The Federal Executive Council (FEC) at its meeting on Thursday approved the establishmentof the Road Trust Fund (RTF) under which companies in the private sector will be able to obtain tax credit for getting involved in road construction.
President Muhammadu Buhari presided over the FEC meeting where the initiative which would incentivise private sector participation in road construction was approved.
Finance minister, Mrs. Kemi Adeosun, told newsmen after the FEC meeting that the initiative would facilitate public-private partnership for the construction of federal roads and complement the federal government’s budgetary allocation to the provision of infrastructure.
“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,” Adeosun said.
The minister explained that 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.“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,” Adeosun said.
She also noted that the tax relief would allow for cost recovery within a year instead of three years for economically disadvantaged areas.The minister however noted that the federal government may decided to toll the roads in accordance with the National Tolling Policy upon handover of the road projects by the participating companies.
The Ministry of Power, Works and Housing headed by Mr Babatunde Raji Fashola is also expected to play a major role in the implementation of the initiative. Adeosun explained that Fashola’s ministry would be responsible for approving the road designs, monitoring all approved RTF projects by managing costs and timelines as well as ensuring equal development across Nigeria by re-balancing the federal budget, where necessary.All costs and contractors are also to 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.
According toPunch, the government expects thatthe impact of the implementation of the RTF initiative on federal revenue would be neutral as efforts were also in place to tighten the tax code, for which reason a limit had been placed so that no company could apply and use more than 50 per cent of its tax within a year for the scheme.One of Nigeria’s biggest companies, the Dangote Group was recently in the news for being the first beneficiary under the scheme. He got the tax credit for undertaking to rebuild Apapa road in Lagos.
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