ABUJA — The Federation Account Allocation Committee (FAAC) has begun the process of recovering over N101 billion from the Nigeria Customs Service (NCS) after an audit revealed major revenue misclassifications that significantly shortchanged states and local governments.
The discrepancies were uncovered by OOM Professional Services, a financial audit firm previously known as Lanre Ogunwale & Co., which was commissioned by the Forum of Commissioners of Finance to scrutinise Customs remittances to the Federation Account for the 2022–2023 fiscal year.
According to findings presented at the FAAC plenary on 16 May 2025, and further deliberated during a follow-up stakeholders’ meeting on 10 July 2025 in Abuja, the NCS, in collaboration with four commercial banks — GTBank, Globus Bank, Nova Merchant Bank, and Taj Bank, wrongly posted N82.04 billion in Import VAT as Import Duty.
The funds were credited to the Federation Account rather than the VAT Pool Account, thereby altering the statutory distribution formula and giving the Federal Government a larger share to the detriment of sub-national governments.
“The remittance of Import VAT into the Federation Account as Import Duty has significantly reduced the share of the sub-nationals due to the application of the vertical revenue sharing formula rather than the VAT sharing formula,” the committee report said.
The audit also revealed another N19.13 billion in revenue erroneously paid into the Consolidated Revenue Fund (CRF) of the Federal Government.
This sum was meant for the Federation Account and was part of a larger N22.05 billion flagged in the report.
Out of that amount, only N2.92 billion rightfully belonged in the CRF, consisting of revenue heads like the Comprehensive Import Supervision Scheme (CISS), Economic Community of West African States Trade Liberalisation Scheme (ETLS), Iron Levy, Port Levy, and Wheat Grain Levy. The remaining N19.13 billion covered revenue types such as Import Duty, Fees, Excise, and Common External Tariff (CET) collections.
The total amount of misclassified and wrongly remitted funds stood at N101.17 billion, a sum the FAAC Post Mortem Sub-Committee has now ordered to be recovered and redistributed according to the proper statutory formulae.
“The N82,037,823,474.76 misclassified as Import Duty should be recovered and re-shared using the VAT sharing formula,” the report recommended.
“Also, the N19,130,495,656.89 wrongly posted to the CRF should be recovered and redistributed to the Federation Account using the vertical sharing formula.”
The Office of the Accountant-General of the Federation (OAGF) was directed to calculate the correct percentages due to each beneficiary tier of government and to effect the redistribution without delay.
The committee also recommended that cost-of-collection allowances and grants are already paid to revenue-generating agencies, I’ll like the NCS, Federal Inland Revenue Service (FIRS), and the North-East Development Commission should be recalculated to reflect actual figures.
Beyond the classification errors, the audit flagged persistent delays by commercial banks in remitting collected revenue to the Federation Account, sometimes stretching into weeks or months, in clear violation of financial regulations.
“These delays created uncertainty and disrupted cash flows to sub-national governments, exacerbating budgetary pressures,” the report noted.
Despite repeated efforts to reach him, the spokesperson of the Nigeria Customs Service, Abdullahi Maiwada, said he was unaware of the matter and declined to comment.
Meanwhile, the NCS reportedly remitted N359.42 billion into the Federation Account in May 2025, representing 16.56 percent of total government revenue for that month.
The total revenue generated in May 2025 by all agencies stood at N2.17 trillion.
Of that amount, the FIRS contributed N1.14 trillion (52.73 percent), followed by the Nigerian Upstream Petroleum Regulatory Commission and Ministry of Petroleum Resources (NUPRC/MPR) with N615.13 billion (28.33 percent).
The FAAC committee concluded its report by urging the Accountant-General to act swiftly in implementing the recommendations to ensure fairness and accountability in the national revenue sharing system.
It also advised that OOM Professional Services be promptly paid its consultancy fee, acknowledging the firm’s role in uncovering the irregularities.
