Nigeria’s revenue collecting agencies, the Federal Inland Revenue Service (FIRS), Nigeria Customs Service (NCS), and Nigerian Upstream Petroleum Regulatory Commission (NUPRC) shared the sum of N214.29 billion as the cost of revenue collection in the first quarter of 2024.
Agora Policy, an Abuja-based think tank, had earlier reported that the N43 billion cost of collection received by the Federal Inland Revenue Service (FIRS) in January exceeded what each state got from the Federal Account Allocation Committee (FAAC) revenue.
According to Agora report, the issue with the cost-of-collection arrangement is not just the agencies collecting more revenue, but the disproportionate allocation at the expense of states facing numerous challenges.
The report read: “The agencies are getting more allocations at the expense of others, including states and zones that have a high number of citizens to cater for and a slew of challenges to tackle.”
Analysis of the FAAC disbursements reports published by the National Bureau of Statistics (NBS), shows that these agencies collectively received N214.29 billion in Q1 2024, up from N92.85 billion in the same period the previous year, a 131 per cent increase.
The FIRS and NUPRC deduct about 4% of the cost of revenue collection, while the NCS receives 7%.
The cost of collection is usually deducted at the monthly FAAC meeting before the federally collected revenues are shared with the three tiers of government and other statutory recipients.
Nigerian Customs Service (NCS): The NCS witnessed a more than twofold increase in its cost of collection, soaring from N29.92 billion in Q1 2023 to N59.85 billion in Q1 2024.
This 100.18 per cent rise suggests enhanced revenue collection activities, likely driven by improved border control measures or a surge in import and export activities.
The FIRS reported a significant 115.53 per cent 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.
On its part, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), saw the most dramatic rise, with its cost of collection increasing by 230.68 per cent, 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.
In January 2024, the total cost of collection for the three agencies was N78.30 billion, a 129.98 per cent increase compared to January 2023’s N34.05 billion.
February’s total collection cost was N66.46 billion this year, a 142.16 per cent increase from N27.45 billion in February of the previous year. The agencies continued their efforts to improve revenue collection and compliance.
March saw a total collection cost of N69.54 billion, marking a 121.81 per cent increase from N31.35 billion in March 2023, highlighting ongoing enhancements in revenue collection mechanisms and regulatory oversight.
It would be recalled that the Presidential Fiscal and Tax Reforms Committee had recommended reducing the cost of collection to 1% to align with global best practices.
During a stakeholder consultation with public policy analysts and journalists in Abuja, the Presidential Fiscal and Tax Reforms Committee, led by Taiwo Oyedele, recommended reducing the cost of revenue collection to 1%, aligning with global best practices where even high-revenue countries like South Africa spend less than 1%.
Oyedele noted that the current cost of revenue collection in the country ranges between 4% and 35 per cent, a situation he said was totally unacceptable.
Part of the recommendations of the Committee was the consolidation of revenue collection under one agency and the renaming of the FIRS to answer Nigerian Revenue Service (NRS) to serve as the sole revenue collecting agency in Nigeria.