THE ROAD INFRASTRUCTURE TAX CREDIT SCHEME: AN EXAMINATION OF

ITS IMPACT ON PROMOTING INFRASTRUCTURAL DEVELOPMENT IN

NIGERIA

Introduction

Nigeria faces a critical infrastructure deficit which has been projected at over $3 trillion in the
next 26 years1. This is estimated with an annual budget of about $29 billion in the last 10
years, of which only about 30% was allocated to capital expenditure. To cure these shortfalls,
the Federal Government of Nigeria (FG) decided to incentivise private sector participation in
providing and maintaining critical infrastructure across the country.

The Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme
Order 2019 (“RITC” or “the Scheme”) is essentially a tax incentive granted to Nigerian
companies that are engaged in the business of construction and refurbishment of eligible
roads that the Federal Government of Nigeria has approved.

The Scheme was enacted on January 25, 2019, when the President Muhammadu Buhari,
GCFR issued the Presidential Executive Order No. 007 and is to be applied for a period of 10
years, starting from the effective date of the Executive Order (i.e., from January 25, 2019, to
January 25, 2029). The Order was issued based on the powers conferred on the President by
Section 23(2) of the Companies Income Tax Act, Cap C21, LFN 2004.

The Scheme's primary objective are to encourage and promote private sector participation in
the construction or rehabilitation of eligible road infrastructure projects in Nigeria, increase
the emphasis on developing eligible road infrastructure projects in a way that will maximize
value for money through the private sector, and ensure the timely and complete recovery of
funds utilised for the project2.

This article will examine the legal framework for the road infrastructure tax credit scheme
and its overall effectiveness in achieving its objective of ensuring road infrastructural
development in Nigeria.
1
According to the data made available by the Senior Director, AfDB Nigeria, at the Africa Investment Forum
(AIF) Road show in Abuja 2018.
2
Section 1 of the Presidential Executive Order No. 007.
Participating in the Road Infrastructure Tax Credit (RITC)

In order to participate in the Scheme, applicants must register and get certification from the
Scheme’s Management Committee (the Committee). The Committee decides if an Applicant
is eligible to participate and determines that the applicant's planned project is feasible,
affordable, and able to be finished promptly (within 12 to 48 months).3

The Scheme's primary objective is to build and renovate qualified road infrastructure projects
using private sector finance. On the proposal of the Minister of Finance, the President must
approve the qualifying roads before they can be published in the Federal Republic of
Nigeria's Official Gazette4. The following entities may participate in the Scheme:5

a. a company (except a corporation sole6) incorporated (with evidence of the certificate

of incorporation) under the Companies and Allied Matters Act 2020 (“CAMA”);
b. corporations operating via a special purpose vehicle (SPV) which are set up solely as
an infrastructure fund and run by a fund manager lawfully registered with the
Securities and Exchange Commission ("SEC") and;
c. Institutional investors such as pension fund administrators (PFAs), collective
investment schemes (CIS) and investment banks.

Applicants must do the following:

 Register and ensure that the Committee confirms its status as a Participant or
representative of a Participant of the Scheme.
 Provide evidence of certification of the Project Cost by the Committee.
 Provide evidence that the project is economically viable, cost-efficient and can be
completed promptly (within 12 to 48 months).
 Provide approval of the Project Cost and completion timeline bid by the Committee.
 Provide a copy of the issued Contract award letter.

In particular, the Scheme grants participants the right to use their future Companies Income
Tax (CIT) obligation as a Tax Credit against the investment cost paid in building or
renovating a qualified road until full cost recovery is realized. Without the RITC, the Federal
3
First Schedule, Section 3 (2) of the Presidential Executive Order No. 007.
4
Section 5 of the Presidential Executive Order No. 007. Definition of “Eligible Road”
5
Paragraph 5 of the Order
6
A corporation sole is a legal entity consisting of a single incorporated office, occupied by a single natural
person.
Government can utilise the CIT payments it receives for purposes other than those directly
benefiting the businesses paying the taxes. The RITC gives businesses the ability to decide
how their CIT payments will be used, and having their taxes used to build important roads
that have an impact on their operations is a significant incentive7.

The Scheme accounts for the cost of finances and permits participants to contribute an
"uplift" equivalent to the current CBN Monetary Policy Rate +2% of the Project Cost because
most roads would take longer than a year to build. It is crucial to remember that a taxpayer
cannot rehabilitate road on their own and get tax credits in exchange. 8 The road has to be an
Eligible Road, designated as such by the President from the recommendation of the Minister
of Finance. However, a taxpayer can apply to the Minister of Finance to designate a road as
eligible under the Scheme. These roads are not limited to Federal roads.

Obtaining a RITC certificate from the Federal Inland Revenue Service (FIRS) is a
requirement for participating in the Scheme. However, the amount of the RITC that may be
accessed in each assessment year is capped at 50% of the CIT that the participant or
beneficiary must pay. On the other hand, there are no limitations on how much of the RITC
granted for qualified roads in economically disadvantaged regions may be used in a given
assessment year.

It should be mentioned that the Scheme enables RITC certificate holders to list and trade their
certificates on the appropriate securities exchanges. Participants are also allowed to sell all or
a portion of their certificates to eager purchasers on the appropriate securities market. Such
transaction must, however, be brought to the Committee's notice. The Committee has the
authority to register the new beneficiary and de-register the participant who sold their RITC.

The Impact of the Road Infrastructure Tax Credit Scheme from 2019 to date

A Nigerian Company may lessen the effect of the ineligible donations by applying for the
Scheme to carry out road building and renovation projects on specified roads in Nigeria and
benefit from the tax advantage offered by the Scheme. In this manner, the Company would be
permitted to claim the cost of the project and the uplift as a tax credit against CIT they are
liable to pay.

7
https://news.bloombergtax.com/daily-tax-report-international/harnessing-the-nigerian-governments-tax-
incentives-for-road-construction (Accessed April 14, 2023)
8
Ibid
As an example, Dangote Cement Plc9 has been one of the major beneficiaries of the
infrastructure tax credit under the Scheme. Dangote Cement Plc constructed roads along the
Apapa-Oworoshoki-Ojota expressway in Lagos and the 43km Lokoja-Obajana-Kabba
expressway connecting Kogi and Kwara states, which are valued at N21.6 billion (approx.
USD $52.4 million) and N721 million (approx. USD $1.75 million) respectively. Following
the construction of the above road networks, the FIRS, through its tax operations group,
issued a tax credit certificate to Dangote Cement Plc covering a total of N22.32 billion
(approx. USD $54.1 million) which can be utilised to reduce the Company's annual
Companies Income Tax liabilities in the subsequent years of assessment until the amount is
fully utilised. Other scheme recipients include National Petroleum Company (NNPC), MTN
Nigeria Communications Plc, Transcorp Group, Access Bank Plc, GZI Industries,
Mainstream Energy Solutions, BUA Group and Nigeria LNG (NLNG).

Between 2019 and 2022, the Federal Government approved about fifty-four (54) roads
spanning the six geographical zones10 for construction under the Scheme. The roads that have
been approved under the Scheme include but are not limited to:

a. Nnamdi Azikiwe Expressway/Bypass, Kaduna State. (21,477km)

b. Bali-Sheti-Gashaka-Gembu in Taraba state (234 km)

c. Obele-Ilaro-Papalanto Shagamu Road, Ogun State (100km)

d. Onitsha-Enugu Expressway (110km)

e. Dikwa-Gamboru-Ngala Road, Borno State (49,577km)

f. Bonny – Bodo Road (34 km)

g. Lokoja-Obajana-Kabba Road (43km)

h. Apapa-Oworonshoki-Ojota Road (35km)

i. Bama-Banki Road, Borno State (49,153km)

j. Oyigbo-Izuoma-Mirinwayi-Oklama-Afam Road

9
https://businessday.ng/big-read/article/nigerias-tax-credit-to-firms-for-roadworks-bears-fruit/ (Accessed
April 14, 2023)
10
https://businessday.ng/big-read/article/nigerias-tax-credit-to-firms-for-roadworks-bears-fruit/ . See also
https://www.thecable.ng/full-list-fec-approves-nnpcs-request-to-fix-21-federal-roads-at-n621bn (Accessed
April 14, 2023)
As at the end of 2022, the RITC Scheme had attracted investments worth circa N97.47bn
from the private sector to fund critical road infrastructure in the country. This includes the
rehabilitation and reconstruction of 33 key road networks 11. In addition to this, the Nigerian
National Petroleum Company Limited (NNPC) in its Phase I project had committed N621
billion in 2021 for revamping about 1,804.6 kilometres of roads 12 in the various geo-political
zones of Nigeria13. This has been increased to N1.96 trillion for the Phase II 14. Similarly,
alternative funding from Sukuk Bonds amounting to N742.5 billion have been invested in the
Scheme15.

Between 2019 and 2022, some of the roads constructed include the Apapa-Oworonshoki-
Ojota Road in Lagos and the Lokoja-Obajana-Kabba Road connecting Kogi and Kwara
States constructed by Dangote Cement; Umueme village road, Abia State by GZI Industries;
Malando-Garin Baka-Ngwaski Road by Mainstreet Energy; 110km Enugu-Onitsha Road in
Anambra State by MTN; Oniru axis of VI-Lekki circulation road in Lagos State by Access
bank; Oyinbo-Izuoma-Mirinwayi-Oklama-Afam Road constructed by Transcorp Group;
construction of Bodo-Bonny Road with a bridge across the Opobo channel in Rivers state by
NLNG; and Bode-Saadu-Lafiagi road, Eyinkorin road and bridge by BUA group.

From our analysis of the approvals granted under the Scheme, it appears that the major
beneficiaries are mainly large or well-known corporations. This may stem from the fact that
the construction of these roads is a cost-intensive project, and some smaller companies may
not have the resources to champion such notable projects.

The scheme has the tendency of improving the Corporation's reputation and business outlook,
particularly in economically depressed areas, and will reduce CIT payable in an assessment
year when the Company has unused tax credits. Businesses planning to take part in the
Scheme should do a thorough financial model analysis so they may make an educated choice.

11
https://punchng.com/road-dangote-others-invest-n97-4bn-in-four-years/ (Accessed April 14, 2023). See also
https://businessday.ng/big-read/article/nigerias-tax-credit-to-firms-for-roadworks-bears-fruit/ (Accessed April
14, 2023).
12
This includes the dualisation of the Suleja-Minna road, dualisation of Jebba-Mokwa Bokani road and the
Junction road on Kwara and Niger state among others.
13
https://www.blueprint.ng/tax-credit-nnpcs-n1-6trn-quest-to-fix-nigerian-roads/ (Accessed April 14, 2023)
14
https://www.thetidenewsonline.com/2023/02/01/infrastructure-nnpc-invests-1-9trn-in-road-construction-
via-tax-credit-scheme/ (Accessed April 14, 2023)
15
Ibid
Challenges observed in the implementation of the Scheme and recommendations.

The Scheme has achieved some success over the years since it was first implemented.
Between this period, the Federal Government has approved about fifty-four roads for the
Scheme and about 21 companies’ applications16. Despite this progress, there are still more
outstanding roads under the Scheme and more taxpayers willing to participate.

The timetable for certification/verification of participants receiving authorisation to start road

construction is one of the primary issues with the RITC Scheme. While conducting due
diligence is essential, it should be done efficiently, eliminating the typical public sector
bureaucracy.

The process requires numerous inter-agency interfaces, such as the Ministry of Works, the
Ministry of Finance and the Bureau of Public Procurement (BPE) which delays the process
further. To manage the process as a one-stop shop from beginning to finish, a designated
Joint Desk should be set up to streamline approval timeline. This may include a similar
process adopted under the Startup Act 2022. The advantages of the RITC Scheme are too
large and important for the Nigerian economy to be dealt with through the normal
bureaucratic channels.

According to the approvals granted thus far, there are still more roads to be fixed than had
been, in the last three years. In addition, it is expected that many more taxpayers might be
willing to participate in the Scheme if the scheme is made more accessible, rather than being
seemingly limited to large companies. It is recommended that a seamless process, and a
simplified approval process should be adopted. This may be made through a digital platform
where updates are shared instantaneously.

Furthermore, the legislature may adopt this incentive in a duly enacted legislation which
further deepens and expands the Scheme from its current form. This will give the Scheme
adequate legal backing like other incentives such as the Pioneer Incentive and export
incentives. It will also ensure that the Scheme which is due to expire in 2029 can be extended
indefinitely and expanded to accommodate other designated roads. This will be crucial if
Nigeria is to bridge the infrastructure deficit which is projected at over $3 trillion.
16
https://businessday.ng/big-read/article/nigerias-tax-credit-to-firms-for-roadworks-bears-fruit/ (Accessed
April 14, 2023)
It is also important for the State Government to also consider adopting the Scheme for State
taxes such as the personal income tax for workers. This will bring several local and inland
roads that are not part of the federal road network into a similar scheme. This will further
boost Nigeria’s road network and will benefit the supply chain for farmers and maritime
workers. It is expected that these "smaller" roads will immediately impact the local
communities of the taxpayers and may result in swifter classification of smaller roads as
eligible roads.

Considering that the RITC certificate may be traded and sold in full or part, there would need
to be clarification on the status of unutilised RITC after the ten-year period of the Scheme.
This will give potential buyers the confidence that the RITC can stand as an asset or
investment in the long term. The Committee or the President may issue a supplementary
order on the subject noting that the ten-year period is for the duration of the Scheme and does
not relate to the validity of the RITC certificate.

The Committee may release guidelines on what constitutes an eligible road to further reduce
bureaucracy and administrative bottlenecks. This will simplify the process for designating
eligible roads such that applications to declare a road eligible can be easily considered once
the conditions in the guidelines are met. As opposed to the current structure where eligible
roads are based on the Committee’s discretion and the President’s Approval, the proposed
guidelines will provide clarity and reduce the bureaucratic hurdles.

Finally, it has been noted that there is an absence of comprehensive dispute resolution
mechanisms for the Scheme. Considering the variety of rules and processes involved in the
Scheme, several disputes on issues such as valuation of project costs, tax computation, and
policy conflicts may often arise. It is therefore crucial to provide for clarity on an appropriate
dispute resolution mechanism such as Mediation or Arbitration where the disputes can be
resolved timely and without interference with the project.

Conclusion

Road infrastructure is very important in any economy as it improves the ease of doing
business and access to resources. Improved and efficient infrastructures are achievable
through increased government revenue in tax payments and PPPs like the RITC Scheme.
To guarantee the RITC Scheme's success in Nigeria, the appropriate procedures must be
implemented. In order to make the Scheme more accessible to smaller enterprises, the
government should pay special emphasis to streamlining approval procedures. Additionally,
since not all firms are subject to the CIT regime, expanding the scope of the Scheme to
include other tax regimes and levies such as personal income tax, value-added tax, etc would
significantly boost the likelihood that more businesses will sign up for the Scheme.

It is clear that the Scheme gives businesses, particularly manufacturing businesses, the chance
to direct funds toward the construction and/or repair of designated roads, including
connecting roads and highways, which are most important for the movement of inventory and
products, reducing supply lead times, enhancing the manufacturing supply chain, and
ultimately enjoying the tax incentive for the cost incurred as specified under the Scheme.

Given the foregoing, participation in the Scheme should be advantageous for the participating
companies as the Scheme should result in a significantly reduced tax liability, particularly if
the eligible road projects are carried out in economically depressed areas. For companies
willing to participate in the Scheme, it is important to conduct relevant due diligence and seek
professional advice to help maximise the value of the Scheme.