Shock Value

Shock Value

The Nigerian economy, like any other, experiences “shocks”— events or policy decisions that can send a ripple of changes through the system. This column zooms in on these ripples in a range of sectors to explore how and why these shocks matter.

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Nigerian Free Trade Zones: As Simple as SEZ

Ebehi Iyoha

Ebehi Iyoha

Ebehi is an avid reader seeking insights in unexpected places. Her research interests include economic development, political economy and trade.

In May 2017, Acting President Yemi Osinbajo signed an executive order on the "Promotion of Transparency and Efficiency in the Business Environment". Though the title is a mouthful, the order aims to make things simpler for businesses who have to apply for permits, licences, waivers, etc. from Federal ministries, departments and agencies (MDAs). The goal here is to move Nigeria up 20 places on the World Bank's Ease of Doing Business ranking within two years and attract more foreign direct investment (FDI).

Bureaucratic delays are just one of many hurdles that hamper business growth in Nigeria. Other main ones being inadequate infrastructure and weak contractual enforcement. But rather than trying to tackle individual issues, the government could focus on addressing the most pressing challenges for a few industries at a time to speed up their growth in the short-term. This is where Special Economic Zones come in. 

 

Simple as SEZ 

A Special Economic Zone (SEZ) is a broad term for industrial parks, free trade zones, export processing zones, etc. The common denominator is that the government demarcates a physical area where businesses receive "special treatment" of some form – different regulations, infrastructure, tax regimes, etc. Governments often opt for SEZs to support industries that would typically find it hard to operate, attract foreign businesses to locate in an otherwise unfriendly climate or to encourage clusters of businesses who benefit by locating near each other by access to standard inputs at lower cost (economies of scale).  

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