The Federal Government has banned revenue-generating agencies from retaining portions of collected funds, ending a longstanding practice of deductions for collection costs.
The move aims to boost transparency and ensure more funds are available for federal, state, and local governments.
Announcing the policy shift during the National Development Update in Abuja, Finance Minister and Coordinating Minister of the Economy, Wale Edun, said agencies like the Federal Inland Revenue Service (FIRS), Nigeria Customs Service (NCS), and Nigerian Upstream Petroleum Regulatory Commission (NUPRC) have been withholding significant sums for operational expenses, with little visible impact on national development.
Edun emphasized that the reform aligns with President Bola Tinubu’s directive to streamline fiscal processes.
“The Constitution mandates that all funds from revenue agencies flow into the Federation Account for distribution per the set formula. Most deductions, including those for collection costs, have been eliminated as of the last FAAC allocation,” he stated.
He noted that while Nigeria’s revenue has been increasing, deductions have reduced the net distributable funds.
The new policy ensures all revenues are channeled to the Federation Account for equitable sharing among government tiers, enhancing spending efficiency.
Edun also highlighted progress in social protection under Tinubu’s Renewed Hope Agenda, acknowledging short-term economic challenges from reforms but affirming measures to support vulnerable Nigerians.
“By October’s end, we aim to reach 10 million households, 50 million Nigerians through direct benefit transfers, using biometric identification to ensure accuracy,” he said, crediting the Nigerian Identity Management Company for its role.
Historically, agencies like NUPRC retained about 4% of royalties and rents, while FIRS withheld N254.82 billion in 2024 and is projected to claim N43.83 billion in the first half of 2025.
The NCS, previously funded by a 7% collection cost, now relies on a 4% Free on Board (FOB) levy on imports, as mandated by the House of Representatives in August 2025.
The government’s decision aims to dismantle entrenched funding mechanisms for revenue agencies, ensuring greater accountability and maximizing resources for national development.
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