Nigeria has witnessed a decisive shift toward tax revenue as the primary source of government funding, with the Federal Inland Revenue Service (FIRS) surpassing oil contributions. Under Zacch Adedeji’s leadership, FIRS has streamlined operations and focused on taxpayer engagement, significantly increasing its collected revenue. This transformation is attributed to strategic reforms and supportive government policies, positioning FIRS as a vital contributor to national fiscal stability and economic diversification.
Before Nigeria’s Independence in 1960, agriculture was the primary driver of its economy, greatly influencing regional wealth. The northern regions thrived on groundnut pyramids, while the west relied on cocoa exports, and the east benefitted from rubber and palm oil. However, the discovery of crude oil in 1956 shifted the economic focus, turning oil revenue into a significant contributor to national financing, leading to a reliance on the Nigerian National Petroleum Corporation (NNPC).
The traditional dependence on NNPC has diminished, with the Federal Inland Revenue Service (FIRS) becoming the cornerstone of Nigeria’s fiscal stability. At recent Federation Account Allocation Committee (FAAC) meetings, the spotlight shifted towards FIRS as it garnered almost 70% of the total revenues collected by the government. In January 2024, out of N2.068 trillion accrued, over 50% came from FIRS, amounting to N1.275 trillion.
As FIRS’ contributions increased, its role in revenue generation became more prominent compared to other agencies. In February, for instance, FIRS raised its contribution to N1.491 trillion, exceeding 50% of the total N2.3 trillion collected. Continuing into March and April, FIRS contributed N1.061 trillion and N1.187 trillion, respectively, further solidifying its position as the main revenue source for the federal, state, and local governments.
By June 2024, FIRS made a significant contribution of N2.841 trillion, which represented a remarkable proportion of the N3.5 trillion shared among the tiers of government. This growth trajectory persisted into July and August, with contributions reaching N2.295 trillion and N1.87 trillion respectively. The patterns observed indicate a shift in fiscal reliance towards tax revenues, now recognized as the primary source of income for Nigeria.
Dr. Oluwatoyin Madein, the Accountant General of the Federation, highlighted the importance of tax revenues from FIRS, stating, “Tax revenue, as of today, is the highest source of revenue accruing to the Federation.” FIRS had to adapt strategically to cultivate strong taxpayer relations and streamline operations, which led to the enrollment of over 182,724 new taxpayers in 2024.
Improvements instigated by FIRS under the leadership of Zacch Adedeji involve making tax processes more customer-centric. By categorizing taxpayers based on their turnover and easing the audit processes, FIRS successfully transformed its operational model into one that prioritizes service delivery to taxpayers. This shift in approach has increased taxpayer trust in the agency.
The impressive revenue growth can largely be attributed to two economic policies enacted by President Bola Tinubu: the removal of fuel subsidy and the unification of the exchange rate. These measures have established a more conducive fiscal environment for tax collection, and Adedeji acknowledges the President’s vision for fostering a more diversified economic landscape beyond crude oil reliance.
Looking ahead, FIRS aims to boost Nigeria’s tax-to-GDP ratio to 18% within three years without placing an undue burden on taxpayers. Addressing the necessity of maintaining solid data and merit-based revenue systems, Adedeji has laid out ambitious targets for future revenue collection. FIRS anticipates raising N25.2 trillion in tax revenue for 2025, enhancing financial provisions for all tiers of government.
In conclusion, Nigeria’s fiscal landscape is undergoing a profound transformation as the Federal Inland Revenue Service emerges as the principal source of government revenue, supplanting the previous dependency on oil revenues. This paradigm shift not only underscores the importance of tax revenues for national stability but also highlights the successful reforms implemented under leadership. The agency’s ambitious future goals aim for a diversified economy driven by robust tax collection methodologies.
Original Source: businessday.ng
