Free Trade Zones In Nigeria: Incentives And Business Opportunities

Publish Date : 2021-05-29

Free Trade Zones In Nigeria: Incentives And Business Opportunities

Introduction: The Free Zones in Nigeria are licensed, regulated and managed by The Nigerian Export Processing Zones Authority. NEPZA is a Federal Government Agency established in 1992 through the Nigeria Export Processing Zones Act 63, of 1992. The Agency is responsible for promoting and facilitating local and international investments into Free Zones in Nigeria. The scheme was set up by the government to ensure the improvement of investment climate in the country especially by stimulating export type business activities through friendly economic policies.

NEPZA administers the various incentives ranging from Export Processing Zones, Free Trade Zones, Border Free Zones, Export Farms, Science and Technology Parks, Tourism and Resort Centers.

Any business located in any of those projects in Nigeria automatically confers upon the owners certain incentives which have been designed by the Federal Government of Nigeria for investors to be competitive and achieve profitability in a short time.

Incentives for operators are:

Legislative provisions pertaining to taxes, levies, duties and foreign exchange shall not apply.

Duty free importation of capital goods, Machinery, Spare Parts, Raw Materials and Consumable items into the zones.

100% foreign ownership of investments.
100% repatriation of capital, profits and dividends.
Waiver of all imports and export licenses.
Waiver on all expatriate quotas.
Rent free land during the first 6 months of construction
Up to 100% of production can be sold in the Customs Territory against a valid permit, and on payment of appropriate duties
The amount of import duty on goods processed or assembled and exported into the Nigeria Customs Territory shall be the rate of duty applicable to the raw materials (in the state in which they are originally introduced).

Companies can use Banking services in the Nigerian Customs Territory. They are however not allowed to access foreign exchange in the official market.

Companies engaged in imports are not required to complete a Form 'M'; however companies in the Nigeria Customs Territory are required to complete a Form 'M' if they intend to import from the Zone. Such Customs Territory companies can access the foreign exchange market to pay for imports from the area.


NEPZA can license any entity to operate any of the following:

1. Free Zone Developers License: This is granted to any entity to develop and operate a Free Zone in Nigeria but under the supervision, monitoring and regulation of NEPZA

2. Free Zone Enterprise License: This is granted to an entity to carry out approved business activities within a Free Zone -Manufacturing, Trading and Service provision

3. Export Processing Factory/Export Processing Farm License: This is granted to export oriented companies located in the Nigerian Customs territory which have capacity to export about 75 per cent of their production.


Oil and Gas Logistics
Electrical and Electronic Products
Textile Products
Wood Products and Handicraft
Leather Products
Petroleum Products
Rubber and Plastic Products
Cosmetics and other Chemical Products
Metal Products and Machinery
Educational Materials and Sports Equipment
Printing Materials, Communication and Office Equipment
Medical Kits, Optical Instruments and Appliances
Biscuits, Confectioneries and other Food Processing
Pharmaceutical Products
Ship Building and Repairs
Proposals for industries outside the above listings will be considered on their individual merit by NEPZA.



1 Calabar: Manufacturing, Oil/Gas & Logistic Services

2 Kano: Manufacturing, Logistic Services & Warehousing

3 Tinapa Resort Calabar: Manufacturing, Trade, Tourism & Resort

4 Snake Island Lagos: Steel Fabrication, Oil/Gas

5 Maigatari Border Jigawa State: Manufacturing, & Warehousing

6 Ladol Logistics Lagos: Oil/Gas, Logistics, & Fabrication

7 Airline Services Lagos: Food Processing & Packaging

8 Sebore Farms Adamawa State: Manufacturing, Oil/Gas & Petrochemicals

9 Ogun Guandong Ogun State: Manufacturing

10 Lekki Lagos: Manufacturing & Logistics

11 Ibom Science & Technology FZ Akwa Ibom Science & Technology

12 Lagos: Manufacturing, Oil/Gas & Petrochemical

13 Olokola: Ondo & Ogun States Oil/Gas & Manufacturing
Advantages of trade receivables

1. Trade receivables are not counted in the balance sheet because they are not replaced by their cash equivalent, and this improves the financial statement of the originator.

2. There is no need for the originator to wait for payments to be received from the receivables. Thus, the originator can continue getting profits even when the payments are not made immediately.

3. The securities are ranked much higher by rating agencies. This reduces the huge interest associated with lower ranking.

4. Assets and other liabilities can be coordinated and this eliminates the need for dividends.

5. It allows investors the opportunity of trading in capital markets that have better funding costs.


1. Trade receivables increase costs. This is because receivables can only be securitized when the securitization process is capable of realizing their values.

2. As a result of the high level of flexibility, the securitization process can be used to securitized anything from credit cards to even mortgages. Thus, an accomplishment record in the region of 3-6 is required in order to be a creditable receivable pool. Additionally the loan guarantee terms are automatically reduced because the person seeking such securitization needs to have a predictable and stable source of cash flow.

Steps to ensure repayment

Stanford and Poor's Rating Services (n.d.) provides steps that can be taken to ensure repayment as:

1. Having clear resolving period - under normal conditions, typical trade receivable pools will liquidate in the space of two to three months, if the pools are relatively constant and all the collections are adopted for the purpose of paying down debts. Thus, the investors need to have a clear, structured and agree resolution period for any trade receivables.

2. Early amortization events - in order to increase the credit quality of the transaction, early amortization are adopted to discount revolving interest-only period if the reinvestment of investors cash flow becomes significantly less desirable and this can increase repayment because reduction in interest will increase speed of repayment.

3. Cash flow allocation - most of the trade receivables are based on borrowing base concept. In this approach, investors entitled to receive a percentage of the collection that is equal to the amount invested over the borrowing base. Thus, it increases repayment to all investors in equal terms and increases overall repayment period.

4. Eligibility criteria - this defines the conditions for the pool and limits investors to high risk receivables, thus reducing and potentially eliminating issues associated with lack of repayment as the investors that don't meet the criteria will not participate in the pool.

Category :business

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