FIRS: Tax Revenue as Nigeria’s New Economic Mainstay

Nigeria’s economy is increasingly transitioning from reliance on crude oil to tax revenue, with FIRS accounting for approximately 70% of total government revenue in 2024. Under Zacch Adedeji’s leadership, FIRS has successfully implemented customer-centric reforms that led to significant increases in taxpayer enrollment and contributions. The agency aims to further enhance the tax-to-GDP ratio without additional taxpayer burden, with ambitious revenue targets set for the coming years, emphasizing a commitment to economic diversification.

Before Nigeria’s independence in 1960, the economy relied heavily on agriculture, with significant contributions from regions through crops like groundnuts in the North, cocoa in the West, and rubber and palm oil in the East. The discovery of crude oil in 1956 altered this landscape, supplanting agriculture and establishing the Nigerian National Petroleum Corporation (NNPC) as the principal source of revenue for government fiscal projections.

However, the prominence of NNPC has diminished, giving way to the Federal Inland Revenue Service (FIRS) as the primary driver of revenue collection. In 2024, FIRS accounted for approximately 70% of total revenue shared among federal, state, and local governments, a significant shift from oil dependence.

In January 2024, total Federation Account revenue reached N2.068 trillion, with FIRS contributing over N1.275 trillion. This trend continued, with FIRS collecting more than 50% in subsequent months, highlighting its vital role in the fiscal health of Nigeria.

FIRS’s contributions reached N1.491 trillion in February and N1.061 trillion in March, indicating robust growth. By April, FIRS had increased its share to N1.187 trillion out of N2.192 trillion total revenue. The upward trajectory continued, demonstrating FIRS’s capacity to stabilize government revenues effectively.

By mid-2024, FIRS contributed N2.841 trillion from a N3.5 trillion total, signaling its dominance in the revenue-sharing sphere. The contributions were strong during subsequent months, averaging substantial amounts that testify to FIRS’s importance in Nigeria’s economy.

Under the leadership of Zacch Adedeji, FIRS has adopted customer-centric strategies aimed at streamlining tax collection and enhancing taxpayer relations. This has encouraged voluntary enrollment in tax programs, with an increase of over 182,724 new taxpayers in 2024, showcasing public trust in the reforms.

The reforms have transformed FIRS from a traditional tax collector to a service-oriented organization, focusing on facilitating taxpayer compliance rather than enforcement. Mr. Gabriel Idahosa, President of the Lagos Chamber of Commerce and Industry, acknowledged FIRS’s advancements in technology and service provision for businesses.

The shift toward tax revenue marks a commitment by President Bola Tinubu’s administration to diversify Nigeria’s economy beyond oil dependency. Economic policy changes, such as fuel subsidy removal, have positively impacted tax revenue streams.

Adedeji emphasized that the agency’s recent success is just the beginning, with plans to raise Nigeria’s tax-to-GDP ratio to 18% within three years without burdening taxpayers further. He recognizes the necessity of data integrity and merit in achieving tax revenue growth.

For 2025, FIRS targets a remarkable N25.2 trillion in tax revenue, signaling intentions to provide ample funds for the various levels of government. Therefore, the ongoing tax reform bills under consideration are crucial to reinforcing Nigeria’s revenue infrastructure.

The revenue generated by FIRS significantly supports the Federation Account and provides critical funding for federal, state, and local governments. Observers agree that the success attributed to President Tinubu’s leadership has greatly enhanced revenue allocations across the nation, benefitting all levels of government.

The transition from oil revenues to taxation as Nigeria’s primary financial resource signifies a pivotal change in the country’s economic strategy. Under Zacch Adedeji’s leadership, FIRS has revolutionized tax collection, promoting voluntary compliance and establishing itself as the most influential revenue-generating body in Nigeria. Moreover, the reforms initiated under President Bola Tinubu’s administration facilitate ongoing fiscal stability and governmental support across various tiers. Overall, the growth in tax revenues represents a commitment to diversifying the Nigerian economy and enhancing public financial management.

Original Source: businessday.ng