By Adewunmi Emoruwa
It appears Nigeria has finally devised a way out of its infrastructure woes. Or not quite.
The cabinet minister in charge of Infrastructure, Mr. Babatunde Fashola announced the government’s move to revisit an existing ‘infrastructure-for-taxes’ provision of the Companies Income Tax Act (CITA), known as the “Exemption of Profits Order 2012” signed by Goodluck Jonathan, Nigeria’s former president.
Plainly put, the order grants tax incentives to corporates that invest in public infrastructure. The minister has promised to expedite the process involved in securing these approvals in a fresh desperate appeal to the private sector.
Section 3, Paragraph 1 of the exemption order, reads: “Any company that incurs expenditure on infrastructure or facilities of a public nature shall be entitled to an exemption from income tax of an additional thirty per cent of the cost of the provision of the infrastructure or facilities in the assessment period in which the infrastructure or facilities were provided.”
Given the right circumstances, the order would ameliorate the burden on individuals and businesses affected by decadent infrastructure. And this ought to be a good thing. Unfortunately, the people’s understanding of this policy would be shaped by an announcement concerning the Dangote Group, a conglomerate owned by Aliko Dangote, Africa’s richest person. According to an initial report, the federal government granted the group a 10-year tax relief for the purpose of reconstructing the road at the Apapa-Oworonshoki end of the Lagos-Ibadan expressway. But it was met with stiff resistance by citizens and civil society organizations, a situation that forced the Dangote Group to release a statement denying the report while government was forced to provide further clarification. The company explained that the tax relief would apply for 3 years. This should do.
Government exists to create enabling environment for businesses to thrive while businesses exist to make profit while making lives better for people. This may not be the case in Nigeria. Our government has failed to do its business and wants business to do its business. In this case the people are the highest losers. Nobody wins.
Any self-respecting country would be ashamed that one of its most important economic roads is a subject of corporate social responsibility. The Apapa road links the port to the rest of the country and a major source of revenue for the state. A national emergency and funding request to rebuild this road would not have been an overkill.
The Dangote Group and Flour Mills of Nigeria made joint commitments to embark on a comprehensive repair of the Apapa road as a matter of corporate social responsibility before being approached by the government to extend the project. The companies claim that the present state of the roads cost businesses billions on a yearly basis. A certain Yakubu Abdullahi, who heads port operations at the Dangote group claimed that the company already spent 1bn on the road repairs and could have done more but for the restrictions by the Lagos state government.
Nigeria’s huge rise in domestic and external debt has become an issue of concern lately and the government is reaching its wits end. Government looks to the private sector to bail itself out at the expense of future revenue. That would only be the first among other issues. Nigeria’s businesses should be investing their revenue towards growth and expansion and not in basic public infrastructure. What the government does not seem to recognize is that the companies, in this case have factored the corporate bail-out, as a part of the costs of doing business. How then can we expect these companies to really grow the economy?
Transparency raises another concern and you can add to this inequality. The idea that the country’s procurement laws might be bypassed doesn’t hurt as much as the possibility that the processes involved till the signing of the deals might escape public scrutiny. One of the roads for taxes deals recently completed is for the construction of the 42.5KM Obajana-Kabba Road in Kogi State. Obajana is site to Dangote’s largest production facility in the country. The government awarded the contract to the group on a tax concession basis. Available information suggests the AG Dangote construction company will deliver the project. With no public record of such a massive public funded project undertaken by the construction company, it would have been impossible for the company to win the bid competitively. Fashola, the infrastructure minister literally described it an experiment.
“Specifically, the section between Obajana-Kabba Road using cement as demonstrative of how perhaps we should continue to build, going forward in order to reduce maintenance on the road and the company proposing to fund the construction of that section of the road in exchange for some tax remissions,’’ he said.
Every other day, small and medium businesses in Nigeria invest in building and repairing public infrastructure at grave costs to their existence without any form of relief. They would probably be unable to benefit or afford to pursue these kinds of deals in an environment where the bigger companies would barely thrive. In another instance cited by the minister, Lafarge, a publicly quoted company also secured a similar deal to repair a road in Cross River state. This could potentially benefit the company’s interest in the United Cement Company plant in Cross River state.
This creates a potentially complex situation that widens the development gap between the more industrialised South of the country and the agrarian North of the country. An ideal situation would have been that the government presents a shopping list of national and regional priority infrastructure projects including hospitals, schools, monorails and the roads. This is the case of Peru’s public work for taxes programme known as “Obras por impuestos” which has been shown to benefit citizens across the country in the ‘neediest sectors’. The initiative has also helped to bring companies together to co-finance mega projects like the metro line projects in Lima, investing about (US)$5.6 billion.
While Nigeria’s demand on the private sector to help it build its roads begs for many answers, the government has to show a little ambition and this is not too much of an ask.
Adewunmi Emoruwa is a strategic communications and public affairs professional.