Economists differ on NNPCL’s N2.52tn road investments

Financial economists on Sunday expressed mixed reactions to the approved plan by the Nigerian National Petroleum Company Limited to invest N2.52 trillion in the reconstruction of federal roads under the tax credit policy.

It will be recalled that last week, the Federal Executive Council approved the recommendation to invest in the reconstruction of selected federal roads under the Federal Government Road Infrastructure Development and Refurbishment Investment Tax Credit Policy phase-2 by NNPC Limited and its subsidiaries.

The approval came 15 months after the national oil company expressed interest in investing in the reconstruction of selected federal roads to sustain a smooth supply and distribution of petroleum products across the country.

Under the initial programme, the NNPC constructed a total of 1,804.6km of roads at a total cost of N621bn, meaning the company has invested N2.52tn in one year.

But reacting, a Professor of Economics at the Olabisi Onabanjo University, Ago Iwoye, Ogun State, Sheriffdeen Tella, described the process as a way of bureaucracy and multiplied sources of corruption.

He said, “They are financing the roads and they have a law backing infrastructural development and some other things but I don’t think it is a good idea. It is not a normal thing to do.

“We have a ministry responsible for this and a single treasury account, so why did they create a separate account if not because some people want to be playing games with national revenue? It is also a way of depriving state governments of their allocations.

The academia, who called for proper analysis of the approval for possible loopholes, added that it was a perfect ploy to deplete allocations to state and local governments.

“It is an abnormal situation and there is a need for proper analysis by legal advisers on loopholes,” he stated.

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Expressing similar views, the Managing Director of Cowry Asset Management Limited, Johnson Chukwu, questioned how the projects will be funded considering the profit made by the company in the 2021 financial year.

He said, “NNPCL has now gotten the approval of N2.52tn for road projects but the company profit before tax in 2021 was only N674bn and at such profit level, they will need at least 17 years to recover N2.52tn, so where will they generate this money to invest on roads now? Where will they generate the money from?

“The projections do not add up. I don’t see a compelling reason why NNPC should get approval to construct roads worth N2.52tn. If they have that money, it should be paid as tax and shared with the three tiers of government. I think it is absolutely wrong for NNPCL, which does not have that level of profit to invest that amount of money in road projects at their current income level.

“It is simply a duplication of roles. We are obviously creating another parallel government. We have the Ministry of Works whose job is to do roads.

“If they want to go ahead, they need to tell us where the money will come from. They clearly don’t have that money. It can’t be from their cash flow. Will they go borrowing? Or are they going to build the roads in 15 years based on their current profit level?” he queried.

However, the Director of the Centre for the Promotion of Private Enterprise, Muda Yusuf, described the investment as a welcome development considering the country’s infrastructural deficit.

He said, “The decision to invest in roads is a welcome development and we must commend it because if there are any areas where we are suffering serious deficit, it is in the area of infrastructure and it is not a space where the private sector can provide leadership. We need the government to provide leadership in that space.

“Apart from that, we have seen a lot of challenges about funding infrastructure through the budget directly. In most cases, infrastructure suffers through the budgetary process because in the process of deliberating all manner of interests are thrown into the budgetary process such that critical infrastructure allocation suffers.