Providing the right infrastructure required for sustainable growth and development is always a challenge even for developed countries. Infrastructure development is capital intensive, involves multi-layer engagement with various stakeholders and can be time consuming. According to the World Bank, with the right policies in place, investments of 4.5 percent of GDP will enable lower-and-middle-income countries to achieve the infrastructure-related Sustainable Development Goals.

On 23 September 2022, President Muhammadu Buhari disclosed that Nigeria needs ₦348trillion over a 10-year period to bridge the nation's infrastructure gap1. Without considering other factors such as inflation and population growth, going by the 2023 proposed budget which earmarks ₦4.93trillion (excluding statutory transfer component) for capital expenditure, it will take the Federal Government (FGN) about seventy years to bridge the infrastructure gap.

From the above, it is evident that the burden of bridging the infrastructure gap is too heavy for the FG to bear alone. The reality of the FG's helplessness was correctly captured by Mr. Muhammad Nami, the Executive Chairman of Federal Inland Revenue Service (FIRS) who pointed out that, "The challenge of road construction in Nigeria has always been funding. Yes, there are contracts for the construction of roads, but funding these constructions is the challenge."

Given the above, designing a framework for public-private sector partnership in bridging the infrastructure gap as it relates to roads became imperative. It is against this backdrop that the FG issued the Road Infrastructure Development and Refurbishment Investment Tax Credit (RITC) Scheme, 2019 (the Order).

It has been over three years since the issuance of the Order, which was aimed at providing for public-private partnership (PPP) intervention in the construction, refurbishment and maintenance of critical road infrastructure in the country. The participants in the Scheme are entitled to tax credits against future companies income tax (CIT).

This article is aimed at evaluating the impact of the Scheme on the construction and rehabilitation of critical roads in the country.

How Does the "Tax for Roads" Scheme Work?

Specifically, the "Tax for Roads" initiative gives participants an entitlement to utilize the total investment cost incurred in the construction or refurbishment of an eligible road as a Tax Credit against their future CIT liability, until full cost recovery is achieved. Without the RITC, CIT paid to the FG can be used for other purposes that do not directly benefit the companies paying the taxes. The RITC gives companies an opportunity to influence how their CIT payments will be spent and having tax paid ploughed into the development of critical roads that affect their business is a major incentive.

Given that most roads will take more than a year to complete, the Scheme provides for the cost of funds and allows participants to add an "uplift" equivalent to the prevailing CBN Monetary Policy Rate plus 2% of the Project Cost. It is important to note that a tax payer cannot unilaterally rehabilitate a road and seek for tax credits in return. The road has to be an Eligible Road which is defined as a road approved by the President based on the recommendation of the Minister of Finance. In practice, a tax payer can submit an application to the Minister of Finance for a road to be designated as eligible under the Scheme. The roads that can be covered under the Scheme are not limited to Federal roads.

A summary of the process required to obtain the RITC is as follows:

  1. The Company prepares relevant documents needed to accompany an Expression of Interest letter to be submitted to the Federal Ministry of Finance, Budget and National Planning (FMoF)
  2. The Company submits an application to the FMoF to be registered as a participant under the Scheme
  3. An analysis of the project cost and timelines will be prepared by the company which will be approved by the Committee working with the Federal Ministry of Works (FMoF)
  4. A Memorandum of Understanding will be executed by the Company and the Minister of Finance, Budget and National Planning.
  5. The Company obtains an approval to commence construction from the Road Infrastructure Development and Refurbishment Committee (the Committee)
  6. Interim/ periodic certificate of work done for each milestone is obtained from the FMoW
  7. An application for RITC is submitted by the company to the Committee
  8. Upon approval of the RITC by the committee, the FIRS is required to issue the RITC Certificate to the Company.

A company does not have to complete the construction or rehabilitation of a road before the RITC Certificate is issued. The benefits of the tax credit can be enjoyed as the company concludes the various milestones earmarked for the completion of the project. Hence, several RITC Certificates can be issued throughout the lifespan of the construction of the road.

Unlike construction of eligible roads in Economically Disadvantaged Areas where RITC can be claimed fully in a given Year of Assessment (YOA), the RITC claimable on roads constructed in other areas is limited to fifty percent (50%) of the annual CIT liability. The remainder of the Credit may be carried forward until fully utilized. However, a company cannot claim RITC and still claim any other form of allowance including Capital Allowance, reliefs, and other tax credits; in the same YOA.

Although the RITC Scheme was designed to be efficient, the efficiency of the Scheme can only be adjudged by what is obtainable in reality. For example, the Order provides that where the Committee fails to issue a Certificate of Work Done after 14 days of completing the inspection / verification exercise, the participant can notify the FIRS of its entitlement to a tax credit. So far, only a handful of (known) companies have benefitted from the Scheme. Between 2019 and 2022, the Federal Government has approved about fifty-four2 roads spanning across the six geographical zones. Some of the roads that have been approved under the Scheme are as follows:

  1. Onitsha-Enugu Expressway (110km, at ₦202.8bn)
  2. Bonny – Bodo Road (34 km; ₦37.28bn)
  3. Lokoja-Obajana-Kabba Road (43km)
  4. Apapa-Oworonshoki-Ojota Road (35km; at ₦73bn)
  5. Bali-Sheti-Gashaka-Gembu in Taraba state (234 km, at a cost of ₦95.2bn)
  6. Nnamdi Azikiwe Expressway/Bypass, Kaduna State. (21,477km at a cost of ₦37.560bn)
  7. Bama-Banki Road, Borno State (49,153km at a cost of ₦51.016bn)
  8. Dikwa-Gamboru-Ngala Road, Borno State (49,577km at a cost of ₦55.504bn)
  9. Obele-Ilaro-Papalanto Shagamu Road, Ogun State (100km at a cost of ₦79.9bn)
  10. Oyigbo-Izuoma-Mirinwayi-Oklama-Afam Road
  11. Oniru axis of VI-Lekki circulation Road in Lagos State (5km)
  12. Umueme village road, Abia State.
  13. Malando-Garin Baka-Ngwaski Road
  14. Bode-Saadu-Lafiagi road; Eyinkorin road and bridge
  15. Obajana-Kabba road
  16. Construction/Rehabilitation of about 21 different federal roads by the NNPC, across the six geopolitical zones (1,804.6km at a cost of ₦621bn)

The roads approved under the Scheme are at various stages of construction / rehabilitation and it is expected that the participants in the Scheme will get the twin benefit of improved motorable roads leading to their various businesses and the accompanying tax credits. The fact that the tax credits are tradable instruments and transferrable between companies with common ownership is also an added advantage.

Three Years After – How has the RITC Scheme Fared?

One of the major challenges with the RITC Scheme is the timeline for certification/verification of participants getting approval to begin construction of the road. While the necessary due-diligence is important, this should be balanced with efficiency and pruned from the regular public sector bureaucracy. Essentially, the process requires numerous inter-agency interface, including between the Ministry of Works, the MoF and the Bureau of Public Procurement, which further delays the process. The ideal approach would have been to have a dedicated Joint Desk mandated to handle the process as a one stop shop and from end to end. The benefits of the RITC Scheme are too significant and critical for the Nigerian economy to be subjected to the regular government process.

The Executive Order 001 of 2017, on Promotion of Transparency and Efficiency in the Business Environment provides that, where a relevant government agency or official fails to communicate approval or rejection of an application within two weeks, all such applications for business registrations, certification, waivers, licenses or permits not concluded within the stipulated timeline of 14 days shall be deemed approved and granted. In practice, this may not be the case as approvals and feedback on applications submitted may take more than 2 weeks before feedback is obtained from the relevant agencies.

Based on the approvals given so far, it would appear that there are still many roads to be fixed than the Scheme has covered in the past three years. In addition, there are many more tax payers that are willing to participate in the Scheme which currently seems to be only accessible by large companies. This is a good problem to have and can be solved by simplifying the approval process without compromising the due process and due diligence required for the Scheme to be successful.

Perhaps, the Federal Government may consider cascading certain aspects of the approval process to State Governments in order to encourage more taxpayers to participate in the Scheme. More taxpayers may be encouraged to participate in the Scheme if they feel "closer" to the government administering the Scheme. This could also lead to speedy designation of more ("smaller") roads as eligible roads, especially considering that these "smaller" roads may directly impact the businesses of these taxpayers. The challenge to this option is that the tax credit associated with the Scheme relates to CIT, a Federal Tax, not collectible by State Governments. The State Governments may consider this and develop a tax for road Scheme that relates to the taxes payable to the State Governments.

It is also possible that some companies are not participating in the Scheme because they are not making enough taxable profits to participate in the Scheme. Uncertainty in the economic climate may also contribute to this as the exchange rate volatility and rising inflation may make it difficult to embark on long-term projects when accurate financial projections cannot be made. To address the funding requirement, companies may explore partnership with development Banks. The Federal Government may also expand the tax credits covered under the Scheme to other tax types and levies.


Road infrastructure is very important in any economy as it goes a long way in improving the ease of doing business in such jurisdictions. Improved and efficient infrastructures are achievable through increased government revenue in tax payments and PPPs like the RITC Scheme.

However, it is important that necessary measures be put in place to ensure the success of the RITC Scheme in Nigeria. Thus, the government should pay particular attention to simplifying approval processes and bringing the Scheme closer to smaller businesses through the State and Local Government. In addition, given that not all businesses fall under the CIT regime, diversification of the scheme to apply to other tax types and levies such as personal income tax, value added tax etc. will go a long way to encourage businesses to participate in the Scheme.

For companies that wish to participate in the RITC Scheme, it is important to conduct relevant due diligence and seek professional advice to help maximize the value of the Scheme.




The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.