MAN Supports FG’s Bold Reform: What it Means for Manufacturers.

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The Manufacturers Association of Nigeria (MAN) has thrown its weight behind the Federal Government’s proposed reform of free-trade zone operations in Nigeria. This move aims to ensure equitable tax treatment for companies operating in the customs territory and those licensed to operate within the free zones, with respect to sales into the customs territory.

According to MAN Director General Segun Ajayi-Kadir, “Licensed entities will also enjoy similar incentives available to entities within the customs territory with respect to their sale of goods and services into the Customs Territory, which is a win-win outcome.”

Ajayi-Kadir emphasized the importance of understanding the context of export processing zones and export free trade zones, which were created to achieve specific economic goals. He noted that the enabling laws, such as the Nigeria Export Processing Zone Authority (NEPZA) Act, clearly state that approved activities within the zones include manufacturing of goods for export, international services, transshipment, and services within the zones.

Ajayi-Kadir pointed out that banking, for instance, is listed as an approved activity, but this does not mean that a bank can operate outside the zone without paying taxes. He stated, “So, this should explain how other activities (apart from manufacturing for export) should be viewed.

The MAN DG expressed concerns about tax incentives, saying, “In specific terms, Section 8 on exemption from taxes only applies to approved enterprises operating within a Zone. They are exempted from all Federal, State and Local Government taxes, levies and rates.” However, he noted that sales to the customs territory are neither an approved activity nor within the zone.

Ajayi-Kadir highlighted the need for clarification on tax exemptions, stating, “Over time, the provisions of sections 8 and 18 have been misinterpreted as not only permitting the sale into the customs territory but also as tax exemption… This position is not consistent with the law and it undermines tax-paying entities operating within the customs territory and producing similar goods and services.”

He rhetorically asked, “Where does the tax exemption enjoyed by the companies operating within the zones leave my more than 2,500 members who operate outside the zone, in terms of level playing field, competitiveness, fairness and equity?”

Ajayi-Kadir expressed support for the tax reform bill before the National Assembly, saying, “The bill seeks to bring clarity and equity by stating that sales to the customs territory are taxable, not just for import duties and VAT, but also Company Income Tax (CIT) purposes.”

He noted that Nigeria’s tax policies are more generous than those of neighboring countries, such as Ghana, which only allows up to 30% sales into the customs territory subject to payment of duties and taxes. Ajayi-Kadir stated, “Exports by a zone entity are tax-free only for 10 years after which up to eight per cent CIT will apply. Nigeria offers indefinite tax exemption on exports”.

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