By Johnbosco Agbakwuru

A Niger Delta group, South-South Study Group, 3SG, has kicked against the allocation of three percent to the zone out of the N621.2 billion tax debt by the Nigerian National Petroleum Company, NNPC, for the reconstruction of 21 federal roads across the six geopolitical zones.

The Federal Government through the Minister of Works and Housing, Mr. Babatunde Fashola, had recently announced that the Federal Executive Council, FEC, approved for the NNPC to take over the reconstruction of 21 federal roads across the six geopolitical zones of the country.

The Minister explained that the FEC decision was in line with Executive Order No. 007 of 2019 cited as the Companies Income Tax (Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme) Order, 2019 (“EO7 of 2019” or “the Scheme”), signed by President Muhammadu Buhari.

But the Niger Delta group has frowned at the 52.22km of roads allotted to the South-South out of 1804.6km for the 21 federal roads, which it said constituted only three percent of the total sum for the reconstruction.

The South-South Study Group in a statement issued by Prince Otoks Dan-Princewill, with the title, “NNPC as A Road Construction Company: Scam or Fiscal Recklessness?”, said it considered the whole scheme unacceptable.

It also declared that it amounted to fiscal recklessness, dishonesty, gross inequity, calculated to shortchange the South-South.

The statement read: “The Federal Government recently approved 21 roads for the Nigerian National Petroleum Company (NNPC) to develop instead of tax debts amounting to N621.2bn.

“Of the 21 roads totaling 1804.6km, the entire South-South was allotted only 52.22km of roads (broken down into 21.9km; 2.32km; and 28Km) for development. This amounts to half the length of the Benin City-Warri road.

“Only a very ungrateful set of people will allot 3% of roads to be fixed to a region that provides 98% of the resources from which the funds to fix such roads was obtained.

“The entire South was allotted 282Km or 13% of the roads to be fixed, yet this is only half of the very egregiously astonishing story that demands many answers.

“Under S.16(1) of the old NNPC Act 1990, the NNPC was not exempted from paying tax though there is no evidence that it ever did. Indeed it is on record that it never once declared a profit.

“Recently, however, it announced it had declared a huge profit that remains unverified or is even unverifiable. We reckon this is because it has now become a limited liability company as required by S.53-65 of the Petroleum Industry Act (PIA), which makes it liable to pay company tax through assessments made by the Federal Inland Revenue Agency (FIRS).

“We presume this is where the expected amount of N612.2bn to be used to develop the said 21 roads will come from.

“The question that arises is whether NNPC can lawfully use its profits for road development or any other development for that matter under the Constitution or under the PIA.

“Our response is in the negative. It is suggested with great force that all income accruing to NNPC by way of royalties, grants, profit after tax, or howsoever called, are funds that are constitutionally required to be paid into the Federation Account or the Consolidated Revenue Fund as the case may be.”

It further stated that stakeholders in the South-South who benefit from the 13 percent derivation believe the purported road development scheme was an accounting trick, albeit fraudulent, to divert most of the NNPC earnings upfront to shortchange the South-South.

It said, “The approval given to NNPC to fund road repairs by the NNPC was purportedly granted under Executive Order No 007 Companies Income Tax ( Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme) Order 2019. But we contend that the approval is ultra vires the PIA and violates the Constitution.

“For the sake of argument, if the approval is valid (but this is not conceded), the profit supposedly declared by NNPC in August 2021, which is its first in over 40 years is said to be in the amount of N287bn. Any keen observer will immediately note that N621 billion approved for the said road development is more than twice its declared profit.

“Presuming the approval is for three years, it almost amounts to all of NNPC’s potential profits for the three years. Can the FGN pledge NNPC’s future profits?

“In addition, an examination of the federally collected revenue shared between the Federal Government, States, and Local Government, shows that in December 2020 all three tiers of Government shared N619.3 billion Naira from which the Federal Government got N218.297bn. All the 36 States and the Federal Capital Territory (FCT) got N178.280bn, while the 774 Local Governments in Nigeria got N131.79bn.

“In January 2021 the same Federally shared revenue which was derived mostly from earnings from The Nigerian Customs and the NNPC amounted to N619.4bn and was equally shared along the same lines described above.

“Putting these in context, keen observers will observe that the N621.4bn approved for fixing 21 roads by the NNPC amounts to the entire collectible revenue of the nation for one month – about the entire collectible revenue for all Federal Activities for 2 months (621.4 /218bn); it is equal to the total collectible revenue from federal consolidated accounts accruing to all 36 states and the FCT for three months (621/178.2bn), and equal to the entire collectible revenue for all 774 Local governments in Nigeria for about 5months (621/131.8bn).

“Moreover, the declared value of the NNPC as a limited liability company is said to be N200bn; this means that the NNPC will fix not construct a mere 21 roads for three years, at a cost that is three times the declared value of the entire company.

“Given that the profit after tax of NNPC as declared is N287bn, assuming that it paid Company Tax of 40%, there is no logical process nor basis for estimating that it will have a plausible tax debt of N621bn in three years.

“Stakeholders of the South-South are concerned at such an opaque and unlawful undertaking which seems like a ruse to shortchange the Region. Accordingly, the South South-Study Group (3SG) wishes to raise the following questions:

“Given that road, development is being substituted for actually collectible revenue, if the tax debt was collected as actual revenue, will the South-South States and Southern states be expected to accept 3% and 13% of N621.4bn as their share rather than their collectible revenues as required during FAAC proration?

“If the South-South and Southern states were given a choice to prioritize their needs, will the South-South choose to fix only 55km of roads which is about half the distance from Benin-City to Warri with their share of a federal allocation that is equivalent to three months of the revenues collectible by all States of Nigeria plus the FCT?

“Presumably, only the Federal Government and the NNPC get to decide which contractors will develop the roads and how they are paid; is this, not an accounting sleight of hand to collect most of the expected earnings of the NNPC in three years as a limited liability company, while denying states, particularly states that expect to gain 13% derivation from such earnings?

“Should it not be considered either a scam or at best fiscal recklessness that a Company will be expected to commit funds that exceed its expected annual profit three times over by selecting 55km of roads amounting to a paltry sum for development in a geopolitical zone where mostWorkshe Nation’s revenue is derived?

“If the Federal Ministry of Works is planning to source funds for federal roads, and it finds funds that exceed its annual budgets by three times from the South-South region, does it make ‘corporate social responsibility sense to allow only 3% of the roads to be fixed from a region where it obtains about 98% of its resources and finances?

“The South-South Study Group considers the whole scheme unacceptable and declares it amounts to fiscal recklessness, dishonesty, gross inequity and is calculated to shortchange the South-South.”