FIRS Now Generates 70% of FAAC Revenue
…Drives Down Debt Costs to 50%
By Patience Ikpeme
The Federal Inland Revenue Service (FIRS) now accounts for nearly 70 per cent of the monthly government allocations disbursed after the Federation Account Allocation Committee (FAAC) meetings, according to the agency’s Chairman, Dr. Zacch Adedeji.
Speaking in an interview marking his two years in office, Dr. Adedeji disclosed that this improved revenue generation has yielded significant fiscal stability for the nation. He noted that debt servicing costs—which previously consumed 90 per cent of government revenue—have fallen to about 50 per cent. He also said that improved revenue has helped 30 states repay N1.85tn in debts within the past 18 months.
“External reserves have also grown on the back of stronger fiscal stability,” Dr. Adedeji said.
He attributed the positive trajectory to the new fiscal policies signed into law by President Bola Tinubu, describing the changes as the most significant fiscal transformation since Nigeria’s independence. He praised President Tinubu for fulfilling his campaign promise to simplify tax compliance and remove hurdles for taxpayers.
The FIRS boss noted that the reforms are already yielding results, with Nigeria’s tax-to-GDP ratio rising from 10 per cent to 13.5 per cent in just two years, with a target of 18 per cent by 2027. He cited the record N2trillion disbursed through the federation account in August as evidence of the success.
The reform package, which includes the Nigeria Tax Act and three other key bills signed into law in June 2025, consolidates multiple tax laws into a single code, set to take effect in January. The changes reduce the number of tax types to single digits and introduce key reliefs.
Dr. Adedeji stated that the government’s tax reforms exempt essential services: “food, education, shared transportation, and agriculture from value-added tax.” Furthermore, businesses with annual turnover below N50 million will no longer pay tax, and personal income tax thresholds have been adjusted to protect low-income earners.
Dr. Adedeji acknowledged that the reforms have caused short-term hardship, likening the process to “the pain of a woman in labour.” However, he maintained that government interventions, such as compressed natural gas buses and crude-for-Naira support for local refiners, are cushioning the effects, with fuel prices showing signs of decline.
He also explained the rationale for renaming the FIRS to the Nigeria Revenue Service, stating that the move is designed to reflect its true function as the central tax authority for all tiers of government. “The word ‘federal’ gave the wrong impression that we only collect for the federal government,” Adedeji explained. “In reality, we collect VAT, of which 90 per cent belongs to the states.”
He moved to clarify concerns over a petrol surcharge included in the new law, explaining that it would not apply automatically. “It will only take effect if activated by a ministerial order and published in the official gazette,” he noted.
The tax boss explained that the new consolidated tax law strengthens compliance and curbs evasion by restructuring FIRS operations, grouping taxpayers into small, medium, and large categories, and creating one-stop shops for filing and payments. He also defined the new relationship with taxpayers: “We are service providers to taxpayers rather than just an enforcement agency.”
Dr. Adedeji concluded by urging taxpayers to embrace the reforms, “when companies are doing well, expanding, and making profits, we will benefit from their growth. Our task is to remove hurdles in their way, and that is what the president has done with these new laws.”
