In the first seven months of 2024, three major revenue-generating agencies in Nigeria spent a staggering N533.11 billion on revenue collection. The agencies involved are the Nigeria Customs Service (NCS), the Federal Inland Revenue Service (FIRS), and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC). This amount shows a dramatic increase of nearly 100% compared to the N266.75 billion spent during the same period in 2023, according to findings by The PUNCH.
The costs for revenue collection are deducted during the monthly Federation Accounts Allocation Committee (FAAC) meetings before distributing the collected revenues to the three tiers of government and other statutory recipients. Among the three agencies, the FIRS accounted for the largest share, deducting N254.82 billion, which represents approximately 47.8% of the total amount.
The FIRS is responsible for collecting various taxes, including Value Added Tax (VAT) and company income taxes, which are crucial for the government’s fiscal operations. In 2024, FIRS’s collection costs rose significantly, increasing by 61.55% from N157.73 billion in 2023. Monthly breakdowns show a notable trend, with the agency collecting N43.35 billion in January 2024, a sharp rise from N18.14 billion in January 2023. In July 2024, FIRS deducted the highest amount, totaling N55.13 billion, marking a slight increase from the same month the previous year.
Following the FIRS, the NCS deducted N147.64 billion, making up about 27.7% of the total cost of collection. This increase, which is 114.49% higher than the N68.86 billion reported in 2023, underscores the NCS’s critical role in managing customs duties and excise collections on imports and exports. The NCS’s higher costs reflect the increased import duties, contributing to its overall expenses.
Meanwhile, the NUPRC deducted N130.64 billion, accounting for around 24.5% of the total. This increase of 225.33% from N40.16 billion in 2023 highlights the agency’s essential oversight of Nigeria’s upstream oil and gas sector, a vital component of the nation’s economy.
A detailed monthly analysis reveals significant trends in revenue collection. In January 2024, the combined total for all three agencies was N78.30 billion, up 129.98% from N34.05 billion in January 2023. In February, collections reached N66.46 billion, marking a 142.03% increase from the previous year. March saw a collection of N69.54 billion, a rise of 121.79% compared to March 2023. April remained steady at N69.54 billion, and May’s collections increased to N80.52 billion, reflecting a 159.09% jump from the same month in 2023. June saw a total of N76.65 billion, up 100.47% from N38.24 billion in June 2023, while July recorded the highest figure at N92.11 billion, a 25.85% increase from N73.24 billion in July 2023.
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Economists are raising concerns about the substantial increase in revenue collection costs, prompting calls for a review by state finance commissioners. A recent report by Agora Policy highlighted that the disproportionate allocation of collection costs affects states facing numerous challenges.
During a stakeholder consultation in Abuja, Taiwo Oyedele, chair of the Presidential Fiscal and Tax Reforms Committee, emphasized the need to reduce the cost of revenue collection to 1%, aligning with global best practices. He stated, “The current cost of revenue collection in the country ranges between 4% and 35%, which is totally unacceptable.”
Sheriffdeen Tella, a Professor of Economics at Olabisi Onabanjo University, noted that while operational expenses play a role in the cost of collection, it is essential to conduct an audited account to verify the current charges. “The usage of technology is one of the ways used to collect revenue, and that is part of the costs. However, an audited account will determine whether the current percentage charged is accurate,” Tella explained.
Another anonymous economist added that the cost of collection includes the manpower and technological infrastructure necessary for revenue generation. “A significant part of their running costs is covered by the amount generated through the cost of collection,” the economist stated. “These agencies have substantial overhead costs, making it clear how these funds are utilized to support their operations.”