NRS, NUPRC take N123.5bn as cost of revenue collection rises

The Nigeria Revenue Service (NRS) and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) received a combined N123.54 billion as cost of collecting Federation Account revenue distributed to the three tiers of government in June 2026, putting a spotlight on the rising cost of mobilising government revenue.

The N123.54 billion represented about 3.6 per cent of the N3.40 trillion shared by the Federal Government, states and local governments from revenue generated in May.

The NRS received N84.69 billion, while the NUPRC received N38.85 billion, according to Federation Account Allocation Committee (FAAC) data released by the National Bureau of Statistics.

The collection fees increased by N9.78 billion, or 8.6 per cent, from N113.76 billion recorded in the previous month, even as total distributable revenue rose from N3.18 trillion to N3.40 trillion.

The increase means the cost of collection grew faster than the overall FAAC pool during the period, raising questions about the efficiency and economics of revenue mobilisation at a time when governments at all levels are under pressure to expand their fiscal capacity.

The June distribution comprised N2.65 trillion in statutory revenue and N743.67 billion in Value Added Tax (VAT). The Federal Government received N818.68 billion, states N759.14 billion and the 774 local government councils N534.28 billion, while oil-producing states received N188.13 billion as 13 per cent derivation revenue.

The cost of collection is deducted before FAAC distributions are made, meaning the fees paid to revenue-collecting agencies reduce the resources ultimately available to fund government expenditure.

For Nigeria, the issue is significant because governments are simultaneously struggling with large financing gaps, infrastructure needs and rising debt-service obligations. Every naira retained as a collection cost is a naira that does not enter the distributable pool for salaries, roads, healthcare, education and other public spending.

The increase also comes amid efforts to strengthen domestic revenue mobilisation through tax reforms, digitisation and wider taxpayer compliance.

Nigeria’s subnational governments generated N5.15 trillion in internally generated revenue in 2025, up 40.93 per cent from N3.65 trillion in 2024, indicating that governments are increasingly looking beyond Federation Account transfers for additional revenue.

The revenue-collection cost therefore needs to be assessed alongside the gains from improved mobilisation. Higher collection fees may be justified where they generate significantly larger and more sustainable revenue, but the efficiency of the system becomes increasingly important as government seeks to extract more resources from an economy already facing pressure from high operating costs.

The N123.54 billion collected by the NRS and NUPRC in one month illustrates the scale of the financial infrastructure required to mobilise public revenue.

For policymakers, the economic question is whether improvements in tax and petroleum revenue collection are producing enough additional income to outweigh the rising cost of collecting it. In an economy where governments need every available naira for productive investment, reducing leakage and improving collection efficiency could be as important as raising more revenue.