Overview of Revenue Collection Costs in Nigeria
The Federal Inland Revenue Service (FIRS), Nigeria Customs Service (NCS), and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) have seen a significant rise in their cost of revenue collection for the first half of 2025. According to data from the National Bureau of Statistics, these agencies collectively retained N575.14bn between January and June this year, compared to N432.97bn during the same period in 2024. This marks an overall increase of 32.8 per cent.
The cost of collection refers to the statutory deductions made by revenue-generating agencies before remitting the remaining balance into the Federation Account. Under the current system, FIRS and NUPRC deduct approximately four per cent of the revenue they generate, while the NCS retains seven per cent. These percentages are key factors in the growth of retained amounts, as higher total revenues directly lead to larger deductions.
Breakdown of Agency Performance
In the first half of 2025, the FIRS recorded a cost of collection of N231.25bn, representing a 12.4 per cent increase from the N205.65bn it earned in the same period in 2024. The NUPRC saw a more substantial rise, with its cost of collection increasing to N147.06bn, up 36.1 per cent from N108.02bn in 2024. However, the most dramatic growth was observed in the NCS, which retained N196.83bn, a 64.9 per cent increase from N119.30bn in H1 2024.
This sharp increase in the NCS’s retention is likely due to higher import duty collections and a possible rebound in cross-border trade. Additionally, the weaker naira has contributed to the inflation of import tariffs in local currency terms, further boosting the amount retained by the agency.
Monthly Trends and Key Highlights
The monthly trends for 2025 show considerable fluctuations. In January, the total cost of collection stood at N84.78bn, followed by a sharp rise to N107.79bn in February. March saw a steep drop to N84.23bn, but the figure increased slightly to N85.38bn in April. May brought a rise to N101.05bn, and June reached a peak of N111.91bn, the highest monthly payout in the period.
The June spike was largely driven by the FIRS, which earned N58.59bn—its highest monthly collection cost so far in the year. This was accompanied by strong allocations to both NUPRC and NCS. March, on the other hand, was an outlier, with the FIRS receiving only N14.22bn, its lowest for the year.
Distribution Among Agencies
Among the three agencies, the NCS posted the largest year-on-year percentage increase. Its N196.83bn in H1 2025 represented 34.2 per cent of the total cost of collection, up from 27.5 per cent in H1 2024. While the FIRS retained the largest absolute amount at N231.25bn, its share of the total fell from 47.5 per cent last year to 40.2 per cent this year. Meanwhile, NUPRC’s share rose slightly from 24.9 per cent to 25.6 per cent in the same period.
The scale of the NCS’s increase means that its seven per cent retention rate now provides significantly more operational funding than in previous years. This trend highlights the growing financial independence of the agency and its ability to operate with greater autonomy.
Fiscal Implications and Government Response
The sustained rise in the cost of revenue collection has important fiscal implications, especially given the Federal Government’s increasing debt service obligations and pressing capital funding needs. Since the deductions are based on a percentage of total revenue, the amounts retained grow automatically when revenues rise, regardless of any efficiency improvements. While this structure encourages agencies to maximize collections, it also reduces the net distributable revenue available to federal, state, and local governments via the Federal Account Allocation Committee (FAAC).
In response to these concerns, the government has initiated a review of deductions and revenue retention practices by major revenue-generating agencies. This move aims to boost public savings, improve spending efficiency, and unlock resources for economic growth. The agencies under review include the FIRS, NCS, NUPRC, the Nigerian Maritime Administration and Safety Agency, and the Nigerian National Petroleum Company Limited.