October 18, 2021

The Infrastructure Tax Credit Scheme; NNPC Taking The Right Steps

6 min read

It is no longer news that the Nigerian National Petroleum Corporation on Wednesday disclosed that following its engagement with stakeholders on the poor state of roads across the country, an agreement has been made to intervene in critical road rehabilitation through the Federal Government Tax Credit Scheme.

It said this was a follow-up to its efforts in sustaining the current smooth supply and distribution of petroleum products nationwide within the festive period and beyond.

The development is premised on the decision of petroleum tanker drivers across the country to embark on strike action last Monday due to the poor state of the country’s road network.

It will be recalled that the NNPC’s Group Managing Director, Mallam Mele Kyari, had on Tuesday met with major stakeholders’ where it pledged to support the PTD and NARTO in carrying out quick intervention fixes on some strategic bad spots identified to enable unhindered movement of trucks for transportation of petroleum products nationwide.

The meeting was attended by the NNPC, the Petroleum Tanker Drivers (PTD), the National Association of Road Transport Owners (NARTO), Department of Petroleum Resources (DPR), Federal Ministry of Works, Federal Inland Revenue Service (FIRS), Department of State Services (DSS), Federal Road Safety Corps (FRSC) and Nigeria Union of Petroleum & Natural Gas Workers (NUPENG).


Nigeria faces a critical infrastructure deficit projected at over $3 trillion in the next 26 years with an average annual budget of approximately $29 billion in the last 10 years, of which only about 30% was allocated to capital expenditure. To combat these shortfalls, the Federal Government of Nigeria has incentivized private sector participation in the provision and maintenance of key infrastructures across the country.

On the 25th of January, 2019, President Muhammadu Buhari relying on the powers conferred on him by Section 23(2) of the Companies Income Tax signed Executive Order No. 007 on “Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme 2019”.

The Order establishes a Ten year scheme known as the Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme (“the Scheme”) which seeks to encourage Public-Private Partnership intervention in the construction/refurbishment of road infrastructure projects in Nigeria.

The private participants of the Scheme provide the funds for the construction/refurbishment projects and in exchange, the participants are entitled to recoup the funds provided as a credit against the Companies Income Tax to be paid.

The various tax credit schemes created are projected to enable companies that are willing and able to spend their funds on the construction, provision and maintenance of various key infrastructures across the country, recover their full construction costs as tax credits, over a period.

The Scheme was established against the background that the Federal Government of Nigeria must provide adequate public infrastructure facilities for all citizens and encourage the free mobility of people, goods and services throughout the Federation, to promote national integration and protect the rights of citizens to engage in legitimate economic activities concerned with the production, distribution and exchange of wealth, goods and services.

It is predicated on the recognition that it is the responsibility of the FGN to harness Nigeria’s resources, promote national prosperity and an efficient, dynamic and self-reliant economy, and manage and operate the Roads Transportation Sector, as well as the major sectors of the economy.

It stems from the commitment of the FGN to ensure that its Roads Transportation Infrastructure Policies are channelled at the promotion of a planned and balanced economic development, in such a manner that the material resources of the nation are harnessed and distributed as best as possible to serve the common good.

To guarantee Participants timely and full recovery of funds provided for the construction or repair of eligible road infrastructure projects in the manner prescribed in the Executive Order.

The Scheme focuses on leveraging private sector funding for the construction and refurbishment of eligible road infrastructure projects. The eligible roads are to be approved by the President, on the recommendation of the Minister of Finance and published in the Official Gazette of the Federal Republic of Nigeria.

The following entities may participate in the Scheme: a company or corporation, other than a corporation sole, established under the Companies and Allied Matters Act, 2020 (CAMA); companies operating through a special purpose vehicle (SPV) registered by a fund manager duly registered with the Securities and Exchange Commission (“the SEC”) and set up solely as an infrastructure fund; and institutional investors such as pension fund administrators, collective investment schemes and investment banks.

The benefits of the Nigerian National Petroleum Corporations participation in the Infrastructure Tax Credit Scheme include:

NNPC is entitled to Tax Credits against its future Companies Income Tax to the tune of the total project cost incurred in the construction or refurbishment of the eligible road.

Recovery of the approved total project costs shall be subject to the utilisation of a maximum annual tax credit of 50% of the total accessed CIT for each year of assessment.

In addition, the NNPC shall also be entitled to a single non-taxable uplift at the prevailing Central Bank of Nigeria Monetary Policy Rate plus 2% of the Project Cost. Both are jointly referred to as “Road Infrastructure Tax Credit (RITC)”.

For NNPC to engage in the construction or refurbishment of roads in areas designated by the President as “Economically Disadvantaged Areas” is entitled to utilise an annual tax credit that covers up to 100% of the total accessed CIT for each year of assessment.

Any unutilised credit within the year of assessment can be carried forward by a NNPC to subsequent tax years until the credit is fully utilised.

The Road Infrastructure Tax Credit can be transferred in part or as a whole by NNPC to a new beneficiary upon notification of transfer to the Committee. The Committee is mandated upon notification to effect the transfer in the Records and immediately issue a new Road Infrastructure Tax Credit (RITC) to the Beneficiary of the transfer.

The Executive Order provides that the tax credit qualifies as an asset in the NNPC’s financial records.

The tax credit is tradable on any stock exchange in which it is registered. However, if the NNPC intends to trade the tax credit, it shall do so only with the consent and approval of the Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme Management Committee (“Committee”).

The Infrastructure Tax Credit Scheme is a commendable initiative and the NNPC pledge to support the PTD and NARTO in carrying out quick intervention fixes on some strategic bad spots identified to enable unhindered movement of trucks for transportation of petroleum products nationwide is a welcome development.

The NNPC has joined some of the most prominent participants of the Infrastructure Tax Credit Scheme which include: Dangote Cement Plc: A tax credit certificate worth N22.3 billion was awarded to Dangote to construct the Apapa-Oworonshoki-Ojota road in Lagos and the Lokoja-Obajana-Kabba road connecting Kogi and Kwara States; MTN: 110km Enugu-Onitsha road in Anambra State in exchange for tax credits; Transcorp Group: Oyinbo-Izuoma-Mirinwayi-Oklama-Afam Road; Access Bank: Oniru axis of VI-Lekki circulation road in Lagos State; GZI Industries: Umueme village road, Abia State; Mainstreet Energy: Malando-Garin Baka-Ngwaski Road; The BUA: Bode-Saadu-Lafiagi road; Eyinkorin road and bridge and NLNG: Bodo-Bonny bridges and road

The success of the Scheme will depend on its attractiveness to the targeted private sector participants and whether the government can win their trust and provide assurances that the Scheme will not be prone to unexpected policy changes either by current or subsequent administrations.

Furthermore, to ensure that the lofty aspirations expressed in the scheme become a reality it is important for both the FGN and other companies that will benefit from the Order to seek appropriate guidance from seasoned experts with in-depth experience in financial, legal and commercial issues for PPP based Infrastructure Developments to identify and manage project risks that are associated with such infrastructures.

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