Federal Government Special Economic Zones (SEZs) Policy: Issues for Legislative Action

Abraham, Terfa ; Makeri, Joy H. (2018-03)

Working Paper

As part of its effort to drive its diversification agenda, the Federal Government of Nigeria announced its plan to set up 6 Special Economic Zones (SEZs) across the country. The Ministry of Industry, Trade and Investment is mandated to facilitate the setup of the zones. The specific goals include to help overcome the infrastructure disadvantages faced by local manufacturers, and promote the cluster effects gained by locating similar manufacturing businesses together. Special economic zones, referred to as SEZs, have become increasingly common as countries have shifted from import substitution policies to export-led growth policies. They are used by governments all over the world to promote trade and FDI in the host countries. While the Federal Government have indicated its desire to establish six (6) SEZs across the geopolitical zones in Nigeria, evidence from developing and emerging countries shows that several factors are considered by countries that have used SEZs to drive their diversification process. This brief examines these issues and highlights possible ways forward for Nigeria. While it is observed that countries like India and Philippines have success stories with SEZs, enacting legislation for SEZs played a significant role in the successful establishment and operation of SEZs in these countries. Nevertheless, the downsides associated with SEZs include loss of initial revenue to government through high incentives and environmental degradation in the geographical location of the SEZ. Nonetheless, the benefits of SEZs in creating jobs remains outstanding.