Director of the Institute of Capital Market Studies at Nasarawa State University, Professor Uche Uwaleke has said that Nigeria’s fiscal challenges stem more from poor revenue management and systemic leakages than from low revenue generation, calling for urgent reforms to improve transparency, cut collection costs, and strengthen public financial systems.
Speaking in an interview with ARISE News on Thursday, Uwaleke said recent concerns raised by the World Bank about Nigeria’s fiscal position are “valid” and reflect long-standing structural weaknesses.
“The World Bank’s concerns are valid,” he said. “But what strikes me is that Nigeria’s problem is not just a revenue problem — it is a revenue management problem. We have significant leakages across the system.”
He noted that despite generating nearly ₦90 trillion in revenue between 2023 and 2026, the impact on development has remained limited due to inefficiencies and poor coordination among key government agencies.
“There are gaps in coordination. The Budget Office, the Office of the Accountant-General, and the Debt Management Office are not properly aligned. That creates confusion and weakens fiscal outcomes,” he said.
Uwaleke identified the high cost of revenue collection as a major drain on public finances, revealing that key agencies retain between 4 and 7 percent of revenues as collection costs — far above global standards.
“Today, agencies like the Federal Inland Revenue Service, the Nigerian Customs Service, and the Nigerian Upstream Petroleum Regulatory Commission retain between 4 and 7 percent as cost of collection. That is very high by any standard,” he said.
“In global best practice, the cost of revenue collection ranges between 0.5 and 1 percent. In the UK, for example, it is about 0.51 percent, while in many OECD countries it is even lower.”
He warned that the current model encourages inefficiency rather than performance.
“It creates a perverse incentive — rewarding volume instead of efficiency. One key principle of public finance is that the cost of collection should be low relative to revenue. That is not the case in Nigeria.”
Uwaleke recommended a shift away from percentage-based deductions to a budget-based funding model.
“These agencies should be funded through the budget based on their actual needs, not as a percentage of revenue. That will improve efficiency and transparency.”
On concerns about over 5,000 sub-accounts outside the Treasury Single Account (TSA), Uwaleke blamed the failure to periodically review the system.
“The TSA was introduced to improve transparency, but over time, it has not been properly reviewed. When reforms are not monitored, people find ways to circumvent them,” he said.
He called for a comprehensive audit of Nigeria’s public financial management systems.
“We need a forensic review of the TSA, as well as systems like GIFMIS and IPPIS. Without regular review, loopholes will continue to emerge.”
Uwaleke acknowledged that some progress has been made in addressing leakages in the oil sector, particularly through recent policy measures.
“The President took a step in the right direction with Executive Order 9, which addressed some of the deductions previously made by NNPC Limited. That has helped reduce leakages, but more needs to be done across other agencies.”
He also criticised the current funding structure for revenue-generating agencies, noting that their earnings sometimes exceed allocations to entire regions.
“In January 2024, three agencies — FIRS, NUPRC, and Customs — received about ₦78 billion through first-line charges. That was higher than what the entire North-East states received, which was about ₦56 billion,” he said.
“When you compare that to funding for critical sectors like health and education, the opportunity cost is simply too high.”
On fiscal federalism, Uwaleke said Nigeria’s current revenue-sharing formula broadly reflects its structure but should evolve as responsibilities shift to states.
“The federal government currently takes about 48.5 percent, states 26.72 percent, and local governments 20.7 percent. That aligns with existing responsibilities,” he said.
“But as more responsibilities are devolved to states — for example in electricity and correctional services — they should receive a larger share of revenue.”
Uwaleke stressed that addressing Nigeria’s fiscal challenges requires a holistic reform approach focused on efficiency, transparency, and accountability.
“We must block leakages, reduce the cost of revenue collection, and strengthen oversight of public financial systems. Without these reforms, increased revenue alone will not translate into meaningful development,” he said.
Boluwatife Enome
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