Prior to Nigeria’s Independence in 1960, agriculture was the mainstay of its economy, even as reflected in the economic activities of the regions there were in the country at that time. Famous stories of the First Republic chronicled how the defunct regions were reliant on revenues from the groundnut pyramids in the North, the cocoa export receipts from the defunct West and the rubber as well as palm oil proceeds from the East.
With the discovery of crude oil in commercial quantities, beginning from Oloibiri in the present-day Bayelsa State in 1956, agriculture, over time, became supplanted by black gold in terms of contributions to national revenue pool. And not only did crude oil receipts ride the wave as far as the total collectable revenue was concerned, the Nigerian National Petroleum Corporation (NNPC), became the cornerstone entity for the three tiers of government to look up to for salvation in terms of their fiscal projections.
However, those days when the federal, states and local government councils wait zealously for revenue figures from NNPC have not only receded into the past but appear to have gone for good. At the monthly meeting of the Federation Account Allocation Committee (FAAC), focus has shifted to the Federal Inland Revenue Service (FIRS), the goose that is laying the golden egg for the fiscal stability and wellbeing of the Federation.
For those who may not know, the ‘cake’ shared monthly by the Federation is baked by four major entities: NNPC, FIRS, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), formerly known as Department of Petroleum Resources (DPR) and the Nigeria Custom Service (NCS).
Of the body of ‘bakers,’ FIRS under Zacch Adedeji has emerged the cream of the crop, singlehandedly and aggregately accounting for close to 70 percent of the total revenues collected and shared by the three tiers of government at FAAC meetings in 2024.
Out of N2.068trillion that accrued to the Federation Accounts in January 2024, tax collected by FIRS accounted for more than 50 percent with the agency’s contribution totalling N1.275trilion. The other three revenue-remitting bodies jointly raked in the balance. While oil receipts from NNPC brought N115billion, NUPRC grossed N469.8billion, just as the Nigeria Custom Service remitted N207 billion.
The contribution of FIRS to the pool grew in February by N300billion from what it brought to the account in January. From the N2.3trillion that accumulated into the account, takings by FIRS amounted to N1.491 trillion, a collection figure that was more than 50 percent of the total revenue for the month. In fact, NNPC’s contribution to the pool was just N92billion. NUPRC and NCS contributed N487billion and N254billion, respectively.
In March, FIRS contributed N1.061trillion out of N1.867 trillion in the pool and in April, the Federation Account got N1.187 trillion from FIRS out of the N2.192trillion revenue accrual. For May, out of the N2.324trillion shared by the three tiers of government, FIRS alone contributed N1.571trillion.
The last month in the first half of 2024 finished on a strong note for the Federation in terms of the size of the ‘cake’ available for sharing among the three tiers of government. Of the N3.5trillion accrual in the Federation Account for the month, FIRS accounted for N2.841trillion. Contributions from NNPC for the month was N8.3billion with NUPRC and NCS remitting N402.5billion N264 billion, respectively.
The upward trajectory of FIRS contribution to the Federation Account continued at the beginning of the second half of the year. It accounted for N2.295trillion out of N3.508trillion remitted into the Federation Account for July, representing 65.4 percent of the total haul. For August, FIRS figure for FAAC was N1.87trillion out of the N2.7trillion in the pool. In September, October, November, and December the agency’s contributions were N1.45trillion (out of N2.4trilion), N1.74trillion (out of N2.9) and N1.56trillion (out of N2.8trillion) and N1.41trillion (out of NN2.2trillion) respectively.
The significance of FIRS contributions displacing oil receipts and turning tax revenue into the country’s new ‘crude oil’ has been well situated by the Accountant General of the Federation, Dr (Mrs) Oluwatoyin Madein. At an event in Abuja, she declared: “Tax revenue, as of today, is the highest source of revenue accruing to the Federation. Therefore, at FAAC meetings, we eagerly await the numbers coming from FIRS because the performance of the agency keeps on increasing and this brings succour to all tiers of government.”
Putting FIRS contribution to FAAC revenue pool in 2024 in context, we will see how it has helped the three tiers of government to plan, project and experience fiscal stability. There is nothing like fiscal discipline except you have accurate revenue prediction. If you say you want to spend N10, that means you must assurance that the N10 will come from somewhere. This commendable collection performance is in tandem with Adedeji’s vision of making taxation the pivot of national development.
What did FIRS do differently?
The impressive revenue collection posted by FIRS is not a product of happenstance. It is the outcome of a well-thought-out strategy and process re-engineering that formed the bedrock of a cocktail of administrative and process reforms embarked upon by the agency under Adedeji. One of his key refrains is that if FIRS is going to succeed in its critical national mandate of domestic revenue mobilisation, taxpayers must be at the centre of all policies and initiatives of the agency.
The FIRS chairman summarised the restructuring and re-orientation that powered the huge revenue collection and turned it to a customer-centric agency thus: “We restructured our operations at FIRS in such a way that we are now effectively carrying out our duty of assessing, collecting and accounting for taxes. We used to have functional types of taxes, but we have since identified that the only customers we have are the taxpayers. We have, therefore, improved the way we relate with our customers by rearranging our operations based on our customers, using their turnover as the basis to categorise them into large, medium, and emerging tax groups.
“We did this to develop expertise in what we do. Secondly, to provide them with a one-stop shop for their activities. If you are in a large tax group, you only need to go to one office to pay all forms of taxes, including conducting audit and other activities. You do not need to move from one office to another again.
“We are here to serve the taxpayers. The taxpayers are not armed robbers or criminals that we will be chasing about. FIRS is also not a law enforcement organisation. We are partners in progress. The taxpayers are the trees in our vineyard. The only thing we can do is to ensure they are well watered and well pruned so they can bear good fruits for us to have big harvest.
Because of the streamlining of tax processes, the removal of hurdles in the way of tax payment as well placing a high premium on transparency and accountability, a total number of 182, 724 new taxpayers, representing 25.3% increase, voluntarily enrolled on the agency’s tax administration platform called Tax Pro-Max in 2024. It is the single biggest leap in the number of firms in the tax net in recent history of the tax agency. This not only underscores the level of trust reposed in the new processes emplaced at the agency. It also lends credence to Adedeji’s sharp vision of making the agency one of the world’s most efficient and trusted revenue authorities.
The president, Lagos Chamber of Commerce and Industry (LCCI), Mr Gabriel Idahosa, testified to the unusual transformation witnessed at FIRS. Idahosa commended the agency for conducting reforms that align with the needs of businesses, particularly singling out the increasing use of technology in tax administration as well as the shift in mental geography of tax officers from being mere tax collectors to “actively providing services that enhance business operations.”
One key import of the unprecedented growth in tax revenue for the Federation is that the non-oil sector account for about 75% of the total haul. This clearly signposts the commitment of the President Bola Tinubu-led administration to truly diversify the economy from its mono-product, crude oil. According to Adedeji, all accolades for the impressive tax collection by FIRS should go to President Tinubu. Of a truth, two key policies by the President, namely the removal of fuel subsidy and unification of the exchange rate gave fillip to the record tax revenue collection by FIRS. The negative consequences of not setting these economic fundamentals at the time President Tinubu did would have unbearable for an economy that was already in ICU before President Tinubu assumed office.
Despite the laudable achievements of the agency since assumption of office in September 2023, Adedeji is not resting on his oars. He believes the success recorded so far is just a beginning with his key fiscal focus being on growing Nigeria’s tax-to-GDP ratio to 18% in the next three years. This, he believes, is achievable without putting additional burden on the taxpayers but by making the pie bigger to collect more revenue for government at all levels to be able to meet their obligations to the citizenry.
For him, there is irreducible minimum if the upward tax revenue trajectory must continue. “We can play with everything, but what we cannot afford to play with, if we are going to succeed, are data and merit,” he once said.
It needs to be said that prior to Adedeji’s leadership, the agency’s contribution to FAAC had been growing. However, the coming of Adedeji has moved the quantum significantly higher through a potpourri of internal administrative and process reforms he introduced, leading to simplifying of tax payment.
For 2025, FIRS is targeting to collect N25.2 trillion in tax revenue and this means more money for the three tiers of government to meet their needs. This is another reason why there should be no opposition to the tax reform bills currently before the National Assembly. If FIRS could post these huge records in a shortly time, breaking its own records and setting higher target and goals, a tax system that is modernised and fit for purpose can only add impetus to the task of domestic revenue mobilisation given to FIRS.
For those asking the question: where does tax revenue by FIRS go? The answer is this: every month that the federal, states and local government councils gather in Abuja for FAAC meeting and money shared accordingly, about 70% of that money comes from the tax revenue FIRS collects from taxpayers.
For perceptive observers, President Tinubu deserves to be hailed for the huge jump in shareable FAAC allocations which continue the upward swing since his assumption of office. All the states now collect almost three times of what they used to get as FAAC allocation prior to the coming of the Tinubu administration. Every month, managers of the three tiers smile to the banks, thanks to the President’s courageous leadership.
Adekanmbi is the Special Adviser on Media to the executive chairman, Federal Inland Revenue Service (FIRS).
