Nigerian Economists Urge Policy Stability to Protect $500 Million SEZ Revenue Stream
Economic experts call for regulatory consistency in Nigeria's Special Economic Zones following $500 million in earnings, warning that policy volatility threatens investor confidence and manufacturing sector expansion.
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Nigerian economists have issued urgent calls for policy stability and regulatory consistency to protect the $500 million revenue stream generated by the country's Special Economic Zones (SEZs), warning that abrupt policy shifts could derail manufacturing growth and erode hard-won investor confidence.
The appeal comes as Nigeria's SEZ framework faces pressure from various reform initiatives, with economists emphasizing that predictable regulatory environments remain critical for sustaining foreign direct investment flows into manufacturing operations. According to analysis from Nairametrics, the zones have emerged as significant contributors to Nigeria's industrial output, but their continued performance hinges on maintaining stable operating conditions.
Manufacturing Sector Vulnerability
The $500 million earnings figure represents a substantial achievement for Nigeria's industrial policy, particularly as the country seeks to diversify its economy away from oil dependency. SEZs have provided manufacturers with tax incentives, streamlined customs procedures, and dedicated infrastructure that offset some of Nigeria's broader business environment challenges.
"Abrupt reforms could undermine investor confidence and stall manufacturing growth," economists warned in assessments cited by Nairametrics. The concern reflects broader anxieties about policy consistency in Nigeria's economic management, where regulatory changes have historically occurred without adequate stakeholder consultation or transition periods.
Manufacturing facilities within SEZs typically require multi-year investment horizons, with companies committing substantial capital to plant construction, equipment installation, and workforce development. Policy volatility introduces risk premiums that make such investments less attractive compared to more stable markets across Africa, including Kenya, Rwanda, and South Africa.
Regional Competition Intensifies
Nigeria's SEZ performance occurs against intensifying regional competition for manufacturing investment. The African Continental Free Trade Area (AfCFTA) has heightened competition among member states to position themselves as preferred manufacturing hubs, with countries offering increasingly sophisticated incentive packages.
Egypt's Suez Canal Economic Zone reported $8.6 billion in investments through 2025, while Kenya's Special Economic Zones Authority has attracted over $2 billion in manufacturing commitments. These benchmarks underscore the competitive pressure Nigeria faces in retaining and expanding its SEZ portfolio.
The Central Bank of Nigeria's monetary policy stance adds complexity to the SEZ investment climate. With the benchmark interest rate at 27.50 percent as of February 2026, following aggressive tightening to combat inflation running above 30 percent year-on-year, borrowing costs for manufacturers remain elevated. SEZ incentives partially offset these macroeconomic headwinds, making their preservation particularly important.
Regulatory Consistency Imperative
The economists' call for regulatory consistency addresses specific concerns about potential changes to tax holidays, import duty exemptions, and foreign exchange access provisions that currently benefit SEZ operators. Nigeria's history of retroactive policy changes, including the 2016 suspension of foreign exchange allocations for certain import categories, has left investors wary of sudden regulatory shifts.
Current SEZ benefits include corporate income tax holidays ranging from three to five years, exemptions from import duties on raw materials and capital goods, and simplified repatriation procedures for profits and dividends. Any modifications to these provisions would require careful calibration to avoid triggering investment withdrawals.
The Nigerian Export Processing Zones Authority (NEPZA) oversees 43 designated zones across the country, with concentrations in Lagos, Kano, and Calabar. These zones employ approximately 75,000 workers directly, with secondary employment effects extending to logistics, services, and supplier networks.
Manufacturing output from SEZs spans textiles, pharmaceuticals, consumer goods, and light engineering products. Several zones have developed sector specializations, including pharmaceutical manufacturing in Ogun State and textile production in Kano, creating industry clusters that enhance productivity through knowledge spillovers and shared infrastructure.
The $500 million earnings figure likely encompasses direct zone revenues, tax collections from operational phases following incentive periods, and indirect economic contributions. While modest compared to Nigeria's $440 billion GDP, the zones' strategic importance extends beyond immediate revenue to their role in industrial capability development and export diversification.
Looking ahead, sustaining SEZ performance will require balancing reform imperatives with investor stability needs. As Nigeria pursues fiscal consolidation and revenue enhancement, policymakers face pressure to review tax expenditures including SEZ incentives. The economists' intervention suggests that any such reviews should prioritize grandfathering existing commitments and providing extended transition periods for policy changes, protecting the investment climate that generated current performance levels while allowing space for evidence-based policy evolution.