Aviation Industry on Edge as FG’s FTZ Tax Plan Puts 600,000 Jobs at Risk

Aviation Industry On Edge As FG’s FTZ Tax Plan Puts 600,000 Jobs At Risk

The Federal Government’s proposed taxation of Free Trade Zones (FTZs) in Nigeria has raised concerns among industry players, particularly in the aviation sector, who fear it could deter foreign investment and trigger mass job losses.…..READ MORE 

Currently, two major aviation companies operate within the FTZs at Murtala Muhammed Airport (MMA), Lagos—ExecuJet Aviation Nigeria and the Nigerian Aviation Handling Company (NAHCO) Free Zone (NFZ). These companies benefit from exemptions on Value Added Tax (VAT), customs charges, and other levies, making Nigeria an attractive destination for investors.

The Chairman of Quits Aviation Services Limited, operators of ExecuJet Nigeria, Sam Iwuajoku, warned that imposing taxes on FTZs could spell doom for Nigeria’s economy. He argued that the FTZ policy had successfully attracted investors, but frequent policy reversals by the government were driving businesses away.

“Government policy inconsistency is killing businesses in Nigeria. Companies like Lever Brothers left for Ghana due to backward integration. The textile industry has collapsed. Where are the major players today?” Iwuajoku lamented.

He further warned that the taxation could disrupt technology transfer, investment opportunities, and employment, making it difficult to carry out aircraft maintenance operations locally.

With the new tax regime, ExecuJet may be forced to lay off 80% of its workforce, which currently stands at about 160 employees, mostly professionals.

Aviation analyst Chris Amokwu questioned the rationale behind the proposed tax, noting that investors were initially drawn to FTZs because of their tax-free status. He warned that the policy change could lead to business closures and capital flight from Nigeria.

“The government is destroying the very incentive that made these zones attractive. Investors will simply take their business elsewhere,” he said.

Similarly, Toyin Elegbede, Executive Secretary of the Free Trade Zone Stakeholders, expressed concerns over the 2024 Nigeria Tax Bill, particularly its proposal to remove key sections of the Nigeria Export Processing Zones Authority (NEPZA) Act and Oil & Gas Free Zones Authority (OGFZA) Act, which provide tax incentives for Special Economic Zones (SEZs).

Potential $200 Billion Investment Loss

The Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) has warned that the proposed tax on FTZs could drive away over $200 billion in Foreign Direct Investment (FDI) and put over 600,000 jobs at risk.

In a strongly worded statement, NACCIMA National President, Dele Oye, criticized the proposed amendments, stating that scrapping FTZ tax incentives would erode investor confidence and damage Nigeria’s reputation in the global investment community.

“Out of Nigeria’s 50 FTZs, 48 were developed through private-sector investments. These tax incentives have been crucial in attracting investors, creating jobs, and generating over N650 billion in government revenue,” NACCIMA stated.

Industry experts have urged the Federal Government to reconsider its stance, warning that imposing taxes on FTZs could undermine economic growth, reduce foreign investment, and stifle job creation in Nigeria.