Fashola: FG Resorting to Tax Relief to Fund Road Construction

  • To spend N100bn Sukuk bond on 25 major roads works

Chineme Okafor and Nnenna Akuma in Abuja

Following its claims of huge reduction in its revenues from the oil industry, and the resultant paucity of funds to conveniently carry on with its infrastructure development plans, the federal government tuesday said it would now begin to look towards tax recovery funding schemes to build and reconstruct roads in the country.

The Minister of Power, Works, and Housing, Mr. Babatunde Fashola, disclosed this during a progress report meeting in Abuja with contractors handling major road projects for the government.

Fashola said the government would as a new push to revive Nigeria’s infrastructure, offer companies operating within tax reliefs to allow them undertake key road projects in the country.
He explained that companies with the capacity and willingness to reconstruct existing or build new roads in the country would be encouraged by the government to go ahead, and subsequently claim tax relief as recompense for their investments.

Fashola also disclosed that the N100 billion Sukuk bond which the government recently launched would be channeled to fund works on 25 major road networks which fall within the A1 to A4 arteries.

By definition, a sovereign Sukuk is an ethical-based investment in which rent is based on the investment bi-annually and the principal sum paid at the end of a tenor.

However, in his response to a question on details of the government’s recent agreement with Dangote Group for the rehabilitation of the Oshodi to Toll Gate highway in Lagos, Fashola said shortly after presentations from the contractors: “Our discussions with the Dangote, yes, we have an offer now beyond what they have done as voluntary which is two kilometres of the Wharf Road, it is an offer to take up the entire length from Creek Road, Liverpool Road, through Apapa, Tin Can, Oshodi, Mile 2, all the way to the Toll Gate.

“This is going to be done under a tax recovery order that exists under the Companies Income Tax (CIT) Act. It is not something that is new, but it is something we are going to use more of. Another company Lafarge, is also using that in Cross River State to build a road.”

The minister explained that the government was well at home with using tax reliefs to get companies to rebuild the country’s road infrastructure, saying: “We welcome other like minded individuals and companies who have that kind of money to intervene in certain roads, and claim tax relief back.”

“What it really means technically is that government is spending in advance the taxes that it should collect to quickly respond to places where there is pain because some of these companies, if they make profit should pay tax at the end but the government is saying if they spend some of the tax on public infrastructure, they will get some relief. We commend and welcome this initiative.

“That is the long term solution to the lock down in Apapa. There will be some discomfort, but as we begin work on that area, people should expect some relief,” he added.

On the Sukuk bond, Fashola equally stated: “Sukuk is coming and if it is fully utilised, at least 25 major roads will have some interventions. The truth is that this country is now earning less from what it earned some four years ago, the major revenue source is oil, we are just diversifying to earn money from other sources like agriculture but we are trying to do the best we can with the limited resources that we have.

“The Sukuk addresses in part our strategy for providing finance. This is the first ever Sukuk that the federal government is issuing. All we are targeting is to see if we can raise N100 billion, that won’t cover all of Nigeria’s roads but we can target certain roads and if you look at the 25 roads, they are the integral part of the A1 to A4 roads – Lagos to Sokoto highway, Warri to Katsina, Port Harcourt to Potiskum, and Calabar to Maiduguri-they all originate from our ports and end at the boundaries.”

The minister noted that the government was also undertaking repair works on 41 roads across the country that had gone bad from the heavy rains and other weather related issues.

He said the meeting was to keep in touch with contractors on the progress of their jobs, especially with considerations to the next couple of months when most of the roads in the southern parts of the country would be heavily engaged.

“We are looking at a 10-week window starting from around the end of September to the middle of December when your workers would go on annual leave and what kind of contingency arrangements you would be making so that the operational staff will be on ground to deal with emergencies.

“In addition to the major construction works that are going on, we also have rehabilitation works using specific contractors to improve motorability, and we have been working on 41 roads across the country covering each zones and trying to make remediation to them as a result of what has happened during the rainy season. We are getting ready to conclude procurement on that,” Fashola stated.

Similarly, he asked shipping firms in the country whose operations at the Lagos Port could be disadvantaged by the repair works on the road leading into the port to consider using other ports in the country.

According to him, “This morning, I read that the Association of Licenced Custom Agents is complaining about the Lagos Port, we hear you loud and clear, we have responded and started work but bear with us because the construction will cause some discomfort but we will have a better experience by this time next year when we finish what we are doing.

“But what we can also do is to for now move our cargoes through other ports because if cargoes are not destined for Lagos, and are headed up north or to the east, then the Warri and Onne ports are there. The Calabar Port is also there so the inconvenience will be reduced.

“We have all of these assets, let’s also be flexible about using them. I have spoken to the MD of NPA about this. We appeal to shippers to also bear in mind that we are constructing in built up areas, and so their flexibility will help us improve service delivery.”