A Critique Of The Companies Income Tax (Road Infrastructure Development And Refurbishment Investment Tax Credit Scheme) Order 2018
Since the return to democracy in 1999, each successive government in Nigeria has signed a number of executive orders. More often than not, the news of the signing of a new executive order is usually greeted with either public outcry at worst or with mass apathy at best. However, the jubilant reaction of Nigerians at home and in the diaspora to the news of the signing of the Executive Order No. 007 cited as “The Companies Income Tax (Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme) Order 2018”,
on 25th January 2019, was almost unprecedented. But what exactly is an executive order?
Neither the 1999 Constitution of the Federal Republic of Nigeria nor any legislation of the National Assembly or House of Assembly of any State of the Federation has defined the term ‘executive order.’ Moreover, the Acts of the Legislature that contain the term ‘executive order’ do not define or interpret it and neither does the Interpretation Act give any definition of the term. This paper would therefore begin with a working definition of the term. Although executive orders have received much popular and scholarly attention in the USA, they have received very scanty scholarly attention in Nigeria till date. For this purpose, it is instructive to turn to the USA, as it has a long history of presidential use of executive orders.
According to Kenneth R. Mayer, an executive order is “a presidential directive that requires or authorizes some action within the executive branch.”
As per Raven-Hansen, “executive orders are presidential policy directives to the federal bureaucracy.”
With this definition in mind, this paper provides an overview and a critique of the Executive Order No. 007 (hereinafter referred to as “the Scheme”).
- An Overview
- 1 Background
1.1.1 The Scheme is based on the demand for road projects by companies and other corporate sponsors, who are willing to deploy their own working capital and financial resources to fund road construction and refurbishment projects located in the major economic corridors of igeria where they have significant businesses and operations. The pilot project of the Scheme is for an initial 10-year period from the date of commencement.
1.1.2 A Public-Private-Partnership, the Scheme is an intervention that enables the Federal Government of Nigeria (FGN) to leverage private sector capital and efficiency for the construction, refurbishment and maintenance of critical road infrastructure in key economic areas in Nigeria. Participation in the Scheme is open to every Nigerian company wishing to construct or refurbish any road identified and designated by the FGN as an “eligible road” under the Scheme.
1.1.3 Participants will be entitled to utilize the total cost, hereafter referred to as “Project Cost”, incurred in the construction or refurbishment of an eligible road as a Tax Credit against their future Companies Income Tax (CIT) liability, until full cost recovery is achieved. As an incentive, Participants will be granted a Tax Credit Certificate to be issued by the Federal Inland Revenue Service and a single non-taxable uplift on Project Cost. The uplift will be included in the total Tax Credit available to each participant. 1.2 Features
The scheme is innovative in a number of ways. The Minister of Finance, Mrs. Zainab Ahmed, during the signing ceremony at the Council Chambers of State House Presidential Villa, listed what is unique about the Scheme thus
1.2.1 It guarantees Participants a minimum recovery of 100% of their Project Cost. This is a significant improvement on previous infrastructure development incentives that offered taxpayers limited cost recovery ranging between 30% – 70% of their investment.
1.2.2 Participants are permitted to act in concert (i.e., as a collective) to finance and oversee an eligible road project(s). Each Participant in the collective will be separately entitled to a Tax Credit in proportion to its financial contribution.
1.2.3 Tax Credits will be issued to Participants annually based on construction milestones achieved and will become immediately available for use. This is another noteworthy distinction from previous infrastructure development incentives.
1.2.4 Participants may sell or transfer the whole or part of its unutilized Tax Credit to any interested party, subject to complying with protocols prescribed in the Scheme. This means that a Participant, who for any reason does not wish to utilize its Tax Credit, may easily recover its investment without recourse to the FGN
1.2.5 It will be administered and implemented by the Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme Management Committee (“the Committee”). The Committee, which will serve as a one-stop liaison office for the Scheme, is expected to reduce the administrative bottlenecks typically associated with dealing with multiple ministries/parastatals in obtaining approval of road projects.
1.2.6 Investors shall not be entitled to claim any other tax credit, capital allowance, relief or incentive on relevant project costs incurred in respect of any Eligible Road Project under any law in force in Nigeria, in addition to the tax credits provided pursuant to this Scheme. This is to avoid duplication of claims being made.
1.2.7 It upholds the powers of the Federal Inland Revenue Service, pursuant to Section 22 of the Companies Income Tax Act, to set aside any artificial or fictitious transactions that may be used to evade taxes, in accordance with extant anti-avoidance laws; and Fiscal Implication Reports will be regularly generated to monitor and track the fiscal costs of the Scheme in line with extant laws”. 1.3 Legal Framework
Sections 5 and 315 of the 1999 Constitution, and some provisions of the Companies Income Tax Act are claimed to be the legal framework of the Scheme. 1.4 Process and Governance
Prospective road projects are to be submitted to the Government via the Scheme’s Management Committee. The Management Committee to be chaired by the Finance Minister has the Minister of Power, Works and Housing as its Deputy Chairman, and the Permanent Secretary of the Federal Ministry of Finance as its Secretary. The other members of the Management Committee are drawn from a number of relevant Federal Ministries, Departments and Agencies (‘MDAs’). They include The Federal Ministry of Finance; the Federal Ministry of Power, Works and Housing, etc. 1.5 Contractors
The pilot phase of the scheme will be executed by six private sector players in the construction industry, which include Dangote Industries Limited, Lafarge Africa Plc., Unilever Nigeria Plc., Flour Mills of Nigeria Plc., Nigeria LNG Limited, and China Road and Bridge Corporation Nigeria Limited. 1.6 Scope
These Investors will be investing in selected 19 Eligible Road Projects totaling 794.4km which have been prioritized in 11 States across each of the 6 Geo-Political Zones. The list of Eligible Road Projects is not exhaustive. Other serious proposals are welcome from interested Investors, State Governments and other stakeholders who may wish to take advantage of the Scheme to partner with the Federal Government in investing on roads. The vision is for there to be at least one significant Eligible Road Project underway in every State of the Federation within the first year of the operation of the Scheme. 1.7 Eligible Road Projects
The pilot project is targeted at road construction, and rehabilitation, depending on need and circumstances in different states and geo-political zones. 2. A Critique of the Executive Order No. 007 2.1 Sustainability
: One of the major banes to infrastructural development in Nigeria is the lack of policy sustenance due to lack of policy continuity. In other words, some of the best infrastructure policies on record have not survived the tenure of the government that signed them. The present administration will need to assure investors that the government will continue to respect the terms of the Scheme and will continue to create an enabling environment for perpetual implementation.
History testifies that successive governments in Nigeria are wont to investing tax-payers monies in roll-back campaigns of the policies of their predecessors, no matter how solution-driven, rather than sustaining them in the interest of existing contracts and social development. One can only hope that if a new government comes into power in June 12, 2019, it will sustain rather than roll back the scheme. 2.2 Legal Framework
: The government should gazette and also set out a clear legal framework and procedures for the Scheme and uphold them. This paper recommends that the Scheme, for all its beauty and glory, be made an Act of Parliament so as to give it a lasting force of law. Agencies like the Infrastructure Concession Regulatory Commission (ICRC) enacted by Statute in 2005 develop a national policy on Public Private Partnership (PPP) as well as guidelines for their supervisory role. All PPP projects, like the Scheme, should be submitted for approval of the ICRC and must comply with the Public Procurement Act, 2007, and the Fiscal Responsibility Act, 2007, amongst other statutory regulations. There are also other sector-specific laws which must be observed depending on the target project, such as the Civil Aviation Act, 2006, the Federal Highways Act, 2004, the Nigeria Ports Authority Act 2004, the Land Use Act, 2004, etc.
It is hoped that the Scheme will not become an instrument of fundamental human rights abuse by empowering the government and powerful corporations, fired by greedy commercialism, to encroach, annexe, seize or rob citizens of their lands without due process of law.
Legal practitioners can assist in drafting guidelines for investments in the Scheme by creating suitable investment templates and guidelines to give adequate comfort to investors. Lawyers can also advise on the terms of the module to be adopted, and the negotiation of such terms.This is a paramount role in the success of the Scheme. A well-drafted contract must include an efficient and appropriate risk allocation and distribution between parties to the Scheme by carefully assigning to the party best able to manage each risk, and ensuring proper dispute resolution mechanisms are included. Possible risks would differ for example from political risks to financial risks such as interest rate fluctuations due to long term credit implementation, to environmental risks like deforestation, and so on. 2.3 Interest in Tax Credit
: The primary interest of investors in the Scheme is the Tax Credit. Since the Scheme designs the Tax Credit to be transferrable, that gives rise to pertinent questions: Can the Tax credit be used as collateral for a bank loan? What incentive will there be for a corporation in nigeria legally exempted from tax like an agricultural firm or a religious body, that desires to invest in the scheme? 2.4 Usurping Legislative Powers
: Many legal scholars of the doctrine of Separation of Power have posited that Executive Order usurps the powers of the legislative arm of a government in a democratic setting. In Unongo v. Aper Aku
, for instance, the Supreme Court, per Kayode Eso (JSC, as he then was), observed: “The Constitution of the Federal Republic of Nigeria 1979 (read 1999) …is very unique, compared with the previous Constitutions, in that the executive, the legislature and the judiciary are each established as a separate organ of government. There is what can be termed a cold, calculating rigidity in this separation…”
Aside from the Executive’s involvement in the legislative process, whereby the president assents to a bill that has been duly passed by the two Chambers of the National Assembly to become law, there is no known zone of twilight in which the Executive and the Legislature possess concurrent authority to legislate. Little wonder that some scholars wonder where the Nigerian President derived the authority to legislate, interpret and enforce laws, which executive orders, like the Scheme, are adjudged to be. 2.5 Politicization of the Scheme:
Many critical minds fear that the Scheme may become subject to politics; some are already inferring tribalism and sectionalism to the structure of the pilot Eligible Road Project. Ten (10) out of the thirteen (13) roads to be constructed are located in the northern part of Nigeria, and three (3) out of the six (6) roads earmarked for rehabilitation are also located in the northern part of Nigeria.
3. CONCLUSION “I’ve got a pen and I’ve got a phone – and I can use that pen to sign executive orders and take executive actions and administrative actions that move the ball forward.”
The quote is attributed to the former U.S president, Barak Obama, about Executive Orders. And so did the president of the Federal Republic of nigeria when he signed the Executive Order 007 on 25th February 2019. From inception, the present administration has maintained a façade of being founded on Austerity Principle. Andrew Jackson said, “I hold it the duty of the executive to insist upon frugality in the expenditure, and a sparing economy is itself a great national source”
. The scheme, to all intent and purposes, and subject to professional and integrity-based implementation, will in the long-run lead to a sparing economy
================== This paper is provided by Odujinrin & Adefulu for information purposes only. It is not intended to provide legal advice and does not create a lawyer-client relationship; neither does it address the circumstances of any particular individual or entity. If you would like further information on any matter, please contact the writer via jonathan.ekpo@odujinrinadefulu or visit our website at www.odujinrinadefulu.com.
 See “Executive Orders in Nigeria as Valid Legislative Instruments and Administrative Tools” by Dr. Elijah Oluwatoyin Okebukola, Lecturer/Researcher, Faculty of Law, Nasarawa State University, Keffi; and Dr Abdulkarim A. Kana, Ag Dean, Faculty of Law, Nasarawa State University, Keffi.
 A professor of political science at the University of Wisconsin, Madison, and the author of ‘Executive Orders and Presidential Powers’ (1999) 61, and ‘The Journal of Politics’ pg. 445-466, at p. 445.
 A professor of national Security Law, Counterterrorism Law and Civil Procedure and Evidence. Author of ‘Making Agencies Follow Orders: Judicial Review of Agency Violations of Executive Order 12,291’ (1983) 1983 Duke Law Journal 285-353 at 286.
 Section 1 (2) of the Executive Order No. 007 of 2018: Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme Order, 2019
 Some prominent examples include, but not limited to, Ajaokuta Steel project which cost $5bn, Minna Airport City awarded at the cost of $600m, Minna five-star Hotel – N19.6bn, Abia International Hotel –N6bn to complete and would need about $25m to expand, Jos Main Market — N5bn to rebuild, Bayelsa Hotel —N13.9bn, Ibom Tropicana —N33bn, Ibom Specialist Hospital (completed but shut down)—N41bn.
 (1983) 2 SCNLR 332 @361