The Federal Government has unveiled plans to permanently end the practice of deducting revenue collection costs paid to agencies such as the Federal Inland Revenue Service, the Nigeria Customs Service, and the Nigerian Upstream Petroleum Regulatory Commission, among others.

Minister of Finance and Coordinating Minister of the Economy, Wale Edun, announced this on Wednesday in Abuja during a panel session following the launch of the October 2025 edition of the World Bank’s Nigeria Development Update titled “From Policy to People: Bringing the Reform Gains Home.”

Edun explained that, following a presidential directive, multiple layers of deductions previously made before disbursing proceeds from the Federation Account Allocation Committee have been abolished.

He said the move is aimed at enhancing fiscal transparency and ensuring that a larger share of national revenues reaches the three tiers of government.

“Funds have flowed to the Federation Account, but the point is this: efficiency of that spending is critical We have been mandated by His Excellency, President Bola Tinubu to take a look at deductions, not just the deductions for cost of collection, but deductions generally, as we saw, when you look at the gross figure, you see all kinds of deductions before you get to the net distributable figure, which goes to the federal state and local governments. And I must inform that even during the last FAC allocation, most of those deductions have been removed once and for all,” he said.

The minister stated that the reform is part of the government’s wider effort to bolster fiscal governance, increase transparency, and provide federal and subnational governments with more reliable revenues to support development projects.

He further noted that the government is reviewing all deductions from gross revenues, including refunds and intervention funds, to ensure that every naira collected is effectively utilized for national development.

“The constitution says that funds should flow from revenue-collecting agencies into the federation account and be distributed according to the then formula, and that is what is now being done. And we can expect it’s a work in progress in terms of the review of the different deductions, but what we can expect is greater transparency, efficiency, funding for development at the federating units, the federal government and the states, and of course, flowing from the states to the local governments. So we are looking at a much stronger fiscal situation. We are going to be looking at much stronger accountability, transparency, and efficacy of spending. We are cleaning that up because efficiency and transparency are key to achieving fiscal sustainability,” Edun explained.

Under Nigeria’s fiscal framework, agencies like the Federal Inland Revenue Service and the Nigeria Customs Service have traditionally retained a portion of the revenues they collect as a “cost of collection.” Critics have long contended that this practice fosters inefficiency, inflates administrative costs, and reduces the funds available for distribution to federal, state, and local governments through FAAC.

Earlier, World Bank Lead Economist for Nigeria, Samer Matta, noted that although Nigeria’s gross revenue collections surged significantly in 2025, a substantial share was being lost to various deductions, many of which did not directly support national development.

In presenting the economic overview, Matta highlighted that FAAC-distributed revenues increased from about 5 per cent of GDP in 2023 to nearly 9.5 per cent in the first eight months of 2025, driven by stronger oil receipts and non-oil tax collections.