Financing roads in Nigeria
The Guardian’s editorial piece “Road Fuel Tax and Highway Tolls” of November 3, 2003 was based on the comment ascribed to the minister of works, that tolls on federal roads could be done away with, if fuel tax was instituted. The import of The Guardian lead article, however, goes deep, in highlighting many other sources for funding road programmes in particular and national development in general. The seminal information must be considered thoroughly and applied for tapping the many sources available for financing roads in every tier of government in our country.
It is understandable that the Minister, as well as the Federal Government, is sensitive to public reaction about a combination of fuel levy and tolling. This could be misconstrued as double extraction from the populace. However, the two sources are not mutually exclusive. The difficulty is, in part, one of nomenclature: arising from the dreaded word “tax” by its very nature, it connotes an imposition. Taxation sparked off the American war of independence. Till this day, it never voluntarily received anywhere in the world!
The principle of road user contribution, in whatever form is that, in addition to the civic duty to pay income tax, the road user may also be required to contribute to a fund for the roads used. Where such contribution comes from the pump price of fuel, the rationale is that, as fuel is consumed by rolling stock on roads, a small portion of the price paid for it ought to be part of a Road Fund for constructing, maintaining and administering the road network in a given territory.
This derivation from the price per litre of premium motor spirit and diesel, has formed the major recommended source of funding in the proposals for establishing a road agency since 1971. Then, the Federal Government set up the Delegation on the proposed Federal Highways Authority. It was headed by the Federal Commissioner for Special Duty, S.O. Wey and had Engr. M. Tukur Usman and John Oyegun as members. After visiting five countries (Italy, East Germany, Sweden, United States and Brazil) they proposed the setting up of the Highways Authority.
The recommendations of the Wey Committee remain relevant even till this day, despite the fact that after many years, the Federal Government established, this year, the Federal Road Maintenance Agency (FERMA). It is true that maintenance is now a priority, for the more than 30,000 kilometres of federal highways nationwide, the most extensive in Africa. However, all those interested in the advancement of roads know that FERMA is only the first step towards the ultimate goal of a National Highways Authority that will administer, fully, federal roads and give assistance to state and local government road programmes: based on stated criteria. In this Nigeria is going Ghana’s way, as with many other issues in our two nations. Ghana set up agencies for specific aspects of roads until, eventually, everything was brought together as the Ghana Highway Authority.
Many experts canvass the age-long principle that there must be an alternative to a tolled road. It took sustained effort by the Nigerian Road Federation and the World Bank, for the Federal Government to accept tolling at all. The first federally tolled road was the Lagos-Ibadan Expressway. Soon, everyone realised the bonanza in tolling. Yes, there are alternative routes to the Ibadan expressway. But this is not always the case. The erectors of the wooden pedestrian bridge at the end of Marine Road have been collecting tolls from those crossing to Ajegunle, from the day it was constructed. I first used it in 1962. There are bridges and tunnels all over the world which are tolled to recover the borrowed funds used for their construction. To cross from Oguta to the Lake Hotel, you have to use the ferry. Anyone wanting an alternative to the Golden Gate Bridge in San Francisco or the Channel Tunnel in Europe might as well take the ferry. Until the Lokoja Bridge was built, there was no alternative to the ferry. There are tolls collected within private road systems.
Tolling is the one sure steady flow of funds for capital recovery, routine maintenance and road network administration; also for contributing towards developing alternative (like railways and waterways) to the road, to preserve the structure. The regularity of the flow from tolls makes projects attractive for financial institutions, like banks, insurance companies and multilateral financial institutions such as the World Bank and the African Development Bank. In the U.S., when Robert Moses of New York State, set up the Triborough Bridge and Tunnel Authority in the 1950s, the toll paid was 10 cents. Today, it costs $3.50 for each crossing of any bridge or tunnel built by the authority from funds provided by banks which rolled over each other to participate because of the flow in the coffers of the authority.
There is need for very efficient collection machinery which will reduce leakages to the barest minimum. Worldwide, there are problems even in developed countries where estimates for diversion can be as high as 25% of collected funds. Many countries have developed systems for advance payments by vehicles plying a given route regularly, with electronic reading of each crossing.
In 1984, when proposals for a Highway Authority were submitted to the Federal Military Government, premium fuel was sold at 19 kobo per litre. When the government was sounding out the public about moving it up to 25 kobo, proponents for a Federal Highway Authority recommended that 2 kobo there-from be allocated for roads. The total annual consumption of premium and diesel nationwide was 6 billion litres. This would have given N300 million to the roads fund. At the time the Naira was worth US 1.50. Later, the Babangida administration also received a proposal that part of the proceeds from the withdrawn subsidy be used to set up a Federal Highways Authority and the president sent the proposal to the Presidential Advisory Committee headed by the late eminent economist, Professor Oyetunji Aboyade, with the world renowned scholar Professor Ikenna Nzimiro as a member. Eventually, that regime decided to use half of proceeds from the withdrawn subsidy to set up the Directorate of Food, Road and Rural Infrastructure.
The NNPC publishes a monthly summary of petroleum statistics. The total annual consumption at this time must be more than 20 billion. The road user contribution of a few Naira per litre was part of the draft bill sent to the National Assembly for the establishment of a full-fledged National Roads Board. But when the FERMA law was being debated, the legislators removed that major source of funding. They also limited the new agency to maintenance. Funding became a problem for the nascent agency at inception. The Board of FERMA must be commended for commissioning an accurate vehicle count on federal highways nationwide, to determine realistic revenues from toll plazas. The funding must be re-visited, as well as the name and functions of a full-fledged road agency of government.
The Guardian was also right in stating that basic issues concerning the nation, like the value of the Naira must be addressed promptly and with competence. This will provide the macro-economic environment enabling us to utilise well-known sources for financing development, such as bonds, loans and special drawing rights from multilateral agencies in which Nigeria is a member. Such an approach for funding development will stimulate the banking sector as operatives participate in financing heavily-used roads, knowing full well the daily flown from the toll plazas. A bank manager once told me that the money deposited daily by the madam from the local restaurant (buka) nearby provided much needed liquidity for small withdrawals in his branch.
We commend The Guardian for pointing to the Minister in charge of federal roads, and all others involved in the funding of development projects, valid ideas to explore and apply. This indicates the need to include development economists in road planning rather than the prevailing focus on the engineering services. There must be adequate public enlightenment campaigns with the message: “contribute to the roads you use.” The public must also see tangible results from the work of agencies responsible for constructing and maintaining road infrastructure. Good and safe roads indicate good living. In the type of financial regime proposed, diversion of funds must be eliminated and corruption reduced. That is the task for economic intelligence within the apparatus of national security.
Culled from The Guardian, November 5, 2003