Government agencies such as the Federal Inland Revenue Service, Nigerian Upstream Petroleum Regulatory Commission and Nigeria Customs Service received a combined N78.3 billion as cost-of-collection in January 2024, an amount surpassing the gross allocation of any state in Nigeria, a latest report by Agora Policy has revealed.
The total amount received by these government enterprises from the federal account allocation committee (FAAC) is almost twice what Delta State, the highest gross allocation earner for the month, got to cater for its people just reeling from a cost of living crisis.
In its report released on Monday entitled “Why Nigeria’s Cost-of-Collection Approach is no Longer Tenable”, Agora Policy stated that the FIRS received N43.35 billion as cost-of-collection for the month of January this year.
“FIRS received N43.35bn 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 N39.59bn, which means that FIRS not only received an amount more than what each of all the 36 states but also got 109.49% of the allocation of the state with the highest gross allocation,” the report stated.
Agora policy also noted that 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 period under review
Furthermore, the non-governmental organisation stated that NUPRC got N16.85 billion as its share of the cost of collection in January matching what Akwa Ibom, Delta, Bayelsa, Rivers and Lagos got as revenues from the federal account.
Cost of collection is a recent feature of Nigeria’s revenue collection and sharing formula wherein some federal agencies receive a percentage of the revenues they collect on behalf of the federation.
These costs are deducted at the monthly meetings of the FAAC before federally-collected revenues are shared to the three tiers of government and other statutory recipients.
Though there are no extant laws establishing a particular percentage, FIRS receives 4% of non-oil revenues; NUPRC gets 4% of royalties, rents and other revenues from the oil and gas sector while the Nigeria Customs Service receives 7% of custom duties and levies accordingly.
According to the Abuja-based think-tank, the cost of collection approach might have served a useful purpose at some point, recent developments show that it is a flawed idea that needs to be jettisoned.
“It enables abuse, distortions, distractions and wasteful expenditures. The utility of the approach has been overtaken. It is thus no longer tenable,” Agora Policy said.
What’s more is that the combined amount received by these agencies is even higher than the allocation given to each of the six geo-political zones in the first month of the year, a further analysis by Agora Policy revealed.
“The gross allocations to the six geo-political zones for the same month were as follows: N56.60bn for the North-East; N55.58bn for the North-Central; N76.09bn for the North-West; N47.75bn for the South-East; N141.85bn for the South-South; and N86.60bn for the South-West,” it said.
