FG’s Plan to Suspend Airport FZ Licences Will Discourage FDI, Experts Warn
Investors and aviation experts have warned that the recent pronouncement by the Federal Airports Authority of Nigeria (FAAN) that it would suspend issuance of licences to investors who wish to establish businesses at the airport free trade zones (FZ), would hinder the flow of Foreign Direct Investment (FDI) and discourage the berth of capital intensive manufacturing concerns that want to operate there.
With proximity to the airports and insulated from taxes and other hazards faced in operating from the open market locations, there are indications that more businesses have completed plans to open at the airport free trade zones.
But last week, the Managing Director of FAAN, Captain Rabiu Yadudu announced that his management had suspended issuance of new licenses to intending free trade zone applicants at the airport areas.
Already, existing companies at the airport free trade zones include Execujet, Caverton, some airline catering companies and others.
THISDAY learnt that talks have been going on between lessors and their local representative to establish aircraft spares depot at the free trade zone at the Lagos airport and this would help the airlines to save the waiting time for such spares to be brought from overseas.
Free trade zones are expected to provide benefits to investors, which include duty exemption, duty referral, duty reduction or inverted tariff, merchandise processing free (MPF) reduction, streamlined logistics, quota avoidance and other benefits.
A former Director in the Nigeria Export Processing Zones Authority (NEPZA), however, told THISDAY that FAAN does not have the right to issue any licence to anyone, adding that it is the duty of NEPZA to do so.
But earlier report indicated that FAAN had with immediate effect suspended the issuance of licenses to applicants on the free trade zones at the nation’s airports until the conflicts in the regulatory framework between it and the Nigeria Export Processing Zones Authority were resolved.
While justifying the decision, Yadudu noted that at the Lagos Airport alone, there are presently two free trade zone operators, while additional two companies have applied.
He explained that as “it stands today”, all the five international airports in the country have been designated as free trade zones and warned that if not well regulated, it may be a big challenge for the country in the future.
Confirming Yadudu’s fears, industry operator and Managing Director of King Airlines Limited,
Senator Musa Adede, who served in various business committees relating to aviation, such as NEPZA and maritime when he represented Cross River North in the Senate between 1999 and 2003, told THISDAY that “there is proliferation of free trade zones in the country, so it is being abused by those who site their businesses there to avoid paying taxes.”
Senator Adede said that if the free trade zones were effectively regulated, companies operating there would be producing goods and services purely for export. According to him, “If you sell such goods in Nigeria or provide services to Nigeria, you must pay duties.”
In a recent proposal to establish aviation free zone at the Murtala Muhammed International Airport, Lagos, former General Manager, Business Development, FAAN and currently, the Managing Partner, TMSS Logistics, Nuhu Adam, described free trade zones as special economic enclaves, “a country within a country” with the privilege of enjoying some remarkable incentives not available in the other parts of the host country – with the intention of encouraging rapid growth, industrialization and development of that region.
“Specifically, free zones are