The World Bank has revealed that Nigeria’s revenue-sharing arrangement, which allocates 4% of non-oil and oil revenues (excluding royalties) to the Federal Inland Revenue Service (FIRS), is significantly higher than what is obtainable in comparable economies such as Kenya, Ghana, South Africa, and Uganda.
This disclosure was made in the October 2025 edition of the Nigeria Development Update (NDU), titled “From Policy to People: Bringing the Reform Gains Home.” The report highlighted that Nigeria’s cost of revenue collection framework has contributed to a rise in statutory deductions, reducing the total funds available for distribution among the federal, state, and local governments through the Federation Account Allocation Committee (FAAC).
Nigeria’s Collection Cost Far Above Peers
According to the World Bank, Nigeria’s 4% cost of collection allocated to FIRS stands out as one of the highest globally.
“Nigeria’s current arrangement—allocating a fixed four percent of non-oil and oil revenues (excluding royalties) to FIRS—is significantly higher than the cost of collection in peer countries,” the report stated.
In contrast, Kenya caps its collection cost between 1% and 2% of budgeted revenues, granting bonuses only when performance targets are exceeded. Meanwhile, Uganda, South Africa, and Ghana fund their revenue agencies primarily through annual parliamentary appropriations, allowing for stronger budgetary oversight and transparency.
The World Bank cautioned that Nigeria’s current model has led to fiscal inefficiencies, reducing the resources available for essential public spending and weakening the equitable sharing of national revenue across government tiers.
Deductions Nearly Double in One Year
The report revealed that statutory deductions surged to N1.785 trillion in 2024, up from N870 billion in 2023 — a near 100% increase.
Major beneficiaries of these deductions include:
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Federal Inland Revenue Service (FIRS)
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Nigeria Customs Service (NCS)
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Nigerian Upstream Petroleum Regulatory Commission (NUPRC)
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Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA)
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North-East Development Commission (NEDC)
Agencies Received More Than Some States and Ministries
The World Bank noted that the size of these allocations was so substantial that several parastatals received more funding than some states and even key federal ministries.
“In 2024, several of these parastatals received more from FAAC than individual states collected in total revenues. Moreover, the combined allocations to these agencies exceeded the 2024 budgetary resources for pro-poor ministries such as Education (N1.589 trillion), Health (N1.336 trillion), and Poverty Alleviation (N263 billion),” the report stated.
Nigeria’s Economic Outlook Improving
Despite the fiscal inefficiencies highlighted, the World Bank’s latest NDU report acknowledged Nigeria’s economic resilience and gradual recovery.
It projected that Nigeria’s public debt could fall below 40% of GDP for the first time in over a decade. The economy reportedly expanded by 3.9% year-on-year in the first half of 2025, compared to 3.5% in the same period of 2024, driven by growth in services, agriculture, and non-oil industries.
According to the Bank, improvements in oil production, coupled with ongoing reforms in monetary and fiscal policy, have supported a more stable outlook for the Nigerian economy heading into 2026.
