NNPCL deducts $262.55 million from remittances to FIRS as tax credit for road infrastructure

The Nigerian National Petroleum Company Limited (NNPCL) has deducted a total of $262.55 million from its remittances to the Federal Inland Revenue Service (FIRS) as part of the Road Infrastructure Tax Credit Scheme (RITCS).

This is according to a report from a FAAC Post-Mortem Sub-Committee (PMSC) meeting held in August 2024 and seen by Nairametrics.

According to the report, NNPCL made monthly deductions of $52.51 million from the amount due to FIRS for Joint Venture (JV) Gas and Company Income Tax (CIT) between February and June 2024.

These deductions have been earmarked for the RITCS, a scheme designed to enable private companies to invest in critical road infrastructure and offset their tax liabilities.

The report read: “Members may recall that the Sub-Committee reported that NNPCL had made deductions in respect of the Road Infrastructure Tax Credit Scheme from the amount due to FIRS JV Gas and CIT taxes. So far, a calendarized sum of $52,509,484.28 was deducted each for the months of February to June 2024 totalling $262,547,421.40.” 

States kick against a deduction

However, the state representatives at the meeting expressed concerns, emphasizing that the responsibility of road construction lies with the federal government.

They argued that their share of the $262.55 million deduction should be calculated based on the existing Revenue Allocation Sharing Formulae and refunded accordingly.

However, representatives from NNPCL clarified that the deductions were preliminary estimates, with a reconciliation process set to occur at the end of the year to determine the exact amount due.

To address these concerns, the Chairman of the Revenue Mobilization Allocation and Fiscal Commission (RMAFC) formally requested detailed information from the FIRS on the tax credits granted to NNPCL and other organizations involved in the scheme.

The report noted: “The Sub-National position was that it is the responsibility of the Federal Government to construct roads; hence, the share of the Sub-National from the $262,547,421.40 deducted should be computed based on the existing Revenue Allocation Sharing Formulae and refunded to them.

“However, the NNPCL representative explained that the deductions for the Road Infrastructure Tax Credit Scheme are estimates and that there will be a reconciliation with FIRS at the end of the year to ascertain the actual amount due. 

“In order to resolve the issue, the Chairman of the Commission wrote to the Management of FIRS requesting the detailed Tax Credit granted to NNPC Ltd and other organizations. The Sub-Committee awaits FIRS’s response.” 

What you should know

The Road Infrastructure Tax Credit Scheme (RITCS) enables companies with high tax profiles to construct roads in a negotiated agreement with the federal government to provide the infrastructure instead of taxes.

Last year, the Nigerian Government approved N1.535 trillion under Phase 2 of the NNPCL tax credit scheme.

This was after the national oil company announced that it would spend N1.9 trillion in the second phase of the tax credit scheme for infrastructure development.

However, the Federal Inland Revenue Service (FIRS) recently said that it would meet with the Central Bank of Nigeria (CBN) and Ministry of Works to review about N2.59 trillion tax credit scheme meant for road repairs and construction in the country.

Zacheus Adedeji, the Chairman of the FIRS, expressed strong disapproval of the N2.59 trillion tax credit scheme initiated under the administration of former President Muhammadu Buhari. This scheme, aimed at facilitating road construction across Nigeria, was under scrutiny.

The critique came as the NNPCL said it spent about N664 billion towards refurbishing roads across Nigeria’s six geo-political zones.

However, Adedeji argued that the tax credit scheme is “unlawful” and advocated for its termination, stressing that the FIRS should strictly involve tax collection and remittance rather than funding road projects through executive orders.

Nairametrics earlier reported that the NNPCL incurred a total of N2.69 trillion as tax in the full year 2023. However, the total taxes paid by the NNPCL in 2023 was N1.17 trillion, which included N497.26 billion in income tax and N669.09 billion in royalties.

 

– Nairametrics.