The Federal Government has forgone a staggering $577.6 million in tax revenue under the Road Infrastructure Tax Credit Scheme to the Nigerian National Petroleum Company Limited (NNPCL) from February to December 2024.
This development has sparked concerns about the long-term implications of such revenue forfeitures, especially as the country grapples with economic pressures.
The Road Infrastructure Tax Credit Scheme was introduced under Executive Order 007 of 2019, allowing private companies to finance road projects in exchange for tax credits. This initiative aims to reduce the government’s direct financial burden on road infrastructure development.
NNPCL, the state-owned oil company, has been actively involved in the scheme, leveraging its tax profile to construct roads across the country. In 2023, the government approved N1.535 trillion under Phase 2 of the NNPCL tax credit scheme, marking a significant investment in the country’s road infrastructure.
The forgone tax revenue of $577.6 million has raised concerns about the country’s fiscal management and the potential consequences of such revenue forfeitures. With Nigeria facing significant economic challenges, including a rising debt profile and dwindling revenue, the government’s decision to forgo such a substantial amount of tax revenue has sparked debate.
The Federation Account Allocation Committee (FAAC) has expressed concerns about the deductions, emphasizing that the responsibility of road construction lies with the Federal Government. FAAC members have called for a suspension of the deductions, arguing that their share of the deduction should be calculated based on the existing Revenue Allocation Sharing Formula and refunded accordingly.
To address the concerns raised by FAAC and other stakeholders, the Chairman of the Revenue Mobilisation Allocation and Fiscal Commission has formally requested detailed information from the Federal Inland Revenue Service (FIRS) on the tax credits granted to NNPCL and other organizations involved in the scheme.
The Federal Government’s decision to forgo $577.6 million in tax revenue under the Road Infrastructure Tax Credit Scheme to NNPCL has significant implications for the country’s fiscal management and economic development. As the government continues to navigate the complexities of the scheme, it is essential to ensure transparency, accountability, and fairness in the allocation of tax credits.