NEPZA positioned to drive Nigeria’s industrial revolution, economy development —Adesugba, MD/CEO

The Managing Director, Nigeria Export Processing Zones Authority (NEPZA), Professor Adesoji Adesugba, in an exclusive interview with the Nigerian Tribune speaks on the social economic importance of the authority to the development of the country.

 

COULD you give us an overview of your modest achievements since you assumed office as the MD/CEO of this authority a year ago?

I am glad you call it modest achievements and because a lot more can be done, in fact the management team and I have just begun scratching the surface, because as you try to take action with respect to the mandate, you discover quite a number of challenges which slow down our momentum. I assumed office as Chief Executive Officer of this great agency on July 1, 2020, a period characterised by the declaration of global pandemic and lockdown as a result of the spread of the coronavirus, also called COVID-19. It was indeed a challenging period for human race and for our investors. It has also affected our ability to prospect for new investors that would have come into the zones. It’s no gainsaying that the pandemic affected economic activities across the world leading to major losses of jobs, return-on-investment and dislocation of our   business strategic plans. In any case, we did not surrender totally to the scourge as we developed other strategies to continually encourage and engage the existing zones’ operators and over 500 enterprises operating within the zones’ space. We proposed to keep our investors and also reached out to new ones through zoom conferences. The idea was that if we could not do much in terms of new investors drive, we must ensure not to lose grip of the ones we have. What did we do? We had to raise the ante by restructuring and repositioning the Authority to improve on its service delivery template. We were more concerned on the wellbeing of the operators and other key stakeholders knowing that they were themselves confronted with the economic challenges acerbated by the economic downturn due to the COVID-19 epidemic. We were on a crossroads but we made the best use of the times even though the threats of the pandemic are still here.

 

Is the Special Economic Zones scheme really understood in Nigeria?

From my experience and recent interactions with people that are within the system, that I believe should know further exposed the need to vigorously embark of sensitisation in order to close the obvious knowledge gap. I will unequivocally say that the concept is either misconstrued or misunderstood in our clime. We have not furnished ourselves on the history of the scheme worldwide- from Europe and to how the Asian Tiger, with special mention of China had utilised this global economic model successfully. There are now over 3,000 special economic zones in China. The scheme has propelled what we now see as the `Chinese Miracle’ of developing within such a short period. China has used the zone scheme to catch up with the developed world even though they are still classified as a developing nation. It is indeed fascinating to see how they are able to use the model to control the world’s markets, logistics and services in the world; how they have been able to conquer technology and also develop their capacity. Dubai, Singapore, South Africa, Kenya, Ethiopia and Malaysia have since understood the capacity of the special economic zone to leapfrog development. Nigeria has everything to gain if we collectively abide by the rules of the concept. Let me for the umpteenth time say that the zones have diplomatic status and independence where operations within the perimeters of the zones are exempt from paying duties, levies and taxes. This tax freedom is suspended the moment they encroach customs areas. Needless to say, that there is greater need for us to communicate the basic ingredients of the scheme to Nigerians, especially state governments and local tax agencies. For instance, the local stakeholders including the government should understand why free trade zones must have off-shore banking regime as zones’ operators are not allowed to access forex from the local banks. At the moment, zones’ operators are compelled to source forex from banks outside of their territories. The Central Bank of Nigeria having understood this logic is doing everything within its powers to approve the establishment of the off-shore banking. Yes, it is apparent that most people do not understand the concept very much. But it is very simple, the answer to them is that they should look at the best practice elsewhere, especially now that the African Continental Free Trade Zone Agreement (AfCFTA) is in place, the competition that is coming in terms of production; human capacity; influx of capital; influx of goods and services from other countries; and the use of special economic zones and free zones as lunch pad; mechanisms to attract foreign investors; as well as local investors production linkages shall be determinant factors as to whether we are prepared to compete.

 

You have hinted on the importance of off-shore banking as special banking regime for free zones, why has it taken the country so long to put it in place and what really is the position of the CBN and the Federal Government on this?

It is evident that the Federal Government’s policy on using the zone scheme to drive the country’s industrialisation process is very clear. The intent is basically to ensure that the scheme succeeds. The implementation of that policy as it relates to the banking regime is also understood by the CBN. The Authority has had series of meetings with the CBN officials in this respect leading to the setting up a committee to advise the CBN governor. This committee has long concluded its assignment with a recommendation for the establishment of the offshore banking regime within the free zone, if the scheme was to function optimally. Like I earlier stated, the free zone concept does not permit operators to source foreign exchange from the normal banking system. The question is how then do operators run their businesses in these enclaves to function if they do not have access to opening their letter of credits and to perform other daily financial protocols? The lack of offshore banking has indeed stiffened the positive impact this concept should bring to bear on the economy. It is our candid opinion that the CBN governor should fast-track the immediate implementation of the recommendation of that committee, which favoured the establishment of the offshore banking system within the free zone ecosystem. Aside these limitations of somewhat knowledge gap of the scheme in some quarters and the non-existence of the offshore banking regime as yet perhaps as a result of red-tapism, I believe the present administration of His Excellency, President Muhammadu Buhari is doing so much catch-up by his deliberate injection of funds into the system to upscale infrastructure in and around the two public zones in Kano and Calabar. It is his understanding of the capacity of the concept to spike development that led to the approval of four of the country’s international airports to now hold free trade zone status.

 

There have been reports of some inter-agency wrangling with the Authority, perhaps due to lack of their firm grasp of the tenets of the concept. What are you doing to gain the cooperation of these agencies of government?

Yes, I would not rule out such antecedent before my assumption of office a year ago, but because of my background, having worked with several of those agencies before and knowing how they operate, the cooperation is much more encouraging. I have taken special steps to ensure that those key agencies like the Nigeria Customs Service (NSC), Federal Inland Revenue Service (FIRS), Nigerian Immigration Service (NIS), and Standards Organisation of Nigeria (SON) are speedily brought to the understanding of our mandate and the special nature of the zone scheme. Yes, there was some frictions, there were some misunderstanding in policy implementation, and I think we have been able to engage such organizations as the Nigeria Custom Service, the Federal Inland Revenue Service in terms of the interpretation of the law and implementation of such. As a retired Customs Officer myself with over 17 years of working experience, it took me few moments to broker this needed cooperation. We have amicably resolved areas of conflicts, and developed new cordial approaches to relate with these agencies. These agencies have come to the understanding that the management of the zones must be done within the purview of the law and international best practices. The era when officials of these agencies encroach the zones to demand for tax payments are gone. Let me say that the Nigerian Immigration Service is a key stakeholder in this sector and we are also relating fine with their officials working with us. We have had dealings with the Standards Organisation of Nigeria and we are harmonising those areas where we think they can improve on their dealings with investors in the free zones. We have clearly made them to understand that investors in the free zones are to be viewed as foreigners or citizens of their own country and, therefore, must be left alone to carry out their activities outside of the custom territory. We have also had some agencies that probably do not understand the reasons behind the request for their organisations to be located within the zones. Prior to now, we have been able to work efficiently with agencies such as Economic and Financial Crimes Commission (EFCC), the Nigerian Police Force, the Department of State Security in a manner that did not run contrary to the law.

 

We understand the Special Economic Zones scheme now encourages Local Direct Investment (LDI), which means there is now increased local participation. Are you not worried that operations in the zones could be abused if not properly supervised by agencies like NAFDAC, National Drug Law Enforcement Agency (NDLEA) and SON, just to mention a few?

I need to emphasise that the special economic zones under the NEPZA statutory authority is geared towards exportation of goods that are within the zones. The zone is treated as if it is a foreign country. The interaction between the zones and what we call the customs territory, which is Nigeria, is strictly going to be within the ambit of the laws that guide the importation of goods and services into the country. This means that the products and services that leave the zone to Ghana will go to Ghana without both import and export duties paid on them from the zone. Things that are now brought into Nigeria from the zone will be treated just like imports from another country into Nigeria, which means that it must be subjected to thorough customs process; it must be within the SON perimeter; NAFDAC must ensure that it is within what they have contemplated, just as the NDLEA can conduct their due diligence to ensure that no illicit drugs are allowed into the country. The law, however, forbids these agencies to come and disrupt operations within the zone except with the permission and knowledge of NEPZA. This is very clear as it is the position of the laws and zone management all over the world.

 

You mentioned how China and other countries are using the scheme to stimulate growth, development and industrialisation of their respective climes. Why is Nigeria experience not as significant?

You have to understand that for some times, we neglected that scheme, may be because of those who managed the scheme at that time and also because of the lack of budgetary allocation during that time. That inhibition gave way when President Muhammadu Buhari assumed office in 2015. Having seen the need to create even development of the country, the president embarked on a visit to assess the scheme in China. The president was enthused by what he met on the ground and decided to replicate that within the Nigeria space, using NEPZA as a platform because we already had the scheme since 1992. All he needed to do was to improve on the facilities within the scheme, do a little more marketing, give more incentives, ensure that other agencies like you rightly pointed out allow the scheme to thrive. So, this will definitely appeal to investors. I must point out that in recent times; the scheme has really moved from strength to strength going by the volume of investments in the scheme which have almost quadrupled since the president decided to use this as a tactical strategy for industrial development in Nigeria. The president’s positive body language after that famous China visit raised the confidence of local and foreign investors to explore and exploit the scheme for mutual profit. At the moment, the country is host to some world-class free trade zones like the Dangote Refinery/Petrochemical FTE, the Lagos FTZ, Lekki FTZ, Alaro FTZ, Eko Atlantic FTZ, LADOL FTZ, Snake Inland Integrated Free Zone, Ogunguandon FTZ and couple of others considered to be national assets. The private zones are the backbone of the scheme. The country is indeed reaping from the scheme significantly. In a year or two the Lagos free zone shall deliver to the country a Deep-Sea Port estimated to be the largest in Africa. This project will open opportunities in the marine transportation, logistics, and also to stimulate employment for Nigerians.

 

Are you saying that the budgetary allocation now is better than that of before?

Yes! I believe it is since 2017. Since the president returned from inspecting the Chinese Free Trade Zone Scheme, budgetary allocation for the scheme improved significantly.  It could still be better as we are doing catch-up with those countries that have since gone ahead of us. We need to do much more in promoting private sector-led zones than government putting a lot of money in the public zones. We are trying to use the Chinese model where government actually leads in setting up the zones and getting the private sector involved in most of the zones. It is a hybrid kind of thing that we are now implementing within the zone management. It is imperative for government to continue to use the model as a viable scheme to deepen economic development by investing in the infrastructure within the zones.

 

NEPZA was established by Act 63 of 1992, don’t you think that the old legislative framework is responsible for myriad of challenges limiting the country from reaping full potential of this scheme?

Law is dynamic, it is made for change with time and with the world moving in a very fast rate towards technology development; with competitions coming on stream; and with international agreements such as the African Continental Free Trade Agreement; with nations moving closer together to tackle the challenges within the economic space, it is evidently clear that the NEPZA Act must be amended for the country to reap the full benefits of the scheme.   That is why the stakeholders have come together, we have had series of meeting with the operators and investors on the need for us to take a second look at how we do business with the legal framework. The conclusion is that the Act should be modified to make doing business easier for them; to clearly define the status of the free zones; to also clearly define the roles and powers of all the organizations that have anything to do with the free zones. It is to also clearly state issues relating to security, taxation, the process of filling returns, and also how they relate to any other agency of government. This is not peculiar to Nigeria; most other jurisdictions are looking at their laws and this is the time we believe the National Assembly should do the needful. We know the thinking of the federal government is to ensure that we have slimmer government and allow the private sector to do quite a lot when it comes to business. We are also looking at the role of the regulators in the scheme of things. I think currently there is a bill that the stakeholders have put together which they are looking at. We have also tried to study that bill and we have sent our inputs to the Ministry of Industry Trade and Investment and I am sure at the right time, the government will come up with its position.

 

We have followed with keen interest the development in the LADOL Free Trade Zone, where about 3,000 Nigerian workers lost their jobs. What are you doing to resolve the problem between LADOL FTZ and SAMSUNG?

Like any other agreements, the LADOL and Samsung agreement also has some hitches. Unfortunately, those hitches in the past four years affected the businesses within that zone negatively. There is a claim that over 3,000 Nigerians lost their jobs. It is natural to have disputes that we should be able to resolve within its context while the business goes on. That is what we have managed to do. When I came here, I discovered that we were dealing with multi-billion-dollar investments and there was the need for us to have a dispute resolution mechanism. We have gone ahead to set up the NEPZA Dispute Resolution Center, and issuing of licenses to intending zone operators were tied to being subjected to the jurisdiction of the center. This center has become vitally important to resolving all disputes within the purview of the scheme to allow for stability and industrial peace within the zone. We have managed to resolve some disputes without prejudice to those disputes that have gone to court before. At least, like the LADOL and Samsung issue, NEPZA has taken over the operations of the place, just as we have gotten the parties to agree to some terms of settlements in terms of operations of the zone without prejudice to the outcome of the disputes they have taken to court, so that we are not seen to be doing things against the court. We have also been able to resolve to a great extent the issue between the EN-Power, a free zone in Enugu and the Lion Park and the Enugu State Government. We believe that this problem that has existed for almost four years was resolved some weeks ago. We hope that serious business will start in that zone. We need to understand the fact that in every such situation we found ourselves doing business, there is the likelihood of having some disagreements, but I have always insisted that using Alternative Dispute Resolution Mechanism and not necessarily going to court can fast track the resolution of such disagreement.

 

Within one year as the Managing Director of this agency, we understand that you have been able to substantially offset some of the huge debts you met on ground. How did you manage to do this?

We just had to cut costs and stop quite a number of frivolous expenditures. Some expenditures that we found not to be quite necessary to the operations of the organization were put in abeyance and we went ahead to ensure that we pay all the government expected revenues as at when due. I met a total of N1.4 billion debt, and we have since been able to clear that up to N400 million, and within the next few months we intend not to have any such deficit on our book. But the most important thing is the fact that there was also a downturn in revenue generation, which was due largely to the COVID-19 epidemic which slows down the operation of most of the 500 plus companies operating within the zones. During the active days of the virus, most if not all of the enterprises shut down completely. Even as we speak, some have not been able to re-open, and when such happens it affects not just the immediate stakeholders but the authority. This has impacted negatively on our sources of income, but we have tried our best. We have no option than to cut our coat according to our size that is what we have done basically.

 

Four international airports have been designated as free trade zones, while there has been approval for the establishment of special economic zones in some state, how will you midwife this opportunity and key into it?

We are already working on those projects. The designation of the four airports as special economic zones was long overdue. We thank this government for the political will it has displayed in these regards. This is what obtains in other parts of the world. For example, the Dubai International Airport, and all the area around it is designated as special economic zone because of its attendant benefits. Airports in places like Turkey, Egypt and Ethiopia are all designated special economic zones. Airports around the world have left their traditional roles of just being a place where aircraft land; they have become a super industrial outlet where thousands of people are employed. You can see what is happening in Dubai, the number of hotels there, the number of industries, logistic centers, and that is exactly what we should do with our airports. If you went to Heathrow Airport, London, which is designated a free zone, you will be compelled to start spending money once you entered. The economic activities within that airport are in billions of pounds. That is the new concept of how airport should be, and we believe that is what we should do. We are working very hard at that; we have already started the process. We are working with the Ministry of Aviation, FAAN and the Ministry of Industry, Trade and Investment to come out with the best model that will attract international investors to these destinations.

 

How can potential investors key into this scheme?

It is very easy. We have an Investment Promotion and Investors Servicing Department which interfaces with the public and investors to try to help them to make them have proper understanding of the processes they will have to go through. There are two stages of application; one is for those who want to apply to own a zone and administer a zone, the second is for enterprises who want to locate their factories within the zones. So, there are different processes that have to take place and we are also online. We have offices in Lagos, Calabar and Kano and very soon, we would be opening those of Asaba, Kwara and Osogbo. It is very easy if you are in any of those locations to also work in apart from checking our website which also give potential investors all the information they need. Needless to say, that the headquarters is here in Abuja and our officials are handy.

 

How is the Ministry of Industry helping NEPZA to galvanize this process and how is your relationship?

I count myself very lucky to be under the leadership of a very wonderful team; the Minister, Otunba Niyi Adebayo and the Minister of State who happen to be a wonderful team, who have great understanding of development economic, who have been positively supporting all the programmes, and doing everything within their powers and ambit to make sure that Nigeria economic development is on track. The directors in the various departments in the Federal Ministry of Industry Trade and Investment are seasoned and great team players with ample knowledge to give us support we need in areas of policy implementation, People like Alhaji Alkali, Mr Bakare, Mrs Arodudu, and of course my brother Ambasador Audu, have all worked tirelessly to support us and ensure that we succeed. Indeed I am lucky to have such a set of dedicated Nigerians. Without them, everything that you see that is happening will not be possible. They have a perfect understanding of the economy and they are doing whatever they can to improve the lot of our people. They are doing a lot of work, bringing a lot of initiatives and they are supporting this programme, without the usual bureaucratic hurdles which stalls development.

 

Your workforce is very critical to the execution of your mandate, what are your strategies in ensuring a stable industrial harmony?

It is very important that employers of labour understand the interplay of factors that can be used to motivate and encourage the workforce to take the organisation as their own. You must have a caring organisation that takes the welfare of its workers as a very critical aspect of its reasons for success factors. The welfare of workers is sacrosanct. It is also very important for you to be a very pragmatic leader that leads by example. When I got here, the first thing I noticed was that the workers have not had salary increase for the past ten years, their allowances were not paid. Those of them that had retired were in court to get their retirement benefits. All the directors that had worked in this organisation prior to 2006, about twelve of them had gone to court. So, how do you expect to maximise productivity or experience industrial harmony in that circumstance? It is indeed a sad commentary to willfully careless about the welfare of staff. I showed empathy and set up the machinery for ensuring that all the issues were resolved. We have not met all the demands, but we are working toward reviewing the salary structure with the cooperation of the Salaries and Wages Commission. We are hopeful that the commission will in short while act on our requests for the salaries to be reviewed. We have looked at the allowances they are entitled to. I have also spoken to the Director in charge of Corporate Services to also bring up a housing scheme for the staff.  I believe that once you own a home in Abuja, it is less likely that the workforce will engage in brazen corrupt practices. There is no such thing currently and we hope to put that in place as soon as possible. I also engage the staff periodically, relating very closely with the union to understand what their needs are and often than not, I have responded positively to those needs. I try hard to as much as possible reconcile the staff’s welfare with the needs of the organisation. I have promised them to handover an Agency they will be proud to work in. I have changed the structure a bit to make the running of the Authority less cumbersome. We have also ensured that 2019/2020 promotion exercise was conducted to avoid unnecessary stagnation in the system. Our staffs are exposed to periodic training in order to deepen their knowledge of the sector. For those who are lagging behind, we try to build their capacity and make them come up to speed. We shall continue to improve in that respect.

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