Onne Free Trade Zone: Intels’ huge investment driven by confidence in Nigeria’s economy– MD, Free Zones Authority
The Managing Director of the Oil and Gas Free Zone Authority, Chief Victor Alabo, in this interview, describes Intels’ huge investment in the Onne Free Trade Zone, among about 200 investors, as driven by its confidence in the Nigerian economy.
Alabo, who granted this interview on the side-lines of the just-concluded retreat by the Ministry of Industry, Trade and Investment, said over $60 billion USD had been attracted to the zone, which had been adjudged as the most successful of all the free zones.
He also disclosed that additional jobs could be created to the existing over 30,000 workers; directly and indirectly, if investors bring on operations from the downstream sector of the oil and gas industry, considering the availability of raw materials in the zone.
He said that government’s support for the free zone, in terms of policy consistency had encouraged investors, while the authority was working to address the issue of interference on such policy by some agencies, especially on the front of taxes.
He talked on more industry issues of concern and how plans are on to have initiatives expand the nation’s economy.
What amount of money has thus far been investment here?
You know, in Foreign Direct Investment, we have over $60 billion that have been attracted to this free zone. For the free zones across the country, the other zones are not as successful as this and 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, they have confidence in Nigeria’s economy. So, they have done massive investments within the free zone. For instance, they are into port development. Initially, the port here had only about 7-9 metres draft, but they have gone to 9- 12 metres draft.
It is a Public Private Partnership between Intels and ministry of transport. So, whatever the size of the cargo, it arrive at the ports here because the draft have 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.
What is the 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, and 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.
What position does this Onne Free Zone occupy, in terms of operational rating?
This free zone is adjudged as the most developed or successful free zone world over that is dedicated to oil and gas. It is because of the consistence of government policies and also the ingenuity that we have brought into management of free zones.
In this free zone, we have regular stakeholders meetings with investors to address their challenges, such that we have a feed-back mechanism; what are the challenges they are having and how do we solve them together, such that we have a win-win situation?
You know, government has provided lots of incentives; some are physical incentives, some are task incentives, and these have attracted the investors into the free zone. Government also ensures that they are consistent with these incentives. If there are policy somersault, the investors lose confidence in bringing in their funds into the investment.
As long as this confidence is established, it attracts many other investors coming into the zone. That is why in this zone, we have close to 200 investors, several, falling into the maritime
sector, the light manufacture sector and the downstream sector of the oil and gas, and we will say it is a success story and we hope to replicate this success story in other parts of the country.
sector, the light manufacture sector and the downstream sector of the oil and gas, and we will say it is a success story and we hope to replicate this success story in other parts of the country.
The incentives to support operations?
Actually, the incentives that are in the free zone, there is no expatriate quota, it means, if an expatriate investor is bringing in his investment, he can come with the number of experts in that field to set up his investment.
Over time, when this investment has been set up, by our approach of negotiating with them,
there are supposed to train the Nigerian manpower that will take over from those they have brought in, and it has been a success story.
there are supposed to train the Nigerian manpower that will take over from those they have brought in, and it has been a success story.
Certain companies came with over 20, 30 expatriates, today, most of them have not even one left, some have few left. As the years go by, they are reducing the expatriate quota, because if you don’t reduce, we won’t renew their particulars, so, there is a programme. The second incentive is that you can repatriate your profit, there is no limitation; if you invest here and you make profit you can repatriate it to your country. It is to instill confidence in the investors, that whatever you bring in here, you can still gain the profit and send to your home country.
But what does government gain if they repatriate their profit?
Government gains from the infrastructure; what you are seeing here, most of them are private-sector investment. There is no way this investment can leave this area. The backward integration; they are employing our people, they will train them for skills. At the same time, whatever value they bare adding to the neighbouring community 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.
The challenges?
Occasionally, other government agencies try to interfere with these provisions of government.
Companies operating here that are exempted from company tax, from paying withholding tax, because that is part of the tax incentives.
Companies operating here that are exempted from company tax, from paying withholding tax, because that is part of the tax incentives.
But the government agencies are now coming into the zone and asking the investors to pay taxes such as the Withholding Tax; they are not supposed to pay it, but they are deducting it from them, which is a policy somersault, and that is what we are taking up with government. We are handling it at the ministerial level.
Power issues?
You know it is a development issue. Gradually, we are also partnering with NNPC and private agencies like 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. Interestingly, the gas line is such few kilometres from the zone, but it is government that needs to bring in that infrastructure. They have not done so now, and we are working with NNPC to see how that gas line will come in. Once it comes in, the power issue will be addressed.
How many of such zones do you have across Nigeria?
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 regulations. 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; Like LADOL Oil and Gas Free
Zone, Snake Island Oil and Gas Free Zone, Olokola Oil and Gas Free Zones.
Zone, Snake Island Oil and Gas Free Zone, Olokola Oil and Gas Free Zones.
The law provides that that are regulated by our authority, while the non-oil should be regulated by another.
What do you do to regulate and avoid the practice of people bringing in fully-built automobiles, cargo they are not supposed to bring, and the issue of mid-stream discharge?
Actually, let me start from the last one. Mid-stream discharge is not allowed by law; it has been proscribed for a long time 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. Whichever agency that is still undertaking mid-stream, it is outlawed actually, and customs is aware of that.
As regards the issue of cargo coming in illegally, today 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 now 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 that 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.
What areas do you expect more investments from?
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 material. 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 fertiliser, plastics, petro-chemical and refineries. So, that is the concept of development now.
