Executive summary

According to a 7 October 2025 article from the United Nations Conference on Trade and Development (UNCTAD), global foreign direct investment (FDI) flows in 2024 were estimated at approximately US$1.5t, with developing economies attracting nearly US$867b of that total.¹

Within this landscape, West Africa drew approximately US$15.19b in FDI, with Nigeria and Ghana jointly accounting for approximately 18% of the subregion's inflows.² This trajectory underscores West Africa's growing appeal as a hub for investment-led growth and its emerging capacity to channel such capital towards deeper industrial transformation.

This Alert examines the fiscal and regulatory landscape of Free Trade Zones (FTZs) in West Africa, focusing on Ghana and Nigeria. It highlights the development and distinct frameworks of FTZs in both countries, current tax laws and anticipated reforms, emphasizing the need for alignment and sustainable growth.

Introduction

FDI remains a cornerstone of industrialization, economic diversification and integration into global value chains.

Among the most effective instruments for attracting and anchoring investment are FTZs, also known as Special Economic Zones (SEZs). These designated enclaves offer investors preferential regulatory, fiscal and infrastructural frameworks, including corporate tax holidays, duty-free import of raw materials and simplified customs procedures.

Globally, FTZs have evolved into potent tools of industrial policy, enabling governments to stimulate export-oriented manufacturing, create jobs, and enhance competitiveness. In Nigeria, government figures show that FTZs and SEZs together account for more than 60% of total FDI inflows into the country. Collectively, these economic zones have attracted more than US$66b in foreign investment and approximately 620 billion Nigerian naira (NGN620b) in domestic capital since inception.³ In 2024 alone, Nigeria's zones drew close to US$1b in new FDI and generated approximately 13,700 direct jobs.⁴ Beyond these numbers, the zones have become dynamic clusters for value addition in oil and gas, manufacturing and logistics sectors central to Nigeria's economic diversification agenda.

Ghana's experience, though smaller in scale, reflects a consistent trajectory of growth and industrial deepening through its FTZ program. Since its establishment in 1995, the Ghana Free Zones Authority (GFZA) has facilitated more than US$4b in cumulative investment and more than US$27b in exports.⁵ In the first quarter of 2025 alone, nontraditional exports under the GFZA were valued at approximately US$1b,⁶ reflecting Ghana's growing competitiveness in global trade. Employment has similarly expanded, with more than 40,000 direct jobs and thousands more indirect opportunities created within the free-zone ecosystem.

Taken together, these developments affirm the strategic role that FTZs play in economies. Specifically, for Nigeria and Ghana where diversification, job creation and sustainable growth remain central imperatives, FTZs can represent a pragmatic pathway toward achieving these national aspirations.

Concept and development of FTZs

FTZs, also referred to as Export Processing Zones (EPZs) or SEZs, are geographically delineated areas within a country where businesses operate under distinct regulatory, fiscal and infrastructural regimes. Conceived as instruments to accelerate export-led industrialization, FTZs are designed to attract FDI, generate employment and serve as regulatory "test beds" for broader economic reforms. By offering enterprises targeted incentives such as tax exemptions, duty-free import of inputs, simplified customs procedures and reliable infrastructure, FTZs reduce the barriers to international trade while shielding the wider domestic policy environment from associated risks.

Over the past five decades, FTZs have expanded dramatically across the globe. According to UNCTAD, associations representing SEZs now encompass more than 7,000 zones in 145 economies, collectively employing millions of workers and contributing substantially to global value chains (UNCTAD, 2022).⁷ While FTZs have proven effective in mobilizing investment and boosting exports, they continue to face global challenges such as weak integration with domestic supply chains, inconsistent governance, "race-to-the-bottom" tax competition and uneven regional development outcomes.⁸

In Nigeria, the FTZ framework has become a key pillar of industrial and investment policy. The country currently hosts approximately 42 licensed zones and more than 500 approved enterprises, concentrated primarily in Lagos, Ogun and Calabar, among other locations. These zones have attracted significant inflows of capital, technology and employment. The most recent data from the Nigerian Export Processing Zones Authority (NEPZA) indicates that cumulative foreign and local direct investments in Nigeria's FTZs have reached approximately US$30b and NGN620b respectively, underscoring their strategic role in the national economic landscape.⁹

Ghana's Free Zones scheme is similarly designed to support export-oriented enterprises by mandating that at least 70% of production be directed to foreign markets, while allowing a limited share for domestic sales. This export threshold seems to enable Ghanaian firms to integrate effectively into global value chains while simultaneously driving local job creation and economic linkages. The framework generally has served to position Ghana as a competitive manufacturing and services hub while reinforcing the goal to expand nontraditional exports in the subregion.

Despite these achievements, FTZs across West Africa continue to grapple with persistent challenges. Key among them are fragmented institutional oversight, fiscal uncertainty following recent tax reforms and limited backward linkages to the wider economy. Addressing these constraints remains essential to unlocking the full potential of FTZs as sustainable engines of industrial transformation and regional competitiveness.

Fiscal and regulatory framework of free trade zones in West Africa

FTZs have long been heralded as powerful engines of economic growth across West Africa, particularly in Ghana and Nigeria. However, as the fiscal and regulatory frameworks evolve, especially with Nigeria poised to implement sweeping tax reforms next year, the landscape is shifting in ways that demand close examination.

Ghana

Ghana's FTZ regime has built its reputation on stability and investor confidence. The Ghanaian FTZs are regulated by the Free Zone Act, 1995 (Act 504) and other related tax legislation, including the Income Tax Act, 2015 (Act 896), Value Added Tax (VAT) Act, 2013 (Act 870), Customs Act, 2015 (Act 891) and Exemptions Act, 2022 (Act 1083).

The GFZA supervises these zones, providing regulatory guidance, licensing and streamlined customs procedures. Act 504 sets out the rules governing the establishment of FTZs in Ghana, the incentives available to investors and the obligations of companies operating within these zones.

Entities operating in FTZs in Ghana benefit from fiscal incentives that encourage investment and export-oriented production. In general, Ghana's tax framework remains relatively stable and investor-friendly. For example:

• Corporate income tax: A 100% exemption is available for the first 10 years, followed by a 15% tax rate on export profits. Up to 30% of output (or as may be specified in the license granted) can be sold domestically, including damaged or rejected goods, which are treated as imports and subject to duties.
• Customs duties and VAT: Exemptions apply on most imports and exports, and domestic sales are zero-rated for VAT.
• Repatriation of funds: The unrestricted transfer of funds is permitted in freely convertible currency.
• Foreign ownership: Full foreign ownership is permitted.
• Labor and employment: Employment contracts can be negotiated in alignment with International Labour Organisation Standards.

Ghana's consistent policies have cultivated a reliable investment climate, fostering long-term growth and export diversification.

Nigeria

Nigeria's current FTZ framework, governed by the Nigeria Export Processing Zones Act (NEPZ Act) and the Oil and Gas Free Zones Act (OGFZ Act), overseen by the Nigeria Export Processing Zone Authority (NEPZA) and Oil and Gas Free Zone Authority (OGFZA) respectively has similarly attracted substantial investments, contributing billions of dollars to the economy and creating tens of thousands of jobs. Like Ghana, Nigeria offers generous tax exemptions, customs and VAT reliefs, and freedom of foreign ownership and capital repatriation. Additionally, FTZs in Nigeria are considered to be outside Nigeria's customs jurisdiction, meaning that goods imported into the zone are exempt from import duties unless they are subsequently introduced into the Nigerian domestic market.

However, this landscape is on the cusp of transformation. To truly grasp the evolving FTZ landscape in Nigeria, it is essential to dissect the fiscal and regulatory frameworks currently in place and the reforms on the horizon.

Current FTZ tax laws

Historically, Nigeria's FTZs have benefitted from a comprehensive suite of tax incentives under the NEPZ Act and (OGFZ Act), including:

• Corporate income tax: A 100% exemption is available for a specified period, after which a reduced tax rate applies.
• Customs duties and VAT: An exemption from customs duties and VAT is available on imports for production and exports from free zones.
• Repatriation of funds: The unrestricted transfer of funds is permitted in freely convertible currency.
• Foreign ownership: Foreign ownership at 100% is permitted.
• Labor and employment - Enterprises may negotiate employment contracts, with terms aligning with International Labour Standards.

These provisions have positioned Nigeria as a leading FTZ destination in Africa, attracting substantial foreign direct investment and generating significant economic activity.

Upcoming changes under the Nigeria Tax Act 2025 (effective 1 January 2026)

The introduction of the Nigeria Tax Act (NTA) signals a major shift with regard to the following:

• An emphasis on exportation as a basis for tax exemption is a significant change, as currently, FTZ entities are still able to enjoy tax exemptions to the extent that their activities are consummated/completed within the zone.
• The application of minimum tax provisions appears to be under consideration for FTZs, potentially reducing the attractiveness of the zones.
• From 1 January 2028, domestic sales from FTZs should be fully taxable, ending the extant partial exemptions.
• FTZs may become subject to state and local government taxes, creating potential overlaps and conflicts with previous protections against multiple taxation.

These reforms, while aimed at broadening the tax base and enhancing revenue generation, have sparked concern among some industry stakeholders.

When comparing these frameworks, Ghana's approach offers greater stability and predictability, which are critical factors in attracting and retaining investment. Nigeria's pending reforms, while motivated by legitimate fiscal concerns, introduce uncertainty that could dampen investor enthusiasm and complicate operational planning within FTZs.

Ultimately, Ghana and Nigeria stand at pivotal crossroads. Ghana's experience highlights the value of steady, transparent frameworks, while Nigeria's reforms underscore the challenges of evolving tax policy in a complex economic environment. By learning from each other's journeys, these countries can craft resilient FTZ models that continue to fuel regional prosperity in the decades ahead.

The path ahead: alignments, divergences and the road to sustainable growth

Nigeria and Ghana's FTZ regimes are facing unprecedented administrative headwinds as evolving tax policies and compliance obligations increase the burden on enterprises. In Nigeria, the introduction of the 25% domestic-sales ceiling under the NTA, though intended to curb abuse of FTZ incentives and prevent enterprises from gaining undue advantage over domestic operators, has introduced significant tax planning complexities and uncertainty for FTZ entities. One such uncertainty surrounds the taxation of sales to the customs territory once the 25% threshold is exceeded. Specifically, there is ambiguity as to whether taxes should apply exclusively to the volume of sales surpassing the threshold, or to the entirety of such sales. Compounding these challenges is the possible implementation of a 15% minimum effective tax rate (ETR) as part of broader tax reforms. Multinational enterprises with a consolidated turnover exceeding NGN50b and a constituent entity of a group with aggregate group turnover of at least €750b or its equivalent, may now be subject to this minimum ETR. However, critical questions remain unresolved, including whether the minimum tax should be calculated and remitted on all domestic sales after the 25% threshold is breached, or solely on the incremental portion above the threshold.

Ghana faces similar challenges within its FTZ regime. The repeal of key incentives previously provided under Act 504 — including the reduced 8% corporate income tax rate after an initial 10-year exemption, dividend tax exemptions for shareholders and employment tax relief for foreign workers — has diminished the attractiveness of FTZs to investors. Policy initiatives aimed at broadening the tax base and gradually phasing out concessions have resulted in FTZ enterprises now being subject to the standard 25% corporate income tax on domestic sales, effectively reducing the benefits that originally attracted businesses to these zones.

This shift has been particularly detrimental to companies exporting nontraditional goods after their 10-year exemption period. Many are now reconsidering their operational presence in Ghana, with some contemplating relocation to other jurisdictions within West Africa. Notably, FTZ enterprises that fail to export at least 70% of their output face penalties up to 300% of previously exempted taxes. In addition, operational challenges such as administrative delays in obtaining VAT and levy relief documents from the GFZA exacerbate compliance risks and may result in further tax liabilities during audits by the Ghana Revenue Authority.

Until these matters are conclusively addressed, FTZ enterprises must contend with increased compliance risks and the potential dilution of the incentive structure fundamental to the regime. Active engagement with FTZ authorities and timely consultation with professional advisers are critical for navigating these ongoing uncertainties.

Conclusion

Nigeria's FTZs continue to offer considerable prospect for export-focused businesses; however, recent developments in the fiscal landscape mean companies must act strategically to protect value. The introduction of conditional incentives, domestic-sales thresholds and sunset clauses makes thorough planning essential, while administrative overlaps increase the risk of delays and audits. FTZ entities should begin to evaluate their trade footprint, incorporating tax strategy with operational excellence, and build resilience to accommodate ongoing fiscal and regulatory changes. Similarly, in Ghana, better collaboration between the FTZ regulators may help streamline compliance procedures. After the 10-year concessionary period, equal or alternative tax incentives may be considered to prevent FTZ companies from becoming less competitive, particularly in the face of global tax reforms.