How Nigeria can finance a sustainable road fund


Setting up an independent fund sustained with proceeds of commercial tolls, petrol taxes and related charges managed by private sector professionals offers Nigeria the best way to build a sustainable road fund, experts counsel.

The chances for the fund’s success would greatly improve if it has no recourse to the National Assembly for funding and has inherent safeguards to protect against abuse by public officials.

After years of largely unsuccessful policies to attract private capital in road construction, Nigeria’s budgetary provision, which was inadequate to finance big-ticket infrastructure projects, has only fared worse.

Successive governments have tried to leverage private capital through Public-Private Partnership (PPP) models but these have had limited success. Now with COVID-19 eroding the profit of companies, tax incentives are no longer sufficient motivation.

Hence, analysts are urging the Federal Government to develop a sustainable road fund to reduce the current pressure from lower oil revenue.

“The peculiarities of Nigeria’s economic environment demand that relevant government institutions, financiers, and private sector begin to rethink how best to sustainably finance road infrastructure in Nigeria,” said Wolemi Esan, energy and infrastructure lawyer at Olaniwun Ajayi, a Lagos-based legal firm.

Fola Fagbule, senior vice president and head of Financial Advisory at Africa Finance Corporation, said a sustainable road fund should have a highly renowned non-executive chairman selected from the private sector.

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“The board of directors should be made up 60 percent of respected private sector professionals and 40 percent career civil servants and no politician,” Fagbule said.

Car owners in Nigeria who are subjected to various levies by both the state and Federal Government, including vehicle registration, licences, roadworthiness certificate should be applied to the road fund, Fagbule suggested.

Some analysts recommend diverting two line items in the petrol pricing template – the National Transportation Allowance N3.89 per litre and Petroleum Equalisation Fund N7.51 per litre into the fund.

Both line items in the pricing template when applied to the NNPC fuel import figures of 60 million litres daily will yield a cumulative value of N684 million daily or N246 billion yearly. Since a separate road tax would be opposed, it is pragmatic to apply some of these monies to a road fund.

Many Nigerians are outraged that the Federal Government makes these deductions and fails to apply them to roads.

In 2019, Babatunde Fashola, minister of works, said the Federal Government was designing new toll plazas with the intention of reintroducing tolls. It seems ready to implement it with the planned concession of 12 roads under the ministry’s Highway Development Management Initiative.

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About 1,963km of highway Benin-Asaba, Abuja-Lokoja, Kano-Katsina, Onitsha-Owerri, Shagamu-Benin, Abuja-Keffi-Akwanga, Kano-Shuari and Potiskum-Damaturu, Lokoja-Benin, Enugu-Port Harcourt, Ilorin-Jebba, Lagos-Ota-Abeokuta, and Lagos-Badagry-Seme border could be tolled.

Installing tolls on these roads will provide the government another significant source to finance the road fund.

To forestall corruption, which led former President Olusegun Obasanjo in 2004 to order the removal of tollgates, experts recommend that the concessionaires should manage the tolls.

Plans to toll major highways have been opposed by large swaths of the Nigerian people as was seen during the construction of the Lekki Tollgate.

A way to build an incentive into the process, analysts say the proceeds of a toll should be used to maintain the roads from areas where the funds were realised.

Though the Federal Government developed a national tolling policy in 2009 for Federal Roads Maintenance Agency (FERMA) for maintaining, operating and transferring contracts on certain federal roads, it has not demonstrated the political will to implement it.

According to the policy, tolls would be applied on roads linking settlements subject to traffic volumes, like certain bridges, intra-city federal roads would be exempted, and tolls should only be applied to recover costs related to significant investment in maintenance, rehabilitation and expanded highway capacity.

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However, it stated that there were alternative routes, fussed over how Nigerians will benefit, but the government could not clarify coordination between the Infrastructure Concession Regulatory Commission (ICRC), FERMA and state governments in the process. It was eventually abandoned.

Other African nations including Ethiopia, Zambia, Kenya, Ghana, Malawi, Tanzania, and even Benin Republic all have functional road funds, many established since the 1990s. They are financed by fuel levies or some form of tolls and managed by boards representing the interests of road users.

A World Bank study found that in principle, all the road fund boards are responsible for generating and allocating resources for road maintenance. But in practice, the boards’ resource powers are much more restricted than originally envisaged.

Some boards empowered to recommend fuel levy but in many cases spending programmes must be approved by one or more government ministries. Some decide what projects to embark on, independently organise fundraising and select vendors and execute projects.


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