In a bid to propel the Federal Government’s Internally Generated Revenue (IGR), and reduce dependence on costly debts, the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, has announced an ambitious plan to increase the Federal Government’s Internally Generated Revenue (IGR) by a staggering 77%.
This announcement was made during the 2024 Strategic Management Retreat of the Federal Inland Revenue Service (FIRS) held in Abuja on Wednesday.
The Minister emphasized the government’s strategic shift from relying on expensive debts, highlighting the pivotal role of tax revenue in funding essential infrastructure and robust social safety nets for ordinary Nigerians.
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“We are projecting a 77% increase in IGR. Our revenue as a percentage of Gross Domestic Product (GDP) is low at below 10%. It should be much higher. Government needs so much to spend on infrastructure and social services. The idea is to shift from expensive debts to domestic revenue mobilization,” he said.
Notably, Edun had previously mentioned that since the removal of the fuel subsidy, the Federal Government has been generating over N1 trillion monthly, putting more money into the purse of governments. A 77% increase suggests an ambitious target of approximately N1.77 trillion monthly.
At the end of the preceding year, the three tiers of government shared about N1.13 trillion in revenue made in December 2013, setting the stage for the government’s optimistic revenue projections for the current year.
The FIRS, responsible for generating up to 70% of government revenues, is banking on voluntary tax compliance and a revamped organizational structure unveiled during the retreat to achieve the ambitious N19.4 trillion collection target for 2024.
“We want to use the new structure to drive voluntary compliance because the focus cannot be on litigation and investigation. The real strategy is to drive voluntary compliance, and there will always be consequences for non-compliance, and that is where this structure is going,” Zacch Adedeji, FIRS Executive Chairman, said while discussing the new structure and revenue performance at the retreat.
The new organizational structure, set to commence in February 2024, aims to revolutionize tax administration in a modernized and digitized manner.
Adedeji highlighted a technology-based, customer-centric approach designed to streamline processes, enhance efficiency, and meet the evolving needs of taxpayers. He said there is going to be a comprehensive approach to taxpayer services, tailoring services to specific taxpayer segments to simplify the taxpayer experience.
“The structure advocates for a comprehensive approach to taxpayer services, consolidating our core functions and support under one umbrella. By tailoring our services to specific taxpayer segments, we aim to simplify the taxpayer experience. No more complexities, no more overlaps — just a seamless and user-friendly interaction for every taxpayer.
“In a groundbreaking move, we are shifting away from traditional tax categorization. Instead of maintaining different departments for distinct tax categories, the new structure formulates taxpayer segments based on thresholds. This tailored approach ensures that taxpayers are guided and serviced according to their specific needs, eliminating confusion and redundancy in tax administration,” he said.
He said that a meticulous approach would be taken in the reformation, underpinning the FIRS’ dedication to creating a taxpayer-friendly environment in line with global best practices, thereby positioning Nigeria as a pioneer in modern tax administration.
Adedeji clarified that there would be no increase in taxes. Instead, the emphasis would be on “collecting better,” a goal that the new structure also aims to accomplish.
Mr. Edun commended the FIRS’ improved revenue collections, urging a transparent process that earns public trust and citizens’ confidence in voluntarily abiding by tax rules. He reiterated the government’s commitment to growing the economy without resorting to borrowing, focusing on internally generated revenue, domestic resource mobilization, and equity instead.
Expressing dissatisfaction with the country’s current tax-to-GDP ratio, which stands at less than 10 percent, Mr. Edun urged the FIRS to elevate it in accordance with the existing tax policy, aiming for an increase to up to 18 percent within the next few years.
Despite this challenge, he expressed optimism that the FIRS would surpass the target. This confidence stems from ongoing reforms and anticipated new collection strategies expected to emerge from the upcoming retreat.
Making the Nigerian Customs Service a revenue agency
In its bid to boost IGR, the Federal Government is pressuring revenue-generating agencies, including the Nigerian Customs Service (NCS) to increase revenue collection to 100%.
The Comptroller-General of Customs, Mr. Bashir Adeniyi, revealed that the NCS generated an unprecedented N3.2 trillion in revenue in 2023, representing a 21.4% increase from the previous year. However, it fell short of the N3.68 trillion target by N478 billion.
For the year 2024, the NCS set a revenue target of N5 trillion, which was subsequently increased to N6 trillion by the House of Representatives. This move has sparked concerns that the corruption within the agency is going to deepen.
“The Nigeria Customs Service has no business collecting revenues on behalf of the government, whether the minister instructed they remit 100% of IGR or not,” financial analyst, Kelvin Emmanuel said. “Customs should be focused on trade facilitation and should be under the ministry of trade and investment, not finance.”