Nigeria’s revenue-sharing framework has come under renewed scrutiny after an independent audit flagged discrepancies totalling over N101.17 billion in remittances by the Nigeria Customs Service (NCS), triggering a formal demand for recovery and redistribution by the Federation Account Allocation Committee (FAAC).
According to a confidential document from FAAC’s Post Mortem Sub-Committee, the anomalies arose from misclassifications and delayed remittances by four commercial banks—Guaranty Trust Bank, Globus Bank, Taj Bank, and Nova Merchant Bank—between 2022 and 2023. The audit, conducted by Lagos-based firm OOM Professional Services, found that these errors distorted statutory revenue sharing and deprived states and local governments of badly needed funds.
Central to the findings was the wrongful classification of N82.04bn as Import Duty rather than Import Value Added Tax (VAT). Under Nigeria’s fiscal arrangement, VAT is distributed in a manner that prioritises state and local governments, while Import Duty is shared vertically, giving the lion’s share to the Federal Government.
“The misclassification led to a significant reduction in sub-national entitlements,” the report stated, adding that the funds were erroneously posted to the Federation Account instead of the VAT Pool Account.
In addition, another N19.13bn was found to have been wrongly paid into the Federal Government’s Consolidated Revenue Fund (CRF), even though only N2.92bn of that amount was actually due. The remainder—comprising Import Duty, Fees, Excise, and levies—should have been credited to the Federation Account for distribution among all tiers of government.
Together, the two misclassified sums bring the total shortfall to N101,168,319,131.64. The sub-committee noted that the implications of the error were far-reaching, impacting not only the allocations to states and local governments, but also the statutory cost-of-collection fees paid to the NCS, Federal Inland Revenue Service (FIRS), and North-East Development Commission.
In response, FAAC has issued sweeping directives: the immediate recovery of the N82bn in misclassified Import VAT and its redistribution using the appropriate VAT sharing formula; and the refund of the N19.13bn wrongly lodged in the CRF, to be re-shared using the Federation Account’s vertical formula.
“The Accountant-General of the Federation is to recalculate and redistribute the affected sums to ensure fairness to the underpaid sub-nationals,” the document reads.
The report also raised concerns over persistent delays in remittances by commercial banks, sometimes stretching into months—a breach of financial regulations and a disruption to state-level cash flow planning.
Representatives from the NCS and FIRS, who were present at a July 10 stakeholders’ meeting in Abuja, reportedly agreed with the consultant’s findings, lending institutional weight to the revelations. “It was established that the findings… were accurate,” the document affirmed.
The audit was commissioned by the Forum of Commissioners of Finance, and presented at the FAAC plenary on May 16. The committee has since recommended that OOM Professional Services be paid its consultancy fees in recognition of its role in uncovering the discrepancies.
When contacted, NCS spokesperson Abdullahi Maiwada said he was unaware of the report and declined to comment further.
Meanwhile, FAAC data for May 2025 shows the Nigeria Customs Service remitted N359.42bn, representing 16.56% of total monthly inflows. The FIRS led revenue generation with N1.14tn, followed by the Nigerian Upstream Petroleum Regulatory Commission and Ministry of Petroleum Resources, which jointly brought in N615.13bn.
As calls for fiscal transparency intensify, the scandal is likely to deepen pressure on federal revenue agencies and commercial banks to tighten controls and for federal authorities to respect constitutional sharing formulas in letter and spirit.
