Road Construction: FG Approves Tax Relief for Private Sector

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  • Road Construction: FG Approves Tax Relief for Private Sector

The Federal Executive Council on Thursday approved the establishment of the Road Trust Fund Structure for the country.

The Minister of Finance, Mrs. Kemi Adeosun, told State House correspondents after the council’s meeting presided over by President Muhammadu Buhari that the initiative would allow the private sector to get involved in road construction in exchange for tax credit.

The minister 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 the 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 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 year instead of three years for economically disadvantaged areas.

When completed, the minister said the roads would be handed over to the Federal Government, which might decide to toll the roads in accordance with the National Tolling Policy.

On the role of the Ministry of Power, Works and Housing, she explained that it would be responsible for approving the road designs, monitoring all approved RTF 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 for the projects,” she stated.

Adeosun added that the government expected the impact on revenues to be neutral because it was tightening the tax code.

She said that was why a limit had been placed so that no company could apply and use more than 50 per cent of the tax within a year for the scheme.

“A company doesn’t have to be active in that area, so a bank, oil company, or service company could get involved. We are really trying to widen the pool of funds for road construction,” she said.

The Minister of Power, Works and Housing, Mr. Babatunde Fashola, stated that the council approved the construction of a 14-kilometre 330KVA transmission line for the Transmission Company of Nigeria to get it ready to evacuate electricity from the Azura Power Plant in Edo State from May 2018.

The contract is for the sum of N796.6m for a period of seven months, just about when the power plant should be ready.

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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