The Nigerian National Petroleum Company Limited (NNPCL) has sparked controversy by deducting a substantial sum of $525.09 million from its remittances to the Federal Inland Revenue Service (FIRS) under the Road Infrastructure Tax Credit Scheme (RITCS). This deduction, revealed in a report from a Federation Account Allocation Committee (FAAC) Post-Mortem Sub-Committee meeting held in January 2025, has raised concerns among state representatives who question the legality and fairness of the NNPCL’s actions. The deductions, totaling $52.51 million monthly from February to November 2024, were made from funds designated for Joint Venture Gas and Company Income Tax, effectively diverting resources intended for the federation account. This has ignited a debate about the federal government’s role in infrastructure development and the appropriate use of tax revenue.
The RITCS, designed to encourage private sector investment in critical road infrastructure, allows companies to offset their tax liabilities by investing in approved road projects. While the scheme aims to accelerate infrastructure development, the NNPCL’s involvement has become a point of contention. State representatives argue that road construction is primarily a federal responsibility and that deducting funds meant for the federation account effectively shifts the burden of infrastructure financing to the states. Furthermore, they contend that these deductions violate the existing revenue allocation formula, which dictates how federally collected revenue is distributed among the different tiers of government. This has led to demands for a refund of the deducted amounts, calculated according to the established revenue sharing formula.
The state representatives’ concerns are not new. As early as August 2024, FAAC members called for a suspension of the deductions, emphasizing the federal government’s primary responsibility for road construction. This call was reiterated at the FAAC Plenary meeting held in Bauchi, where the NNPCL was explicitly requested to halt further deductions until the contentious issues surrounding the scheme were resolved. Despite these requests, the NNPCL continued the deductions, further escalating the tension between the states and the federal government over revenue allocation and infrastructure financing. The lack of transparency surrounding the deductions has fueled suspicion and mistrust, prompting calls for a comprehensive audit of the scheme.
To address the growing concerns and clarify the situation, the Chairman of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) formally requested detailed information from the FIRS regarding the tax credits granted to NNPCL and other participating organizations. This request seeks to understand the scope and scale of the tax credits, the criteria used for their approval, and the overall impact on revenue allocation. The sub-committee awaits the FIRS’s response, which is crucial for resolving the dispute and ensuring transparency in the management of public funds. The RMAFC’s intervention underscores the importance of accountability and adherence to established revenue sharing principles in managing federally collected revenue.
The RITCS has been utilized for significant infrastructure projects, including the 32-kilometer Apapa-Oshodi-Oworonshoki-Ojota expressway, serving as a pilot funding mechanism. In 2023, the government approved a substantial sum of N1.535 trillion under Phase 2 of the NNPCL tax credit scheme, following the company’s announcement of a N1.9 trillion investment in infrastructure development under the same scheme. While these investments are undoubtedly crucial for improving Nigeria’s infrastructure, the controversy surrounding the deductions raises questions about the long-term sustainability and fairness of utilizing this funding mechanism. The scale of the NNPCL’s investment highlights the significant impact of the RITCS on public finances and the need for clear guidelines and oversight to ensure its proper implementation.
The ongoing dispute over the NNPCL’s deductions under the RITCS highlights the complex relationship between the federal government, state governments, and public corporations in Nigeria. It underscores the need for clear regulations, transparent processes, and effective communication to manage revenue allocation and ensure that infrastructure development projects align with the interests of all stakeholders. The outcome of the FIRS’s response to the RMAFC’s request will be crucial in determining the future of the RITCS and its role in financing critical infrastructure projects in Nigeria. Beyond the immediate financial implications, the controversy raises fundamental questions about fiscal federalism, resource control, and the equitable distribution of national wealth. A comprehensive review of the scheme and its implementation is necessary to ensure that it achieves its intended objectives without undermining the principles of fiscal responsibility and intergovernmental cooperation.
