At Nigeria’s key industrial hub, huge tax means no roads

The road before Nestle
The road before Nestle

The bus huffed and puffed for the umpteenth time, moving sluggishly through the gullies leading to a muddy intersection at Lusada junction in Ogun. Along the dilapidated path leading to Igbesa, the mangled remains of a heavy-duty truck stood in the middle of the road, its tyres suspended in mid-air. Few meters away from Ago-Oloye junction, a red truck remained stuck in the middle of the road, a few boys offloading some of its enclosed contents into another truck.

“This Agbara-Atan road is the worst road in the whole of Nigeria,” Fijabi Ahmed, the driver of the commercial bus conveying PREMIUM TIMES’ reporter from Atan to Agbara area of Ogun State, lamented. “From Atan, through Lusada, to Igbesa Road, all the way to Agbara Estate, the road is terrible. It is the most horrible road I have ever seen in my life, yet we pay all sorts of taxes to the government.”

Mr Fijabi’s position was supported by Chiagoze Samuel, a motorcycle rider at Agbara junction. Mr Chiagoze noted that motorcycle riders plying the Agbara-Atan road pay various amounts of levies and taxes to officials of the local government yet infrastructural facilities remain poor for residents, commuters and commercial transport workers.

“Sometimes, I wonder what purpose our taxes and other levies are meant to serve, really,” he said, as he gently wiped off sweat dripping across his face with a dirty rag. “This lack of trust in government remains why people evade taxes in this country. If we cannot get something as basic as a motorable road, then why do we pay taxes?”

Modinat Kolawole, a resident of Agbara Estate, said the condition of the road is most pathetic because of the concentration of industries in the environment.

She said: “In this Agbara Estate, we have many big and small companies and they are over one hundred in number. Nestle, GSK, Drury, Unilever; just name it. Yet, we have the most pathetic road in this state, where we witness accidents almost every week. If we say private citizens don’t pay taxes, are the companies too not paying taxes?”

Agbara Industrial Estate

Agbara Industrial Estate is one of Nigeria’s most important industrial hubs. It is located in Ado-Odo Ota Local Government Area of Ogun State. With an area of 878 km² and a population of 526,565 according to the 2006 census, the hub hosts the highest number of companies in the state. It is also a huge source of revenue and taxes for both the state and the Nigerian governments.

From the Lagos-Badagry expressway end of the industrial hub, a long stretch of road connects the many industries to Atan, an agrarian community in Ogun State, via Lusada, another community. The road leads to Ota, through Obasanjo Farm, and then Sango, another industrial hub, which ultimately links it to the Lagos market.

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It is a federal road, and the only route that opens up the industrial hub, allowing manufactured goods to be transported to warehouses in Lagos and Ogun states and onwards to other parts of the country. It also serves as means of supplying raw materials to the various companies in the industrial hub.

But the road, as multiple checks by PREMIUM TIMES showed, is in a complete state of disrepair. Many residents who spoke to this reporter said the road has been in such poor condition for many years.

Mrs Kolawole said some small scale entreprises have had to fold up due to the impact of the poor road network on their businesses. She explained further that small businesses that depend on regular supply of raw materials and the distribution of finished goods would not survive in the environment, despite its huge potential.

She said: “Many people think that because industries are heavily concentrated here, small businesses can tap from their potentials and survive. But that is not true.

“The poor road network and poor access to the market can kill businesses faster than any other thing. A relative of mine had his paint distribution shop closed last year, less than six months into the business.”

She added, however, that only big businesses and industries can survive the harsh terrain, with its ripple effect sales, profit and, ultimately, taxes.

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PREMIUM TIMES’ finding showed that even the big companies are affected by the poor state of the road, despite the huge amount of taxes being paid to governments at various levels.

Speaking at the commissioning of an expansion plant in Agbara in February 2018, the Chief Executive Officer of Beloxxi group, Obi Ezeude, urged the Nigerian government to help fix the road.

“I urge you to help us look at the roads in Agbara and Ota axis,” the CEO of the biscuit production company, told Vice President Yemi Osinbajo.

Apart from Beloxxi, there are numerous other industries located in Agbara. They include Unilever, Nestle, Beta Glass, Procter and Gamble, Pharma Deco, Green Tech, Wesco Cable, ComeStar, GZ Industries, Nampak Bevcam, among others.

At the Ota end of the hub, the companies include Drugfield, Alumax, C-Way Food, Fidson Healthcare, among other industries.

Last year, P&G shut one of its Nigerian plants in Agbara, amidst operational challenges, saying that it would focus on its Ibadan plant.

A spokesperson for one of the industries who sought anonymity said that their operations are being affected by the poor state of the road, despite the huge taxes paid by small and big industries. She attributed the development to reasons why tax compliance in Nigeria has been a lingering challenge.

Hakeem Bello, special adviser to former minister of works, Babatunde Fashola, declined comment on the status of the road. He directed this reporter to an official named Engineer Popoola, Federal Comptroler of Works in Ogun State. Mr Popoola was, however, not reachable.

Big Industries; Huge taxes

PREMIUM TIMES did a random check of taxes paid by some of the companies located in the Agbara industrial hub with results showing that governments at different levels generated huge tax revenue from their operations.

According to its 2018 annual results, Glaxo SmithKline Consumer Plc paid N542,530,000 as income tax expense in 2018. According to details of its annual report for same year, the company paid N637,836, 000 in 2017.

Nampak Bevcan, on its part, paid 140 million South African Rands (about N3,594,092,685.40) to tax authorities in Nigeria, South Africa and Zimbabwe, the three countries within which it operates. In 2017, it paid a total sum of 304 million Rands (N7,804,288,000.00) as tax expense.

For Procter and Gamble, which operates in 80 countries across the world, over $3 billion was paid as taxes in 2018 across the various countries, including Nigeria. In 2017, it paid $3.063 billion and $3.342 billion in 2016, for company and subsidiaries in the numerous countries it operated in the year.

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For Unilever Nigeria Plc, the company paid N3,489,756, 000 as taxes in 2018, leaving its profit before tax at N12,621,908,000. Earlier in 2017, details of its annual account showed that it paid N3,526,25,000 as taxes.

Numerous other small scale business operators in the Agbara industrial hub told PREMIUM TIMES they pay different amount of taxes to local and state government tax officials, with no commensurate value in social infrastructure.

Social Contract and Nigeria’s Tax Compliance Problem

Nigeria’s tax-to-GDP ratio is considered one of the lowest in the world, put at about 6 per cent. Much of the taxes that should go into government coffers, analysts said, are often lost to tax evasion, poor collection methods, and official corruption especially in the informal sector.

In 2017, the immediate past Minister of Finance, Kemi Adeosun, lamented the rate of compliance among Nigerians. “Prosperous nations have high levels of tax compliance whilst poor nations have low rates. Nigeria aspires to be a prosperous nation, so this problem must be solved,” she said.

In Lagos State that accounts for 65 per cent of manufacturing and finance sectors, only 700,000 individuals and firms pay their taxes out of eight million eligible taxpayers, according to former Governor Akinwunmi Ambode.

Only 19 million pay various taxes out of 70 million eligible Nigerians, supporting a population of 193 million. In 2016, Vice President Yemi Osinbajo disclosed that only 214 individuals paid over N20 million in annual PITs, citing Federal Inland Revenue Service figures.

“Paying taxes is not particularly easy anywhere in the world for anyone who has expended time, energy and other resources to earn the income,” according to Taiwo Oyedele, Head of Tax and Corporate Advisory Services at PwC Nigeria. “The major reason for this is that there is no direct benefit for tax payment. How well you enjoy social services and public infrastructure is not a function of how much tax you pay hence people will avoid paying if they can.”

Some analysts say there is no aspect of the law that specifies that specific taxes must be expended on peoples’ preferred infrastructure. According to them, government cannot be held responsible for not using taxes paid by some people to fix their roads or build bridges for them.

Bamgboye Emmanuel, an economist and tax consultant based in Lagos, noted that it is not binding on government to “reciprocate the amount paid in taxes with the infrastructure (provided)” but government should be accountable and build trust in the people.

He said: “At the end of the day, Adam Smith said that the citizenry must feel the effect of the tax being paid. Although it is not written anywhere that government must justify payment of tax in the infrastructure and social amenities, there should be accountability.”

Kojo Makanju, a resident of Agbara, told PREMIUM TIMES that when government does not use tax revenue judiciously, it reduces trust in such government.

The 63-year-old retired banker gave an example of an abandoned bridge constructed by the Ogun State government at Lusada area of the industrial hub. According to him, the bridge does not reflect the priority of citizens, which he said was the road construction, adding that the decision amounted to waste of government resources generated through taxes.

Compliance: What’s the way out?

In a June 2016 publication, Mr Oyedele said the low level of tax compliance among Nigerians can be attributed to incoherent fiscal policies, cumbersome and inefficient tax administration system, high level of tax evasion, ambiguities in the tax laws and lack of transparency regarding the utilisation of tax revenue for social services and visible development. Mr Makanju agrees with this position, adding that the compliance rate would increase if people can feel the impact of taxes paid.

Mr Oyedele, therefore, called for capacity building through both soft and technical training of personnel. In addition, he called on tax authorities to undertake significant enlightenment and public awareness and take advantage of technology and innovation including social media.

“Transparency is critical,” he noted, adding that the nation does not need the auditor general of the federation for access to basic tax accountability details. “Most importantly we must implement the 2010 National Tax Policy and our leaders must set the right tone from the top and lead by example,” the tax expert submitted.

Mr Bamgboye on his part explained that in strategic parts of some cities like Lagos, there are posters and inscriptions sensitizing people on tax payments and re-affirming that taxes paid by the people provided funds for the infrastructural uplift in the state.

“Things like that increase tax compliance and reduce (tax) evasion,” he said.

Speaking further, he illustrated with the experience he had while handling the account of a client earlier in the year.

“I did her (the client’s) tax computation and realised that the woman complies with PAYE payment and all. But when we calculated her company’s tax liability, we came up with N1.5 million. Yet she declined to pay, saying government does not utilise the money well. Meanwhile, her actual revenue was N35 million, showing that she made the money.

“When people don’t see the value in tax paid, it affects compliance.”

Mr Makanju, in his submission, urged the government to fix the social contract, saying citizens will comply with tax payment when they get value for their money.

“They can begin by fixing this (Agbara Industrial Estate’s) road and making our taxes and those of all these big companies work for us. If government can increase provision of social infrastructure, it will improve (tax) compliance. There should also be increased sensitisation, as well as transparency in government. For now, there is no justification for paying taxes,” he said.

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