Financial economists expressed mixed reactions on Sunday to the Nigerian National Petroleum Company Limited’s (NNPCL) approved plan to invest N2.52 trillion in the reconstruction of federal roads under the tax credit policy. Last week, the Federal Executive Council endorsed the recommendation for NNPCL and its subsidiaries to invest in the reconstruction of selected federal roads as part of the Federal Government Road Infrastructure Development and Refurbishment Investment Tax Credit Policy phase-2. This approval came 15 months after the national oil company initially showed interest in funding road reconstruction to ensure a smooth supply and distribution of petroleum products across Nigeria. Under the previous program, NNPCL constructed a total of 1,804.6 kilometers of roads at a cost of N621 billion, indicating that the company has invested N2.52 trillion in just one year.
Professor Sheriffdeen Tella, an economist at Olabisi Onabanjo University in Ogun State, criticized the process, labeling it as bureaucratic and a potential source of corruption. He stated, “They are financing the roads and have a law backing infrastructural development, but I don’t think it is a good idea. It is not a normal thing to do. We have a ministry responsible for this and a single treasury account, so why create a separate account if not for individuals to manipulate national revenue? This approach also deprives state governments of their allocations.” Tella called for a thorough analysis of the approval to identify possible loopholes, suggesting that it could be a strategy to diminish allocations to state and local governments. He emphasized the need for legal advisers to examine the situation for any irregularities.
Similarly, Johnson Chukwu, Managing Director of Cowry Asset Management Limited, raised concerns about the funding of these projects, especially in light of NNPCL’s profit of only N674 billion in the 2021 financial year. He questioned, “NNPCL has now received approval for N2.52 trillion in road projects, but at their profit level, they would need at least 17 years to recover that amount. Where will they generate this money to invest in roads now? The projections do not add up. I don’t see a compelling reason for NNPC to receive approval for such a large investment in road construction. If they have that money, it should be paid as tax and shared among the three tiers of government. It is absolutely wrong for NNPCL, which does not have that level of profit, to invest such a significant amount in road projects.” He further criticized the initiative as a duplication of roles, arguing that it creates a parallel government since the Ministry of Works is already tasked with road construction. Chukwu demanded clarity on the funding sources, questioning whether NNPCL would resort to borrowing or if the projects would take 15 years to complete based on their current profit levels.
In contrast, Muda Yusuf, Director of the Centre for the Promotion of Private Enterprise, welcomed the investment, citing Nigeria’s significant infrastructural deficit. He remarked, “The decision to invest in roads is a welcome development, and we must commend it. Infrastructure is an area where we are suffering a serious deficit, and it is not a space where the private sector can provide leadership. We need the government to take the lead in this regard.” Yusuf also pointed out the challenges of funding infrastructure directly through the budget, noting that critical infrastructure often suffers during the budgetary process due to competing interests.
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