Desperate to expand its flagging revenue profile, the Federal Government is at an advanced stage of re-introducing highway tolls. Amidst economic turbulence, the Minister of Works and Housing, Babatunde Fashola, unveiled the Muhammadu Buhari administration’s plan after last week’s Federal Executive Council meeting. At a time most of the federal highways are in a shambles, Fashola said, “We expect to return toll plazas. We have concluded the designs of what they will look like, what materials they will be rebuilt with, and what new considerations must go into them. What we are looking at now is how the back end runs.”
Finding serious money to fix serious problems is a challenge every government grapples with from time to time. In most countries, tolls are erected to recoup and pay for future road maintenance and expansion. In Nigeria’s peculiar situation, a study reportedly conducted by Mckinsey said over $31bn needed to be invested annually over a 10-year period to bridge the country’s huge infrastructure deficit. But bolstering non-oil revenue to finance state assets should be pursued with a human face. The poor or those who live in neighbourhoods with poor transit service should not be overburdened.
Make no mistake about it, government has the right to tax its people, but the proposed toll is coming at an inopportune time. No doubt, road tolling increases transport costs for goods, suppresses consumer activity, wastes revenues on bureaucratic administration, double-taxes businesses and negatively impacts residents and communities located around toll facilities. In the United States, federal law prohibits states from imposing tolls on existing interstate lanes.
There is also the possibility of abuse. While it could be another avenue for sleaze, it makes living and working more expensive for the poor. Seeing the corruption, inconvenience to travellers and the paltry revenue being generated, the Olusegun Obasanjo government abolished tolling on federal roads in 2004. In the intervening period, many businesses and homeowners have relocated to the adjoining sites on the expressways where tolls were cancelled. In all probability, they have not envisaged the return of tolls. If eventually Buhari implements this plan, there will be grave consequences on them.
In addition, the commercial transport operators will double their fares. Those commuting on a daily basis will suffer seriously. Above all, the affected businesses will transfer the new cost to consumers. Others will close down, inflicting more job losses on the populace, all just because government wants to raise revenue from tolls. Experts argue that multiple taxation leads to inflation, contracts business and deepens poverty. With 94.45 million people below poverty line (as per World Poverty Clock data), Nigeria is already the global capital of extreme poverty. If it is not properly thought out, the reintroduction of tolls will defeat Buhari’s mantra of lifting 100 million Nigerians out of poverty 10 years from now. At a time tolls are being reconsidered, government is also planning to increase value-added tax from five per cent to 7.2 per cent. Through this, it will raise VAT revenue to N2.09 trillion in 2020. Additional tax income is good, but it should not endanger businesses or prevent new ones from taking off.
Although the road tolls option is being exercised around the world, it is not usually in perpetuity. When were the roads to be tolled constructed? Have they not outlived their tolling lifespan? Indeed, new roads are hard to come by in Nigeria, all the government is doing is to reconstruct or expand existing roads, which it wants to toll. As government exists primarily for the welfare of the people, the onus is on the Buhari government to provide social infrastructure without increasing the tax burden at every opportunity. In the US, tolls might be removed after the government or the private investor has recouped its investment. An example is the James River Bridge in Virginia, whose toll was removed in 1976 when a new public bridge was being built. In Spain, the government unveiled a gradual plan to make more than 500 km of its roads tolls free from 2018 onwards.
On its part, the UK generates revenue for its roads partly through vehicle tax, whereby tax is levied on every vehicle in that country. The income from it is spread on roads. We could modify this. The vehicle licence could be reviewed and a portion of it designated for road maintenance, graduating higher the levy on luxury vehicles. Apart from that, too many wealthy Nigerians and companies are not paying tax. As of 2017, Nigeria’s non-oil tax to GDP was six per cent. Tunde Fowler, the chairman of the Federal Inland Revenue Service says that only 20 million Nigerians are paying their taxes, leaving millions as defaulters. Vice-President Yemi Osinbajo says that only 214 people based in Lagos are paying tax in excess of N20 million annually. The Senate said Nigeria lost N7 trillion in revenues for not reviewing the oil production sharing contracts with the international oil companies. All these leakages should be blocked first before imposing another toll on the people, and tax defaulters brought to book.
Additionally, the government should reduce the cost of governance. The luxurious lifestyle of public officials is a major drain on the economy. No matter how much revenue it makes, government will always be short of fund if it fails to address this, as well as tackle corruption. To generate fund, it should open up the economy, selling off the loss-making state owned enterprises, like the Ajaokuta Steel Company and the refineries.
The three tiers of government should devote considerable funds to the promotion of the welfare of the people because Nigerians are already burdened with paying for their own security, education, water, health and generation of electricity. Plainly, tolling is another layer of taxation. As vehicle owners renew their licences annually, in addition to paying other charges, they are already paying for the use of the roads.
Financing road infrastructure will require more than the lazy and easy approach of reintroducing tolling on the highways. The Buhari government can leverage public funds and infrastructure investments, while encouraging private sector participation. As the African Development Bank argues, private actors everywhere are searching for profitable ventures at reasonable levels of risk – they need to make profits to stay in business. Government should liberalise the rail and aviation sectors to attract foreign capital.
