The Federal Executive Council on Thursday approved a tax relief scheme to attract private sector involvement in the provision of Federal road infrastructure across the entire country.
The approval was the outcome of a Memorandum for the setting up of a Road Trust Fund (RTF) presented by the Honourable Minister of Finance, Mrs. Kemi Adeosun, to the council at its meeting presided over by President Muhammadu Buhari.
The Road Trust Fund concept was jointly developed by the Federal Ministry of Finance and the Federal Ministry of Power, Works and Housing.
The RTF is expected to mobilise significant capital into road provision in order to unlock socio-economic development as well as facilitate investment across all areas of Nigeria to achieve inclusive economic growth.
Federal roads carry more than 80% of national vehicular and freight traffic, accounting for 17 per cent of the total national road network.
Addressing State House correspondents at the end of the FEC meeting, the Finance Minister explained that the RTF would facilitate and incentivise private sector involvement in Nigeria’s Federal road infrastructure.
The Minister of Power, Works and Housing, Mr. Babatunde Fashola and Minister of Information and National Orientation, Alhaji Lai Mohammed, were also at the post-FEC briefing of the State Press Corps.
Adeosun said, “It is a form of Public Private Partnership that will accelerate the provision of Federal Roads by allowing private sector operators to collectively fund road provision in exchange for tax credits. This will complement Federal Government’s budgetary allocation to roads.
“Private sector participation is being incentivised through a Tax Credit Scheme that enables all participating companies to claim tax relief based on the amount of capital contribution (on a pro-rata basis).
“We have already consulted with the private sector in the development of the RTF and some companies have already identified roads they wish to reconstruct and are organising their funding. However, this scheme is designed such that Financial Intermediaries will be promoting Road Trust Fund projects and soliciting commitments from interested companies.”
Under the tax relief scheme, companies will be allowed to recover 100 per cent of costs incurred on road infrastructure as a tax credit against total tax payable (including up to 10 per cent for cost of funds).
Adeosun further noted that the tax relief would allow for cost recovery within a single year instead of three years for economically disadvantaged areas.
When completed, the Minister said the roads would be handed over to the Federal Government who may decide to toll the roads in accordance with the National Tolling Policy.
On the role of the Federal Ministry of Power Works and Housing, she explained that the ministry would be responsible for approving the road designs, monitoring all approved Road Trust Fund Projects by managing costs and timelines as well as ensuring that equal development across Nigeria by rebalancing the Federal budget, where necessary.
She added that all costs and contractors would be scrutinised and approved by the Bureau of Public Procurement in line with legal requirements.
“This will ensure that costs are not inflated and that unqualified contractors are not used on the projects,” she stated.