The Federal Government has discontinued the 7 percent cost-of-collection deduction previously retained by the Nigeria Customs Service (NCS) from Federation Account revenues, introducing a new funding structure based on import values.
The cost-of-collection system allowed revenue-generating agencies to retain a percentage of funds before remitting the balance into the Federation Account Allocation Committee (FAAC) pool for distribution among the three tiers of government.
This arrangement has been subject to review as part of broader fiscal reforms aimed at improving transparency and increasing funds available for federal, state and local governments.
The Nigeria Customs Service is one of the country’s major non-oil revenue agencies, responsible for collecting import duties and other trade-related taxes.
An analysis of the FAAC report for February 2026, which captured revenues generated in January 2026, showed that the Customs Service recorded ₦0.00 as cost of collection.
This marked a sharp drop from the ₦24.01 billion it received in December 2025 under the previous arrangement.
Under the new system, the Customs Service is no longer funded through FAAC deductions. Instead, it operates under a financing model introduced by the Nigeria Customs Service Act, 2023, which provides for funding through at least 4 percent of the Free-on-Board value of imports.
Confirming the change, the National Public Relations Officer of the service, Abdullahi Maiwada, said the agency no longer receives allocations from FAAC.
He stated, “What we operate now is four per cent of the Free-on-Board value of imports… you should not expect any allocation from FAAC.”
The FAAC report also showed that other agencies, including the Nigerian Upstream Petroleum Regulatory Commission and the Nigeria Revenue Service, continued to receive their statutory 4 percent cost-of-collection deductions for January.
The removal of the 7 percent deduction is expected to increase the amount of revenue available for distribution among the Federal Government, states and local governments, as more funds will flow directly into the Federation Account.
The shift also changes how the Customs Service is financed, linking its operational funding to import volumes rather than shared national revenue.
For public finance management, the policy aligns with ongoing reforms aimed at improving transparency and reducing deductions that reduce distributable revenue.
