Photograph — Brookings Institution

Nigeria’s tax agency, the Federal Inland Revenue Service (FIRS), has revealed that Dangote Group and other private companies will be getting up to 50 percent of their expenditure in tax credits.

As explained by the FIRS Executive Chairman, Babatunde Fowler, the actual amount of tax to be paid by the concerned companies is reduced because they share the cost of infrastructural projects with the government, which is looking to solve infrastructural deficit in the country.

Earlier in January, Ventures Africa reported that Dangote Industries Limited, along with five other major firms, were set to invest in 19 road projects in Nigeria in accordance with the Executive Order 007 2019, signed by President Muhammadu Buhari. The new order, known as Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme, allows private companies to construct federal roads across the country and be repaid in the form of tax credits.

With the arrangement, companies who agree to share the cost of infrastructural projects with the government will not have to worry about paying half of the cost incurred on road construction and related public goods. Other firms that invested in the pilot scheme execution included Lafarge Africa Plc.; Unilever Nigeria Plc.; Flour Mills of Nigeria Plc.; Nigeria LNG Limited; and China Road and Bridge Corporation Nigeria Ltd.

Over 10 local companies had applied for the scheme to receive 50 percent of expenditure in tax credits, Fowler said. However, only two companies have benefitted from the arrangement so far – Dangote Group and another anonymous company. The plan is to make sure that those companies get the agreed credits.

The infrastructure development-tax credit scheme is part of a drive to diversify Nigeria’s economy away from its dependence on oil, the tax chief added. Oil revenue has been dwindling in recent times with the high cost of debt servicing, and the government has been making efforts to explore other sources to diversify revenue away from crude sales.

More so, local manufacturers are calling for improvements to road, rail, and power infrastructure in order to compete with their counterparts from across the continent after President Buhari signed the new Africa-wide free trade agreement (AfCFTA) in July.

Implying that the scheme may reduce the amounts the federal tax agency collects, Fowler said “It may reduce the amount of my collections initially, but … as I expand my tax net, I would make up for that reduction, we believe we would generate more revenues from the additional infrastructure that would be created.”

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