Nigeria’s revenue-sharing framework, which allocates 4 per cent of non-oil and oil revenues (excluding royalties) to the Federal Inland Revenue Service (FIRS), far exceeds those of peer countries such as Kenya, Ghana, South Africa, and Uganda.
This is according to the World Bank’s newly released October 2025 edition of the Nigeria Development Update (NDU), themed “From Policy to People: Bringing the Reform Gains Home”.
According to the Bank, this arrangement has contributed to the surge in statutory deductions, which in turn has reduced the amount of revenue available for distribution to the federal, state, and local governments through the Federation Account Allocation Committee (FAAC).
“Nigeria’s current arrangement—allocating a fixed four percent of non-oil and oil revenues (excluding royalties) to the Federal Inland Revenue Service (FIRS)—is significantly higher than the cost of collection in peer countries,” the report stated.
The Bank noted that Kenya caps its cost of collection between 1–2 percent of budgeted revenues and provides a performance bonus only when targets are exceeded. In contrast, Uganda, South Africa, and Ghana primarily fund their tax and revenue agencies through annual parliamentary appropriations, ensuring more transparent budgetary oversight.
The World Bank warned that Nigeria’s elevated cost of collection model has created fiscal inefficiencies that are straining public finances and undermining equitable resource sharing among tiers of government.
According to the report, total statutory deductions surged to N1.785 trillion in 2024, nearly double the N870 billion recorded in 2023.
The Bank identified key beneficiaries of these deductions as the Federal Inland Revenue Service (FIRS), Nigeria Customs Service (NCS), Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), and the North-East Development Commission (NEDC).
FIRS, NUPRC, others received more allocations than several ministries
The World Bank noted that the scale of these deductions is “substantial,” stressing that in 2024, some of these parastatals received more allocations from FAAC than several states earned in total revenues.
“In 2024, several of these parastatals received more from FAAC than individual states collected in total revenues. Moreover, the combined allocations to these agencies exceeded the 2024 budgetary resources for pro-poor federal ministries such as Education (N1,589 billion), Health (N1,336 billion), and Poverty Alleviation (N263 billion),” the Bank stated.
What you should know
The NDU is one of the World Bank’s flagship reports on Nigeria, providing regular assessments of the nation’s economic landscape, policy progress, and potential risks to inclusive and sustainable growth.
In its October 2025 edition, the report noted that Nigeria’s economy is showing signs of resilience and recovery, with the World Bank projecting that the country’s public debt will fall below 40% of GDP for the first time in over a decade.
According to the NDU, Nigeria’s economy expanded by 3.9% year-on-year in the first half of 2025, up from 3.5% during the same period in 2024. The growth, the report explained, was driven by strong performance in the services and non-oil industries, supported by improvements in oil production and agriculture.
Imagine China had relied on the world bank
– They would have floated their currency. It would have crashed, today they would have millions of poor
– They would have been exposed to western leverage. They’d never grow.
– They would have scrapped energy subsidies, today they would not be the biggest energy producers on earth.
– They would have privatized their companies, today they wouldn’t have some of the biggest banks on earth.
– They would have liberalized their markets, today they would have lost control and their economy would have been puppeteered from Europe or USA.
– They would have opened their markets, and today their local companies would not have had export and competitive advantage….
But China did not listen to the world bank.
China chose a unique economic trajectory. A mix of capitalist and socialist.
China did what was good for China and delivered the most remarkable growth in history.