States Kick As Nigerian Oil Company NNPCL Deducts $525Million From FIRS Remittances For Road Tax Scheme
According to a Federation Account Allocation Committee (FAAC) report from a January 2025 post-mortem sub-committee meeting, NNPCL made monthly deductions of $52.51 million from funds due to FIRS for Joint Venture Gas and Company Income Tax between February and November 2024.
The Nigerian National Petroleum Company Limited (NNPCL) has deducted a total of $525.09 million from its remittances to the Federal Inland Revenue Service (FIRS) under the Road Infrastructure Tax Credit Scheme (RITCS), sparking concerns among state governments.
According to a Federation Account Allocation Committee (FAAC) report from a January 2025 post-mortem sub-committee meeting, NNPCL made monthly deductions of $52.51 million from funds due to FIRS for Joint Venture Gas and Company Income Tax between February and November 2024.
The RITCS allows private companies to invest in critical road infrastructure in exchange for tax relief.
However, state representatives at the FAAC meeting objected to the deductions, arguing that road construction is the responsibility of the Federal Government.
In August 2024, FAAC members called for a suspension of the deductions, demanding that their share of the withheld funds be calculated based on the existing revenue-sharing formula and refunded.
During the FAAC plenary in Bauchi, members reiterated their stance, prompting the Chairman of the Revenue Mobilisation Allocation and Fiscal Commission to formally request detailed information from FIRS on the tax credits granted to NNPCL and other companies under the scheme.
According to the report, “The Sub-National position was that it is the responsibility of the Federal Government to construct roads; hence, the share of the Sub-National should be computed based on the existing Revenue Allocation Sharing Formula and refunded to them.”
The Road Infrastructure Tax Credit Scheme has been instrumental in projects such as the 32-kilometre Apapa-Oshodi-Oworonshoki-Ojota expressway.
However, state governments are now pressing for transparency and a resolution regarding the deductions.
The RITCS was introduced by the Nigerian government to encourage private sector investment in critical road infrastructure.
Under this scheme, companies can fund road construction or rehabilitation projects in exchange for tax credits, which reduce their tax liabilities. This approach aims to accelerate infrastructure development while easing the burden on public finances.
Why Did NNPCL Deduct $525 Million?
NNPCL deducted a total of $525.09 million from its remittances to FIRS over 10 months (February to November 2024) under the RITCS. The funds were meant to cover investments in road infrastructure, allowing NNPCL to offset these expenses against its Joint Venture Gas and Company Income Tax obligations.
State governments have expressed strong opposition to these deductions for several reasons.
For instance, states argue that the deducted funds should have been part of the revenues shared among the three tiers of government (federal, state, and local) through the Federation Account Allocation Committee (FAAC).
They demand their share of these funds, calculated using the existing revenue-sharing formula.
States contend that road construction is primarily the responsibility of the Federal Government. They question why funds meant for revenue distribution are being used for federal infrastructure projects.
Meanwhile, there is a demand for greater transparency regarding the tax credits granted under the RITCS, particularly to NNPCL and other companies.
During meetings, including the January 2025 post-mortem sub-committee and a plenary in Bauchi, FAAC members reiterated their opposition to the deductions.
They demanded a suspension of the practice and a refund of the withheld funds. Consequently, the Chairman of the Revenue Mobilisation Allocation and Fiscal Commission requested detailed information from FIRS about the tax credits granted under the scheme.
The RITCS has been crucial in financing major infrastructure projects, such as the 32-kilometre Apapa-Oshodi-Oworonshoki-Ojota expressway.
