By Merit Ibe [email protected]
Stakeholders are worried that items produced in the free trade zones (FTZs) that are meant for export, find there way into the local market, making products already in the Nigerian market less competitive.
Going by the agreement on the FTZs in Nigeria, all the products manufactured in the zones are meant to be exported to nearby African countries.
The free trade zone is an area where companies are allowed to bring in raw materials and machinery to produce for export.
At the zones, companies enjoy a lot of benefits like free duty and tax. Facilities are highly subsidised. The land is free, immigration waiver given and full repatriation of profits and dividends to operators guaranteed.
However, the caveat is that whatever is produced at the zone (100%) is exported. It is a way of attracting forex to the country. But some operators have flouted the rules by engaging in practices that have led to non competitiveness of Nigerian products in the local markets outside the free trade zones.
Lax regulations and logistics error have been listed as part of the reasons things were going in the wrong direction in the zones according to stakeholders.
They allege that some manufacturers in the FTZ smuggle out products to the open market for sale, thereby making products in the local market uncompetitive.
Logistically, zones are most often located near ports of
entry; air, land or sea, but operate apart from traditional ports of entry and often under different rules.
This location facilitates entry to the zone as well as the exit and entry to the customs territory. It also provides Customs officials with easier access to the port and FTZ. But reverse is the case with some of the FTZs in the country as there are no means of moving there goods through the sea or ship to those countries.
Since there is no means to export their large quantity goods, through the sea to other countries, they begin to push them into the local market, making the already products in the market uncompetitive.
Commenting, an executive of Manufacturers Association of Nigeria (MANEG) and Export Manager, Aarti Steel, Okhai Ehimigbai, explained that the act of smuggling goods out of the zones was common with fast moving consumer goods (FMCG) companies. “They have their manufacturing plant in the FTZ and they smuggle their goods out of the zones rather than export them.
“They smuggle them to the open local market in Nigeria.
Some of them have sister companies outside the FTZ, so when they produce, in connivance with the some Customs men, they smuggle these goods into the companies outside who now push them into the local market. So that creates competition for the ones outside the FTZ, that don’t enjoy the benefits of the FTZs.
He alleged that some of the companies export about 60 percent of their manufactured foods, but from the definition of FTZ agreement, they are suppose to export 100 percent of all their products. “That is how it’s done in other countries.”
He lamented that because some of the companies push all their goods into the local market, it gives them an edge over other products in the market.
“While they smile to the banks, the local operators are wallowing in poverty.
It’s a huge disadvantage to companies outside, especially those in the FMCG.
Because of the advantage these people gain in the FTZs, others outside the zone in the local market find it difficult to compete.” He called for stringent regulation of the zones.
“There should be stringent regulation. Looking at the volume of raw materials they bring in, what they produce and the quantity of their finished good, they should show evidence of how these goods are exported out of the zones.
He noted that as far as Manufacturers Association of Nigeria (MAN) and the Ministry of Industry Trade and Investment are concerned, most of them that operate at the FTZs still want to collect the ECOWAS Trade Liberalisation Scheme (ETLS), a certificate that issues zero duty for exporting from one ECOWAS country to another.
“MAN has said it that these companies that operate from the FTZs were already enjoying benefits and there was no need for the ETLS.
“Across the ECOWAS countries now, any company that is under the FTZs, does not enjoy the ETLS.”
He urged government to improve its regulations on FTZ, as some practices there are against the rule of engagement.
“Our FTZs are easily accessible, which is not so in other countries. Most of the companies in the zone are flouting the law.
Monitoring is important to know if they are really conforming to the rules.”
For the President, Calabar Chamber of Commerce, Industry, Mines and Agriculture, David Etim, rules of the FTZ have turned upside down. He decried that the regular manufacturers are not competitive due to the high cost of production. So products from FTZs competing with the local market is a huge challenge.
He said flooding the local markets with goods manufactured in the FTZs, was making our local products uncompetitive.
“The FTZ is created to produce for export. The value addition that takes place in the zone is not taxed. What is taxed is the components that come into the zone.”
He said the FTZs was never designed to compete with local manufacturers, but because these zones don’t have the logistics solution to the export of their goods to other African countries, the alternative of pushing them to the local market becomes an option.
The free zones create employment for the nation but the products are not for market in Nigeria.
Since there are no means of transport to export their goods through the sea by ship to other countries, they begin to push them into the local market making local products manufactured out of the zone uncompetitive.
Once logistics is provides for easy movement of their goods to other countries, that problem of saturating the market with their goods meant for export disappears.
When the country started the implementation of the FTZs, it did include the full process. For you to have FTZs, you have to connect it to logistics, both of them work hand in hand.