Nigeria Ends Corporate Road Tax Credits, Restores Fiscal Authority

The Federal Government has discontinued the Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme, previously established under Executive Order 007, which allowed companies to finance federal road construction in exchange for tax credits.

The Executive Chairman of the Nigeria Revenue Service, Zacch Adedeji, stated the programme conflicted with constitutional tax administration because tax authorities are mandated to assess, collect and remit revenue, not appropriate expenditure.

According to him, granting tax credits for infrastructure effectively turned tax administration into public spending authority, a function reserved for statutory fiscal institutions.

DECISION HIGHLIGHT

Decision: Termination of corporate tax credit utilisation for federal road construction
Authority: Federal Government through Nigeria Revenue Service (NRS)
Legal Rationale: Violation of constitutional separation between revenue collection and appropriation
Fiscal Implication: Infrastructure spending returns fully to budgetary allocation process
Institutional Impact: Federation Account Allocation Committee (FAAC) re-established as sole custodian of distributable tax revenue
Operational Effect: Companies must now pay taxes in full, government decides infrastructure spending

DECISION MEMO

For nearly half a decade, Nigeria operated an unusual fiscal arrangement. Companies built federal roads and deducted the cost from future tax obligations. The policy appeared pragmatic, infrastructure improved without immediate public borrowing, and corporate Nigeria gained predictable logistics assets around production corridors.

Yet the state quietly surrendered something more fundamental than revenue timing, it surrendered fiscal hierarchy.

The tax credit scheme blurred a boundary central to public finance, the separation between collecting money and deciding how it is spent. By allowing companies to offset taxes against infrastructure they selected, government ceded appropriation discretion to private balance sheets. In effect, firms were choosing which public goods deserved funding.

Zacch Adedeji’s explanation was less about engineering roads and more about restoring fiscal sovereignty. “Appropriation is not part of the remits of the Nigeria Revenue Service,” he argued, noting that tax receipts belong to the federation pool before any spending decision. His question, “who says that money is yours,” reframes taxation as collective entitlement rather than negotiable liability.

The deeper issue was not legality alone but economic signalling. When firms substitute taxes with projects, infrastructure allocation follows industrial geography rather than national planning. Roads gravitate toward factories, ports and extraction zones, not necessarily toward social connectivity or regional balance. Efficiency improves for producers but planning coherence weakens for the state.

The scheme’s defenders emphasised delivery speed. Bureaucracy slows procurement, private firms build faster. That argument is operationally correct but fiscally incomplete. Speed achieved by decentralising appropriation fragments public investment strategy. Government ceases to coordinate infrastructure as a network and instead supervises it as a collection of negotiated offsets.

Ending the scheme therefore signals a re-centralisation of fiscal authority. Taxes become taxes again, not negotiable instruments convertible into corporate infrastructure portfolios. The state regains control over sequencing, geographic equity and sectoral priorities.

However, the decision also removes a mechanism that temporarily compensated for weak capital budgets. Nigeria’s infrastructure deficit did not shrink because planning improved, it shrank because firms funded assets they depended on. Removing the scheme without strengthening public capital execution risks returning to slower project delivery.

The policy is thus less a rejection of private participation and more a rejection of private appropriation power. Public-private partnerships remain possible, but they must operate through contracts, concessions and budget transparency rather than tax substitution.

Nigeria has effectively chosen fiscal clarity over delivery convenience. The question now becomes whether institutional capacity will replace corporate urgency.

DATA BOX

Scheme Start: 2019
Structure: Companies build roads, offset costs against Company Income Tax
Major Participant: NNPCL financed over 21 projects covering more than 1,800 km
Other Participants: Dangote Group, BUA Group, MTN Nigeria, NLNG, Access Bank, Transcorp, Mainstream Energy, GZI Industries, Lafarge, Unilever, Flour Mills
Planned Duration: 10 years
Policy Status: Discontinued before completion

WHO WINS / WHO LOSES

Wins
Federal fiscal authority and budget integrity
Subnational equity in infrastructure allocation
Treasury revenue predictability

Loses
Corporates relying on logistics-linked infrastructure control
Fast-tracked road delivery around industrial corridors
Hybrid public-private spending flexibility

POLICY SIGNALS

Return to orthodox public finance structure
Reassertion of FAAC primacy over distributable revenues
Preference for PPP concessions over tax substitution
Shift from opportunistic infrastructure to planned infrastructure

INVESTOR SIGNAL

Investors should interpret the decision as institutional consolidation rather than hostility to private capital. Nigeria is narrowing participation channels to formal concession frameworks. Infrastructure investment will likely migrate toward structured PPPs, infrastructure funds and availability-payment models instead of tax offsets.

Predictability improves in fiscal accounting, but execution risk rises until procurement capacity strengthens.

RISK RADAR

Short-term infrastructure slowdown as projects transition
Budget pressure from full cash funding obligations
Potential disputes over ongoing projects financed under the old scheme
Private sector reluctance if alternative PPP frameworks remain slow
Public expectation gap if road delivery declines after policy change