Free Zone, Or Free Lunch   

The Lekki Free Zone beckons, dogged by controversy

•The Free Zone Administrative building.

There is no end to the opposition against the Lagos State Governor, Babatunde Raji Fashola  over some of his radical policies. Last year, operators in the hotel and hospitality  industry engaged him in a protracted altercation over the introduction of the Hotel  Occupancy and Restaurant Consumption Tax Law. The law compels hotels and other operators  captured in the net to pay 5 per cent of their individual total bills, excluding Value Added  Tax, issued to consumers. In advertising, many stakeholders are still fuming over what they  consider unreasonable charges that the Lagos State Signage and Advertising Agency, LASAA,  imposes on any slight thing it considers a revenue generating potential. And last month, on  19 August 2010, residents around the Lekki axis opposed to toll collection on the expressway  confronted – peacefully though – the governor on the issue.

Fashola was headed to the official commissioning of the Lekki Free Zone, LFZ, Administrative  Complex when the angry critics impeded his vehicular traffic to drive home their grievance.  For one hour, the dissidents held him up. Through their spokesman, Adewale Sanni, they  kicked that the state government didn’t consult with them before deciding on the toll plan.  They were more enraged that the Lekki Concessionaire Company, LCC, builders of the road with  the mandate to collect the toll, would be installing not one, but three toll booths on the  road. And it took all of the one hour for Fashola to explain to the protesters the benefits  accruable from the new 49.5-kilometre road before he was let go. He backed his appeal for  understanding with a quote from an American newspaper caption on countries and states  turning to tolls to fund roads. “Toll roads are increasingly emerging,” the caption read,  “as a strategy for states and metro areas eager to build and maintain expressways amidst a  recession that has battered government budgets.”

One of the benefits, the governor further explained at the LFZ location at Ibeju-Lekki, is  the smooth passage the expanded road would provide to the LFZ located. The road is a  precursor to a more ambitious coastal road network. Fashola participated in the first  meeting about seven years ago and as chief of staff to his predecessor, Bola Tinubu, with  the Managing Director of the Nigerian Export Processing Zones Authority, Shine Agboluwaje,  when the prospect of a Free Trade Zone was discussed. And with huge funds sunk into the  project since then, it is not even an option to back out now. “Let me say, for the avoidance  of any doubt, that the prosperity of this region of Lagos is inexorably tied to the success  of that toll road,” Fashola stated.

Fashola reiterated that the success of the LFZ is hinged on the transportation network that  will support and enable goods and services to be distributed across Nigeria in the fastest  and most efficient manner. The free trade zone concept is a relatively new development model  that many economies have adopted to surge forward. Fashola cited China as a case study. “We  cannot wish to have what they have when we choose to ignore what they do,” he said. And  since the Nigerian economy is not immune from the impact of the global recession, he  advised, it should adopt ideas that have worked well in lifting other economies.

Managers of the LFZ has listed a basket of juicy incentives to aspiring foreign investors.  They will be allowed 100 per cent repatriation of their profits. There will also be 100 per  cent tax holiday for them and exemption from custom duties and levies. Other incentives  include 100 per cent tax-free imports of raw materials and components for goods destined for  re-export, 100 per cent waiver on all imports and export licences, 100 per cent freedom to  hire foreign employees and waiver on expatriate quota.

Some critics believe the Lagos State government is overstretching the incentive magnanimity.  “Are we saying the free trade zone is a complete free lunch for foreigners? What incentives  are we offering Nigerian investors? Nothing? What the project is offering denies local  investors the advantages accruing from it while giving everything away to foreigners. In a  way, it is giving the Lagos economy away to foreigners,” said Abimbola Awofodu, a  developmental economist.

But the project managers disagreed. Segun Jawando, an engineer and chairman of the Lekki  Free Zone Development Corporation stated the incentives should not be perceived as unduly  favourable to foreign investors, considering the huge funds those investors would be  bringing in. “They will be investing in buildings, with all the materials locally sourced,  with a lot of people employed and goods manufactured here. Our people will stop going to  Shanghai to buy things, while we save a lot of resources,” he explained. He pointed  out  that the rosy incentives are basically theoretical on paper. Expatriates, he expatiated, are  expensive to maintain, with investors usually preferring to minimise their overhead costs by  employing more of local hands. With foreign investment projected to hit about $2.5bn,  Jawando expected nothing short of $30bn turnover in the first five years.

Olusola Oworu, Special Adviser to the Lagos State government on Commerce and Industry shared  Jawando’s optimism. She told TheNEWS that essentially, the incentives are meant to attract  investors into the tax-free zone. “It’s not just for export/import arrangement; you can  actually produce and sell into the domestic market for as long as the value added is about  35 per cent” she said. And since the investors would have invested substantially at  take-off, they should be allowed to take back their profit.

The LFZ, a long-term project strategically spanning 15,500 hectares, will take 10-15 years  to fully develop. Geographic and geological experts point out that few places exist  worldwide that are so strategically positioned like the LFZ region which lies in a peninsula  that is hugged by the Atlantic on one side and a lagoon on the other. The first phase of the  masterplan provides for structures for trade exhibitions, shopping and leisure centres,  hotels and tourism sites, warehousing, oil and gas, manufacturing, business resorts,  exclusive residential development, civil centre, cinematography and cultural development.

Fashola’s commissioning of the Administration complex signals the commencement of business  in the zone with the next few months expected to herald full commercial enterprise. At  present, over 70 local and foreign companies have signed the Memorandum of Understanding,  MOU, backed by various forms of financial commitments. The zone for now, provides employment  for 800 Nigerians and 70 Chinese engaged in various activities, especially in construction.

Meanwhile, the dispute over the toll booths rages, although collection of fees is yet to  begin. Only a test-run and handbills distribution exercise commenced there 19 August 2010,  while the Lagos State government has been forced to set up an 18-man committee to look into  the numerous protests. The concession agreement was signed with the Lekki Concessionaire  Company on 24 April 2006.

—Funsho Balogun

Tags:  Babatunde Raji Fashola, Hotel Occupancy and Restaurant Consumption Tax Law, Lagos State Governor, Lekki Free Zone