Unsustainably high

Experts have expressed concern at the heavy deductions retained by these agencies, from their remittances to the Federation Account for disbursement to all tiers of government. These have become a considerable burden to the latter’s capacity to fulfill their developmental objectives.

Between January and June, 2025, for instance, about N658 billion was deducted from the total revenue of N17.418 trillion remitted to the Federation Account by these agencies. In the same vein, the NRS, NCS, and NUPRC received the sum of N291.658 billion as collection costs from the N7.295 trillion revenue collected between December 2024 and February 2025.

A report by a think tank group, ‘Agora Policy’, last year, published by ‘The Guardian’, said that “the cost of collection for January 2024 shows that the FIRS (now NRS) retained N43.35 billion; Customs, N16.27 billion and NUPRC,  N18.68 billion”. It noted further that “no state government received a gross allocation as much as what NRS got as cost of collection for the month”.

No less revealing was the fact that the amount received by three revenue-collection agencies as collection costs in January 2024 was higher than what was received as gross allocation by each of four geo-political zones that month.

A situation in which revenue collection agencies retain recovery costs higher than amounts disbursed to some constitutional beneficiaries of the Federation Account is clearly unacceptable. It is indication that the cost of revenue collection has become dysfunctional, both to the revenue management system and the country’s developmental goals.

The matter is reportedly worsened in the cases of the NNPCL and NIMASA, which are mandated to remit only operating surpluses to the Federation Account, implying that only amounts left after deduction of their total spending is sent to the Federation Account.

Thus, the Agora Policy report submits that “That probably explains why for the greater parts of 2022 and 2023, during the subsidy regime, the NNPC was making zero remittances to the Federation Account”.

It is obviously to remedy this situation that President Tinubu issued his latest Executive Order to “safeguard and enhance oil and gas revenues for the federation, curb wasteful spending, eliminate duplicative structures in this critical sector of the economy, and redirect resources for the benefit of the Nigerian people”.

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In its Nigeria Update Report, released on October 8, last year, the World Bank also raised concerns as regards what it perceived as the possibility of rising cost of revenue collection threatening the country’s fiscal efficiency despite recent gains in non-oil revenue mobilisation and digital tax reforms.

The new presidential Executive Order 9 compels the NNPCL to remit the 30 per cent management fee and the 30 per cent Frontier Exploration Fund which it currently retains to the Federation Account for disbursement to the three layers of government, and also mandates the NUPRC to pay the proceeds for the MDGIF into the Federation Account.

This will not only make more funds available for distribution by the different levels of government, it will reduce the amount of largely idle funds available to the revenue collection agencies, which could be sources of temptation and corruption.

Contrary to the former tax governance regime, which allocated different percentages to the three main revenue collection agencies -- NRS, NCS and NUPRC as amounts to be retained as collection costs, the new tax reform laws harmonise revenue collection under a single agency. Section 22 of the new Act provides for the NRS to assume responsibility for all tax collection and the agency shall be entitled to four per cent of the total revenue collected.

Experts have commended these reforms as necessary and courageous first steps but the Tinubu administration must not relent in ensuring continuing efforts to sanitise and reform the revenue collection costs processes.