Tax cuts, low prices top benefits of special airport zones
Businesses operating within the designated special economic zones (SEZS) of four international airports in Lagos, Kano, Abuja and Port
Harcourt are expected to enjoy incentives such as tax cuts, while customers from air passengers to hotel guests could be looking forward to lower prices.
In air travel, taxes and levies form a significant part of air fare and with airlines getting reliefs typically associated with special economic zones, the ripple effect will be felt by travellers. With company income tax between 20 and 30 percent of profit, while the exact percentage to be enjoyed is not yet known it is not expected to deviate much from what obtains in other economies.
OR Tambo International Airport in South Africa and Charles De Gaulle in France are typical examples of this well integrated airport community.
For instance, OR Tambo International is Africa’s largest and busiest airport, and the SEZ there offers ease of access to Africa’s more than 200-million consumers through its connectivity capabilities. The SEZ has competitive rental lease rates, with access to incentives.
Tax deductions are offered for projects above R200-million, and a lower corporate tax of 15 percent instead of the standard 28 percent is proposed for companies housed within the SEZ. There is also exemption from value-added tax for goods produced in the zone for export.
OR Tambo International Airport has incentives packaged to support foreign or domestic direct investment. With the support of the department of trade and industry’s SEZ fund, designated SEZS can apply for grant infrastructure funding for the development of bulk and top structure, resulting in lower rental rates being offered to the market, and duty-free imports of raw materials or equipment utilised for production in the SEZ.
If global standards are anything to go by, the four airports recently announced by the Nigerian government as SEZS might soon witness a flurry of commercial activities.
A special economic zone (SEZ) is an area in which the business and trade laws are different from the rest of the country. SEZS are located within a country’s national borders, and their aims include increasing trade balance, employment, increased investment, job creation and effective administration.
Experts say designating these airports as SEZS would attract billions of naira through foreign direct investment towards Nigeria’s airports, through duty free shopping, hotels, ticketing and non-aeronautical services, and also boost employment, especially in tourism and retail for Nigeria.
The airport community is ordinarily a large community. Turning this community into a large, organised and urban aerotropolis and to further demarcate it as an SEZ portends a major advantage to the Aviation Sector.
The airport community being designated SEZ brings a great advantage to the community such as top notch security system and networks thereby making it a safer community, one-stop shop for business professionals and tourists without the need of going into country’s downtown or city centres, Seyi Adewale, CEO, Mainstream Cargo Limited, says.
Adewale explains that because of the tax and many other government incentives therein to attract foreign direct investments, major hotels, international offices, conference centres, recreational sports and entertainment centres will want to be situated there.
“For the nation, there are huge job creation opportunities, high revenue generation in the long run, greater productivity and outputs through 24/7 hour like operations, new and emerging commerce being developed and so many advantages,” he states.
Giving an example of the benefits thereof, he says one 5-star hotel newly built within the zone will cost approximately N 70 billion, noting the job opportunities, fdi into the country, direct and indirect labour, impact on supply chain, among others.
He further explains that to the city at large, the cost of property around this zone begins to appreciate and thereby upscale infrastructure, businesses and buildings surrounding the zone with the goal to tap into the outflow resources from its vantage positioning.
“The place can trigger large financial institutions to situate therein, further boosting trade and commerce,” he notes.
All of these would contribute to make the airport community a fully integrated and well-structured one that caters to the needs of the elite and upper middle-class, foreigners or expatriates, businesses and tourists.
Amid decline in passenger traffic as a result of COVID-19 in 2020, airports across Nigeria processed 9,426,297 passengers. From these figures, Murtala Muhammed International Airport, Lagos (MMIA) recorded 1,046,568 passenger traffic, representing 11.1 percent; Nnamdi Azikiwe International Airport, Abuja, recorded 473,008, representing 5 percent, and Port Harcourt International Airport recorded 29,526 passenger traffic, representing 0.31, while Kano International Airport recorded 46,071 passenger traffic, representing 0.48 percent.
Experts say these airports can process more passengers if some incentives are given to airlines and operators, and this can be achieved with the approval of these airports as SEZS.
According to Olumide Ohunayo, an aviation analyst, designating these airports as SEZ would mean tax holidays for investors, adding that there would be expeditious clearing through customs.
“Factories and assembling companies can spring up within the airport environment. Those living around the airport will have more jobs. Transportation will have a boost as airport vehicles would have to move in more passengers and everyone down the value chain would gain.
“There is a huge economic activity that would come up with SEZ airports. The logistics companies would see the biggest gain because goods and machinery would come in,” Ohunayo explains.
He however suggests that a strategic marketing arm be set up to move beyond just the government pronouncement to see how they can market these economic zones to aviation related companies and other value chains outside the country.