FAAC LOGOAudit exposes massive revenue misclassification, delayed remittances; states, LGs shortchanged by over N101bn
The Federation Account Allocation Committee (FAAC) has initiated moves to recover a staggering N101.17 billion from the Nigeria Customs Service (NCS) following revelations of major revenue misclassifications and delayed remittances, which deprived sub-national governments of their rightful allocations.
According to findings presented by an independent financial audit firm, OOM Professional Services, significant discrepancies in Customs revenue remittances for the 2022–2023 fiscal period were uncovered. These included the wrongful posting of over N82 billion in Import Value Added Tax (VAT) into the Federation Account as Import Duty and the erroneous remittance of more than N19 billion into the Consolidated Revenue Fund (CRF) of the Federal Government.
The misclassification, primarily carried out by four commercial banks, Guaranty Trust Bank, Globus Bank, Nova Merchant Bank, and Taj Bank, resulted in a skewed revenue-sharing arrangement. Import VAT, which should have been distributed using a VAT-specific formula that favours states and local governments, was instead shared using the Federation Account's vertical formula that disproportionately benefits the Federal Government.
“The sum of N82,037,823,474.76 being Import VAT was wrongly posted into the Federation Account as Import Duty,” a document from the FAAC Post Mortem Sub-Committee disclosed. This misstep significantly reduced the allocations due to state and local governments.
Additionally, the NCS confirmed that of the N22.05 billion initially treated as CRF revenue, only N2.92 billion was due there. The balance of N19.13 billion, comprising revenues such as Import Duty, Excise, and CET, rightfully belonged in the Federation Account.
With these combined errors totalling N101,168,319,131.64, FAAC has recommended the immediate recovery and redistribution of the funds. The Office of the Accountant-General of the Federation (OAGF) has been tasked with recalculating the allocations and ensuring that the affected sub-national entities receive what is rightfully theirs.
The discrepancies were unanimously acknowledged at a stakeholders’ meeting held on July 10, 2025, at Brick Wall Hotel, Asokoro, Abuja. Representatives from the NCS, Federal Inland Revenue Service (FIRS), Central Bank of Nigeria (CBN), the OAGF, and the FAAC Secretariat were present. The NCS and FIRS agreed with the consultant's findings and accepted the accuracy of the report.
Beyond the classification errors, the audit also revealed systemic delays by commercial banks in remitting revenues collected on behalf of the NCS. In many cases, funds were held for weeks or even months in violation of financial regulations, exacerbating cash flow challenges for state and local governments.
“The revenues collected by NCS through Commercial Banks were delayed... in breach of lawful provisions,” the committee noted.
FAAC has now directed that the misclassified N82 billion be recovered and re-shared using the VAT formula. Likewise, the N19.13 billion wrongly paid into the CRF is to be recovered from future Federation Account inflows and reallocated using the appropriate vertical sharing formula.
Further, the committee called for a recalibration of the statutory cost of collection paid to agencies like the FIRS, NCS, and the North-East Development Commission, noting that the misclassification had also distorted these entitlements.
In addition, the report acknowledged the crucial role played by OOM Professional Services, recommending the payment of its consultancy fees for exposing the financial irregularities.
The urgency of these corrective actions was underscored in the committee’s appeal to the OAGF to act swiftly to ensure fairness to all tiers of government, particularly the sub-national entities that had been underpaid due to the flawed classifications.
In May 2025 alone, the NCS remitted N359.42 billion to the Federation Account, accounting for 16.56% of the month’s total revenue inflows. For the same period, total contributions by all revenue-generating agencies stood at N2.17 trillion, with the FIRS leading at N1.14 trillion (52.73%), followed by the Nigerian Upstream Petroleum Regulatory Commission/Ministry of Petroleum Resources (NUPRC/MPR) with N615.13 billion (28.33%)
When approached for comments on the issue, NCS spokesperson Abdullahi Maiwada stated that he was not aware of the matter and declined further comment.
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