FAAC Demands Recovery of N101bn Misclassified by Customs and Banks
A forensic audit by OOM Professional Services has uncovered revenue remittance discrepancies amounting to N101.17 billion involving the Nigeria Customs Service (NCS) and several commercial banks. The findings have prompted the Federation Account Allocation Committee (FAAC) to call for immediate recovery and redistribution of the misallocated funds.
According to a document obtained by The PUNCH from a FAAC official involved in ongoing reconciliation meetings, the audit revealed that the misclassification of funds and delayed remittances significantly distorted the statutory revenue-sharing formula—shortchanging states and local governments.
Audit Reveals Systemic Errors
The audit, commissioned by the Forum of Commissioners of Finance, reviewed Customs remittances to the Federation Account for the 2022–2023 fiscal period. The findings were first presented during FAAC’s plenary session on May 16, 2025, leading to further investigations ordered by the Federal Ministry of Finance.
A follow-up stakeholders’ meeting was held on July 10, 2025, at Brick Wall Hotel in Asokoro, Abuja, and included representatives from the NCS, Federal Inland Revenue Service (FIRS), Office of the Accountant-General of the Federation (OAGF), Central Bank of Nigeria (CBN), and the FAAC Secretariat.
The audit’s conclusions were unanimously accepted by the agencies present. “The FIRS and NCS representatives agreed with the consultant’s findings. It was confirmed that the report was accurate,” the committee’s document stated.
N82bn Misclassified as Import Duty Instead of VAT
The most significant error identified was the misclassification of N82.04 billion in Import Value Added Tax (VAT) as Import Duty. The amount was incorrectly remitted to the Federation Account instead of the VAT Pool Account by four commercial banks:
-
Guaranty Trust Bank
-
Globus Bank
-
Taj Bank
-
Nova Merchant Bank
This mistake had serious implications. Unlike Import Duty—which heavily favours the Federal Government—VAT is distributed with greater weight toward state and local governments. As a result, sub-national entities received a smaller share than they were due.
“The misclassification led to a significant reduction in allocations to the sub-national governments,” the report said.
Additional N19bn Misallocated to Federal Consolidated Revenue Fund
Beyond the VAT misclassification, the audit also discovered that another N19.13 billion was mistakenly credited to the Consolidated Revenue Fund (CRF) of the Federal Government. Of the N22.05 billion initially sent to the CRF, only N2.92 billion actually belonged there. The remaining N19.13 billion should have gone into the Federation Account.
“The NCS has confirmed that the N19.13bn was Federation Account revenue from Import Duty, Fees, Excise, and CET, not CRF revenue,” the document noted.
Total Misallocated Funds: N101.17bn
Combined, the two errors led to the wrongful posting of N101.17 billion:
-
N82.04bn misclassified as Import Duty
-
N19.13bn wrongly paid into the CRF
Impact on Revenue Allocation and Cost of Collection
The misclassifications affected not only the revenue shares of the three tiers of government but also the statutory cost of collection paid to revenue agencies such as the NCS, FIRS, and the North-East Development Commission.
“The cost of collection and grants to FIRS, NCS, and the NEDC should be recomputed,” the sub-committee recommended.
Commercial Banks Faulted for Delayed Remittances
The audit also raised concerns over delays by commercial banks in remitting revenues collected on behalf of the NCS. In some cases, funds were held for weeks or even months, violating financial regulations and creating liquidity uncertainty for state and local governments.
“These delays breach lawful provisions and undermine the financial stability of sub-national governments,” the report stated.
FAAC Issues Recovery Directives
In response to the findings, FAAC issued the following directives:
-
Immediate recovery and redistribution of the N82.04bn wrongly classified as Import Duty, using the VAT sharing formula.
-
Recovery of the N19.13bn paid into the CRF and redistribution using the vertical revenue sharing formula.
-
Recalculation of statutory cost of collection due to affected agencies.
-
The OAGF was tasked with computing and disbursing the corrected revenue allocations.
-
Prompt payment of the consultant’s fee, acknowledging their role in exposing the discrepancies.
“This is to ensure fairness to sub-national governments that were underpaid due to the errors,” the report noted.
As of May 2025, the NCS remitted N359.42 billion to the Federation Account—16.56% of total government revenue for the month.
Total revenue stood at N2.17 trillion, with the FIRS leading contributions at N1.14 trillion (52.73%), followed by the Nigerian Upstream Petroleum Regulatory Commission/Ministry of Petroleum Resources (NUPRC/MPR) at N615.13 billion (28.33%).
When contacted, NCS spokesperson Abdullahi Maiwada said he was unaware of the issue and declined to comment.