The Nigeria’s road Infrastructure Development Scheme, aimed at encouraging private companies to share the cost of developing road infrastructure by providing them with tax credits, is beginning to yield some of the much needed fruits.
So far the Scheme has secured N205 billion worth of private investment since commencement this year, as the interest in the scheme shows that Nigeria remains a compelling capital destination. Despite our economic challenges, there are huge opportunities in the nation’s infrastructure and Federal Government is keen to attract private capital into the space.
It should be noted that the amount N205 billion is 47 percent higher than the entire public expenditure on transport infrastructure in 2018 and 62 percent of the total amount spent on Power, Works and Housing in the same period.
The early fruit of this Scheme has in a way highlighted the widespread confidence and credibility in the initiatives of the government.
As part of efforts to develop critical infrastructure in the midst of lean resources, President Muhammadu Buhari had signed on 25 January, 2019, the Executive Order No. 007 on Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme, to encourage private companies to assist government in developing these infrastructure because, certainly the Federal Government has realised that it does not have enough funds to meet the nation’s infrastructural development.
Indeed, the government’s Economic Recovery Growth Plan (ERGP) thus states: “The value of Nigeria’s total infrastructure stock (road, rail, power, airports, water, telecoms, and seaports) represents only 35 percent of Gross Domestic Product (GDP). This is far below the level of peer emerging market countries, where the average is 70 percent.”
The Scheme is open to any indigenous or foreign company (other than sole corporations), acting on its own or in collaboration with other Nigerian companies, and institutional investors wishing to construct or repair any road identified and designated by the government as an “eligible road” under the Scheme.
Given this challenge, and since the private sector must join the Federal Government in building Nigeria’s infrastructure, the 10-year Scheme is a public private partnership (PPP) intervention that enables the Federal Government to leverage private sector capital and efficiency for the construction, repair, and maintenance of critical road infrastructure in key economic areas in Nigeria that have obstructed businesses and economic growth.
According to the Infrastructure Concession Regulatory Commission (ICRC), Nigeria has about 195,000 km of road network out of which about 32,000 km are federal roads and 31,000 km are state roads. In total, only about 60,000 km roads are paved leaving 135,000 km of roads untarred. A large proportion of the paved roads are in bad conditions due to years of neglect.
Earlier into the Scheme more than 10 companies had applied for the Scheme to receive 50 percent of expenditure in tax credits. Federal government had handed over the first batch of tax credit certificates to the managements of Dangote Cement Plc and Nigeria Liquefied Natural Gas (NLNG). The certificates were presented to the companies in line with Executive Order #007.
There are incentives to benefit. It is advisable, therefore we call, on more companies to participate in the Scheme so that they will be entitled to utilise the total cost (Project Cost), incurred in the construction or refurbishment of an eligible road as a tax credit against their future Companies Income Tax (CIT) liability, until full cost recovery is achieved.
In addition, we also call on companies that are yet to key into the Scheme to participate so that they will be granted a single non-taxable uplift. The Uplift will be a percentage of the Project Cost, and the percentage to be applied is Monetary Policy Rate plus two percent on Project Cost. The uplift will be included in the total tax credit available to each participant.
Since this Scheme, given its underlying objectives, is also meant to activate the public interest and to ensure the support of the private sector, we urge the participation of responsible corporate organisations to key into the Scheme and drive our so much needed nation’s infrastructural development.