To move the economy into the 21st century, Nigeria needs to fully embrace digital free zones.

Nigeria’s 52 free trade zones, 18 of which are in Lagos, have proven to be a win-win for oil and gas, agriculture, and manufacturing interests. By operating in free trade zones, these businesses receive incentives such as zero tax, full foreign ownership, and repatriation of capital. With the emergence of a vibrant digital economy in Nigeria, the country’s announcement of its plan to establish a partnership with Binance is a positive development.

Digital free trade zones allow companies to establish digital hubs, open businesses virtually, and enjoy tax incentives. Nigeria currently lacks specific legislation that accommodates the business needs of technology companies. Existing policies act to discourage foreign investors and technology giants from investing in the country. Because of this, the government needs to create investment-friendly policies such as a tax for digital infrastructure and a reduction of right-of-way fees to support digital infrastructure investment. The government should explore legislation and regulatory fixes to empower digital free trade zones to thrive.

Aging digital infrastructure slows down Internet connectivity which will have the effect of discouraging technology companies from embracing digital free trade zones. Thus, investment policies supporting the reduction of right-of-way charges and a tax for digital infrastructure will significantly increase investment and set a precedent for developing functional digital free trade zones.

Right-of-way charges are fees telecommunication companies pay to install fibre optic cables. Drastic reduction of right-of-way fees will reduce the burden of installing fibre optic cables and encourage telecommunications companies to invest more in fibre optic cable installation. Tax incentives will have a similar effect and make the installation of digital infrastructure cost-effective for the private sector.

Also, facilitating investment in digital infrastructures through a public-private partnership will encourage the localisation of data centres in Nigeria. Despite many Nigerians relying on the Internet, the country has few data centres. What this means is that the digital footprint of millions of Nigerians is stored in locations outside the country. Data localisation ensures compliance with Nigerian data protection laws, promotes data sovereignty, fosters local innovation, leads to job creation, and promotes patronisation of local data centres.

Furthermore, Nigeria needs to have a law that facilitates digital trade and e-commerce in free trade zones. None of the existing laws regulate the operation of e-commerce hubs, satellite service hubs, and data centres in free trade zones. To fix this, Nigeria can take a cue from Panama which has made laws facilitating the establishment of digital free trade zones. This will show a clear indication of Nigeria’s plan to fully maximise the benefits presented by the digital economy.

Additionally, Nigeria should rescind economic directives that impede digital trade. For instance, Nigeria’s central bank should update its approach to cryptocurrency. The central bank’s current stance on cryptocurrency is very outdated considering how the technology seemingly changes by the day. Although the Securities and Exchange Commission released rules guiding digital assets in 2022, and there is a new tax on digital assets, these new policies are canceled out by the ban on cryptocurrency.

For a country that claims it wants Nigerians to stop using cash to pay for everyday goods, crypto can be the linchpin of a cashless society. According to the African Export-Import Bank, the transaction fees on cross-border payments cost Nigeria and other African countries about $5 billion a year. With cryptocurrency, the transaction costs and lengthy duration associated with making cross-border payments using fiat currency will be reduced.

Cryptocurrencies like Stablecoins also serve as a safer investment option. Hence, the central bank should clarify its current stance on crypto as a medium of exchange. This would significantly improve private and decentralised participation in digital free trade zones.

Current and emerging technologies will play a crucial role in shaping the global economy. Thus, creating digital free trade zones in Nigeria can help promote economic growth as tech giants will see Nigeria as a potentially lucrative market. Creating digital free trade zones will attract more foreign direct investments, increase Nigeria’s export, and it will significantly boost the country’s chances of full virtual integration into the global economy. However, the challenges of infrastructural deficit and policy failures remain major threats. These underlying threats may keep the country in a retrogressive loop of trade failures if not well tackled.