Bridging Nigeria’s huge Infrastructure gap through tax




When the President Muhammadu Buhari led administration assumed power in 2015, it promised to focus to bridging Nigeria’s huge Infrastructure deficit. And through to his words, the present administration continues to drive it’s development agenda using the infrastructure tax credit scheme; BENJAMIN UMUTEME writes.

It is a fact that without infrastructure there cannot be development. And that is why President Muhammadu in his inauguration speech in 2015, promised to focus on rebuilding the country’s infrastructure which was at the point of collapse.

The government engaged in various way to bridge the huge Infrastructure deficit among which is taking loans that were tied to specific projects. However, that has not had the desired impact as it has led to increase of the country’s debt profile to about N45 billion as at June 2022.

Nigeria faces a critical infrastructure deficit projected at over $3 trillion in the next 26 years with an average annual budget of approximately $29 billion in the last 10 years, only about 30 per cent was allocated to capital expenditure.
With dwindling oil revenue which accounts for about 70 per cent of the country’s foreign exchange, it was obvious that the government needs to think out of the box, if it is to keep faith with its promise to Nigerians.

This, gave birth to the Executive Order 007 of 2019, the Road Infrastructure Development And Refurbishment Investment Tax Credit Scheme.

The Road Infrastructure Development And Refurbishment Investment Tax Credit Scheme
In making the Executive Order 007 a law, President Buhari took into cognisance the vital role of government in providing the conducive environment for businesses to thrive.

The President noted that whereas it is the duty of the “federal government to provide adequate facilities for and encourage the free mobility of people, goods and services throughout the Federation, for the purpose of promoting national integration and protecting the rights of citizens to engage in legitimate economic activities concerned with the production, distribution and exchange of wealth, goods and services; whereas it is the responsibility of the State to harness the resources of the nation and promote national prosperity and an efficient, dynamic and self-reliant economy, and in particular, to manage and operate the Roads Transportation Sector, as well as the major sectors of the economy; whereas the Federal Government of Nigeria is committed to directing its Roads Transportation Infrastructure Policies at ensuring the promotion of a planned and balanced economic development in such manner that the material resources of the nation are harnessed and distributed as best as possible to serve the common good,” the Order read.

In exercising the powers conferred on him by the “Constitution of the Federal Republic of Nigeria, and Section 23 (2) of the Companies Income Tax Act”, President, Buhari ordered the Commencement of the Scheme which is expected to be in force for an initial 10 years period.

According to the President, it shall be a Public-Private Partnership intervention that shall will enable the federal government to leverage on private sector funding for the construction or refurbishment of eligible road projects; focus on the development of eligible road projects in an
efficient and effective manner that creates value for money through private sector discipline; and guarantee “participants in the Scheme timely and full recovery of funds provided for the construction or refurbishment of eligible road infrastructure projects in the manner prescribed in this Executive Order.

Managing the Scheme

The Order is explicit on the management of the would be managed by a Committee to be headed by the Minister of Finance and the Minister for Works as Deputy Chairman. They are charged with the responsibility of implementing and administering the Scheme. Others on the committee are: Permanent Secretary of the Federal Ministry of Finance shall be the Secretary to the Committee.

According to the Order, the regulations for the administration and operation of the Scheme shall be as provided for in the First Schedule.

Thus, the President, on the advice of the Minister of Finance, shall make such further regulations, or amendments to the current regulations, as may be deemed expedient. Also, the President shall have the powers to amend this Executive Order from time to time as may be deemed expedient.

The Order states that participating companies in the Scheme shall be entitled to utilise the project cost incurred in the construction or refurbishment of any road as a credit against Companies Income Tax payable, they shall be entitled to a single uplift equivalent to the prevailing Central Bank of Nigeria Monetary Policy Rate plus 2 per cent of the project cost, the uplift shall not constitute taxable income in the hands of a participant or beneficiary and shall be utilised as a credit against Companies Income Tax payable, the tax credit granted under sub-paragraphs (1) and (2) of this paragraph, shall be referred to as “Road Infrastructure Tax Credit”.

Furthermore, the Order stated that in issuing the road tax credit certificate, the Federal Inland Revenue Service shall, upon approval by the Committee of a participant’s application for Road Infrastructure Tax Credit, issue a Road Infrastructure Tax Credit Certificate to a participant on an annual basis.

The Certificate shall only be issued upon presentation of the information as stated in the Executive Order.

More so, “the Certificate shall denote the project cost incurred by the participant relevant fiscal year as certified by the Committee and as specified in the first Schedule to this Executive Order as it relates to on-going Eligible Road projects the uplift on the relevant Project Cost.

The Certificate shall also denote the Road Infrastructure Tax Credit due to the participant, which shall be based on the project cost as certified and communicated by the Committee.

The Committee shall not approve the issuance of a Road Infrastructure Tax Credit to (a) person not duly registered and certified by the Committee as a Participant or representative of a Participant in the Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme; person not duly registered as a Participant and not designated as a Beneficiary of a Road Infrastructure Tax Credit by a Participant; and participant or beneficiary that is unable to provide evidence of certification of the Project Cost by the Committee.

Ulising the road infrastructure tax credit.

To get the full benefit in the Scheme, it is expected that the road infrastructure tax credit shall become valid for use by a participant or beneficiary upon receipt of a Certificate from the Committee, as issued by the Federal Inland Revenue Service (FIRS).

Accordingly, a participant shall be entitled to utilise the road tax credit against the Companies Income Tax in and from the relevant fiscal year, in which the project cost is incurred, until it is fully utilised.

In addition, the amount of road tax credit that
may be utilised in any year of assessment shall be limited to 50 per cent of the CIT payable by the participant or beneficiary for that year of assessment.

All is dependent, however, that the road tax credit issued with respect to an eligible road in an economically disadvantaged area shall be available for utilisation, in any year of assessment, without the 50 per cent limitation.

Any unutilised road tax credit within the year of assessment shall be available to be carried forward by the participant or beneficiary to subsequent tax years, until fully utilised.

Moreover, without prejudice to the provisions of ‘section 22 (Artificial Transactions) of the Companies Income Tax Act, Cap C.21, Laws of the Federation of Nigeria, 2004, a beneficiary may elect to undertake a disposal of the whole or part of its road tax credit certificate to a willing buyer on a relevant Securities Exchange or pursuant to such other approved.

Every sale or transfer in conformity with sub-paragraph (4) of this paragraph shall be reported to the Committee which shall de-register the participant making the disposal and register the new beneficiary of the Certificate in a register maintained by the Committee.

Also, upon transfer, the beneficiary shall be entitled to utilise the credit certificate in any year of assessment subject to sub-paragraph 2 of this paragraph. For the purpose of sub-paragraph (4) of this paragraph, a participant may register the whole or part of the road tax credit certificate as a tradable instrument on the relevant Securities Exchange.

The relevant Securities Exchange shall maintain a register of every road tax credit certificate registered and traded on the Exchange. Any beneficiary wishing to trade its Road Infrastructure Tax Credit Certificate shall
obtain the approval of the Committee and designate the registration status of its
Certificate, in a register maintained by the Committee, as ‘tradable on the Relevant
Securities Exchange’.

Ongoing road projects under infrastructure tax credit scheme

Some of the most prominent participants of the Infrastructure Tax Credit Scheme include:
NNPC, which is engaging in 21 critical roads across the 6 geopolitical zones.

In the North Central, there is the dualization of Ilorin-Jebba-Mokwa/ Bokani Junction road Section 1: Ilorin-Jebba, Kwara State C/NO. 6468. 110.8km; dualization of Ilorin, Jebba-Mokwa/Bokani junction Road Section II: Jebba-Mokwa-Bokani junction in Kwara and Niger states. C/NO.6469. 46 km; Dualization of Suleja-Minna road, Niger state. C/O. 6077. 40km; dualization of Suleja-Minna Road, Niger State Phase II (Km 40+000-101+000) C/NO.6267. 61km; reconstruction of Bida-Lambata Road, Niger state C/NO.6372. 125km; Agaie-Katcha-Baro Road, Niger State 52.3km; emergency repairs of failed section of Mokwa-Makera-Tagina-Kaduna state border in Niger state. 164km; Minna-Zungeru minna-Zungeru-Tagina road, Niger state. 90km; and Bida-Minna road, Niger state. 79.1km.

In the North Central, there is the rehabilitation of Cham-Numan section of Gombe-Yola road in Adamawa state. 46.35km; construction of Bali-Serti road in Taraba state. 110km; and rehabilitation of Gombe-Biu road in Gombe/Borno state. 117km.

The North West has rehabilitation of outstanding sections of Gada-Zaima-Zuru-Gamji road Phase II in Kebbi State 62km; and rehabilitation of Zaria-Funtua-Gusau-Sokoto-Birnin Kebbi. 221.5km.

In the South West, there is the dualization of Aba-Ikot Ekpene road in Abia/Akwa Ibom states. 73km; and the rehabilitation of Umuahia (Ikwuano)-Ikot Ekpene road: Umuahia-Umudike in Abia state. 49km.

For the South South there is rehabilitation of Odukpani-Itu-Ikot Ekpene road in Cross River state Section I: Odukpani-Itu Bridge Head in Cross River/Akwa Ibom states. 21.9km; dualization of outstanding portion of Odukpani-Itu-Ikot Ekpene: lot 2. 32km; and dualization of Oku-Iboku Power Plant Section of the Odukpani-Itu-Ikot-Ekpene road in Cross River/Akwa Ibom state. 28km.

While the South West the rehabilitation and expansion of Lagos-Badagry Expressway (Agbara Junction-Nigeria/Benin border) in Lagos State. 62km and dualization of Ibadan-Ilorin road (Route A2) Section II in Oyo State (Oyo-Ogbomosho) 52km, are ongoing.

MTN is handing the 110km Enugu-Onitsha road in Anambra State in exchange for tax credits; Transcorp Group is doing the Oyinbo-Izuoma-Mirinwayi-Oklama-Afam Road; and
Access Bank, the Oniru axis of VI-Lekki circulation road in Lagos State.

Others include: GZI Industries which is handling the Umueme village road, Abia State; Mainstream Energy is doing Malando-Garin Baka-Ngwaski Road; BUA the Bode-Saadu-Lafiagi road; Eyinkorin road and bridge; NLNG: Bodo, the Bonny bridges and road; and Dangote Group, the Obajana-Kabba road.

‘Financing innovation to the rescue’

For political economist and development researcher, Adefolarin Olamilekan, the Scheme is an innovation that has come at the right time considering that the country’s roads are in dire need of critical financing.

According to Olamilekan, it is creating alternative window to decongest financial challenges on the government shoulders.

“The Infrastructure Development and Refurbishment Investment Tax Credit Scheme is a pleasing tax financing innovation to the rescue.

“It demonstrate how the public and private sector can actually engage in mutually benefiting enterprise.

“A situations that would allowed government to redirect funds to other critical sector beyond roads.

“Again, it going to close the deep gaps in roads infrastructure network going by the attention and deployment of funds.

“In addition, the roads infrastructure will gain it place in boosting economic activities particularly as intra and inter state transportation as well as other logistics movement would yield positive result that would further impact domestic trade and production adding to our GDP..

“Additional, this would further improve the ease of doing business rating of the country. That is significant to the attraction of Foreign Direct Investment (FDIs), Foreign Investment Portfolio (FIPs) and other strategic investors choice of destination in agricultural, mining and manufacturing sector.

“Consequently, road infrastructure sector is one big medium of job creation and several other economic activities.

I believe that if the Road infrastructure Development and Refurbishment Investment Tax Credit Scheme is pushed with all intents by the government we are going to experience a boom in job creation that could help us tackle our huge unemployment deficit.

“Similarly, this benefit would also include opening up of new areas of development in urban and rural areas as roads infrastructure received attention,” he said.

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