The Federal Government (FG) has announced the permanent removal of deductions for the cost of revenue collection previously paid to key agencies, including the Federal Inland Revenue Service (FIRS), the Nigerian Customs Service, and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
Minister of Finance and Coordinating Minister of the Economy, Wale Edun, disclosed this significant fiscal reform yesterday in Abuja.
Speaking at a panel session following the launch of the World Bank’s October 2025 Nigeria Development Update, titled “From Policy to People: Bringing the Reform Gains Home,” the minister stated that the move aims to drastically improve fiscal transparency and ensure more resources are available for the three tiers of government.
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According to Edun, the action was a direct result of a presidential directive.
He noted that multiple layers of deductions traditionally made before the sharing of proceeds from the Federation Account Allocation Committee (FAAC) have been scrapped to achieve a clearer financial picture.
“We have been mandated by His Excellency, President Bola Tinubu to take a look at deductions, not just the deductions for cost of collection, but deductions generally,” Edun explained.
“And I must inform you that even during the last FAAC allocation, most of those deductions have been removed once and for all.”
The minister stressed that the reform is a core part of the government’s broader strategy to strengthen fiscal governance and ensure that federal and subnational governments have more predictable and higher revenues to finance development projects.
Under the traditional fiscal structure, revenue-collecting agencies like FIRS and Customs retained a percentage of the revenue they collected as a “cost of collection.”
Critics have long argued that this practice reduced the net amount distributed via FAAC and encouraged administrative inefficiency.
The minister confirmed that the government is currently reviewing all forms of deductions from gross revenues, including refunds and interventions, to ensure every naira collected is used efficiently for national development.
“The constitution says that funds should flow from revenue-collecting agencies into the federation account and be distributed according to the then formula, and that is what is now being done,” Edun said.
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He added that Nigerians can expect “greater transparency, efficiency, funding for development at the federating units flowing from the states to the local governments.”
This major cleanup of the deduction structure is anticipated to lead to a much stronger fiscal situation, characterised by increased accountability, transparency, and efficiency of spending across all levels of government.
