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Onne Free Trade Zone: Intels’ huge investment driven by confidence in Nigeria’s economy– MD, Free Zones Authority

R-L: Facility Manager, Mr Alex Morrow; Hon. Minister, Industry, Trade and Investment, Dr. Okechukwu Enelamah; Managing Director OGFZA, Chief Victor Alabo, and Head of Administration & General Service, Mr Chibuisi Onyebueke, when the minister toured the facility as part of a two-day retreat by his ministry

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-line 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.

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.

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. 

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. 
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. 

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