Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) and the Organised Private Sector of Nigeria (OPSN) have submitted a memorandum to the National Assembly that opposed the proposed taxation of Free Trade Zones (FTZs).
The opposition came as the Kano State government questioned the constitutionality of certain provisions of the tax reform bills, particularly, those granting the federal government extensive powers over state and local government tax authorities.
The memorandum, which was submitted by NACCIMA and OPSN, called on the National Assembly to remove all sections of the Nigeria Tax Bill 2024 that intended to impose new tax obligations on operators of FTZs.
The groups argued that the proposed changes in the tax bill, which introduced mandatory minimum tax rates and eliminated tax exemptions previously granted under NEPZA and OGFZA, could lead to capital flight, job losses, and legal disputes that would disrupt Nigeria’s stability.
National President of NACCIMA, Hon. Dele Kelvin Oye, had raised concerns that the bill’s provisions would subject FTZs to state and local government taxes, a departure from the original legal framework that protected the zones from multiple taxations.
Oye also emphasised that 98 per cent of FTZs in Nigeria were privately owned and developed.
“This demonstrates the inherent capacity of the private sector to drive economic development,” he stated.
“The involvement of private entities raises the importance of maintaining a competitive regulatory environment that fosters investment,” he added.
The NACCIMA president explained, “The Nigeria Tax Bill 2024 proposes amendments that threaten the operational framework of FTZs by introducing mandatory minimum tax rates and removing existing tax exemptions under NEPZA and OGFZA.
“These changes are poised to diminish investor confidence and negatively impact long-term investment strategies.”
He said, “The proposed changes to the tax regime would lead to loss of investors’ confidence, as the removal of foundational tax exemptions can trigger capital flight, as investors may seek jurisdictions with more favourable conditions for business.”
Oye said the amendments could cause loss of employment opportunities, hinder the growth of domestic industries reliant on FTZs, and incite extensive legal challenges, ultimately, destabilising the existing economic landscape.
He said, “The proposed amendments within the Nigeria Tax Bill 2024 threaten the existing framework that has successfully drawn significant foreign investments and fostered economic growth. Prompt and decisive action from the Senate is crucial to ensuring stability in this vital sector.
“We urge the committee (National Assembly) to evaluate these concerns and take immediate action to preserve the integrity and attractiveness of Nigeria’s FTZs for both current and prospective investors.
“By consolidating NACCIMA’s research, insights, and recommendations, this presentation seeks to encourage measured discussion and legislative action to secure the economic future of Nigeria through its Free Trade Zones.”
Oye, who is also the chairman of OPSN, recommended the removal of the proposed tax provisions that would affect FTZs.
He also called for amendment of the Nigeria Export Processing Zones Authority (NEPZA) and Oil and Gas Free Zone Authority (OGFZA) laws to maintain tax incentives, and suspend the new tax laws for 10 to 15 years to allow businesses to adjust their financial models.
He said, “Today, Nigeria boasts several successful Free Trade Zones, including the Lekki Free Zone, Onne Oil and Gas Free Zone, and others.
“These zones have collectively attracted over $200 billion in foreign investments and created more than 600,000 jobs.
“They play a pivotal role in Nigeria’s economic growth by enhancing export activities and providing a regulatory framework that facilitates business operations.”
Oye said, “The significance of FTZs in Nigeria’s economic landscape cannot be overstated.”
Kano State government questioned the constitutionality of certain provisions of the tax reform bills that granted the federal government extensive powers over state and local tax authorities.
Permanent Secretary, Office of the Secretary to the State Government, Alhaji Umar Jalo, disclosed the position of the state government on Wednesday at the public hearing on the tax reform bills organised by the House of Representatives Committee on Finance.
Jalo called for the removal of provisions that granted the tax reform bill constitutional supremacy over other laws.
He stated, “This clause is objectionable as it grants this bill a constitutional status similar to military rule, which cannot withstand the scrutiny of constitutional validity. The supremacy provision should be deleted.
“These provisions are substantially in breach of the Constitution of the Federal Republic of Nigeria, 1999, as the National Assembly lacks the competence to legislate on matters exclusively affecting state and local governments.”
Addressing the proposed reduction in the funding for key national agencies critical to Nigeria’s education, technology, and engineering sectors, including Tertiary Education Trust Fund (TETFUND), National Information Technology Development Agency (NITDA), and National Agency for Science and Engineering Infrastructure (NASENI), Jalo stated, “Reducing funding to these strategic agencies will affect national interests in education, engineering, and information technology in adverse ways.
“TETFUND, NITDA and NASENI should continue to be funded to support the nation’s aspirations for technological advancement, prosperity, and sustainable development.”
While expressing concern about the proposed value-added tax (VAT) increase, which would see rates rise from 7.5 per cent to 15 per cent by 2030, Jalo stated, “Increasing the VAT rate at a time when Nigerians are facing an unprecedented cost of living crisis will create more difficulties for families and elevate their levels of vulnerability and deprivation.”
The Kano State government recommended improved tax collection efficiency, rather than increasing VAT rates. It said, “Available information suggests ample room for improvement in coverage and collection efficiency. Weak compliance accounts for a significant portion of the inefficiency.”
However, the government expressed its support for fiscal reforms, while highlighting key concerns regarding the federal government’s ongoing tax system overhaul and stressed the pressing need to expand Nigeria’s fiscal capacity.
The Kano State government stated that public revenues, currently at approximately 10 per cent of GDP, were insufficient to address the country’s mounting development challenges.
Jalo said, “The fiscal space needs to be enlarged. The public revenues at approximately 10 percent of GDP are currently too small relative to the daunting challenges of development.
“A more auspicious fiscal space will provide tremendous opportunities for the governors to deliver on their promises, including achieving the Sustainable Development Goals (SDGs), reducing poverty, and rebuilding infrastructure for growth, wealth, and job creation.”
“Despite past reforms, tax administration remains weak and plagued by inefficiency, poor governance, and corruption. Tax avoidance and evasion are prevalent and must be addressed.”
The government expressed concern about how the reforms were being rushed through the National Assembly without sufficient stakeholder consultation.
Furthermore, Kano State government also criticised the federal government’s failure to adequately communicate the potential benefits and costs of the reforms, and the alleged vilification of northern governors who opposed certain provisions of the tax reform bills.
Comptroller General, Nigeria Customs Service, Adewale Adeniyi, during his presentation on the bills stated that they aimed to make Nigeria more business-friendly and competitive. But Adeniyi raised concerns about potential jurisdictional conflicts.
He said “Our concerns are laid out in a 17-page document, but key areas of conflict include Section 23, 29, and 41A of the Joint Revenue Bill.”
The customs boss pointed out that Section 162 of the bill essentially “legislates the Nigeria Customs Service out of existence”.
He stressed that while tax was a vital revenue-generating tool, customs duties went beyond fiscal policy to promote industrialisation, prevent environmental pollution, and uphold public health.
“The UK experience is instructive,” Adeniyi said, referencing the 2005 merger of customs and tax functions in the UK, which was later reversed due to operational inefficiencies.
He stated, “In 2012, the UK separated border control functions, acknowledging the distinct nature of customs operations.”
He cited examples from African countries, like Uganda and Ghana, where customs and tax authority integration initially resulted in higher tax-to-GDP ratios but later caused inefficiencies and operational complexities.
Adeniyi stated, “With success stories, like Morocco’s customs modernisation, which increased revenue by 37 per cent and reduced clearance times by 65 per cent, Nigeria’s customs service argued for preserving its autonomy.
“We should encourage collaboration between customs and tax authorities, not abolish customs or repeal an existing law.”
In his presentation, Secretary General of Trade Union Congress (TUC), Mr. NuhuToro, rejected the increment of VAT from the current 7.5 per cent to 15 per cent.
Toro told the public hearing that “the TUC unequivocally rejects this proposition”.
He explained, “Our reason is simple, allowing the VAT rate to remain at 7.5 percent is in the best interest of the nation.
“Increasing it would place an additional burden on Nigerians, many of whom are already struggling with their economic challenges and realities.
“At a time when inflation is on the rise, and unemployment is becoming an ever-growing concern, higher taxes will only further strain households and businesses alike. We must be mindful, Mr. Chairman, that such measures could slow down the economy.”
