Nigeria’s shift from oil dependency to tax revenue, primarily through the FIRS, marks a significant transition in its fiscal dynamics. Under Zacch Adedeji, FIRS has become the leading revenue source, contributing an unprecedented 70% of shared government revenues in 2024, signaling a new era in economic management and diversification.
Prior to Nigeria’s independence in 1960, agriculture was the backbone of the economy, with regions relying heavily on agricultural exports. The discovery of crude oil in 1956 shifted this reliance, making oil the primary revenue source, particularly through the Nigerian National Petroleum Corporation (NNPC). However, as oil revenue has dwindled, focus has shifted to the Federal Inland Revenue Service (FIRS), now viewed as the main contributor to Nigeria’s fiscal health.
The monthly revenue shared at the Federation Account Allocation Committee (FAAC) has increasingly depended on FIRS, which under Zacch Adedeji’s leadership, accounted for about 70% of the government’s total revenue collections in 2024. For instance, in January, FIRS generated N1.275 trillion of the N2.068 trillion shared, showcasing its significant role.
FIRS’s contributions continued to rise in February and through subsequent months, consistently accounting for more than 50% of total revenues shared with state and local governments. Notable contributions included N1.491 trillion in February and N1.571 trillion in May, while oil contributions from NNPC have significantly declined.
By analyzing revenue contributions through the first half of 2024, we see a robust reliance on tax revenues. FIRS accounted for N2.841 trillion out of N3.5 trillion shared in the last month of the first half, showcasing its critical role in government planning and fiscal stability across all tiers of government.
Reflecting on the impressive contributions from FIRS, the Accountant General of the Federation emphasized that tax revenue is now the primary source for shared government revenues. This transformation points to effective revenue mobilization strategies and reformed processes that prioritize taxpayer engagement and transparency.
The significant increase in FIRS’s tax collections stems from administrative reforms intended to enhance taxpayer relations and improve collection efficiency. Under Adedeji’s vision, the agency transitioned towards a customer-centric approach, simplifying tax payments and removing barriers.
This strategic shift led to a record enrollment of over 182,724 new taxpayers in 2024, illustrating renewed public trust in the agency’s operations. The FIRS’s focus on technology and alignment with business needs has transformed it into a more supportive entity for economic growth.
The growth in tax revenue signifies a commitment to diversify away from oil dependence, with 75% of total revenues now stemming from non-oil sectors. This diversification aligns with the President’s policies aimed at strengthening fiscal foundations through subsidy removal and exchange rate unification.
Despite the impressive achievements, Adedeji looks towards future growth, aiming to increase the tax-to-GDP ratio to 18% within three years without placing additional burdens on taxpayers. He stresses the importance of data-driven approaches for sustaining revenue growth and improving administrative processes.
For 2025, FIRS aims to collect N25.2 trillion in taxes, boosting fiscal capacities across government levels. The success seen in the tax system highlights the need for support for proposed tax reforms to ensure effective domestic revenue mobilization in Nigeria.
Each month, approximately 70% of FAAC allocations derive from tax revenues collected by FIRS, illustrating its central role in fiscal distributions among federal, state, and local governments. Under President Tinubu’s administration, states have seen their FAAC allocations nearly triple, further emphasizing the positive impact of effective tax policies and leadership on revenue generation.
The Federal Inland Revenue Service (FIRS) has emerged as a vital player in Nigeria’s fiscal stability, surpassing oil revenue contributions significantly in recent months. The organization’s transformation under Zacch Adedeji emphasizes taxpayer engagement and systemic reforms, resulting in record collections that now account for the majority of government revenue. The shift towards tax-driven revenue presents a foundational strategy for Nigeria’s economic diversification, aligning with broader government policies aimed at fiscal sustainability and growth.
Original Source: businessday.ng
