Efficiency at a price
Nigeria's key revenue collection agencies spent $559 million on operational costs between January and November 2024, accounting for 2.51% of the total revenue collected.
Despite improved technology that has made revenue collection more efficient, the cost of revenue collection by Nigeria's key agencies—Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS), and Nigerian Upstream Petroleum Regulatory Commission (NUPRC)—has continued to rise. The three agencies jointly received a total of ₦924.73 billion ($559 million) as part of the cost of revenue collection between January and November 2024. Between January and November 2024, these agencies collectively received ₦924.73 billion for operational costs, accounting for 2.51% of the total ₦36.952 trillion collected. In 2023, they collected ₦22.344 trillion, with a cost of ₦472.13 billion, or 2.11%.
Several agencies in Nigeria have cultivated a habit of testing and discarding technology. From INEC to Customs and the FIRS, these agencies continuously allocate large budgets to acquire technology to ease their operations. While acquiring technology is not inherently bad, it becomes concerning when this practice perpetually consumes national revenue without delivering commensurate value. The cost of revenue collection should decrease with each new piece of technology acquired.
It can be argued that the rising cost of collection incurred by these agencies is justified by increased revenue generation and serves as a morale boost to ensure revenue targets are met (and exceeded). However, this becomes troubling when citizens and businesses see no positive impact. For example, improved efficiency in the FIRS aims to enable businesses and citizens to pay taxes seamlessly, resolve tax disputes promptly, and prevent tax officials from arbitrarily assigning tax debts to individuals. Yet, this is still not the case.
In its pursuit of meeting revenue targets, Customs frustrated the implementation of the six-month import duty waiver from the federal government meant to ease food prices. The Nigeria Customs Service’s website currently prioritises revenue generation over efficient trade facilitation and national security in its mission statement—a detail that speaks volumes.
States, which directly impact citizens’ social well-being, should be prioritised in revenue sharing. The proposed tax reforms that streamline and eliminate the revenue generation duties of certain agencies are a step in the right direction. Unfortunately, these reforms will also necessitate additional technology, further expanding Nigeria’s already bulging bouquet of administrative software.
A key provision of the Tinubu administration’s Tax Reform Proposals is the establishment of the Nigeria Revenue Service (NRS), which would fully replace the FIRS and assume the tax collection responsibilities of all other federal government agencies. Modelled after the UK’s HMRC (His Majesty’s Revenue and Customs), the NRS is designed to make tax collection more effective and efficient while allowing other agencies to focus on their core law enforcement duties. However, President Tinubu must overcome opposition to the reform from politicians in Northern Nigeria and secure the National Assembly’s passage of the Tax Reform Bills into law before the NRS can be realised.