Cost of revenue collection gulps N463.576b in six months

In spite of the improvements in technology which have made the process of revenue collection much easier, Nigeria is still spending billions of naira each month as the cost of revenue collection.

An analysis based on the Federation Account Allocation Committee (FAAC) disbursement reports, published by the National Bureau of Statistics (NBS), shows that the three revenue-collecting agencies: the Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS) and Nigerian Upstream Petroleum Regulatory Commission (NUPRC), received a combined sum of N463.576 billion out of the N12.128 trillion revenue they collected in the first six months of 2024.

A breakdown of the figures shows that in January 2024, out of the total revenue of N2.068 trillion, the cost of collection was N78.30 billion; in February, out of a total revenue of N2.326.149 trillion, the cost of collection was N66.46 billion; and in March, with a total revenue of N1.868 trillion, the collection cost was N69.54 billion.

The report says in April, while the total revenue of N2.192 trillion was collected, the agencies received N80.517 billion as the cost of collection.

In May, out of a total revenue of N2.32 trillion, the cost of collection was N76.647 billion, while in June, the total cost of collection was N92.112 billion, from a revenue of N1.354 trillion.

At the moment, the FIRS receives 4% of non-oil revenues; the NUPRC gets 4% of royalties, rents, and other revenues from the oil and gas sector; while the NC) receives 7% of customs duties and levies.

The issue of the high cost of revenue collection in the country has been a contentious one, with calls for a review of the amount the agencies receive as the cost of revenue collection.

In fact, at the May 2024 FAAC meeting, state commissioners of finance expressed displeasure at the amount going to the revenue-collecting agencies as the cost of collection, which they said is denying them a substantial portion of the revenue. They say at some point, no state receives as much as what some of these agencies receive.

For example, in January 2024, FIRS received N43.35 billion as the 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.

The argument of the state commissioners is that with the improvements in technology, the process of collection has been made easier.

Chairman of the Presidential Committee on Tax Policy and Fiscal Reforms, Mr. Taiwo Oyedele, obviously aligning with the argument that there is a need to bring down the amount that goes to the revenue-collecting agencies, announced recently that the committee had proposed the reduction of revenue collection costs to one percent or below.

Oyedele said these costs were too high compared to countries like South Africa, which generated much higher taxes at lower costs of collection.

The committee is also proposing the harmonization of revenue collection under one agency as one of the ways of ensuring more efficient revenue collection and reduction in the cost of collection.