For the first quarter of 2024, the cost of revenue collection for the Federal Inland Revenue Service (FIRS), Nigeria Customs Service (NCS), and Nigerian Upstream Petroleum Regulatory Commission (NUPRC) increased by 131%.
Based on the National Bureau of Statistics (NBS)’s Federation Account Allocation Committee (FAAC) disbursements reports, this study reveals that these agencies received a total of N214.29 billion in Q1 2024, an increase from N92.85 billion in the same period the year before.
About 4% of the cost of revenue collection is withheld by the FIRS and NUPRC, while 7% goes to the NCS.
The federally collected funds are distributed to the three tiers of government and other statutory recipients after the cost of collection is typically subtracted at the monthly FAAC meeting.
Nigerian Customs Service (NCS): The cost of collection for the NCS increased by more than twofold, from N29.92 billion in Q1 2023 to N59.85 billion in Q1 2024.
This 100.18% increase indicates increased efforts to collect income, most likely as a result of strengthened border security or a spike in import and export activity.
Federal Inland Revenue Service (FIRS): The FIRS revealed that its collection expenses increased significantly from N46.60 billion in Q1 2023 to N100.40 billion in Q1 2024, or 115.53%.
This significant increase is indicative of increasing efforts to collect taxes, maybe as a result of improved tax compliance strategies and a rise in economic activity.
Nigerian Upstream Petroleum Regulatory Commission (NUPRC): With its cost of collection rising by 230.68%, from N16.34 billion in Q1 2023 to N54.05 billion in Q1 2024, the NUPRC had the most notable increase.
This spike suggests greater regulatory activity in the upstream petroleum sector, which may be the result of increasing production of crude oil and new oil field finds.
Monthly Summary
The combined cost of collection for the three agencies in January 2024 was N78.30 billion, up 129.98% from N34.05 billion in January 2023.
The total amount collected in February of this year was N66.46 billion, up 142.16% from N27.45 billion in the same month last year. The authorities persisted in trying to enhance compliance and revenue collection.
The overall cost of collection in March 2023 was N69.54 billion, up 121.81% from N31.35 billion in February 2023. This indicates that regulatory monitoring and tax collection procedures are still being improved.
Things To Note
A new Agora Policy paper claims that the problem with the cost-of-collection system is not only that the agencies are making more money, but also that states that are dealing with a lot of difficulties are being disproportionately affected.
According to the research, certain agencies are receiving higher allocations at the expense of other entities, such as states and zones with a large population and several difficulties to address.
The Presidential Fiscal and Tax Reforms Committee, led by Taiwo Oyedele, recommended lowering the cost of revenue collection to 1% during a stakeholder consultation with public policy analysts and journalists in Abuja. This recommendation would have put the country in line with international best practices, where even high-revenue nations like South Africa spend less than 1%.
According to Oyedele, the country’s present income collection costs vary from 4% to 35%, which is completely intolerable.
Renaming the FIRS to the Nigeria Revenue Service (NRS) to reflect its responsibility in revenue collection for the entire country is another of the planned modifications.
