The scheme is a public-private partnership, which enables private companies fund the construction and refurbishment of eligible roads in Nigeria. In return, participants in the scheme are entitled to recover the project funds by way of tax credits, claimable against Companies Income Tax (CIT) payable. The scheme will be implemented and administered by a special management committee (the Committee), consisting of representatives from relevant Ministries and agencies, including Federal Inland Revenue Service (FIRS) and chaired by the Minister of Finance.
The scheme will be in force for a period of 10 years from the date of commencement of the Order. The Scheme is open to Nigerian companies (other than corporation sole), institutional investors and a pool of companies operating through a special purpose vehicle set up as an infrastructure fund. Eligible road refers to any road approved by the President as eligible for the scheme on the recommendation of the Minister of Finance and as duly notified to participants and published pursuant to the Order
In a chat with Newsmen, recently on the impact of this on the industrial sector and implication on the economy, the founder/President of International Centre for Tax Research and Development (ICTRD), Mrs. Morenike Tejade Babington-Ashaye, said if it is properly implemented by the Federal Government and participating companies, it will boost the industrial sector but caution should be taken in order not to violation the constitution.
Babington-Ashaye noted the issue of road infrastructure tax credit scheme is a constitutional matter that the National Assembly must be aware of and which the executive must have presented in the 2019 Budget. How much will be accommodated in annual budgets must be approved, otherwise the Executive will be funding projects outside the budget. That is unconstitutional.
She stated the idea of President Buhari joining hands with the private sector for road development is a laudable and welcome approach. However, the executive order 007 which is to use tax revenue to fund infrastructure is a new dimension which requires a critical look.
An executive order is the power granted to a President, Governor of a State, or Minister of the Federation in the Constitution or any act of Parliament to do certain things to complement the Constitution or the Act of Parliament. The order is usually specific on issues that such power has been granted. The President, Governor, or Minister cannot act outside that power. For example in section 315 of the 1999 Constitution, the appropriate authority is given the power to make modifications in the text of any existing law as the appropriate considers necessary or expedient to bring that law into conformity with the provisions of this Constitution. Modifications includes addition, alteration, omission or repeal. Existing law means any law and includes any rule of law or any enactment or instrument whatsoever which is in force before the 1999 Constitution. Authority on the other hand means the President, Governor or any person appointed by any law to revise or rewrite the laws of the Federation or of a State.
Executive Order 007 on road infrastructure development and refurbishment stand for
The Executive Order 007 on road infrastructure development and refurbishment is an avenue for the Government to partner with the private sector to bring about the needed infrastructure development that has plagued the country for the past 20 years. Despite budgetary allocations, road infrastructure and refurbishment are yet to develop to a satisfactory level. To this end, in May 2018 President Buhari got the approval of National Executive Council (NEC) and launched the Presidential Infrastructure Development Fund (PDIF) with N199 billion Naira (US$650 million). The National Sovereign Investment Fund (NSIF) Act was signed in 2011 while the Agency formally commence business in 2012. President Buhari assigned the management of the PIDF to the NSIF. It empowers the Authority to receive, manage and invest funds in a diversified portfolio of medium and long term assets on behalf of the Federal Government, State Governments, Federal Capital Territory, and Local Governments Area Councils in preparation for the eventual depletion of Nigeria’s hydrocarbon resources. To give effect to the mandates, the NSIA established three main funds: the Stabilisation Fund, the Future Generations Fund and the Nigeria Infrastructure Fund. The role of the Stabilisation Fund is to provide budget support in times of economic stress; the Future Generations Fund is an inter-generational savings fund for future generations of Nigerians and the Nigeria Infrastructure Fund is to invest in domestic infrastructure. After a series of start-up challenges, the NSIA began investment activities in the 3rd quarter of 2013, with a seed capital of US$1 billion, which was allocated as follows: 20% to the Stabilisation Fund, and 40% each to the Future Generations Fund and the Nigeria Infrastructure Fund. An additional $250 million was committed to the Authority by the National Executive Council on November 19th, 2015. And in 2018 President Buhari added N199 billion Naira.
The above is to give a summary of facts that governments have been putting money aside for Infrastructure development and refurbishment. The idea of President Buhari joining hands with the private sector for road development is a laudable and welcome approach. However, the executive order 007 which is to use tax revenue to fund infrastructure is a new dimension which requires a critical look.
Benefit to industrial growth
Of course, when the roads are in good shape, the movement of goods and services would be much easier. As a country, we need to have good roads. For over the years Nigeria does not have good roads, and this is affecting the manufacturing sector and the economy greatly. For the president to come up with Public-private partnership on Infrastructure development and refurbishment Investment tax credit scheme to boost industrial growth and economy is good one. But cautions must be taken. The current steps would definitely improve the economy.