The executive order may provide a push on road infrastructure if properly implemented
Nigeria is blessed with about 195,000-kilometre road network, out of which some 32,000 km are federal while 31,000km are state’s. Only about 30 per cent of the entire road network is paved. Of the paved, a large proportion is in poor, deplorable condition due to insufficient investment and an appalling maintenance culture. Sadly, investment in this critical infrastructure has been uninspiring. For instance, a paltry N295 billion was budgeted in 2018 to fund key capital projects, including road construction, expansion and maintenance across the country. This has been the trend over the years, leaving huge funding gaps and a worsening road infrastructure.
According to the African Development Bank (AfDB), Nigeria’s cumulative infrastructure financing needs is estimated to hit $3 trillion by 2044 or about $100 billion annually, which is about four times the size of the nation’s annual budget. Providing this humongous funding requirement is a mirage considering the extreme pressure facing public sector finances. It is perhaps in the realisation of the critical role of the private sector to fill the void that President Muhammadu Buhari recently signed the Executive Order 007 of 2019 on Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme. The new order allows private companies to construct and refurbish roads across the country and get paid in the form of tax credit.
It is gratifying that the signing of the order has helped the two-year-old Nigeria Industrial Policy and Competitiveness Advisory Council (Industrial Council) chalk up a landmark achievement in accelerating infrastructure development for economic growth. Already, six investors including Dangote Industries Limited, Lafarge Africa Plc, Unilever Nigeria Plc, Flour Mills of Nigeria Plc, Nigeria LNG Limited, and China Road and Bridge Corporation Nigeria Ltd are set to invest in 19 road projects, measuring 794.4 km which have been prioritised in 11 states across each of the six geo-political zones.
By this order, the president is authorised to grant exemption from corporate taxation, for certain companies or groups of companies, which are willing to deploy their working capital to fund road projects, by way of issuance of tax credits. In simple terms, what this means is that companies can go into funding road constructions directly from their taxable incomes in exchange for exemption from the payment of their corporate tax equivalent to the amount that is required for the funding of the road infrastructure.
This will translate to companies fixing those road networks around their operational areas and stop the injustice of deplorable road conditions for which the taxes they pay are meant to fix. Giving further insight into the executive order, the Minister of Finance, Mrs. Zainab Ahmed, said the scheme was the outcome of efforts to think outside the box and deploy new techniques to develop critical road infrastructure in the country. More of such thinking outside the box is needed to address our staggering infrastructure gap which has continued to torpedo our journey into greatness.
If well implemented, the executive order will also help to address the perennial conflicts between companies and their respective host communities particularly in respect of accusations and counter-accusations over corporate social responsibility. With the order, companies now have the opportunity of killing two birds with one stone: the ability to provide a bit of their own social capital (roads) for ease of their operations and at the same time fulfilling their corporate social responsibility.
We believe that there is a dire need for more of such interventions to address deficits, particularly in the areas of power, education, healthcare and housing. This has therefore, more than ever, calls for a change in the funding mix to create partnerships to finance infrastructure and other