The Federal Inland Revenue Service (FIRS), Nigeria Customs Service (NCS), and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) have experienced a 131% increase in their cost of revenue collection for the first quarter of 2024.
This analysis, based on the Federation Account Allocation Committee (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.
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% rise suggests enhanced revenue collection activities, likely 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 saw 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.
State Finance Commissioners Seek Reduction
The significant increase in the cost of revenue collection by the FIRS, NCS, and NUPRC in Q1 2024 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, according to the minutes of the meeting seen by TheWitness.
According to a recent Agora Policy 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.”
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%, a situation he said was totally unacceptable.
The proposed reforms also include renaming the FIRS to the Nigeria Revenue Service (NRS) to reflect its role in collecting revenue for the entire federation.
