Nigeria’s top revenue-generating agencies—the Federal Inland Revenue Service (FIRS), Nigeria Customs Service (NCS), and Nigerian Upstream Petroleum Regulatory Commission (NUPRC)—experienced a dramatic increase in their cost of revenue collection in the first quarter of 2024. According to the Federation Account Allocation Committee (FAAC) disbursements reports, these agencies collectively received N214.29 billion, marking a 131% rise from N92.85 billion during the same period in 2023.
Breakdown of Agency Collections
**Nigerian Customs Service (NCS)**: The NCS saw its cost of collection more than double, increasing from N29.92 billion in Q1 2023 to N59.85 billion in Q1 2024, a 100.18% rise. This growth suggests enhanced revenue collection activities, possibly driven by improved border control measures or a surge in import and export activities.
**Federal Inland Revenue Service (FIRS)**: The FIRS reported a significant 115.53% increase in its collection costs, rising from N46.60 billion in Q1 2023 to N100.40 billion in Q1 2024. This substantial growth reflects expanded tax collection efforts, potentially due to better tax compliance measures and increased economic activities.
**Nigerian Upstream Petroleum Regulatory Commission (NUPRC)**: The NUPRC experienced the most dramatic rise, with its cost of collection increasing by 230.68%, from N16.34 billion in Q1 2023 to N54.05 billion in Q1 2024. This surge indicates intensified regulatory activities in the upstream petroleum sector, possibly driven by new oil field discoveries and increased crude oil production.
Monthly Breakdown
– **January 2024**: The total cost of collection for the three agencies was N78.30 billion, a 129.98% increase compared to January 2023’s N34.05 billion.
– **February 2024**: The total collection cost was N66.46 billion, a 142.16% increase from N27.45 billion in February of the previous year.
– **March 2024**: The collection cost was N69.54 billion, marking a 121.81% increase from N31.35 billion in March 2023.
Calls for Review
The significant increase in collection costs has sparked calls for a review from state finance commissioners. During the FAAC meeting in May 2024, state finance commissioners expressed strong opposition to the rising cost of revenue collection deductions. They argued that the substantial payments to Revenue Generating Agencies (RGAs) were reducing the revenue available for distribution to the various tiers of government.
Akinola Ojo, Commissioner of Finance for Oyo State, highlighted the need for a downward review of these payments, recalling that FAAC had previously agreed on this necessity. Isaac Kamalu, Commissioner of Finance for Rivers State, and Dr. Nathaniel Urama, Commissioner of Finance for Enugu State, supported the call for a review, emphasizing that revisiting the cost of collections would not disregard the laws but would require legislative amendments.
Dr. Leonard C. Uguru, Commissioner of Finance for Ebonyi State, added that states were contributing more than 40% to the collection of taxes and fees but were not benefiting proportionately from the cost of collections.
Proposed Reforms
The Presidential Fiscal and Tax Reforms Committee, led by Taiwo Oyedele, recommended reducing the cost of revenue collection to 1% to align with global best practices, where high-revenue countries like South Africa spend less than 1%. Oyedele noted that the current cost of revenue collection in Nigeria ranges between 4% and 35%, which he deemed unacceptable. The committee also proposed renaming the FIRS to the Nigeria Revenue Service (NRS) to reflect its role in collecting revenue for the entire federation.
Bottom Line
As Nigeria’s revenue agencies continue to see significant increases in their cost of collection, the debate over the equitable distribution of these costs remains heated. State finance commissioners and the Presidential Fiscal and Tax Reforms Committee are pushing for reforms to ensure that revenue collection processes are more efficient and beneficial to all levels of government.
