By Okoi Obono-Obla
Undoubtedly, the earlier report by Tribune Online—dated 16 April 2026 and written by China Nwokoji, titled World Bank Flags ‘Hidden Spending System’ Diverting Over ₦34.53tn of Nigeria’s Revenue—is no longer applicable. That report highlighted a hidden system diverting over ₦34.53 trillion of revenue collected by federal agencies, leaving only about 49% for distribution among the Federal, State, and Local Governments. However, this framework ended on 1 January 2026, when the Nigeria Revenue Service (Establishment) Act, 2025 and the Tax Administration Act, 2025, under the oversight of the Joint Tax Board, came into force.
This reform is one of the most far‑reaching fiscal innovations introduced by President Bola Ahmed Tinubu. It is bold, comprehensive, and transformative, and it truly deserves commendation.
Key Features of the Current Tax Reforms:
End of Automatic Retention:
- The previous practice that allowed agencies to retain a percentage of collected funds (the “cost of collection”) has been abolished.
- This practice had led to enormous amounts of money collected by federal agencies not being distributed to the three tiers of government—namely the Federal, State, and Local Government Area councils.
- Under the new system, all federally generated revenue is now remitted directly into the Federation Account.
Centralization of Revenue Collection:
- The Nigeria Revenue Service (NRS) is now the sole collector of federally generated revenue.
- Agencies such as the Nigeria Customs Service have been divested of revenue collection responsibilities.
Funding of the Nigeria Revenue Service:
- The NRS is authorized to retain 4% of total revenue collected (excluding petroleum royalties) for operational costs.
- This retention is subject to National Assembly appropriation, ensuring legislative oversight.
Funding of the Nigeria Customs Service:
- The Customs Service no longer retains a share of collected revenue.
- It is now funded through a 4% Free on Board (FOB) levy on imports, providing a transparent and predictable revenue stream.
Old vs. New System: A Comparison:
| Aspect | Old System | New System (2026 Reform) |
|---|---|---|
| Revenue Collectors | Multiple agencies | Nigeria Revenue Service (NRS) only |
| Funding Mechanism | Agencies retained % of collections | NRS retains 4% (excl. petroleum royalties); Customs funded via 4% FOB levy |
| Federation Account Share | ~49% remitted | 100% remitted (before NRS appropriation) |
| Transparency | Low, prone to diversion | High, with legislative oversight |
| Legal Basis | Old administrative practice | Nigeria Revenue Service (Establishment) Act, 2025; Tax Administration Act, 2025 |
Implications of the Reform:
- Transparency: Direct remittance eliminates hidden diversions.
- Efficiency: A single revenue‑collecting agency reduces duplication and leakages.
- Accountability: Parliamentary appropriation ensures scrutiny of operational costs.
- Predictability: Agencies like Customs now have a clear, independent funding mechanism.
Conclusion:The reforms mark a decisive break from opaque practices of the past. By centralizing revenue collection under the Nigeria Revenue Service and introducing structured funding mechanisms, Nigeria has taken a bold step toward fiscal transparency, efficiency, and accountability. This innovation is far‑reaching and deserves recognition as a cornerstone of President Tinubu’s economic legacy.
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