Updated: Nigeria says tax credit scheme to fix bad roads has fetched N205bn
Nigeria’s road infrastructure development scheme is beginning to yield much needed fruit, a senior government official said Thursday.
The Scheme, aimed at encouraging private companies to share the cost of developing road infrastructure by providing them with tax credits, has secured N205 billion worth of private investment since commencement this year, according to Adeyemi Dipeolu, the special adviser to the President on Economic matters.
Dipeolu, who disclosed this at the FMDQ Capital Markets Conference, Thursday said “The interest in the Scheme shows that Nigeria remains a compelling destination of capital despite our economic challenges.”
“There are huge opportunities in infrastructure and the government is keen to attract private capital into that space,” Dipeolu said.
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.
Details were not provided on the specific roads that attracted the money and the private investors behind the deal.
Nigeria’s President Muhammadu Buhari signed, on 25 January 2019, the Executive Order No. 007 on RoadInfrastructure Development and Refurbishment Investment Tax Credit Scheme.
The ten-year Scheme is a public-private partnership (PPP) intervention that enables the cash-strapped 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 deterred business and economic growth.
According to the Infrastructure Concession Regulatory Commission, 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 are paved leaving 135,000 km of road untarred. A large proportion of the paved roads are in bad conditions due to poor maintenance.
Tunde Fowler, executive chairman of the Federal Inland Revenue Service (FIRS), said in an interview in September that more than 10 local companies had applied for the scheme to receive 50 percent of expenditure in tax credits.
Fowler said two companies had successfully applied to receive tax credits for infrastructure projects so far. One was part of the Dangote Group conglomerate, owned by the continent’s richest man Aliko Dangote, which will build a road under the scheme. He did not name the other company.
The Scheme is open to any Nigerian 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.
Participants will be entitled to utilize 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.
As a further incentive, Participants 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 2% on Project Cost.
The uplift will be included in the total tax credit available to each participant.