The Federal Inland Revenue Service (FIRS) has emerged as the primary source of revenue for Nigeria, significantly surpassing oil contributions. Under Zacch Adedeji’s leadership, FIRS has implemented strategic reforms leading to substantial increases in tax revenue, effectively supporting government fiscal stability. The agency’s rising contributions, coupled with supportive government policies, reflect a successful transition in the nation’s revenue generation efforts, emphasizing the importance of tax in the economic diversification strategy.
Prior to Nigeria’s independence in 1960, agriculture was the economic backbone, with regions relying on agricultural exports such as groundnuts, cocoa, rubber, and palm oil. However, the discovery of crude oil in 1956 transformed the national revenue landscape, positioning oil as the primary source of revenue and leading to the Nigerian National Petroleum Corporation (NNPC) being the focus of government fiscal planning.
Over time, the once-reliant focus on oil revenues has diminished, as evidenced in the monthly meetings of the Federation Account Allocation Committee (FAAC). The Federal Inland Revenue Service (FIRS) has emerged as the principal contributor to fiscal stability, accounting for nearly 70% of total revenues shared by all government tiers as of 2024.
In January 2024, out of a total of N2.068 trillion transferred to the Federation Accounts, FIRS contributed N1.275 trillion, representing over 50% of the total revenue. There has been further growth in tax collection, with contributions increasing throughout February, March, April, and May, consistently outperforming NNPC and other revenue sources.
As of June 2024, FIRS’s contribution peaked at N2.841 trillion from a total of N3.5 trillion shared, highlighting the agency’s critical role in revenue generation. The continuous upward trend in FIRS’s contributions continued into the subsequent months, reinforcing its position as the leading revenue source for the government.
The Accountant General of the Federation, Dr. Oluwatoyin Madein, praised FIRS’s growth, stating that tax revenue is now the foremost source of revenue for the Federation. This shift reflects a growing reliance on FIRS for fiscal planning and underscores the importance of accurate revenue projections for maintaining fiscal discipline.
The successful revenue collection by FIRS results from strategic administrative and process reforms instituted under Zacch Adedeji’s leadership. By prioritizing a customer-centric approach, FIRS has improved taxpayer relations and streamlined tax payment processes, leading to significant enrollment growth in its tax administration platform.
The transformation at FIRS has also garnered recognition from business leaders, indicating that the agency has evolved to meet business needs through enhanced services and technology integration. The recent fiscal improvements are attributed to President Bola Tinubu’s key economic policies, which have facilitated the agency’s record revenue achievements.
Looking forward, FIRS aims to increase the tax-to-GDP ratio to 18% over the next three years without imposing additional burdens on taxpayers. This ambitious target aligns with the agency’s ongoing commitment to efficient revenue collection and fiscal responsibility.
As FIRS continues to display impressive revenue growth, it is essential to recognize the vital role that tax revenue plays in financing government initiatives. Approximately 70% of the funds disbursed at FAAC meetings originate from taxes collected by FIRS, underscoring its significance in national financial planning.
President Tinubu’s leadership has been pivotal in enabling states to access substantially increased FAAC allocations, resulting in elevated revenue for local governments. This upward trajectory in fiscal distribution is a testament to effective governance and reinforces the need for ongoing tax reforms to sustain economic diversification.
In summary, the Federal Inland Revenue Service (FIRS) has become the mainstay of Nigeria’s tax revenue collection, replacing oil revenues as the primary fiscal source for the government. Under Zacch Adedeji’s leadership, FIRS implemented significant reforms resulting in enhanced taxpayer engagement and substantial revenue growth. The agency’s contributions are vital for national fiscal stability, with President Tinubu’s policies facilitating remarkable increases in allocations to all tiers of government.
Original Source: businessday.ng
