Private Investment worth billions of dollars, not Government funding to another equal level free trade zone but Government funded, OGEFZA who is not a lawful national free trade zone regulator by law.

The reason the Honourable Minister gave was a solicited private opinion between school mates, the Attorney General and Dr. Noble Abey, both graduated from the University of Maiduguri. Honourable Minister of FMIFI was not told that late President YarAdua debunks the opinion because it is not consonant with the law. The Solicitor General chaired the Presidential Committee on Free Trade Zones where Federal Government approved the establishment of a single Free Zones Authority. Honourable Minister of FMITI picked the worst course of action and left behind Federal Government Conclusion, decisions and policy, to work with it.

Honourable Minister FMITI has given himself power that he does not have by undermining the Presidential declaration and designation of these free trade zones. He is annexing to OGEFZA Private Investments without recourse to the approving Authority, Mr. President. The opinion of the Attorney General is not higher and cannot be the opinion of the Authority; it is personal opinion like any opinion in the market place. It is disheartening for an Honourable Minister FMITI to use personal opinion to destabilize private investment worth billions of dollars in the development and operation of the zones without Government funding. He however disowned Federal Government decisions and policy to rot.

The issue started with Stakeholders forum called by OGEFZA to amend its legal Act to give it more power where the subsidiary Act did not, the sole power to designate and declare oil and gas free trade zone in Nigeria.  Stakeholders under the NEPZA Regulatory umbrella who were not give the opportunity to speak because it was the third time OGEFZA is embarking on this journey since both Ahmed Joda and Steve Oronsaye panels Reports on Rationalization of Parastatals and Government Agencies report recommended putting OGEFZA under NEPZA, it has been making efforts to tarnish and stop the merger.  The attitude of the Honorable FMITI on 4th May, 2020 is now finally revealed in disallowing Stakeholders to speak at the Forum because the stage has been compromised and the Honorable Minister of Finance broadcast that Government was going to implement the
Oronsaye report merging the two Authorities has forced the Honorable Minister of FMITI to show his hand of shame like the Federal Minister of State for Transportation did in 2008 when he willingly reversed Government policy on oil and gas activities sector.

When the Stakeholders read the mind of the Minister of FMITI they met to advise NEPZA to informed the Honourable Minister of FMITI that the current exercise by the Ministry to amend and change OGEFZA Act is the third attempt because the proposed amendment goes against and contrary to Federal Government Policy of fair play and equal level playing field and investment opportunities.  The Federal Ministry of Industry, Trade and Investment are the custodian of fair play and level playing fields in the Nigeria economy.

Stakeholders further directed that NEPZA should call the attention of the Honourable Minister to the fact that similar action of going against the Federal Government Policy had occurred in 2008 when the Honourable Minister of State for Transportation was deceived by an entity from OGEFZA to issue Policy Circular that “importers of oil and gas cargo” should only patronize Onne, Warri and Calabar. The Circular was issued contrary to and against Presidential directive that “importers of oil and gas cargos should be free to choose port of preference” to open up competition in the sector.

The Minister, in an effort to extricate himself from Presidential query, caused Bureau of Public Enterprises (BPE), the umpire to Port Concessions Exercise, to pad the Port Concessions Index to include concept of oil and gas cargoes as part of the index.
President YarAdua Administration disagreed and made the Minister to reverse and reinstated the policy in the freedom of importers of oil and gas cargos to choose port of preference in national interest.  Attached letter  ref T.4316/S.35/T3s24 of 7th August, 2008.

Stakeholder further said that when the effort through the Ministry of Transport failed to give OGEFZA coercive monopoly through edict, they turned over to Nigeria Customs Service (NCS) for self-help which led NCS to issue Circular NCS/T&T/I&E/092/S.3/VOL.111/STMS dated 20th November, 2008.  The target companies were listed as 1 & 2, however knowing the implication of its circular the NCS hurriedly explained its position with regards to Free Trade Zones at paragraph 7 which was the norms in the sector.

President Jonathan, at the wee hours of his departure, took the position of INTELS that Onne, Warri and Calabar ports were the only dedicated ports of discharge in the loading and discharge of oil and gas cargo contrary to the previous Government policy.  The Administration also went a step further in accepting the amendment of the Onne Oil and Gas Export Free Zone Act to insert Onne, Warri and Calabar as being the only ports where importers of oil and gas cargo should make the choice in the country to receive oil and gas cargoes which the current OGEFZA Bill proposal wants to achieve.

Stakeholders, after the Senate had passed the bill twenty four hours to the end of Legislative term, objected and went to Federal High Court and secured court injunction to stop the House of Representatives from reading the Bill and President Jonathan from signing the Bill into law.  The court injunction is still pending.

Jonathan Administration had allowed OGEFZA to overreach its legal jurisdiction in expanding its operations into Warri, Calabar and now Apapa ports by approving its operations while the enabling law did not give OGEFZA such power of designating an area in Nigeria as an Oil and Gas Export Free Zone but the enabling law limits its operations to Onne/Ikpopiri area of Rivers State only.

The current proposal is the third time that OGEFZA and INTELS are trying to amend the Act to muzzle out competition in the sector.   INTELS used its surrogate OGEFZA to pursue Senators in the 8th National Assembly  to reopen the bid to amend the OGEFZA Act to achieve, this time, two objectives:- to absorb the stubborn Private Sector Free Zones operators in oil and gas logistics services into its fold and under the regulatory framework of OGEFZA and secondly to make Onne, Warri and Calabar ports as being the only ports importers of oil and gas cargos can choose in discharging and loading of cargoes. Stakeholders sniffed the attempt to amend the Bill with good arguments and positions at Senate Public Hearings at National Assembly.

Stakeholders exposed the brazenly acts of OGEFZA with INTELS in the facilitation that usurped the legislative powers of National Assembly in altering its Corporate title to Oil and Gas Free Zones Authority.  “EXPORT” was deliberately deleted and the word “Zone” was deliberately pluralized in direct contravention of an extant Act of the National Assembly without a formal amendment of same.

OGEFZA constituted itself into an extra arm of the Nigerian Legislature and by a stroke of pen unilaterally amended an Act of the National Assembly which is not only unconstitutional but also illegal. OGEFZA’s actions are manifestly in variance to due process as it has acted in excess of its express statutory authority.  All its purported actions to “create” new Free Zones, “take over” privately funded Free Zones, and to oversee oil and gas logistics operations within Free Zones scheme that are outside its statutory mandate.  Federal Ministry of Industry, Trade and Investment should not be seen to facilitate OGEFZA activity in acquiring coercive monopoly in oil and gas sector of the economy.

President Mohammadu Buhari, through NPA letter to LADOL, one of the Stakeholders, Ref. MD/17/MP/VolXX/484 of 10th May, 2017, on Conveyance of Presidential Approval:- Report on Concessioner Terminals in the Ports, that the President has conveyed his approval on 24th April, 2917 to Honourable Minister of Transportation, on right of importers of oil and gas to choose terminals or port for discharge of their cargoes, and the recognition  of the company’s right to operate.  That Federal Government remains guided by the general global practice in the designation of Terminals/Port operations are put into three broad categorizations of bulk cargo, container cargo and multi-purpose cargo.  Federal Government rejects the categorization of oil and gas multipurpose as is alien to the concession agreements and inconsistent with global shipping practices.

Mr. President further stated that the non- designation of Onne Oil and Gas Export Free Zone Terminal as an’Oil and Gas Multi-Purpose Cargo Terminal’ does not in any way legally obstruct or compromise the operations of the free zone as an Oil and Gas Export Free Zone, but rather, it merely indicates that all cargo (including oil and gas cargoes) meant for the free zone may continue to be discharged at the Onne Port for use in the zone.  Here again the Presidency is confirming that OGEFZA Act is thus geographically confined at Onne/Ikpokiri and does not give powers for any further or other designation/declaration of any area as an oil and gas free zone.

OGEFZA BILL PROPOSAL IS COERCIVE MONOPOLY IN OIL AND GAS SECTOR.

Stakeholders have opposed the current third proposal of OGEFZA amendment of its Act because it is contrary to Government policies in the freedom of importers of oil and gas cargos to choose port of preference in national interest.  It is also in contradiction to Government policy that Onne, Warri and Calabar ports are the only ports importers of oil and gas cargos can choose in discharging and loading of cargoes.  President Buhari has emphasized on the right of importers to choose terminals or port for discharge of their oil and gas cargoe.  Third, the proposal is in contrast to Government policy that OOGEFZA Act 1996, in Section 1(1) is for designation of Onne/Ikpokiri area of Rivers State as an export free zone.  OGEFZA Act is thus geographically confined to Onne/Ikpokiri.  Fourth, the 1996 OGEFZA  Act  does not give it powers for any further or other designation/declaration of any area as an oil and gas export processing zone. This has been reconfirmed in Presidential letter of 2017 through NPA to LADOL that all cargo (including oil and gas cargoes) meant for Onne free zone may continue to be discharged at the Onne Port for use in the zone.

To prevent coercive monopoly in the oil and gas sector, Federal Government had taken various major decisions and policies, one of which was in the Ministry of Transportation where importers of oil and gas cargos are allowed to choose port of preference in national interest further expatiated by President Buhari on the right of importers of oil and gas to choose terminals or port for discharge of their cargoes. The second major decision was a single Free Zones Authority in the country.  Federal Government has taken the following decisions towards harmonization of free trade zone sector:-

a)  Federal Government had taken a strategic change in concept from export processing zone to the new free trade zones scheme to attract private sector participation in the strategic development of free trade zones in Nigeria.

b)  Federal Government has allowed private sector participation in free trade zone development to attract and anchor core manufacturers, fabricators,refineries, products assembling plants, housing estates and logistic service providers instead of exporting commodity in its raw form and importing the end products for merchandising. Federal Government approved additional incentives to facilitate the attraction and anchorage of investors, this proposed amendment is against it. The Honorable Minister of FMITI has now abuse this policy by coercive monopoly edict which he issued after the Ministry of Finance has made the announcement for the implementation of Oronsanye report making the Circular baseless and illegal.

c)  Federal Government took decision to amend the NEPZA Act 63 of 1992 and it also replaced export processing zone (EPZ) strategy with free trade zone strategy because of its inhibit nature, this proposed amendment is in variance to it. The Minister of FMITI is ignoring the Government decision.

d)  Federal Government approved the Nigeria Free Zones Authority (NIFZA) as amended, to be enacted into law to replace the Nigeria Export Processing Zones Authority Act No. 63 of 1992; this proposed OGEFZA amendment is against it.
As far as the current Minister of FMITI is concerned there should be two Regulatory Authorities in one economic sector.

e)  Federal Government also directed Federal Ministry of Justice “to prepare the relevant instrument for the enactment of NIFZA Bill into law by the National Assembly” in its FEC Conclusion 4, EC (2002) 27th Meeting, to only regulate and monitor, to allow for the participation of the private sector in the free trade zone development in Nigeria, this proposal in amending OGEFZA is negatively working to stop it. The Minister of FMITI is in full support of OGEFZA in contradicting Government policy.

f)  Presidential Committee on Free Zones report, as approved by Mr. President, was sent to Federal Ministry of Commerce vides ECD/P/338/11/526 of 17th October, 2006, now Federal Ministry of Industry, Trade and Investment, for implementation. The President states that “there shall be only (1) Free Zone Authority to regulate and harmonize the operations of other zones. To be known as the Nigeria Free Zones Authority, it will be responsible for policy formulation for and general supervision of free zones in the country (including oil and gas free zones activities), set general standards of operation and arbitrate disputes between the free zones where they occur.” OGEFZA did not like the policy and had been working tiredness to prevent its implementation. They have deceived the Honourable Minister or the Honourable Minister is deceiving himself by refusing to implement the Presidential directive.

g)  Federal Government approved the role of “the new Free Zones Authority, which is consistent with the Council Conclusion on the Harmonization and Rationalization of Parastatals, to only  a regulatory and monitoring to allow for the participation of the private sector in the free trade zone development.” OGEFZA has been fighting this Government policy and the proposal is to kill it to give OGEFZA coercive monopoly in oil and gas sector. The action of the Minister today is his intention of doing that without recourse to Federal Executive Council.

Federal Government free trade zones in Calabar and Kano are therefore to be privatized to run as an independent free trade zones similar to  Onne Oil and Gas Export Free Zone, Lekki Free Trade Zone, Lagos Free Trade Zone, LADOL, Snake Island Integrated Free Zone to name a few.  But the Honorable Minister is against it contrary to the Government policy and decision.

The Free Trade Zones are destined to compete amongst themselves for attracting free zone enterprises, value added chains suppliers and manufacturers.  OGFEZA had refused to pick operation license from NEPZA when the First Executive Order on Free Zones Tariff was gazette in 2002.  Picking the license will make OGEFZA freely to operate like any other free trade zone in Nigeria with a single Regulator.  The Honorable Minister of FMITI prefer to empower OGEFZA whose primary Act did not give it that power and worst nationalizing Private Sector Operation through Circular.

Federal Government also approved that Private Sector should be the Driver in Zones Development and Operation because
the growing trend for privately owned, developed and operated free trade zones is to enhance economic development and employment opportunities to free public funds for public projects than having public owned, developed and operated free trade zones..

It was a shock to learn that Federal Government budgeted N50 billion for the establishment of six geopolitical Special Economic Zones when private sector, with good policy and a single Regulator will be willing to participate in the development and operation of free trade zones in Nigeria as a profitable ventures releasing for example the N50 billion to other areas of public needs.  But the attitude of the Honorable Minister of FMITI has shown that the Administration prefers Government funding to do it alone as his latest action is tailored to drive away foreign and domestic investment in Nigeria.

Federal Government has realized that Free Trade Zone facilities can be profitably operated and its success is linked to location, development and management.  Management is enhanced when operated on cost-recovery, market oriented and customer-focused enterprises.  Best practice policy and incentive framework is encouraging free zones to compete on the basis of facilitations, facilities and services rather than provision of government incentives regimes. But the Honorable Minister of FMITI does not like it.  He prefers public funding of free trade zones.

Privately operated zones offer better facilities and amenities, command higher prices from tenants and attract high value added investors. Private zone is ran on cost-recovery basis and responsive to tenant needs, and provides wider range of properly management services and amenities including health clinics, day care centers, onsite housings and business support services. It is better for Nigeria free trade zone to stay stagnated without foreign investment.

Federal Government encourages fair competition amongst free trade zones by promoting a single Free Zones Authority as a Regulator to provide private sector operators confidence with further investment.  The current OGEFZA Bill proposal is to stifle fair competition envisaged by Government and cripple investors’ confidence in the free trade zone sector.  This is not in the philosophy of the current Honorable Minister of FMITI who is expected to promote trade and investment not to stifle and cripple it illegally.

In fair play competition, as best practices, is the  difference a free zone can provide between “hardware and services” by a free trade zone and “software” of incentives and privileges offer by government.  All types of zones shall be permitted, offering customized infrastructure, facilities, and services tailored to specific needs of target industries.  As far as possible, all zones shall have a common set of incentives and privileges, rather than duplication and overlapping regime resulting in government revenue loss, which the current OGEFZA Bill proposal is negatively aiming at. The Honorable Minister of FMITI is in tandem OGEFZA because of his compromised position.

Where Government ran zones exist in Nigeria, legal framework shall ensure competition among private and public zones on a level playing field and public zones do not have unfair advantages -such as subsidies, and coercive monopoly which undercut private projects as being promoted by the Federal Ministry of Industry, Trade and Investment in the current OGEFZA Proposed amendment of its Act of 1996 and his directive of nationalizing Private Sector Investment. With his latest edict to annex private investments to Government side has definitely confirmed where his knowledge is with respect to ensuring competition among private and public zones on a level playing field and public zones do not have unfair advantages, which he gave OGEZA by annexing private free trade zone to it without recourse to Mr. President,

Rights, responsibilities, and obligations of government and private sector are defined to enable partnership for zone development not monopoly.  It is the highest bidder rights and obligation should be respected according to the act of the Honorable Minister of FMITI issuing illegal Circular annexing Private Sector Investment.

Stakeholders are therefore advising Federal Ministry of Industry, Trade and Investment to conclude the above decisions of Federal Government by implementing the Presidential directive for a single Regulator, responsible for policy formulation for and general supervision of free zones in the country (including oil and gas free zones activities).  The current OGEFZA proposed amendment Bill is not different from the previous two attempts in acquiring power where the prime Act has not provided the power it requires.  Custodial for fair play and level playing field for competition in the economy, the Federal Ministry of Industry, Trade and Investment, cannot be seen and should not be seen to be an actor for coercive monopoly by promoting the proposed OGEFZA amendment of its Act because it is contrary to Federal Government policy in free trade zone sector.  Nigeria Free Zones Authority (NIFZA) Bill should be the appropriate Bill to be promoted by the Federal Ministry of Industry, Trade and Investment for Free Trade Zone Sector in the Nigeria economy.

Honourable Minister of FMITI to withdraw his Letter Circular to NEPZA in directing it to transfer Private Investment to OGEFZA as unnecessary act without legal basis.

Yusufu Abdullahi
Former Director
Planning, Research and Statistic, Officer on Free Trade Zones from 2000 to 2005.
Director SIMCO, SIIFZ, Lagos.

Endorsement by:

Dr. ADESINA A AGBOLUAJE
EX MD/CEO NEPZA
CONSULTANT TO ECONOMIC ZONES
SINOLAT COMPANY
DATE; 05 /MAY 2020.