FAAC orders recovery of N101bn from Customs following revenue audit

A recent audit conducted by OOM Professional Services has uncovered discrepancies amounting to ₦101.17 billion in revenue remittances by the Nigeria Customs Service (NCS), prompting urgent action from the Federation Account Allocation Committee (FAAC).

According to a document from the FAAC Post Mortem Sub-Committee, obtained on Monday by a correspondent involved in ongoing revenue reconciliation talks, the irregularities stemmed from fund misclassification and delayed remittances by commercial banks. These discrepancies significantly distorted Nigeria’s statutory revenue sharing formula, resulting in financial shortfalls for state and local governments.

The audit firm—formerly known as Lanre Ogunwale & Co before rebranding to OOM Professional Services—was commissioned by the Forum of Commissioners of Finance to carry out a thorough review of Customs remittances into the Federation Account for the 2022–2023 fiscal period.

The engagement culminated in the presentation of a report at the FAAC plenary session of 16th May, 2025, where the Chairman of the Forum informed members of the anomalies uncovered by the consultant.

Following deliberations, the Federal Ministry of Finance directed the FAAC Post Mortem Sub-Committee to verify and report with recommendations.

A follow-up stakeholders’ meeting was held on July 10, 2025, at Brick Wall Hotel, Asokoro, Abuja, attended by representatives of the Nigeria Customs Service, the Federal Inland Revenue Service, the Office of the Accountant-General of the Federation, the Central Bank of Nigeria, and the FAAC Secretariat.

The consultant re-presented its findings, which were unanimously agreed upon by the relevant agencies. “The FIRS and NCS representatives were in agreement with the position of the consultant. It was established that the findings of the consultant contained in the report were accurate,” the document noted.

One of the most critical errors identified in the report was the wrongful classification of N82,04bn (N82,037,823,474.76) as Import Duty instead of Import VAT. The funds were posted into the Federation Account instead of the VAT Pool Account by four commercial banks – Guaranty Trust Bank, Globus Bank, Taj Bank, and Nova Merchant Bank.

“The sum of N82,037,823,474.76 being Import VAT was wrongly posted into the Federation Account as Import Duty instead of the VAT Pool Account by four commercial banks, namely Guaranty Trust Bank, Globus Bank, Nova Merchant Bank, and Taj Bank,” the document stated.

Unlike VAT, which is shared under a separate formula that prioritises state and local governments, Import Duty is shared vertically, disproportionately favouring the Federal Government. The consequence, according to the committee, was a significant reduction in the share due to sub-national governments.

“The remittance of Import VAT into the Federation Account as Import Levy 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 document noted.

In addition to the VAT misclassification, the report revealed that another N19.13bn (N19,130,495,656.89) was erroneously remitted to the Consolidated Revenue Fund of the Federal Government, instead of the Federation Account. Of the N22.05bn (N22,047,725,350.91) originally thought to belong to the CRF, only N2.92bn was actually due there.

“The NCS has confirmed that the sum of N19,130,495,656.89 was Federation Account revenue comprising Import Duty, Fees, Excise, and CET. While only N2,917,229,704.49, comprising CISS, ETLS, Iron Levy, Port Levy, and Wheat Grain Levy, was CRF revenue,” the document disclosed.

With the two misclassified sums combined, the total amount of funds wrongly posted stood at N101.17bn (N101,168,319,131.64). “The amounts posted in error were N82,037,823,474.76 as Import Duty and N19,130,495,656.89 to CRF, which totalled N101,168,319,131.64,” the committee noted.

The sub-committee further observed that these errors affected not only revenue sharing among government tiers but also the statutory cost of collection paid to agencies such as the FIRS, NCS, and the North-East Development Commission.

“The Cost of Collection and grant to FIRS/Nigeria Customs Service and North-East Development Commission be recomputed,” the committee recommended.

Beyond classification discrepancies, the sub-committee highlighted delays by commercial banks in remitting funds collected on behalf of the Nigeria Customs Service. These delays, which in some instances extended into months, violated financial regulations and contributed to cash flow uncertainty at the sub-national level.

“Revenues collected by NCS through Commercial Banks were delayed for weeks and in some instances months before being remitted into the Federation Account, which is in breach of lawful provisions,” the committee stated.

In response to the findings, the sub-committee made sweeping recommendations, starting with the immediate recovery and redistribution of the N82.03bn misclassified as Import Duty.

“That the sharing of the sum of N82,037,823,474.76 Import VAT, which was erroneously classified as Import Duty and wrongly remitted to the Federation Account, be recovered and re-computed using the VAT sharing formula for possible net-off,” the document recommended.

It also called for the recovery of the N19.13bn wrongly paid into the Consolidated Revenue Fund and its subsequent distribution to eligible beneficiaries using the vertical sharing formula.

“The N19,130,495,656.89 erroneously remitted to the Consolidated Revenue Fund of the FGN should be recovered from Federation Account inflows and distributed to the beneficiaries using the vertical formula,” the report added.

The committee tasked the Office of the Accountant-General of the Federation with the responsibility of recalculating and disbursing the corrected revenue allocations to the appropriate beneficiaries.

“The OAGF should work out the appropriate percentages due to the beneficiaries,” the committee directed. The report also stressed the need for fairness and accountability, particularly as the affected funds were shared using a formula that penalised sub-national governments.

“This is to ensure fairness to the Sub-Nationals who were underpaid using the Federation Account sharing formula rather than the VAT Sharing formula,” it noted. The committee concluded by recommending the payment of the consultant’s fees, acknowledging the critical role played in exposing the remittance discrepancies.

The document ended with a strong appeal to the Accountant-General to act swiftly. The PUNCH further learnt that the Nigeria Customs Service remitted a total inflow of N359.42bn to the Federation Account in May 2025, representing 16.56 per cent of the total revenue generated by all revenue-collecting agencies for the month.

The total contributions by revenue-generating agencies for the month stood at N2.17tn, with the Federal Inland Revenue Service leading with N1.14tn, or 52.73 per cent, followed by the Nigerian Upstream Petroleum Regulatory Commission/Ministry of Petroleum Resources (NUPRC/MPR), which contributed N615.13bn or 28.33 per cent.

When contacted, the spokesperson of the NCS, Abdullahi Maiwada, said he was not aware of the matter and declined to comment on it.

(Punch)