MAN Endorses Proposed Reforms for Free-Trade Zone Operations in Nigeria

The Manufacturers Association of Nigeria (MAN) has expressed strong support for the proposed reforms aimed at clarifying the operations of free-trade zones in the country.

In a statement from Segun Ajayi-Kadir, the Director General of MAN, the association emphasized the need to reevaluate the current framework governing export processing zones and free-trade operations to enhance equity and competitiveness in the manufacturing sector.

Ajayi-Kadir highlighted that the primary purpose of these zones, as outlined in the National Economic Processing Zones Authority (NEPZA) Act, is to facilitate the manufacturing of goods for export. He argued that while various activities, including banking, are permitted within these zones, the tax incentives associated with these operations must align with the law to ensure fairness for all manufacturers.

Central to the discussion is the concern regarding tax exemptions for companies operating within free-trade zones. According to Ajayi-Kadir, while Section 8 of the NEPZA Act exempts approved enterprises from all federal, state, and local taxes, sales to the customs territory must be approached differently. He pointed out that while Section 18 allows for the sale of goods and services to the customs territory, it does not grant tax exemption, a point he claims has been misinterpreted.

“Our members are concerned that the current interpretation of these provisions creates an uneven playing field,” Ajayi-Kadir stated. “It undermines the competitiveness of over 2,500 manufacturers operating outside these zones who are subject to full taxation.”

The proposed tax reform bill currently before the National Assembly seeks to address these concerns by clarifying that sales to the customs territory are taxable under corporate income tax regulations, thus ensuring that all businesses, regardless of their operating environment, are subject to similar tax obligations.

Ajayi-Kadir reassured stakeholders that the reforms do not reverse existing incentives but rather aim to align them with the original intent of the law. He cited Nigeria’s relatively generous approach, allowing 100% sales into the customs territory without tax for exports for an extended period, compared to neighboring Ghana’s more restrictive policy.

“The proposed changes will foster equitable tax treatment for both free-zone companies and those within the customs territory,” he concluded. “This will not only promote fair competition but also bolster the nation’s tax base, ultimately benefitting the economy as a whole.”