Six firms breasted the tape early in January in a new CSR-for-tax scheme to provide roads. The first enrollees in the Road Infrastructure Development and Rehabilitation Investment Tax Credit Scheme will construct 794.4km of roads in 11 states across the six regions of the country. Executive Order No.007of2018: Road Infrastructure Development and Refurbishment Tax Credit Scheme, Order, 2019 comes with so much promise but also deserves scrutiny.
The pioneer firms are Dangote Industries Limited, Lafarge Africa Plc, Unilever Nigeria Plc, and Flour Mills of Nigeria Plc. Others are Nigeria LNG Limited, and China Road and Bridge Corporation Nigeria Ltd. They will build 19 roads in return for a tax credit from the government.
Roads listed are
- Construction of Ashoka-Bajoga highway in Gombe state;
- Reconstruction of Dikwa-Gambaru Ngala Road in Borno State;
- Reconstruction of Bama-Banki road in Borno State;
- Rehabilitation of Sharada road in Kano State;
- Rehabilitation of Nnamdi Azikiwe Expressway/ Bypass in Kaduna State;
- Reconstruction of Birnin-Gwari Expressway in Kaduna State
- Reconstruction of Birnin-Gwari – Dansadau road in Kaduna State
- Reconstruction of Makurdi-Yandev-Gboko road in Benue State
- Reconstruction of Zone Roundabout – House of Assembly Road in Benue State;
- Reconstruction of Obajana-Kabba road in Kogi State;
- Reconstruction of Ekuku-Idoma-Obehira road in Kogi State;
- Construction of Adavi Eba-Ikuehi-Obeiba-Obokore road in Kogi State;
- Reconstruction of Lokoja-Ganaja road in Kogi State;
- Ofeme Community Road Network and Bridges in Abia State;
- Rehabilitation of Obele-Ilaro-Papalanto-Shagamu Road in Ogun State;
- Reconstruction of Sokoto Road in Ogun State;
- Reconstruction of Apapa-Oshodi-Oworonshoki-Ojota Road in Lagos State;
- Construction of Bodo-Bonny Road & Bridges across Opobo Channel in Rivers State;
- Rehabilitation of Benin City-Asaba Road in Edo State
Nigeria’s Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme positions as a Public-Private Partnership intervention. It seeks to enable the Federal Government “to leverage on private sector funding for the construction or refurbishment of eligible road infrastructure projects”; to do so in an efficient and effective manner “that creates value for money through private sector discipline” and guarantees participants “timely and full recovery of funds” expended in the prescribed manner.
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The Scheme will run for ten years. A Management Committee for the scheme would have the Minister of Finance as Chairman and that of Works as Deputy Chairman. The Permanent Secretary of the Finance Ministry will run the Secretariat.
Executive Order 007 also provides that “Participants shall be entitled to a single uplift equivalent to the prevailing Central Bank of Nigeria Monetary Policy Rate plus two (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.”
Firms have to register with the Committee to be eligible to participate. Approved project costs translate to Road Infrastructure Tax Credit. The caveat is that no firm can use Road Infrastructure Tax Credit that surpasses 50 percent of its tax assessment for a given year. The government in its wisdom removed this limitation for projects in Economically Disadvantaged Areas. The scheme allows for tradeability of the tax credit. Companies can sell their tax credit to other firms or a securities exchange. The buyer will, in turn, register with the Management Committee. Companies can also roll over their tax credits to the following year. Sales of tax credits depend on the approval of the Committee.
There are issues with the order.
On the upside, Executive Order 007 will unlock the social responsibility of the private sector in deploying its entrepreneurial drive to contribute to societal upliftment. It should enable firms in various industrial centres to come together to provide access roads lack of which has been a deterrence to productivity. It should thus boost infrastructure development in the country.
The Companies Income Tax (Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme) Order, 2018 (its official citation) is at heart an economic empowerment scheme. It passes federal funds as a tax credit for infrastructure to firms and groups of which the President approves. It is thus intensely political.
What makes a road “eligible” is nebulous underExecutive Order 007. It requires greater rigour in the definition of terms and measurable parameters here as access to this credit and approval of infrastructure depends on “eligibility” of the road projects that companies choose to execute.
Is there a dichotomy, as EO 007 introduces, between roads everywhere and those in “Economically Disadvantaged Areas”? Disadvantaged areas under EO 0007 are those where a) income levels fall below the national minimum wage b) lack the availability of infrastructure such as electricity, water, sewage, telecommunication, transportation facilities etc.; c) the volume and nature of economic activity are low. The Committee can add other factors. Executive Order 7 through this provision recalls the Nigerian challenge of the quota system and similar efforts ostensibly aimed at assisting “disadvantaged areas”. It will be contentious in the days ahead.
Finally, but sadly, Executive Order 007 is a cop out from the responsibility of government. It aligns with the reality that Government in our clime is unable to do what it ought to do. In empowering the private sector, it provides a way out for citizens to get a taste of what government ought to provide. On the other hand, it raises the question about how many other items in the plate of government it would pass on to the private sector. For now, Nigerians will taste this pudding.
BusinessDay
