The rising 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 become a contentious issue, particularly in light of technological advancements designed to improve efficiency. Despite significant investments in automation, these agencies received a total of ₦924.73 billion in 2024 as their share of revenue collected, up from ₦472.13 billion in 2023—a 96% increase.

1. Increasing Costs Despite Technology Investment:

• NCS, FIRS, and NUPRC have collectively spent billions on automation and digital transformation. For example:

• FIRS allocated ₦112.46 billion in 2024 for tax automation and digital initiatives.

• NCS budgeted ₦706.43 billion, primarily for technology upgrades.

• However, the cost of collection remains disproportionately high, suggesting inefficiencies in resource allocation and potential misuse of funds.

2. Impact on States and Local Governments:

• The agencies’ share of revenue collection significantly impacts allocations to states and local governments. In January 2024 alone:

• FIRS retained ₦43.35 billion, exceeding the total allocations received by many states.

• The total cost of collection (₦78.3 billion) surpassed the gross allocations received by entire geopolitical zones like the North-Central (₦55.58 billion) and South-East (₦47.75 billion).

3. Conflict of Interest and Core Mandates:

• The model of allowing agencies to retain a percentage of revenues creates a perverse incentive:

• Agencies prioritize revenue generation over their broader mandates, such as trade facilitation (NCS) and regulatory oversight (NUPRC).

• Critics argue this model encourages extravagance, opacity, and potential corruption.

4. Suggestions for Reform:

• Performance Bonuses: Replace the current percentage-based retention model with performance bonuses to incentivize efficiency.

• Unified Revenue Collection: The Presidential Fiscal Policy and Tax Reform Committee proposed consolidating revenue collection into a single agency and reducing the retention rate to 1% or less.

• Transparency and Accountability: Greater oversight of expenditures to curb excessive spending on office buildings, vehicles, and staff welfare.

• Benjamin Ogbeide (CITN): Advocates for performance-based incentives rather than a fixed share of revenue, emphasizing that this would align agency goals with national economic priorities.

• Agora Policy Report: Highlights that the cost-of-collection model diverts focus from crucial functions, such as improving tax compliance and regulatory enforcement.

While the increased revenues generated by these agencies are commendable, the escalating costs of collection undermine their efficiency and limit funds available for other levels of government. A reform of the revenue collection framework is essential to ensure sustainable and equitable resource distribution, leveraging technology to minimize costs and foster accountability.