CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
In a progressively globalized world with accumulative trade and human travel, the struggle between nations and cities has also increased at a consistent rate. This has meant that nations and cities are involved either openly or clandestinely in a malicious trade war or competition. It has also made nations or cities to grant incentives or subtle encouragement to potential investors and established businesses within their territories. These incentives could vary from tax wavers, tax reliefs, and simplicity in procuring properties to the institution of free trade zones. A Free Trade Zone is any area in a country where goods may be imported/exported without any barrier imposed by the host's customs authorities. It could also refer to a particularly chosen area within a country where regular trade barriers like quotas and tariffs are removed and the administrative restricted access is lessened in order to attract new businesses and foreign investments. In the same vein, a Free Trade Zone could be defined as a labor-intensive manufacturing or assembling hub, which consists of the import of raw materials and/or components for manufacturing or assembly of finished or semi-finished products meant for export to different countries. Likewise, Free Trade Zones have been defined as a geographic area where raw materials may be landed, handled, manufactured or reconfigured and re-exported without the intrusion of the customs authorities. In this regard, only when the goods are moved to consumer (customs territory) within the country in which the zone is located do they become subject to the predominant customs duties. Free Trade Zones are usually developed in places that are geographically beneficial for trade. Places close to international airports, seaports etc are preferred for developing Free Trade Zones. In some countries, Free Trade Zones are called Special Economic Zones (SEZ) or Free Zones (FZ). Generally, Free Trade Zones around the world frequently provide special exemptions from regular immigration procedures and foreign investment limitations as well as other features. The modern model of FTZs first gained impetus over the last few decades (FTZPHD,2005). In 1975, there were 25 countries with FTZ in place, whereas that number had increased to 93 by 1997 (EPZ, 1998). Similarly, it is estimated that approximately 800,000 people were employed within FTZs in 1975 and approximately 4.5 million in 1997 (FTZPHD, 2005). As at the commencement of 2007, there were an assessement of more than 2,700 FTZs around the world, providing employment for almost 63 million people (ILO, 2008). Increase in global trade and swift developments in infrastructure stimulated change and adaptation of the FTZ concept.there has been numerous different terms for FTZ during the last decade, Most popular terms includes, terms include Free Trade Zone (FTZ), Export Processing Zone (EPZ), Free Export Zone (FEZ) and Special Economic Zone (SEZ).FTZPHD,(2005). It has been renowned that the different terms over time and space repeatedly reflect the specific activities carried out within a particular zone. Commonly, customary trade barriers such as tariffs and quotas are disregarded in FTZs and governmental requirements are dropped to entice new business and foreign investments. Establishments operating within the FTZ may also be granted certain host country, income tax breaks or holidays as an additional enticement. These zones are regularly located in a developing part of the host country, and the zones are expected to encourage economic activities and consequently reduce poverty and unemployment. FTZs are regularly located around a port of entry to simplify import and export process. Globally, research has recognized a strong correlation between the presence of FTZs and increasing export trade, and it appears clear that FTZs have become increasingly popular as a policy apparatus for the promotion of export focused on FDI (FTZPHD, 2005).
1.2 Problem Statement
Nigerian Economy and shipping industry has experienced prolonged stagnation in growth. Therefore, shipping operators, manufactures along with commercial and private importers and exports have been exposed to delays in receiving their cargo. Frequently these maritime stakeholders have been subjected to unfavorable storage and port charges high administrative fees and lack of cargo security as well as procedural hurdles for the clearing of cargo. These issues are combined with outdated are insufficient port infrastructure. Furthermore, these challenges have resulted in major operating problems for the carriers, causing them to divert their operations to other shipping friendly ports. These problems have also caused manufacturers to move their operations from Nigeria to locations which are conducive to commercial and private cargo movements. Therefore, in order to alleviate the loss of manufacturers and facilitate large ocean carriers significant development is required. Moreover, the development should be led by the integration of Free Trade Zones and the innovation related maritime activities.
1.3 Objectives of the study
The intention of the research is to discuss and outline the important of free trade zone and maritime activities on economic development of Nigeria a case study of lekki free trade zone thus the objectives are:
● Identify how the free trade zone and maritime activities affect economic development of Nigeria
● Reveal the factors which makes a FTZ and maritime activities influence economic development.
1.4 Research Questions
How does the free trade zone and maritime activities affect economic development of Nigeria?
What are the factors which make a FTZ and maritime activities influence economic development?
Who are Nigeria’s main competitors in FTZ development?
1.5 Research Hypothesis
Ho: There is no significant impact of FTZ on Nigeria’s economy.
H1: There is a significant impact of FTZ on Nigeria’s economy.
1.6 SIGNIFICANCE OF THE STUDY
The results of the findings of this research are expected to reveal the factors which are needed to enable Free Trade Zone to complement port and economic development. The research is also expected to outline a practical approach to increase cargo volumes into Nigerian ports. Additionally, results from the research are expected to clearly articulate the economic relationship between economic and port development. The finding will also show how Nigeria can improve its vessel calls by increased operations through free trade zone operation. Finally, the research will determine if port expansion is either positively or negatively influenced by free trade zone operations and maritime activities.
1.7 Scope of the study
This study assesses the important of free trade zone and maritime activities on economic development of Nigeria a case study of lekki free trade zone. Therefore, this study will be limited to free trade zone and maritime as the subject matter. The study will be focusing on the free trade zone and maritime activities on economic development of Nigeria.
1.8 Limitation of the study
This research is expected to encounter limitations in its execution, the possible constraints are likely to occur in the following areas.
Restricted access to information from government agencies.
Restricted access to information from private stakeholders who operate in the local maritime sector.
Insufficient time to capture all related information of trade patterns and cargo flow dynamics.
Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Attitudes of Respondents: The researcher encountered the major challenge from the respondents on their typical reluctant attitude to fill the questionnaire or grant interview. In some cases, some respondents expect to be paid for the use of their time and knowledge; if otherwise, they were very reluctant in giving the required information. Some hoard information in keeping with the oath of secrecy. In spite of repeated assurance of confidentiality most of them fear the loss of their job and some were too busy to grant interview and fill the questionnaires correctly.
Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
