OGFZA, the Mandate, and the Journey So Far
By: Mmek-Abasi Akpabio
At the core of the reasons for birthing the policy (strategy) of special economic zones (SEZ) by the federal government of Nigeria in the 1990s was to drive economic growth for the prosperity of Nigerians through a number of benefits. These include; job creation, attracting foreign direct investments (FDI), engendering technology transfer, boosting export, and promoting rapid industrialization.
The implementation of this policy, as of necessity, came with its natural precursor such as the need for regulatory agencies for the then would-be SEZs since such establishments (locations and their promoters) were not going to run their businesses and also regulate their existence in the zones all by themselves. Such regulators included the Nigerian Export Promotion Council (NEPC), Nigerian Export Processing Zone Authority (NEPZA) and the Oil and Gas Free Zones Authority Nigeria (OGFZA). Others were the Nigerian Export Import Bank (NEXIM), Bank of Industry (BI) and the Nigerian Investment Promotion Commission, (NIPC), etc.
Much as a mention has also been made of the other regulatory agencies, however, the focus of this write-up will be on the last of the three, namely, OGFZA. This is because this particular outfit is the sole regulator of SEZs in the oil and gas sector in Nigeria which apart from consistently contributing significantly to Nigeria’s gross domestic product (GDP) in the last four years (hovering between 5.66% between the 4th quarter of 2018 and the 3rd quarter of 2022) according to Statista 2023, it also enjoys the preeminent position far above all other sectors in Nigeria in terms of its foreign exchange earnings for the country (80%) according to dmarketforces.com. With the above fact, apart from perhaps agriculture sector with a higher contribution to the national economy, the Oil and gas sector can be expressly said to be the mainstay of not only the national economy but virtually all aspects of the country.
It is, therefore, not out of place if an agency that regulates a critical aspect of the oil and gas industry i.e. the SEZs therein, like the OGFZA, is occasionally put in the spotlight in order to objectively assess its continuous relevance to the needs of the country. This discourse is going to focus on the coming of OGFZA, its journey through the about two and a half decades of its existence, its achievements and, a critical examination of its relevance and viability as a stand-alone regulatory body for SEZs in a deeply specialized and all-important sector of the economy such as the oil and gas.
An eye will also be put on the challenges, if any, and possible opportunities that lie behind those challenges, that can be leveraged upon if such militating factor(s) are remedied in order to enable this agency to win more and, in the end, optimally deliver on its mandate and possibly, even more, than was assigned to it by its founding fathers at inception.
Being uniquely created as the “first government agency in the world solely dedicated for the regulation of SEZs in the energy industry”, OGFZA has remained true to its destiny and even, with a little more support, perhaps on the way to surpassing it. As at today, the Authority has eight expansive free zones that it is regulating out of which six are fully operational while two are at advanced stages of completion preparatory to take off. Those in full activity and their years of establishment include; Onne Oil and gas free zone 1996, Warri oil and Gas free zone 2011, Eko Support Oil and Gas Free Zone 2015 and Notore Oil and Gas Free Zone also in Onne 2018 . Others are, Liberty Oil and Gas Free Zone, Akwa Ibom 2020 and Bestaf Maritime and Industrial Oil and Gas Free Zone, Tin Can, Lagos 2022. The yet to be completed free zones are, Brass Oil and Gas Free Zones in Brass Island Bayelsa State 2018, and OGFZA-SBA Free Zone, Lagos 2023.
At a recent media briefing in Abuja by the Managing Director/CEO of the Authority, Senator Tijjani Y. Kaura MFR, the CEO stated that OGFZA in the last two decades of its existence has “recorded real achievements in quantitative terms which contributed significantly to the nations GDP.” These according to Senator Kaura, has really shown in three notable areas, namely; Foreign Direct Investment (FDI) of $21.6b between 2001 and 2021, technical skills transfer to 35,330 Nigerians within the same period and direct jobs for 41,085 Nigerians and indirect employment for 164,000 Nigerians, all within the period in reference.
The MD/CEO of OGFZA further announced that the Authority’s activities also accounted for substantial revenues that have accrued to the federal government of Nigeria between the years 2018 and 2021. These include; N119b for goods exported from the Free Zones to the Customs territory, withholding tax of N10.4b (for transactions carried out between Free Zone enterprises and non-free zones licensees) and Value Added Tax (VAT) of N9.5b (for transactions carried out between Free Zones enterprises and non-free zones licencees). Senator Kaura also revealed that the oil and gas free zones “are evolving well and making impactful contributions to the national economy” as they keep attracting impressive investment commitments from both new and existing investors particularly in five of the free zones in the oil and gas industry.
These commitments run up to nearly $16b in four years 2021-2025. A highlight of these commitments shows that Liberty Oil and Gas free zone in Akwa Ibom State has so far attracted the highest investment commitment of $6.4b while Notore free zone in Onne, Rivers State has raked up the second highest with a $5.3b commitment, with Brass Oil and Gas Free Zone finishing third with a $3b proposed investments. Others are, OGFZ-SBA Free Zone $738m and Bestaf Maritime and Industrial OGFZ proposed investment of $485m.
Looking at the above impressive scorecard, one may be wondering if these quoted records are for real. However, a close look at the evolution of the Authority vis a vis the numerous awards and credible recognitions it has garnered particularly in recent years will buttress the credibility of this brilliant record. For instance, between 2018 and 2022, on ease of doing business, the Presidential Enabling Business Environment Council (PEBEC) consistently presented OGFZA with awards in different categories on account of the Authority’s sterling performance. The awards include; first position (most transparent and efficient agency-PEBEC 2018), first position (Best MDA in Cumulative Compliance in the Implementation of Ease of Doing Business Policy- PEBEC 2019), first position (best MDA in efficiency and compliance PEBEC 2022) and third position (Overall performance on efficiency and transparency PEBEC 2022).
In addition to the above local awards were international recognitions dating even earlier from 2017. These were: Specialism Award for the Free Zone of the Year (oil and gas) 2017, Winner-Large Tenant (Africa) 2018, Winner-Bespoke award- (Incentives) 2018 and Winner Large Tenants- (Africa) 2019. Others in tow were, the 2019 Highly Recommended Specialism Award (Oil and Gas), 2020 Specialism Award for free zone of the year (Oil and Gas) and, Specialism Award- free zone of the year (Oil and Gas) in 2021.
As at today, the Authority through its cumulative activities has scored an impressive 69% in achieving its employment generation target. It has also achieved another commendable feat of 73% on skills transfer, a key goal of the federal government for adopting the special economic zones strategy as an important part of its overall economic development efforts. Right now, in its traditional proactive nature, OGFZA has already aligned with the vision of President Bola Ahmed Tinubu GCFR who is poised to positively turn around the Nigerian oil and gas sector. In this regard, apart from ramping up more Zones in the oil-rich Niger Delta region, also more gas processing projects such as the Giwa Gas projects in Liberty free zone, the proposed methanol plant project in Brass free zone and the Meliora Methanol FZE project are being attracted to the the enclave.
Besides, there is an ongoing collaboration with some exploration and production (E&P) companies including Waltersmith Petroman Oil Ltd for the development of an industrial and Innovation Park/oil and gas free zone in Imo State. In addition to this, is the Authority’s initiated discussion with some key industry stakeholders like BrentexCPP Limited of China. All of these initiatives are aimed at setting up a gas-to- industry manufacturing and related activities clusters in order to facilitate investments and other economic development in the areas of focus.
In spite of all the above milestones of OGFZA, there is still one striking achievement that must be brought up here. And that is the achievement of partial self-funding by the Authority in an era when most government agencies even some bigger revenue-generating ones often run to the government cap in hand to beg for money. This is another area where the agency has set itself apart for high commendation and as the Managing Director hinted some time ago, ” if a few issues that tend to challenge us are sorted out, there’s the possibility that we may tell the federal government to totally hands off the funding of the Authority”. What are these challenges? The very deplorable state of the Port Harcourt -Onne corridor of the East West Road. This section of the road provides access to some major oil and gas free zones and other national strategic investments of the country such as the Onne Oil and Gas free zone, Notore Industrial complex, Eleme Refinery and Indorama Petro Chemical Complex, Liberty Oil and Gas zone in Akwa Ibom State, etc.
There is also the issue of regulatory interference mostly due to lack of understanding of the peculiar nature of the workings of free trade zones. However, on this issue, there is some good news that this particular challenge is currently being addressed by the authorities. In all the outlined trajectory of OGFZA in the last 27 years, one fact cannot be successfully denied. And that is that the agency has impressively impacted the Nigerian economy and the Nigerian people by majorly fulfilling the dream of its founding fathers. And, even if there may have been shortfalls in the realization of certain targets, however, that could be understood in the context of several attenuating global socio-economic circumstances that occasionally ravaged the global economy and producing in its wake acute challenges that hampered economies of many countries including Nigeria in these past 27 years.
Some of such problems include; the 2008 global financial crisis, the Covid 19 global pandemic, etc. At the local level, the issues of under development in the general business environment such as poor infrastructure, insecurity, etc are almost always there to undermine genuine efforts at attracting investments into the free zones, and by extension, OGFZA’s work.
In conclusion, it can be safely said that OGFZA has largely fulfilled its mandate as enunciated by its founding fathers at inception. It has imprinted brilliant strides on the sands of time. Let it, therefore, be strongly suggested here that the Authority be further strengthened by the federal Government by continuing to guarantee its autonomy apart from solving the earlier mentioned challenges in order for the country to fully reap from its, so far, impressive run. Even in the face of the much ballyhooed decline in the global need for crude oil because of the advent of cleaner energy sources, at least, in the foreseeable future, oil will still remain a dependable energy provider to many economies of the world. That realistic prospect should guarantee a unique pride of place for any oil-related endeavor in Nigeria’s scheme of things, more so, when the Country remains a substantial oil producer in the world.
