SB 06: Oil and Gas Export Free Zone Act CAP D5 LFN 2011 (Amendment) Bill, 2015

Download Bill Bill Analysis Download Bill Analysis
infograph

Sponsor:

Sen. Ibrahim Gobir

Bill Status: Awaiting Committee Report

  • First Reading: 25/06/2015
  • Second Reading: 29/11/2016
  • Committee Referred To: Committee on Trade and Investment
  • Consolidated with:
  • Date Reported out of Committee:
  • Third Reading:

Bill Analysis:

BILL ANALYSIS

 

SHORT TITLE

Oil and Gas Export Free Zone Act (Amendment) Bill, 2015

OBJECTIVE

The Bill seeks to provide for the designation and establishment of Oil and Gas Free Zones and Sub-Zones

PROPOSED AMENDMENTS TO THE ACT

 

Oil and Gas Export Free Zones Act, (“the Principal Act”)

Oil and Gas Export Free Zones Act (Amendment) Bill, 2015

Implications of the amendments

Section 1 –

  1. Designation and establishment of the Oil and Gas Export Free Zone

(1) The President hereby designates the Onne/lkpokiri area of Rivers State as an export free zone, (in this Act referred to as "the Export Free Zone").

(2) The Export Free Zone established pursuant to subsection (1) of this section shall be operated and managed by the Oil and Gas Export Free Zone Authority established by section 2 of this Act.

 

 

 

 

 

Clause 2 of the Bill proposes to amend Section 1 of the Principal Act as follows: -

“Designation and establishment of the Oil and Gas Export Free Zone

  1. The President on the recommendation of the Authority, may by order:
  1. designate any area within the Federal Republic of Nigeria as Oil and Gas Free Zone and Sub-Zones (“Free Zones and Sub-Zones”)
  2. designate any area within the Federal Republic of Nigeria as an oil and Gas Sub-Zones (“Sub-Zones”)
  3. amend, vary or add to the limit of any Oil and Gas Free Zones and Sub-Zones as the case may be
  1. The President hereby designates the areas as listed in the schedule to this Act (as amended) as Oil and Gas Free Zones and Sub-Zones.
  2. Oil and Gas Free Zones and Sub-Zones established pursuant to subsection (1) of this Section, may be designed, developed, funded or operated by the Authority or a combination of both the Authority and a private or public enterprise”

 

The proposed new Section 1 will give the Authority the power to recommend any part of the country as an export free zone to the President.

 

The listed parts of the country on the schedule shall be the statutorily recognized oil and gas free zones and sub-zones. If this Bill is passed into law, any other location (not part of those listed on the schedule) that is recommended to the President by the Authority as an oil and gas export free zone shall require an amendment to the Act to be included on the list.

 

** “the Authority” is the Oil and Gas Export Free Zone Authority

Section 2(1)

(1) There is hereby established for the Oil and Gas Export Free Zone, an authority to be known as the Oil and Gas Export Free Zone Authority (in this Act referred to as "the Authority")

 

Clause 3 proposes to amend Section 2(1) of the Principal Act by substituting it as follows:

“There is hereby established an Authority to be known as the Oil and Gas Free Zones and Sub-Zones Authority (“the Authority”)

The name of the Authority is amended to include “sub-zones”

Section 3(1)

“There shall be for the Authority a governing board (in this Act referred to as "the Board") which shall consist of the following members, that is-

  1. a chairman, who shall be appointed by the President, being a person who by reason of his ability, experience or specialized knowledge of export and investment promotion, commercial or economic matters is capable of making outstanding contributions to the functions of the Authority;
  2. one representative each of the following Ministries, that is-
  1. Finance
  2. Commerce
  3. Industry
  4. Petroleum Resources
  5. Justice

 

(c) the Managing Director of the Nigerian Ports Authority or his representative not below the rank of a Director in the civil service of the Federation;

(d) the Comptroller-General of Customs or his representative;

(e) one representative each of the following bodies, that is-

 (i) the Nigerian Chamber of Commerce, Industries and Mine and Agriculture;

(ii) the Corporate Affairs Commission;

(iii) the Manufacturers Association of Nigeria;
 (iv) the Rivers State Government;

(f) two eminent and knowledgeable Nigerians who shall not be employed in the public service and shall be persons with vast practical experience in the field of industry, commerce, finance, export promotion and such other related fields to be appointed by the Minister; and

(g) the Managing Director of the Authority.

 

Clause 4

“There shall be for the Authority a Governing Board (“the Board”) which shall consist of the following members that is:

  1. a Chairman who shall be:
  1. a suitable qualified person by reason of his profession, academic or administrative qualifications or experience in trade and investment promotion, commercial or economic matters
  2. appointed by the President, subject to the confirmation of the Senate;
  1. one representative of the following, not below the rank of a Director in the Public Service of the Federation
  1. Ministry of Industry, Trade and Investment;
  2. Ministry of Petroleum Resources;
  3. Ministry of Justice;
  4. Ministry of Transport;
  5. The Nigerian Chamber of Commerce, Industry, Mines and Agriculture
  6. Manufacturers Association of Nigeria;
  7. Federal Ministry of Finance
  8. The Managing Director of the Nigerian Ports Authority

(c) the Comptroller-General of the Nigerian Customs Service or his representative not below the rank of Assistant Comptroller-General;

(d) the Comptroller-General of the Nigerian Immigration Service or his representative, not below the rank of Assistant Comptroller-General; and

(e) the Managing Director of the Authority.

In the amendment Clause, the scope of the qualification of the Chairman was expanded by the addition of “administrative qualifications”.

 

The appointment of the Chairman shall be subject to the confirmation of the Senate.

 

 

 

 

On the other members of the Board, the amendment seeks to exclude the Corporate Affairs Commission, the government of Rivers State, and two eminent and knowledgeable Nigerians employed in the public service

Section 5 (Functions of the Authority) –

 

“(1) In addition to any other functions conferred on the Authority by this Act, the functions and responsibilities of the Authority shall include-

       (a) the administration of the Authority and management of the Export Free Zone;”

 

 

Clause 5 proposes to amend the section by inserting “and sub zones” after “Free Zone”, and wherever it appears in the Principal Act:

“(a) the administration of the Authority and management of the Export Free Zone and sub zones”

 

(b) by inserting new paragraphs (g) – (l): -

(g) attract, facilitate and encourage the retention of investment leading to value addition into Free zones and Sub zones;

(h) regulate activities and monitor the operations of Free Zones and sub zones, enterprises as well as organization that provide services within and to free zones and sub zones;

(i) develop and monitor performance standards and indices relating to free zones and sub zones;

(j) act as one-stop shop for all government services for Free Zones and Sub Zones;

(k) shall establish and maintain a registry as specified in the fourth schedule to the Act (Principal Act);

(l) carry out such activities as may be necessary or expedient for the full discharge of all function and activities of the Authority under the Act”

The amendment seeks to add “sub zones” to the scope of the Act

 

 

 

 

The new paragraph seek to increase the functions of the Authority to make it more results-oriented

Section 6 (Appointment of Managing Director, Secretary, and other employees, etc.)

 

“(3) Without prejudice to the generality of subsection (1) of this section, the Authority shall have power to –

 (a) appoint a secretary who shall be qualified to practice as a legal practitioner in Nigeria and shall have been so qualified for not less than ten years;

(b) pay the employees such remuneration and allowances as it may, from time to time, determine;

 

 

Clause 6 proposes to amend the Section by substituting subsection (3) with a new subsection (3) as follows: -

 

“the Managing Director shall hold office for a period of four years and may be eligible for re-appointment for another period of four years and no more”

 

b) the existing subsection (3) shall be renumbered to be subsection (4); subsection (4) shall be renumbered subsection (5); and subsection (5) shall be renumbered subsection (6)

 

(c) A new subsection is inserted as (7) -

“(7) the Secretary of the Authority appointed pursuant to subsection (4)(a) of this section shall serve as secretary to the Board to:

  1. oversee the activities of the registry established in section 5(1)(k) of this Act; and
  2. perform such other duties as the Chairman of the Board or the Managing Director may from time to time direct”

Section 6 of the Principal Act shall have a new paragraph inserted to replace subsection (3) and it shall provide for the tenure of office of the Managing Director. The existing subsection (3) shall be renumbered (4) and the following paragraphs renumbered accordingly

 

 

 

 

 

The new subsection (7) shall enumerate the functions of the Secretary of the Authority

Section 7 (Vesting Power in the Authority)

 

“The President or the Governor of a State respectively may, by Order, transfer to the Authority, any property belonging to the Federal or State Government which appears to be necessary or expedient to the Authority in carrying out its functions under this Act and such property shall vest in the Authority by virtue of that Order and without further assurance.”

 

Clause 7 proposes to amend this Section by inserting a new subsection (2) –

 

“(2) the Authority shall have power to acquire land, hold, manage and alienate movable or immovable property, assets and real estate”

The amendment seeks to insert a new subsection (2) and vest in the Authority the power to acquire property

Section 8 (Exemption from taxes)

 

“Approved enterprises operating within the Export Free Zone shall be exempt from all Federal, State and local government taxes, levies and rates.”

 

Clause 8 proposes to amend Section 8 of the Principal Act by replacing the existing Section with a new Section (8) –

“(1) Notwithstanding the provisions of any other enactment or law an approved enterprise, body corporate or firm operating within the free zones shall be exempted from the payment of Federal, State and Local Government taxes, value added tax, levies, customs duties, rates, withholding tax and deductions for as long as such enterprise continues to operate in the Free Zone and Sub-Zone.

(2) Notwithstanding the provision of any other law, all employees in the Free Zones shall comply with the provisions of the Personal Income Tax Act except those employees who work and reside in the Free Zones.

(3) Except as provided under this Bill, provisions of the Federal Inland Revenue Services Act, Customs and Excise (Consolidated) Act, Companies and Allied Matters Act, Industrial Training Fund Act and other related enactments applicable in the Customs Territory shall not apply within the Zones.”

The amendment seeks to exclude operators within the free zones and sub zones from taxation or liability to pay any form of levy or duty.

 

 

 

 

 

 

 

 

Furthermore only residents and workers within the free zones are exempted from personal income tax.

 

 

Legislations that impose, regulate and monitor taxation and other levies shall not apply within the zones.

 

 

 

Section 10 (Power to Grant License)-

 

“(1) The Authority may grant a license for any approved activity in the Export Free Zone to an individual or business concern whether or not the business is incorporated in the customs territory.

(2) The grant of a license by the Authority shall constitute registration for the purposes of company registration within the Export Free Zone.

(3) A body corporate licensed to operate within the Export Free Zone and undertaking an approved activity shall notify the Authority of any purchase, assignment or transfer of shares in the body corporate, except where its shares are quoted and are freely transferable on any international stock exchange.

(4) The Authority shall by order, from time to time, prescribe the regulations governing the Export Free Zone.”

 

Clause 9 proposes to amend S. 10 of the Principal Act by inserting a new subsection (5) as follows: -

“10(5) In addition to any other power conferred on the Authority notwithstanding the provisions of any other enactment or law an approved enterprise or by this Act, the powers of the Authority shall include:

  1. to undertake or purchase or otherwise acquire any asset in furtherance of the objective of the Act;
  2. when it is expedient, to take loans from banks licensed by the Central Bank of Nigeria;
  3. to enter into contracts, partnership and collaborative agreement or arrangement with any company or firm or body which in the opinion of the Authority will facilitate the discharge of its function under this Act;
  4. to exercise such other powers as are necessary or expedient for giving effect to the provisions of this Act.”

 

This amendment seeks to expand the powers of the Authority, irrespective of any provisions of other legislations

Section 12 (Import goods into Export Free Zone) -
 

“(5) Subject to the provisions of this Act and any regulations made thereunder, goods brought into the Export Free Zone pursuant to this section may-

        (a) unless otherwise directed by the Authority, be stored, sold, exhibited, broken up, packed, graded, cleaned, marked, re-marked, loaded, unloaded, re-loaded, divided, mixed, separated or otherwise manipulated; or

       (b) be worked, processed or re-processed or otherwise manipulated or manufactured; or be consumed if the goods are meant for consumption in the Export Free Zone, unless otherwise directed by the Authority; or

    (d) subject to subsection (6) of this section, be removed from the Export Free Zone or sent into the customs territory, whether as originally packed or otherwise; or

    (e) subject to any enactment pertaining thereto, be destroyed.”

“(6) Where any goods which are dutiable on entry into the customs territory are sent from the Export Free Zone into the customs territory, the goods shall be subject to the
provisions of the Customs, Excise Tariff, etc. (Consolidation) Act and any regulations made thereunder, and if the goods are intended to be disposed of in the customs territory,
shall not be removed from the Export Free Zone unless-

       (a) the consent of the Authority has been obtained; and 

       (b) the relevant customs authorities are satisfied that all import restrictions relevant thereto have been complied with and all duties payable in connection with the importation thereof into the customs territory have been paid.”

 

 

Clause 10 proposes to amend subsections (5) and (6) by substituting the existing words with the following: -

 

“(5) In consideration of the substantial investment in Oil and Gas Free Zones, all Oil and Gas related cargoes must be handled only at approved Oil and Gas concessioned ports, however, investors are free to choose ports of discharge of their cargoes within the designated terminals at Onne, Warri and Calabar ports”

 

“(6) A licensee may with the approval of the Authority move machinery or equipment into the Customs Territory for the execution of Special Projects and return such machinery or equipment inserting immediately after the existing”

The amendment seeks to give investors the liberty to choose any port - Onne, Warri or Calabar for discharge of cargoes; while oil and gas related cargoes are to be handled at designated oil and gas concessioned ports

 

 

 

 

 

 

The amendment to subsection (6) is incomplete and not comprehensive enough to relate the desired meaning.

 

Section 26 (Interpretation)

Clause 11 proposes to amend Section 26 of the Principal Act by inserting a new Section 26 and renumbering it as Section 27. The new Section 26 shall be: -

 

“Establishment of Oil and Gas Free Zones and Sub-Zones Labour Council;

26(1) There is here by established a Council known as the Oil and Gas and Special Sub-Zones Labour Council (“the Council) which shall:

  1. be responsible for dialogue and resolution of labour issues within the Free Zones and Sub-Zones;
  2. from time to time, make recommendations to the Authority on resolution of labour issues within the Free Zones and Sub-Zones.

(2) The Labour Council shall comprise of:

(a) a representative of the Managing Director of the Authority not below the rank of a Director who shall be the Chairman;

(b) a representative of the Federal Ministry of Labour, Employment and Productivity;

(c) a representative of one of the following:

(i) Nigerian Labour Congress;

(ii) National Union of Petroleum and Natural Gas Workers (NUPENG)

(iii) Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASAN);

(iv) Maritime Workers Union of Nigeria (MWUN);

(d) two persons to represent operators of Free Zones and Sub-Zones, provided however that they shall be rotated among operators of the Zones;

(3) The tenure of each Labour Council shall be a period of 3 years;

(4) The council shall regulate its own proceedings”

The new Section 26 seeks to establish a Council for the Authority to be composed of key stakeholders. The Council, which shall be referred to as “the Oil and Gas and Special Sub Zones Labour Council” shall be responsible for dialogue and resolution of labour-related issues within the free zones and sub zones.

Section 27 (Short Title)

Section 27 is amended by being renumbered as Section 28

 

CONCLUDING NOTES

The Bill seeks to provide for the designation and establishment of the Oil and Gas Export Free-Zones and Sub-Zones; and lists the free zones and sub zones under its schedule. The Bill further provides that a location shall become enlisted as a free zone or sub zone when the President designates it to be, on the recommendation of the Authority.

In the amendment proposed under Clause 4, the Bill proposes to make changes to the composition of the Governing Board as provided under the Act. The government of Rivers State and Corporate Affairs Commission where excluded in the proposed amendment.

The Bill proposes to expand the powers of the Authority under Clause 9; however the amendment under 10(5)(a), which states that the Authority shall have the power to acquire assets, is similar to the proposed amendment under Clause 7. Accordingly, Clause 2(1)(a) covers the same amendment proposed under Clause 2(1)(b).

The Bill is not clear in its proposed amendment to Section 12 of the Principal Act, where under subsection (6), it includes the number “1” which does not exist in the Act. In addition, the provision under this amendment is incomplete and so does not convey its intended meaning. The Bill needs to be revised to accommodate these observations before passage.

 

 

 

 

 

 

 

 

 

 

placbillstrack 2017