The Federal Government has announced the immediate end of the long-standing practice that allows revenue-generating agencies to retain a portion of the funds they collect as a cost of collection.
Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, disclosed this in Abuja yesterday during the unveiling of the National Development Update. He said the move is part of President Bola Tinubu’s broader fiscal reforms aimed at improving transparency and ensuring more funds flow into the Federation Account for equitable distribution among the federal, state, and local governments.
Edun explained that although Nigeria’s total revenue has increased, substantial portions have historically been withheld by agencies such as the Federal Inland Revenue Service (FIRS), the Nigeria Customs Service (NCS), and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) as collection costs—without significant visible impact on national development.
According to him, “Funds have flowed to the Federation Account, but the efficiency of that spending is critical. We have been mandated by His Excellency, Mr. President, to take a look at deductions, not just those for the cost of collection, but deductions generally. During the last FAAC allocation, most of those deductions were removed once and for all.”
He added that the new policy aligns with the constitutional provision that all revenues collected must first be paid into the Federation Account before being shared.
The finance minister also highlighted the government’s ongoing social protection programmes under the Renewed Hope Agenda, stressing their importance in cushioning the effects of ongoing economic reforms.
Edun acknowledged that while the reforms have temporarily raised the cost of living, measures are in place to protect vulnerable citizens through direct cash transfers. “By the end of October, we will have covered about 10 million households, reaching 50 million Nigerians. The commitment is to have completed 50 million households before the end of the year,” he said.
The new policy effectively ends the traditional funding model for key revenue agencies. For instance, the NUPRC previously retained about four percent of royalties, rents, and other earnings it collected for the Federation Account. Similarly, the FIRS kept N254.82 billion in 2024 and is projected to retain N43.83 billion for the first half of 2025 as a cost of collection.
Until recently, the Nigeria Customs Service received seven percent of collections from the Federation Account. However, this was replaced in August 2025 by a four percent Free on Board (FOB) levy on imports, following a directive by the House of Representatives—now serving as its primary funding source.
Edun affirmed that these reforms would ensure greater accountability and a more efficient use of public funds across all levels of government.
