FG moves to check deductions as revenue collection hits N658bn in six months

The Federal Government has finally taken a major step to check the heavy deductions by revenue-generating agencies in the country, as the cost of collection gulps N658 billion in the first half of 2025.

President Bola Tinubu last week ordered the Economic Management Team to review all deductions and revenue retention practices by Nigeria’s major revenue-generating agencies, in a bid to boost public savings, improve spending efficiency, and unlock resources for growth.

The agencies include the Federal Inland Revenue Service (FIRS), Nigeria Customs Service (NCS), Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigerian Maritime Administration and Safety Agency (NIMASA), and the Nigerian National Petroleum Company Limited (NNPC).

President Tinubu specifically called for a reassessment of NNPC’s 30 per cent management fee and 30 per cent frontier exploration deduction under the Petroleum Industry Act.

An analysis of the monthly Federation Accounts Allocation Committee (FAAC) disbursements shows that between January and June 2025, a total of N658 billion was deducted from the gross Federation revenue of N17.418 trillion as cost of collection.

Over the years, stakeholders have raised the alarm over what they called an excessively high cost of revenue collection, which they say is not only denying the country much-needed funds to finance critical sectors of the economy but is also creating super agencies that are richer than some states of the federation.

For example, the Federation Account Allocation Committee (FAAC) disbursements between December 2024 and February 2025 showed that N281.658 billion was disbursed to FIRS, NCS, and NUPRC as cost of collection out of the N7.295 trillion gross revenue they collected during the period.

This amount is more than the N268.7 billion combined total revenue allocated to 11 states of the federation by the FAAC in the third quarter of 2024

A breakdown of the figures showed that in December 2024, out of the total revenue of N2.310 trillion, the cost of collection was N84.780 billion; in January 2025, out of a total revenue of N2.641 trillion, the cost of collection was N107.786 billion.

Also, in February 2025, it cost the Federation N89.092 billion to collect a total revenue of N2.344 trillion.

Meanwhile, 11 states of the federation comprising Abia, Anambra, Adamawa, Bauchi, Ebonyi, Cross River, Ekiti, Gombe, Kwara, Ogun, and Osun collectively received N268.7 billion in three months covering July, August, and September 2024.

A report by Agora Policy, a think tank group, raised the alarm that these agencies are collecting more money than most states in the country.

According to the report, the cost of collection for January 2024 shows that the FIRS retained N43.35 billion; Customs, N16.27 billion; and NUPRC, N18.68 billion.

Agora said no state government received a gross allocation as much as what FIRS got as cost of collection for the month.

It noted that the real mind-blowing part is that the amount received by the three federal agencies in January 2024 was higher than what each of four zones of the Federation got as gross allocation for the month.

According to the report by Agora Policy, the total cost of collection received by FIRS, NUPRC, and NCS in January 2024 was N78.30 billion, while the allocations to the geopolitical zones were: South-East (five states), N47.75 billion; North-Central (six states), N55.58 billion; North-East (six states), N56.60 billion; North-West (seven states), N76.09 billion; South-West (six states), N86.60 billion; and South-South (six states), N141.85 billion.

The case of the NNPC and NIMASA is even worse because they only remit operating surpluses, meaning that what is left after they have finished spending is what they remit to the federation account

That probably explains why for the greater parts of 2022 and 2023, during the subsidy regime, the NNPC was making zero remittances to the federation account.

A new bold step to check the high cost of revenue collection was the new tax reform laws that established the Nigeria Revenue Service (NRS), which harmonizes revenue collection under one agency.

According to Section 22 of the new Act, the NRS shall be entitled to four per cent of the total revenue collected.

This is a great relief from what previously obtained, where each of the three revenue-collecting agencies—Nigeria Customs Service, the Federal Inland Revenue Service, and the Nigerian Upstream Petroleum Regulatory Commission—were allocated different percentages of the revenues they collected as cost of collection.

The Nigeria Customs Service was entitled to seven per cent of customs levies and duties, the Federal Inland Revenue Service receives four per cent of non-oil taxes, while the Nigerian Upstream Petroleum Regulatory Commission collects four per cent of royalties, signature bonuses, fines, and other oil and gas revenues.

The immediate past Executive Chairman of FIRS, Mr. Mohammad Nami, in an interview, acknowledges that while estimating the exact amount the federation is losing due to deductions by revenue-generating agencies like NNPC and NIMASA may be difficult because it requires specific data and analysis, he noted that those deductions impact the nation’s revenue because some of the Revenue Generating Agencies (RGAs) have been underperforming

He said some of them (unlike FIRS and Nigerian Customs) have been remitting only operating surplus to the government. In other words, while FIRS, Customs, and NUPRC only enjoy between 4–7 per cent of the gross revenue generated by them, the rest of the RGAs remit ‘operating surplus’. “The implication of this is that these RGAs generate, spend, and decide what to remit to the government for social services, critical infrastructure, and others,” he said.

While acknowledging the fact that the new NRS has the potential to streamline tax collection and improve revenue generation in Nigeria, he observed that the new agency will have to contend with some fundamental challenges, which include infrastructure and capacity gaps; coordination with state and local governments; as well as digitalization and tax compliance.

To address the above potential issues, Mr. Nami said that the implementation of a robust digital system will enhance tax collection, reduce leakages, and improve efficiency.

“Providing training and capacity-building programmes for NRS personnel will ensure they are equipped to handle their responsibilities,” he said, adding that engaging with state and local governments, taxpayers, and other stakeholders will facilitate smooth implementation and address concerns, while establishing clear guidelines and regulations will provide clarity on tax administration and compliance requirements.

“With effective implementation and mitigation of potential challenges, the agency can play a crucial role in supporting the nation’s economic development,” he concluded

While commending the new order by the President and the establishment of the NRS, a tax expert, Mr. Benjamin Ogbeide, said the Act could reduce revenue leakage, improve compliance, and strengthen tax collection, ultimately enhancing the country’s fiscal position.

This, he said, would provide greater financial support for critical sectors such as power, telecommunications, healthcare, and education.