In a recent article by Dare Adekanmbi published in The Guardian, the focus is on how the Federal Inland Revenue Service (FIRS) is rapidly transforming the landscape of Nigeria’s economy.
As the nation attempts to move beyond its reliance on crude oil revenue, tax revenue has emerged as the dominant source of funds for government operations.
This evolution marks a significant change in Nigeria’s fiscal dynamics and should be highlighted as a pivotal journey toward economic diversification and stability.
Historical Context: From Agriculture to Crude Oil
Before Nigeria gained independence in 1960, agriculture was the backbone of its economy, with regions specializing in groundnuts, cocoa, rubber, and palm oil.
However, the discovery of crude oil in 1956 shifted this paradigm, leading to an economy heavily reliant on oil revenues. The Nigerian National Petroleum Corporation (NNPC) became the cornerstone of government revenue, overshadowing agricultural contributions.
The Rise of FIRS: Dominating Revenue Contributions
Fast forward to 2024, the FIRS has eclipsed NNPC’s contributions, accounting for nearly 70% of total revenue shared among federal, state, and local governments at **FAAC** (Federation Account Allocation Committee) meetings. For example, in January 2024, FIRS contributed ₦1.275 trillion, while NNPC’s share diminished to just ₦115 billion**. This trend continued throughout the year, marking a decisive shift in Nigeria’s revenue generation model.
The impressive growth of FIRS is attributed to comprehensive reforms implemented under the leadership of Dr. Zacch Adedeji. By adopting a customer-centric approach and streamlining tax processes, the agency has successfully enrolled over 182,724 new taxpayers in its Tax Pro-Max platform, representing a 25.3% increase. This remarkable growth showcases the agency’s commitment to serving taxpayers rather than treating them as adversaries.
Impact of the Tinubu Administration
The article also credits President Bola Tinubu’s administration for the significant increase in FAAC allocations. The removal of the fuel subsidy and the unification of the exchange rate have played crucial roles in bolstering tax revenue, reflecting a strong commitment to economic diversification. Under Tinubu’s leadership, states are now reportedly receiving nearly **three times the FAAC allocations compared to previous years.
FIRS is targeting to collect ₦25.2 trillion in tax revenue for 2025, emphasizing the government’s ongoing efforts to enhance fiscal stability. Achieving a tax-to-GDP ratio of **18%** within the next three years is among Dr. Adedeji’s key goals, pursued without burdening taxpayers. He advocates for robust data and merit-driven processes to sustain this upward trajectory.
Critical Outlook
While Nigeria’s economic landscape shows promising developments, the shift from oil reliance to a more diversified revenue base is critical for long-term sustainability. The successful transformation of FIRS into a more efficient and customer-focused agency is commendable but will require continuous innovation and commitment.
For the ambitious targets set forth, it is essential that both the government and the FIRS maintain transparency and accountability to foster trust and support among taxpayers. This is vital for ensuring that the burgeoning revenue can effectively meet the needs of Nigerian citizens across various levels of government.
