Nigeria ends the seven per cent Customs Service deduction from FAAC, shifting funding to import-based charges and increasing distributable revenue

The Federal Government has formally ended the seven per cent cost-of-collection deduction previously retained by the Nigerian Customs Service from Federation Account revenues, a move that removes the agency from direct participation in monthly FAAC allocations.

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Findings from the Federation Account Allocation Committee (FAAC) report for February 2026, covering revenues generated in January, show that the line item for Customs deductions recorded N0.00, a sharp drop from N24.01 billion in December 2025.

Other agencies, including the Nigerian Upstream Petroleum Regulatory Commission and the Nigerian Revenue Service, continued to receive statutory allocations.

The development follows the implementation of the Nigerian Customs Service Act, 2023, which establishes a new funding framework.

Under the Act, the Customs Service will now be financed primarily through a statutory charge of not less than four per cent of the Free-on-Board (FOB) value of imports, rather than deductions from the Federation Account.

Abdullahi Maiwada, National Public Relations Officer of the Customs Service, confirmed the change, stating, “The agency no longer collects the seven per cent surcharge from FAAC and should not be expected to receive allocations from the committee going forward.”

Section 18 of the Act outlines multiple revenue streams for the service, including the four per cent FOB charge, cost-based user fees, applicable budgetary allocations, and grants from development partners.

The law also empowers the President to propose increases to the charge, subject to National Assembly approval, if deemed necessary by the agency’s governing board.

Historically, revenue-generating agencies deducted their operational costs before remitting funds to the Federation Account.

Analysts note that removing the seven per cent Customs deduction could increase distributable revenue for the federal, state, and local governments, though the fiscal impact will now depend on trade volumes and import values.

FAAC data shows that the Customs Service generated N282.83 billion in 2025, underscoring its importance as a major contributor to non-oil revenue, alongside the Nigerian National Petroleum Company Limited and the Nigerian Revenue Service.

State finance commissioners have called for regular reviews of cost-of-collection arrangements, citing high deductions by some agencies as a drain on the Federation Account.

A FAAC retreat in Enugu State recommended that collection frameworks be benchmarked against international best practices and linked to efficiency and performance metrics.

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The reform is part of broader government efforts to enhance fiscal transparency, strengthen revenue mobilisation, and maximise non-oil income to support national development programmes.