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The NNPC N621 billion roads-fixing mandate

By Editorial Board
15 November 2021   |   3:55 am
The decision of the Federal Government lately approving and mandating the newly registered Nigerian National Petroleum Company (NNPC) Limited to construct 21 different roads at a whopping sum of N621 billion across the six geo-political...

road repair

The decision of the Federal Government lately approving and mandating the newly registered Nigerian National Petroleum Company (NNPC) Limited to construct 21 different roads at a whopping sum of N621 billion across the six geo-political zones of the federation is curious and fraught with controversies. The policy has expectedly raised lots of eyebrows by discerning Nigerians. Road construction or maintenance has not been previously associated with the organisation. Questions are therefore arising as to whether the NNPC, an oil company, has suddenly added road construction in its memorandum and articles of association as recently issued by the Corporate Affairs Commission (CAC). The explanation by the Federal Government that the move is in conformance with the Presidential Executive Order 7, which permits private sector operators to deploy their tax liabilities to infrastructural development such as roads appears not to have convinced or assuaged the curiosity of the average Nigerian. The move assuredly needs further interrogation.

According to the Minister of Works and Housing, Babatunde Fashola, who addressed the media on this contentious issue, the affected roads are 21 in number and cover 1,804.6 kilometres in length and are those which impact significantly on petroleum energy distribution in the country. He further stated that the approval given was based on a request put forward to the Federal Executive Council (FEC) by the NNPC for it to use its tax liabilities to reconstruct these roads that affect their business, in line with the Presidential Executive Order. According to Fashola, the large concentration of the roads in the North Central geo-political zone or Niger State in particular is because it is a major storage centre for NNPC distribution network in the country. He, however, failed to mention that contracts for the 21 roads in question have already been awarded to other private construction companies and at various stages of construction or rehabilitation.

If tax liabilities are to be used, by corporate organisations, to construct or rehabilitate roads that affect their operations, in line with the spirit of the Presidential Executive Order 7, who then determines the magnitude of the tax liabilities. How does this new government posture affect its revenue profile particularly if all private companies in the country decide to be involved in road construction, using their tax liabilities? This is a zero-sum game, at best. The loss in tax revenue is compensated by an improvement in road network. No new benefit as such. Do the companies now need to stop remitting their taxes to the Federal Inland Revenue Service (FIRS) and simply get the approval of the FEC to engage in road constructions that affect their business?

Who supervises this multiplicity of road constructions that may spring up across the country? Who guarantees quality? Who guarantees value for money and accountability in these numerous constructions that would invariably litter the country’s geographical landscape, undertaken by different companies, with different standards? What of roads that are totally avoided simply because no private sector operator has indicated interest in undertaking its construction, particularly in areas where there’s little or no government or major private sector presence? Or would government through the FEC allot roads to specific private sector operators for rehabilitation?

What role would the Federal Ministry of Works play in all these, as more companies get approval to construct roads of their choice? Would government with an obviously reduced revenue profile, given this new scenario, be capable of carrying out the reconstruction of the abandoned roads? Or is the Executive Order 7 specifically targeted at major private sector organisations such as NNPC and Dangote Industries, in relation to their tax liabilities? There are many questions begging for answers in this unfolding brouhaha.

On this brewing NNPC case, government should come to terms with the new reality that the NNPC is now a limited liability company with its Board of Directors and that its core business is oil-sector-related and not road construction. What expertise does the NNPC have in road construction? Is it proper for the FEC to make directives or approvals as happened in the case of NNPC? Or will the NNPC, to make up for its lack of expertise in road construction employ experts in that field and pay them from its tax liabilities? If so, will it not therefore affect the quantum of the liabilities and in consequence, the work to be done on the affected roads? And where contracts had previously been awarded, money paid in full or in part and some work done on the roads, how exactly will the projects be evaluated and reconciled among the original contractor, the NNPC and the Federal Government?

This policy is clearly controversial. It signposts a frenzied and uncoordinated approach to governance and economic development and should stop. Nigeria can do better than this zero-sum game approach to development. The same government which has been unrelenting in its continual lamentation that low revenue is its main problem, and which has not stopped its frivolous borrowing adventures, is now foregoing tax liabilities by private sector operators, in exchange for some questionable road construction efforts. The Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) would need to assure the public that this diversion of tax liabilities to road construction is in the overall public interest. This is yet to be seen.