Nigerian Government Approves Reintroduction of Toll Gates on federal highways

The federal government of Nigeria has approved reintroduction of toll gates on federal highways across the country. The approval was made during the Federal Executive Council (FEC) meeting held on Wednesday.

The plan to reintroduce tolling on federal highways in Nigeria was conceived in 2019, as the effects of dwindling oil revenue hit home.

“One of the highlights of today’s Federal Executive Council (FEC) Meeting (Wednesday, August 11, 2021) is the APPROVAL of a Federal Roads and Bridges Tolling Policy and Regulations.

“It has been undergoing development for a while now, and is now finally ready and has been approved by Cabinet,” President Buhari’s media aide Tolu Ogunlesi said in a statement.

The tolls were abolished about 18 years ago, under former president Olusegun Obasanjo, on the argument that their existence was no longer useful to the government as they only had become a source of embezzlement to many state actors.

The revitalization of the tolls at this time is seen as a sign of government’s desperation to generate revenue in the face of declining oil revenue and covid-induced economic strains that has pushed it to relentless borrowing.

Besides the external and domestic borrowing, the Nigerian government has been elaborating its tax scope, even though businesses and people alike are barely surviving the economic downturns believed to have been orchestrated by poor fiscal policies, over dependence on oil revenue and rising insecurity. Last year, following the enactment of the Finance Act, the federal government had reviewed upward Value Added Tax (VAT) from 5% to 7.5% and introduced Stamp Duty tax among others.

As Nigerians lament the burden of multiple taxation on their meager earnings, the reintroduction of the toll gates across the country will become an addition to the burden, as it will spike transport fares, thereby, increasing the cost of goods and services.

Mr. Ogunlesi said that bicycles, tricycles, motorcycles, diplomatic vehicles, military and paramilitary vehicles will be exempt from paying toll fees, while cars, SUVs, private buses, commercial buses, luxury buses and trucks will pay N200, N300, N150 and N500 respectively.

“Recommended Tolling Fees in the Approved Policy and Regulations are as follows: Cars: N200, SUVs: N300, Private Buses: N300, Commercial Buses: N150, Luxury Buses and Trucks: N500,” he said.

Read below the highlights of the new Tolling policy as stated by Mr Ogunlesi:

1. It will be an Open Tolling system (just like the one that used to be in existence in the country), instead of a Closed Tolling system.

(A Closed Tolling system means that you pay per distance traveled (‘distance-dependent’), while Open Tolling means you pay a fixed/flat rate that is not dependent on distance traveled)

1. Only dual carriageways owned by the Federal Government will be eligible for tolling by the Federal Government.

(Of the 35,000km of Federal Roads in existence in the country, only 5,050km are dual carriageway).

Federal carriageways that are single, i.e. undivided highways will not be tolled.

The only exceptions here will be some bridges, which are listed in the Policy.

1. Toll Revenues will be used to maintain the roads and also to repay investors who have invested in building or completing a road under the Highway Development Management Initiative (HDMI).

2. Electronic Toll Collection and Management systems will be prioritized over Cash systems.

3. The following will be exempted from Tolling: Bicycles, Tricycles, Motorcycles, Diplomatic vehicles, Military and Paramilitary vehicles.

4. The Tolling Policy is a broad National framework that will serve as a guide for States and Local Governments who seek to implement their own Tolling Policies.

(As noted earlier, only about 16% of the total road network in Nigeria belongs to the Federal Government.

States own/control roughly the same amount as the FG, while the rest – amounting to two-thirds are last-mile roads belonging to and under the responsibility of Local Governments).

1. People who live around Toll Plaza Areas will benefit from what is called ‘Frequent User’ discounts, in line with global best practice.

2. Recommended Tolling Fees in the Approved Policy and Regulations are as follows:

Cars: N200

SUVs: N300

Private Buses: N300

Commercial Buses: N150

Luxury Buses and Trucks: N500

1. According to the Honorable Minister, the Federal Highways Act vests the power to toll (Federal Roads) in the Minister responsible for roads, but implementation of any tolling policy/regime involves many processes and multiple agencies, and therefore requires multi-stakeholder collaboration.

2. According to the Minister, it is important to stress that even with this policy now approved, tolling is not going to start immediately.

He very clearly said that Tolling will not start “until the roads are motorable.”

This policy is a necessary condition for the implementation of Tolling, and it is now for people to start getting familiar with it and for relevant stakeholders to start using it as a basis for their financial modeling and investment analysis, ahead of the eventual rollout of Toll Plazas.