The federal government of Nigeria appears to have unlocked a new way to tackle poor road infrastructure across the country — using the tax credit scheme.
In a move that has been widely praised, the federal government has approved the reconstruction of the Enugu-Onitsha Expressway by MTN Nigeria under the tax credit scheme that will cost more than N202.8 billion.
The memorandum was presented to the Federal Executive Council (FEC) presided by President Muhammadu Buhari at the State House, Abuja, on Wednesday, by the Ministry of Works and Housing. It was subsequently approved, marking a new era in Nigeria’s road infrastructure rehabilitation.
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A tax credit is an amount of money that taxpayers can subtract directly from the taxes they owe. In the case of this road infrastructure tax credit scheme, MTN, which paid more than N600 billion in taxes to the federal government last year, will have to deduct the money it spent on road rehabilitation from its taxes after the completion of the projects.
Speaking to the press after the FEC meeting, Minister for Works and Housing, Babatunde Fashola, explained that the 110-kilometer dual road project will be completed by MTN. He said the project is being executed in line with the Executive Order 7 signed by the President in January, 2019.
“So we, the Ministry of Works and Housing, presented two memoranda and they are largely Public Private Partnership (PPP) based memoranda and I will explain how.
“In 2019 January 25 specifically, you might recall that President Buhari approved Executive Order 7, which was the road infrastructure tax credit scheme, to allow private sector to invest tax liabilities in advance in infrastructure, and that policy has helped us to finance roads like or by Obajana to Kaba, Apapa-Oshodi, Oshodi-Ojota Expressway, the Bodo-Bonni expressway in Port Harcourt, about 1,000 kilometers covering 21 roads under the NNPC investment. So, there is increase optic for that policy. So, today we have two more.
“So, the first that was approved today was the one by MTN Nigeria Plc, the telecommunication company to take over and complete the ongoing Enugu-Onitsha Expressway. That road is a 110 kilometres, which is being dualised. So, you have 110 kilometers times two.
“The outstanding works aggregate to about 91 point something kilometers on both sides, if you accumulate it for those who use the road.
“You will see that the Enugu bound section has been largely completed but there’s a lot of work to be done on the Onitsha section.
“So, this policy is going to allow a steady and sustained stream of funding to completion by MTN and the amount approved is N202,887,436,672,11 billion to complete the outstanding works of an aggregate of 91.9 kilometers on both sides,” he said.
Fashola further explained that part of the road infrastructure rehabilitation under the tax credit scheme, is the Umuchi-Ususu-Umueme GZ Industries Road in Abia, that will be constructed by GZ Industries at the cost of about N4.2 billion.
“The second memo also was under the Tax Credit Scheme and while the first one was related to the road linking Anambra and Enugu states, this one is with respect to a road in Abia state.
“Now, the road is called Umuchi -Ususu Umueme GZ Industries Road in Abia. The private sector beneficiary of the approval is a company called GZ Industries. GZ Industries manufactures aluminum cans for bottling drinks. They have a factory in Agbara in Ogun state and they have another one in Abia in this area. So, it’s a link road to their factory
“The approval was for N4,205,454,855,26 billion. The road is a 3.7 kilometer road. So it’s an access road to their Industry. Council graciously approved both memoranda,” the minister said.
On the one hand, it’s a failure of our public sector, because it’s proving incapable of executing excellently; on the other hand, it’s a testament of what happens when you have big corporations that can fund big tickets stuff.
Imagine adopting this approach for those two most political roads in the land: Lagos-Ibadan Expressway and East-West Road. These two political roads remain constant features, without ever being completed and certified. If the likes of MTN and Dangote were handling them, by now they wouldn’t be part of campaign messages…
The focus now should be how to seed and grow bigger corporations, because we need plenty sectors that need to enjoy this new policy, since tax returns to FIRS would experience a drawdown, as money goes directly to project funding.
Make the environment business friendly and secure, and we can go partying, because even money for partying is there.
What happened to the proposed arrangement made with Dangote for the construction of Papalanto-Sagamu Road?
Any information on the progress yet?
While corporations can execute better than the government, both in terms of cost and speed, I think it’s not a good idea as this prioritize road infrastructure ahead of all other needs of the people, 200billion spent on roads is tax not paid which could be spent on education or healthcare.
We can run away from developing state capacity if we want to progress as a people.