By Uche Usim
WITH over $60 billion Foreign Direct Investment (FDI) raked into the country’s oil and gas free trade zones so far, Victor Alabo, the Managing Director of Oil and Gas Free Trade Zones Authority (OGFZA), sees Nigeria as a true investment haven in Africa.
Alabo who came on board as OGFZA boss in 2012 says investors in the free zones are still plagued by tax issues, which he wants the government to look into.
He also says the Onne Free Trade Zone is not connected to the national grid and has to generate its own electricity, which gulps a chunk of its operational budget.
He wants the government to assist with gas supply to the zones, even as he hopes there would be robust future investments in the downstream of the petroleum sector going forward.
In this interview with journalists in Onne, Rivers State, he speaks more about OGFZA.
Excerpts:
Appointment
I came on board in 2012 to face the new challenges of administering oil and gas free trade zones. Down the line, we’ve seen the value that the free trade zones have added to the economy of the country. Looking closely, almost 60 per cent of the Foreign Direct Investments (FDI) that have come into the country in the last 10 years came in through the oil and gas free zones.
So, it is a core investment area of government because, like I said, most of the investments are coming to the oil and gas. The free zones, mainly the logistics hubs and the manufacturing hubs for the free zones. The one in Onne, has the major oil companies doing business here. It has been a success story. Why this free zone is adjudged the most successful in the world dedicated to oil and gas is due to the consistency of government’s policy and the ingenuity we have brought into the management of free zones. In this free zone, we have regular stakeholders’ meetings with investors to address their challenges. So, we’ve developed a feedback mechanism on how to mutually address the challenges in the free zone to enjoy a win-win situation.
The government has provided lots of incentives; including some are physical incentives, while others are tax incentives. And these have attracted investors into the free zones. Government must also ensure that it is consistent with these incentives. If there are policy somersaults, the investors lose confidence in bringing in their funds to invest in the country. But as long as this confidence is established, it attracts many other investors into the zone. That is why in this zone, we have close to 200 investors ranging from the maritime, light manufacturing and downstream sector of the oil and gas. We hope to replicate this success story in other parts of the country.
Incentives
The incentives are many. For instance, in the free zone, there is no expatriate quota. It means an expatriate investor bringing in his investment can come with the number of experts in that field to set up his investment. Over time, when these investments have been set up, by our approach of negotiating with them, they are supposed to train our own Nigerian manpower that will takeover from the people they brought in. This has been a success story. I must say certain companies came with over 40, 20, 50 expatriates but today, most of them don’t even have one left. Some others have few left. As the years go by, they are reducing the expatriates quota because if you don’t reduce, we won’t renew your particulars. So, the no expatriates quota is one of the incentives.
The second incentive is that you can repatriate your profit to your home country. There is no limitation. This is to instil confidence in the investors that whatever you bring in here can give you profits you can take back home. But what does government gain if they repatriate their profit? Government gains from the infrastructure. For instance, what you are seeing here in Onne Free Trade Zone is private sector investment. There is no way these investments can leave here.
The backward integration is another. They are employing our people and giving them skills training. At the same time, the value they are adding to the neighbouring communities in terms of social welfare scheme are enormous. These are benefits, which outweigh even the profit they are perceived to be repatriating. So, these are the two major incentives; no expatriate quota, you can repatriate your profit 100 per cent, and we guarantee that you will operate in a secure environment.
Investment volume
You know, in FDI, we have over $60 billion that have been attracted to this free zone. Other free zones across the country are not as successful as this and the investment portfolio there is about $12 to $15 billion.
Intels is the biggest player in this free zone and as an investor in free zones, it has confidence in Nigeria’s economy. So, it has done massive investments within the free zone. For instance, it is into port development. Initially, the port here had only about 7-9 metres draft but it has gone to 9-12 metres draft. It is a Public Private Partnership (PPP) between Intels and Ministry of Transportation. So, whatever the size of the cargo, it arrives at the ports here because the draft has been developed. And if you don’t have faith in the economy of this country, you cannot invest much because only the port, the last phase of port investment, is about $3.5 billion. So, that is what we expect of others.
Compliance level with local content
The local content issue has been very effective here. Most companies have Local Content Desk, which will ensure that they comply with the Local Content Act. We go round to ensure that they have done that. There are some companies that have gone up to 100 per cent compliance with the Act. On a daily basis, we have over 30,000 people, both direct and indirect jobs.
Challenges
Occasionally, other government agencies try to interfere with these provisions of government. Companies operating here are exempted from company tax, and withholding tax because that is part of the tax incentives we give to investors. But the government agencies are now coming into the zone and asking the investors to pay taxes such as the withholding tax, which they are not supposed to pay. They are deducting it from them, and this amounts to a policy somersault hence we are taking up with government at the ministerial level.
Power
We are connected to the national grid. You know it is a development issue. But gradually, we are also partnering NNPC and private agencies like General Electric (GE) to bring in gas turbine so that they can supply power to the free zones. The challenge is that there is no gas supply to the zone, even though gas line is just few kilometres from the zone, it is still government that needs to bring in that infrastructure. It has not done so now and we are working with the NNPC to see how that gas line will come in. Once it comes in, the power issue will be addressed.
Other oil and gas free trade zones
For oil and gas free zones, we have Onne, Ikpokiri, Warri, Lagos, Eko Support, Brass Oil and Gas Free Zone; these are the ones under our regulation. There are other oil and gas free zones that are not under our regulation. But they were created before the oil and gas free zones was established and by law they are supposed to fall under our management but they are still under the management of Nigerian Export Processing Zones Authority (NEPZA). They include Ladol Oil and Gas Free Zone, Snake Island Oil and Gas Free Zone, Olokola Oil and Gas Free Zone. The law provides that they are regulated by our authority, while the non-oil should be regulated by another.
Regulating and avoiding influx of fully-built automobiles, cargo they are not supposed to come in and the issue of mid-stream discharge
Let me start from the last one. Mid-stream discharge is not allowed by law; it has been proscribed long ago because of the security implication. If you bring in a cargo and you are discharging it mid-stream, nobody knows whether it contains arms, whether it contains toxic materials. That is why they said all cargoes destined for the ports must come to Customs port. Any agency that is still undertaking mid-stream should know it is outlawed and Customs is aware of that.
As regards the issue of cargo coming in illegally, today in the free zones, there is nothing like contraband; provided it is for use within the free zone, it is not for export to Nigeria. So, you can import a finished vehicle if you are to use it within the free zone. If you to take that same vehicle outside, you will pay Customs duty.
And cargoes, from their point of destination to the point of arrival, are tracked. We have a free zone inventory monitoring system. From the time the ship leaves whatever point of departure, it will be destined for the free zone. And so, from the point it leaves wherever it is coming from, we are aware that this cargo is coming to the free zone.
When it gets here, the regulatory authority will ensure that it goes to a bonded warehouse within the free zone and we have all the control mechanism to ensure that it does not leave the free zone to the Customs territory.
Some of the issues you hear is because this port is also conventional port and also a free zone port; some of the goods can come in conventional – those ones can have contraband, and it is the Customs that will deal with that. But from my experience here in over three years, we have not had contraband goods brought in under the free zone cargo. One of such ones that came in, came as conventional cargo and Customs rightly would seize them.
Future investments
The area of investment we are looking for is in the downstream of the petroleum industry because we have the raw material of crude oil, we have gas. We cannot continue to just export these raw materials. And so, we are encouraging investors to come into the free zone because we are expecting gas to be there. The crude line is not far away from here so that they can use this crude and gas to produce fertilizer, plastics, petrochemicals and refineries. So, that is the concept of development now.