Road Trust Fund (Press Information Package) 1.    What is a Road Trust Fund? The Road Trust Fund (RTF) is being set up to facilitate and incentivise private sector involvement in the provision of Nigeria’s Federal road infrastructure. It is a form of Public Private Partnership that will accelerate the provision of Federal Roads by allowing private sector operators to collectively fund road provision in exchange for tax credits. This will complement Federal Government’s budgetary allocation to roads. 2.    What are the benefits of the Road Trust Fund? Increases funds available for road development and accelerates road provision across the nation.  Reduces pressure on the Federal Budget by allowing private engagement. Allows for cost reduction by providing a new benchmark in road costing.  Private sector participation in what was previously a Federal Government monopoly will create more efficient delivery of road projects. Better negotiation and the promise of prompt payment to contractors, is expected to materially reduce project costs. Provides alternate funding to the Government for road infrastructure development. Creates a platform for collaboration among private sector players as well as between private sector and Government. Encourages co-operation in business districts affected by poor road infrastructure which will enhance output and reduce business operating costs. Allows businesses to direct funds that would otherwise have been ‘tax Naira’ into much needed areas of infrastructure. 3.    Why is the Government focusing on roads? Federal roads are critical in unlocking socio-economic development.  While they account for just 17% of the total national road network, Federal roads carry more than 80% of national vehicular and freight traffic. (Nigeria’s road network consists of 200,000Km of which N33,000km are Federal Roads according to the Ministry of Power, Works and Housing)  The deficit in roads is so large that there is a need to mobilise additional funding sources. 4.    How does the Road Trust Fund work? The Road Trust Fund is a revision of the existing infrastructure tax relief scheme that allows for tax relief to companies that incur expenditure on public infrastructure. To date, just two companies have been able to take advantage of this provision. The reason being that few companies are large enough to solely undertake road projects. The RTF, being a collective model, can mobilise funds from a range of tax paying companies, irrespective of their location or sector. RTF is it therefore, expected to mobilise significant capital into road provision. RTF uses a collective model to mobilise private capital from companies of all sizes to undertake road projects through a series of Road Trust Funds.  Each Fund will be a stand-alone Collective Infrastructure Fund (CIF) using a Special Purpose Vehicle (SPV). We  have already consulted with the private sector in the development of the RTF and some companies have already identified roads they wish to reconstruct and are organising their funding. However, this scheme is designed such that Financial Intermediaries will be promoting Road Trust Fund projects and soliciting commitments from interested companies. 5.    Why would a private company want to participate in this? Private sector participation is being incentivised through a Tax Credit Scheme that enables all participating companies to claim tax relief based on the amount of capital contribution (on a pro-rata basis). 6.    What are the benefits of the Tax Credit Scheme to the private sector?     Companies will be allowed to recover 100% of costs incurred on road infrastructure as a tax credit against total tax payable (including up to 10% for cost of funds);     Accelerated depreciation to enable recovery in 3 years rather than 4 years for standard assets; and      Ability to directly intervene in roads that are critical to their businesses which drives competitiveness. 7.    Are there special incentives for building roads in economically disadvantaged areas? Yes. The relief allows for cost recovery within a single year instead of 3 years for economically disadvantaged areas. We are encouraging and facilitating investment across all areas of Nigeria to achieve inclusive economic growth. 8.    Would the scheme negatively affect Government revenues? No. The effect of this scheme will be revenue neutral. In addition to the fact that we are already seeing improved performance in our tax receipts by improving tax compliance and blocking loopholes, we are proposing a cap on cost recovery to a maximum of 50% of tax payable by each participant in any year of assessment. This means that in any given year of assessment for tax purposes, at least 50% of total tax payable will be remitted. 9.    Currently, road maintenance puts a major strain on budgetary resources, has this been considered? Reducing budgetary pressure is a major advantage of the fund. Participants are required to guarantee the road for 5 years beyond maintenance.   10.    Will the Roads be tolled? Once the roads are completed they are handed over to the Federal Government who may decide to toll  the roads in accordance with the National Tolling Policy. 11.    What is the role of the Ministry of Power Works and Housing ? The Ministry is responsible for approving the road designs, monitoring all approved Road Trust Fund Projects  by managing costs and timelines as well as ensuring that equal development across Nigeria by rebalancing the Federal  budget, where necessary. 12.    How does Government ensure costs are not inflated All costs and contractors will be scrutinised and approved by the Bureau of Public Procurement in line with legal requirements. This will ensure that costs are not inflated and that unqualified contractors are not used on the projects. 13.    Would further information be provided to the private sector? Yes. The Ministry of Finance will develop detailed Guidance Notes on the Provisions of the new Infrastructure Tax Incentive within the next 30-days. ...

Road Infrastructure: FEC Approves Tax Relief Scheme for Private Sector The Federal Executive Council on Thursday approved a tax relief scheme to attract private sector involvement in the provision of Federal road infrastructure across the entire country. The approval was the outcome of a Memorandum for the setting up of a Road Trust Fund (RTF) presented by the Honourable Minister of Finance, Mrs. Kemi Adeosun, to the council at its meeting presided over by President Muhammadu Buhari. The Road Trust Fund concept was jointly developed by the Federal Ministry of Finance and the Federal Ministry of Power, Works and Housing. The RTF is expected to mobilise significant capital into road provision in order to unlock socio-economic development as well as facilitate investment across all areas of Nigeria to achieve inclusive economic growth. Federal roads carry more than 80% of national vehicular and freight traffic, accounting for 17 per cent of the total national road network. Addressing State House correspondents at the end of the FEC meeting, the Finance Minister explained that the RTF would facilitate and incentivise private sector involvement in Nigeria’s Federal road infrastructure. The Minister of Power, Works and Housing, Mr. Babatunde Fashola and Minister of Information and National Orientation, Alhaji Lai Mohammed, were also at the post-FEC briefing of the State Press Corps. Adeosun said, “It is a form of Public Private Partnership that will accelerate the provision of Federal Roads by allowing private sector operators to collectively fund road provision in exchange for tax credits. This will complement Federal Government’s budgetary allocation to roads. “Private sector participation is being incentivised through a Tax Credit Scheme that enables all participating companies to claim tax relief based on the amount of capital contribution (on a pro-rata basis). “We have already consulted with the private sector in the development of the RTF and some companies have already identified roads they wish to reconstruct and are organising their funding. However, this scheme is designed such that Financial Intermediaries will be promoting Road Trust Fund projects and soliciting commitments from interested companies.” Under the tax relief scheme, companies will be allowed to recover 100 per cent of costs incurred on road infrastructure as a tax credit against total tax payable (including up to 10 per cent for cost of funds). Adeosun further noted that the tax relief would allow for cost recovery within a single year instead of three years for economically disadvantaged areas. When completed, the Minister said the roads would be handed over to the Federal Government who may decide to toll the roads in accordance with the National Tolling Policy. On the role of the Federal Ministry of Power Works and Housing, she explained that the ministry would be responsible for approving the road designs, monitoring all approved Road Trust Fund Projects by managing costs and timelines as well as ensuring that equal development across Nigeria by rebalancing the Federal budget, where necessary. She added that all costs and contractors would be scrutinised and approved by the Bureau of Public Procurement in line with legal requirements. “This will ensure that costs are not inflated and that unqualified contractors are not used on the projects,” she stated. ...

Fashola Presides Over Signing Of PPA Between Qua Iboe Power Plant And NBET To Deliver 540MW To National Grid •Says milestone event is consistent with FG’s Roadmap on Power, ERGP •Advocates dedication, patriotism in service as building block of national development •QIPP will utilize Nigeria’s gas resources to increase our electricity generation capacity and reduce the cost of power”, says Sanusi The Minister of Power Works and Housing, Mr. Babatunde Fashola SAN, Thursday in Abuja presided over the signing of a 540 MW Power Purchase Agreement between the Nigerian Bulk Electricity Trading Plc (NBET) and Qua Iboe Independent Power Plant saying it was consistent with the roadmap of the government on power which is one of the five principal components of the Economic Recovery and Growth Plan (ERGP). In his remarks at the Ministry’s Conference Room venue of the event, Fashola explained that within the responsibility framework of the ERGP, the Ministry of Power, Works and Housing had drawn a roadmap for providing power for the country which, according to him, “is to start with getting incremental energy until we can stabilize; then we go to uninterrupted power”. The Minister said while the Ministry of Petroleum Resources bears the responsibility for the Energy component of the ERGP, his Ministry was saddled with the responsibility of the production and supply of sufficient energy and power for the people of Nigeria, adding, “a process that potentially adds 540 megawatts to our power store fits very well with our incremental power roadmap”. “Within our responsibility framework, we have drawn a roadmap for providing power for this country which is to start with getting incremental energy until we stabilize; then we go to uninterrupted power. That is our journey”, he said. Advocating dedication and patriotism among Nigerians in the service of the country, Fashola said such qualities should be a motivation for national service in or out of government and with or without title adding that with dedication and patriotism, there was a lot one could do to ultimately deliver one’s own share of the national commonwealth to help build prosperity for the people of Nigeria. The Minister commended developers of the plant-Black Rhino Group, Dangote Group, the Nigerian National Petroleum Corporation (NNPC), among others - for demonstrating the aforementioned virtues. He declared, “Well, I think all of the Private Sector partners, Mobil, NNPC, the Ministry of Petroleum Resources, have demonstrated clearly that you don’t need to be in government and you don’t need a title to serve”. He told Nigerian investors, “There is a lot you can do with dedication, patriotism to ultimately deliver your own share of the national commonwealth to help build prosperity for our people”. Fashola thanked the Nigerian Bulk Electricity Trader (NBET), for its efforts in bringing all the parties together to make the signing of the PPA possible adding that the ceremony was important not only because of the presence of the partners but also because the media would be able to share with the members of the public what was involved in delivering the project for the good of the people of Nigeria. The Minister declared, “I think this ceremony is important not just because we are here, but because I hope that those who cover this event will be able to share with the members of the public how much effort, how much team work, how much consensus building, how many people are really involved in order to bring ultimately to the doorsteps of Nigerians this very important commodity that is defining for our development and for our goal”. Thanking, particularly, the NBET Managing Director, Dr. Marilyn Amobi, and the Permanent Secretary, Power, in the Ministry, Engr. Louis Edozien,  for his “very resolute determination in guiding his team and bringing all of them ultimately to safe harbour”, the Minister, however, expressed regrets that the media would not see the behind-the-scene efforts such as “the long distant calls, the emails in the dead of the night, the heated argument over the telephones and the plodding from office to office”, that preceded the event.   He disclosed that at his Ministry’s Monthly Project Review meeting the day before, one of the projects reviewed was the preparation for the construction of the Ikot-Ekpene-Ikot-Abasi Line -which, according to him, the Qua Iboe Plant would depend on adding that the commitment of the Niger Delta Power Holding Company (NDPHC) to deliver on the project was not in doubt. “And we are looking at all the options to get that project back on track”, he said. Urging all the stakeholders to get to work, Fashola declared, “Incidentally and fortuitously, not only will Qua Iboe Power Plant benefit from it, it will also help us release the store of energy that needs to go out to the public from the Ibom Power Plant when all of those lines are finally delivered”. In his remarks earlier, Chairman of Black Rhino Group and Emir of Kano, His Highness Emir Muhammad Sanusi ll, said the project was being jointly developed by his Group, Dangote and the NNPC, following the purchase of the rights to do so from Mobil Producing Nigeria Unlimited adding that the plant would be one of the lowest cost thermal power plants in Nigeria “due to its efficient combined-cycle design and competitive gas price”. Noting the importance of the project to the President and the Vice President, Emir Sanusi, who recalled the persistent follow-ups with the Power, Works and Housing Minister, other Ministers and Agencies concerned, promised that the partners would do everything possible to deliver it to Nigerians on time and schedule, added that in the next few months the partners would inject about $1.2Billion into the project. He declared, “QIPP will utilize Nigeria’s gas resources to increase our electricity generation capacity and reduce the cost of power”, adding that the plant represented “an example of how the Federal Government of Nigeria and private investors can work together to develop infrastructure that has a real socio-economic impact in our country”. In her remarks also, the Managing Director of NBET, Dr Marilyn Amobi, disclosed that the process took almost two years to get to the signing stage adding that the project started as an alliance between the NNPC and the Joint Venture Partners towards the response to the call by government to pursue investment in the power sector towards the privatization of Nigeria’s Electricity Supply Industry. Commending the Minister’s role in bringing the signing event to fruition, the NBET MD declared, “Hon. Minister, I think it will be very unfair if I fail to acknowledge your doggedness…” she said, adding that he should be applauded for his commitment to the entire process and sector. Also present at the ceremony were the Chairman, Dangote Group, Alhaji Aliko Dangote, the United States Ambassador to Nigeria, Mr Stuart Symington, NNPC COO, Mr Saidu Mohammed, among other dignitaries and top officials from both the private and public sectors.   ...