Report Reveals FIRS, Customs, NUPRC Receive More Allocations Than States
A Nigerian think tank and non-profit organization, Agora policy is uncomfortable that collection costs by Nigeria’s revenue agencies is not only huge but bigger than what each state received as federal allocation monthly.
Pointedly, the group listed the Federal Inland Revenue Service (FIRS), the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), and the Nigeria Customs Service (NCS) as special beneficiaries of what its described as unsustainable cost-of-collection in the nation’s revenue system.
Agora Policy’s report comes on the heels of recommendations by the Presidential Committee on Fiscal Policy and Tax Reforms (PCFPTR) to have reduction in revenue collection costs to one percent or below in the country.
As a think tank and non-profit body, Agora Policy is committed to finding practical solutions to urgent national challenges.
According to Agora Policy, the FIRS receives four percent (4%) of non-oil revenues; the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) takes four percent (4%) of royalties, rents and other revenues from the oil and gas sector with NCS) going home with seven percent (7%) of custom duties and levies.
Giving a breakdown of its collated figures, the organisation said that in January 2024, the three agencies got a total of N78.30 billion as the cost of collection for January 2024.
But the gross allocations to the six geo-political zones for the same month were as follows: N56.60 billion for the North-East; N55.58 billion for the North-Central; N76.09 billion for the North-West; N47.75 billion for the South-East; N141.85 billion for the South-South; and N86.60 billion for the South-West.
This shows that for the month, the cost of collection received by the three agencies (N78.30bn) was higher than the gross FAAC allocations to each of four geo-political zones in the country: North East (N56.60 billion), North-Central (55.58 billion), North-West (N76.09 billion) and South-East (N47.75 billion).
The South-South and South-West got more than what the three agencies received only on account of 13% derivation for the oil producing states and the allocation of N21.28 billion as the net allocation to Lagos State for Value Added Tax (VAT).
The report showed that in January 2024, FIRS received N43.35 billion as cost of collection. None of the 36 states of the Federation received up to this amount as Federation allocation.
The state with the highest gross allocation for the month, Delta State, got N39.59 billion, which means that FIRS not only received an amount more than what each of all the 36 states but also got 109.49 percent of the allocation of the state with the highest gross allocation.
The report also noted that the Customs Service received N16.27 billion, the lowest cost of collection for the month. But what Customs got was higher than what each of the 31 states received as gross allocation for the month.
Further dissecting the report, it threw up a scenario where the agencies could claim that their improved receipts for cost of collection are attributable to efforts at ensuring more accruals continuously flow into Federation account.
But this argument falls flat on its face as revealed by the Agora Policy report’s fully disaggregated data on FAAC disbursements in the last five years, running from February 2019 to January 2024.
Available data indicate that significant changes in the Federation’s revenue structure within five years that now gives the agencies an edge over the three tiers of government on behalf of whom they collect the revenues.
In February 2019, the gross FAAC revenue was N619.86 billion and the total cost of collection stood at N13.58 billion, representing 2.19 percent of the gross allocation.
Similarly, the gross revenue was N2.07 trillion in January 2024, with the three agencies getting about N78.30 billion, representing 3.79 percent of the accrued sum.
On the face value, it looks as if the cost of collection is merely rising due to increase in the gross revenue. However, far from the outlook, the report indicates that while the gross revenues between February 2019 and January 2024 went up by about 234 percent, the cost of collection for the same period doubled that figure by going up to over 477 percent.
Overall, Agora Policy submissions showed that the accruing revenue in terms of gross did not march the increased cost of collection in corresponding proportion.
Forefront News recalls that while recommending a far-reaching cut in cost of revenue collection, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms (PCFPTR), Dr. Taiwo Oyedele, said the figure current ranging s between 4 and 35 per cent, a situation was “totally unacceptable”.
According to Oyedele, global best practice cost of revenue collection was around one per cent, and even South Africa that collects the highest revenue in Sub-Sahara Africa, spends less than one per cent to achieve such an impressive outcome.
