The Federal Government, through the Federation Account Allocation Committee, has discontinued the long-standing seven per cent cost-of-collection deduction previously retained by the Nigerian Customs Service from Federation Account revenues, a move that effectively removes the agency from direct allocations of shared federal earnings, The PUNCH has gathered.

An analysis of the Federation Account Allocation Committee report for February 2026, which captured revenue generated in January, indicated that the Customs Service no longer receives the seven per cent cost-of-collection previously deducted from the federation’s earnings.

The line item that usually indicates the amount received as cost of collection showed that the Nigerian Customs Service recorded N0.00 for January 2026, a sharp contrast to the N24.01bn it received under the same category in December 2025.

The report, however, indicated that other revenue-generating agencies continued to receive their statutory deductions, with the Nigerian Upstream Petroleum Regulatory Commission receiving N21.44bn as a four per cent cost of collection, while the Nigerian Revenue Service received N44.16bn as a four per cent cost of collection for the month of January.

Our correspondent further gathered that the new arrangement was introduced by the Nigerian Customs Service Act, 2023.

The service is now funded through a statutory charge of at least four per cent of the Free-on-Board value of imports rather than through the Federation Account sharing system.

The development marks a major shift in the financing structure of one of Nigeria’s largest revenue-generating agencies and is expected to affect how federal revenues are distributed among the three tiers of government.

Confirming the change in an interview with our correspondent, the National Public Relations Officer of the Nigerian Customs Service, Deputy Controller Abdullahi Maiwada, said the agency no longer collects the seven per cent cost of collection from the Federation Account.

Maiwada explained that the new law governing the service provides a different funding model known as the Financing of the Customs Service, which is based on a percentage of import value rather than deductions from federally shared revenues.

The officer said, “Please check the Nigerian Customs Service Act of 2023. What we operate now is four per cent of the Free-on-Board value of imports under the financing arrangement for the service.

“That is what we use to run the service. So you shouldn’t expect any allocation from FAAC to the Nigerian Customs Service because we no longer collect the seven per cent surcharge as the cost of collection.

“What we collect now is the Financing of the Customs Service, which is based on four per cent of the Free-on-Board value of imports. So you should not expect any allocation from the FAAC sharing committee.

“The FAAC distribution is exclusively for the three tiers of government: the Federal Government, the states, and the Local Governments. The Nigerian Customs Service is not part of that sharing arrangement anymore.”

The PUNCH also gathered that the funding model is backed by Section 18 of the Nigerian Customs Service Act, 2023, which outlines the sources of financing for the service’s operations.

The law provides that the Customs Service shall be funded through not less than four per cent of the Free-on-Board value of imports, revenues derived from cost-based user fees, government budgetary allocations where applicable, as well as grants and donations from development partners.

The Act also empowers the President to propose an increase in the four per cent charge, subject to approval by the National Assembly, if the governing board of the service presents verifiable and compelling reasons.

The new financing structure aligns Nigeria’s customs operations with international best practices, where customs administrations are funded through statutory charges linked to trade volumes rather than deductions from national revenue pools.

Available data from the FAAC report showed that the Nigerian Customs Service generated N282.83bn in revenue in 2025, making it one of the largest contributors to the Federation Account alongside the NRS and the NNPC.

The agency is responsible for collecting import duties, excise duties, and other trade-related taxes on behalf of the Federal Government. Customs revenues constitute a major component of Nigeria’s non-oil income, especially as the government continues efforts to reduce reliance on crude oil receipts.

Meanwhile, state commissioners of finance have called for a periodic review of cost-of-collection arrangements across revenue-generating agencies, warning that high deductions by some agencies could significantly reduce the funds available for distribution to the three tiers of government.

The concern was raised during deliberations at the Federation Account Allocation Committee meeting and stated in a communique issued at the end of a three-day committee retreat in Enugu State.

According to a section of the FAAC document obtained by our correspondent, participants noted that high collection costs by some revenue agencies had become a major drain on the Federation Account.

The document stated, “The high cost of revenue collection by certain agencies was identified as a major drain on the Federation Account. Participants resolved that cost-of-collection arrangements should be reviewed periodically, benchmarked against international best practices, and linked to efficiency and performance outcomes.”

Finance commissioners from several states reportedly emphasised that revenue agencies must operate under transparent and performance-based cost structures to ensure that the bulk of collected revenues flow into the Federation Account.

The removal of the seven per cent deduction by the Nigerian Customs Service could potentially increase the net revenue available for distribution among the Federal Government, states, and local governments.

Under the previous arrangement, revenue-generating agencies such as Customs deducted a percentage as the cost of collection before remitting the balance into the Federation Account for sharing.

The shift to the four per cent Free-on-Board import charge means the Customs Service now finances its operations independently of the monthly FAAC distribution process, but the financial earnings of the service are no longer transparent.

However, analysts note that the full fiscal impact of the change will depend on trade volumes and the overall value of imports, which determine the Free-on-Board charges collected by the service.

The development also comes amid growing scrutiny of revenue collection mechanisms in Nigeria as the government seeks to improve fiscal transparency and maximise income to fund national development programmes. (PUNCH)

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