FIRS, NCS, NUPRC Experience 131% Increase In Cost of Revenue Collection In Q1 2024

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.

The Federation Account Allocation Committee (FAAC) disbursements reports published by the National Bureau of Statistics (NBS), show 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.

Monthly breakdown of expenditures

• January 2024: The total cost of collection was N78.30 billion, a 129.98% increase compared to January 2023’s N34.05 billion.
• February 2024: Collection costs reached N66.46 billion, marking a 142.16% increase from N27.45 billion in February 2023.
• March 2024: Total costs were N69.54 billion, up 121.81% from N31.35 billion in March 2023.

What each agency received

• Nigerian Customs Service (NCS): The NCS’s cost of collection more than doubled, rising from N29.92 billion in Q1 2023 to N59.85 billion in Q1 2024. This 100.18% increase suggests improved revenue collection, possibly driven by enhanced border control or increased import/export activities.
• Federal Inland Revenue Service (FIRS): The FIRS saw a 115.53% increase in its collection costs, up from N46.60 billion in Q1 2023 to N100.40 billion in Q1 2024. This growth indicates enhanced tax collection efforts, likely due to better compliance measures and increased economic activity.
• Nigerian Upstream Petroleum Regulatory Commission (NUPRC): The NUPRC experienced the most dramatic increase, with its collection costs rising by 230.68%, from N16.34 billion in Q1 2023 to N54.05 billion in Q1 2024. This surge reflects intensified regulatory activities in the upstream petroleum sector, possibly driven by new oil field discoveries and increased crude oil production.

State finance commissioners call for review

The substantial increase in revenue collection costs has prompted state finance commissioners to call for a review.

During the FAAC meeting in May 2024, state finance commissioners voiced strong opposition to the rising deductions for revenue collection.

Akinola Ojo, Commissioner of Finance for Oyo State, emphasized the need to revisit and reduce these payments, arguing that they significantly reduce the revenue available for distribution among the tiers of government.

Isaac Kamalu, Commissioner of Finance for Rivers State, acknowledged that certain deductions are legally mandated but supported the need for clearer reporting.

Dr. Nathaniel Urama of Enugu State argued for legislative amendments to reduce collection costs, citing technological advancements that have made revenue collection more efficient.

Dr. Leonard C. Uguru of Ebonyi State and Yakubu Adamu of Bauchi State also backed the call for a review. Dr. Chris A. Akomas, Chairman of the Indices and Disbursements Committee at the Revenue Mobilization Allocation and Fiscal Commission (RMAFC), noted that a sub-committee was already examining the issue and urged patience.

Proposed reforms and recommendations

A recent Agora Policy report highlighted the disproportionate allocation of collection costs 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.”

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. The current range of 4% to 35% was deemed unacceptable.

The committee also proposed renaming the FIRS to the Nigeria Revenue Service (NRS) to better reflect its role in collecting revenue for the entire federation.