MAN decry abuse of free trade zones, soaring production costs

The Manufacturers Association of Nigeria (MAN) has raised fresh concerns over the worsening state of the Basic Metal, Iron and Steel sector, warning that widespread abuse of the Free Trade Zone (FTZ) scheme, coupled with rising production costs, is pushing many operators to the brink of collapse.

Lekan Adewoye, Chairman of the Basic Metal, Iron & Steel Sectoral Group of MAN, issued the warning in Abuja during an interview with journalists on Wednesday, where he highlighted the sector’s capacity, competitiveness, and long-term sustainability.

According to him, while post-COVID-19 reports from the Central Bank of Nigeria (CBN) show manufacturing capacity utilisation improving to about 50–60% by the end of 2024, the steel industry continues to operate below that threshold due to persistent structural and policy-related challenges.

Read also: MAN urges FG to make policies to enhance manufacturing

Adewoye identified four major threats undermining the sector, including, high interest rates, exorbitant energy costs, unfair competition from FTZ operators, and weak regulatory oversight.

He lamented that borrowing costs, currently between 28% and 35% make it nearly impossible for manufacturers in a capital-intensive industry to survive, he noted that building a steel plant requires investments running into hundreds of millions of dollars.

Without targeted government support, he said, significant expansion in the sector will remain out of reach.

Energy costs, particularly for natural gas, pose another major challenge. Adewoye explained that gas prices in Nigeria are far higher than in industrialised economies that subsidize energy to improve export competitiveness.

He warned that unless government intervenes, Nigeria risks losing out in the African Continental Free Trade Area (AfCFTA) and becoming a dumping ground for cheaper imports.

The MAN sectoral chairman expressed concern over what he described as rampant and systemic abuse of the Free Trade Zone scheme.

According to him, many FTZ operators have abandoned the original objectives of promoting export-oriented production and attracting foreign direct investment, and have instead turned the zones into conduits for importing cheap finished and semi-finished goods.

Adewoye cited a recent case involving a foreign firm in the Calabar Free Zone which allegedly imported 6,000 metric tons of wire coil at a grossly under-invoiced value of $67,000, roughly $11 per metric ton compared to the global market price of about $500 per metric ton.

“This represents flagrant under-invoicing of raw materials destined for Calabar FTZs. What makes it even more damaging is that FTZ operators already enjoy zero import duty on all inputs, while legitimate manufacturers in the customs territory pay as much as 25% duty on the same materials. This creates an unfair and unsustainable competitive imbalance,” he said.

He noted also that FTZ operators enjoy zero duty on imports while manufacturers in the customs territory pay up to 25% on the same materials. He added that some FTZ operators neither export nor add value to their imports, but simply channel the goods into the local market at prices that undercut genuine producers. In some instances, items imported as raw materials are resold without any processing.

Adewoye accused FTZ operators of exploiting loopholes to evade proper duties, thereby causing huge revenue losses to government and destroying the competitive balance of the local market. He recalled that one MAN member in Ogun State had scrapped 80% of its plant after being pushed out of business by FTZ competition.

He blamed poor oversight for the situation, saying regulatory agencies have failed to enforce compliance despite years of warnings and petitions from MAN.

To restore fairness to the system, he called on the government to urgently conduct a 10-year audit of FTZ operations in the metals and steel industry, recover lost revenue, prosecute offenders, and establish a special task force comprising MAN, Customs, and the Ministry of Trade to sanitise the zones.

“Unless decisive action is taken, more steel manufacturers will collapse and Nigeria stands to lose decades of industrial investment and jobs,” he warned.

Adewoye stressed that the original vision of FTZs, to boost exports, attract investment, and strengthen local industrial capacity, must be reclaimed if Nigeria hopes to build a globally competitive steel sector.

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