Explainer: Does FIRS Allocate Funds to State Governments?

By Oluwaseye Ogunsanya 

Last week Tuesday, the Senate President, Godswill Akpabio, said during plenary that an “unverified report” indicated that state governors received N30 billion each from the Federation Account to ameliorate inflation and the high cost of food in their respective states.

Akpabio further added that apart from the first tranche of funds given to the governors, an additional N30 billion was also given to them through the Federal Inland Revenue Service (FIRS).

“I must say that unverified report has it that each of the state government in the last few months has received additional N30 Billion from Federal Inland Revenue Service, outside their normal allocation from the federation account to assist them in ameliorating the food situation, we believed that every state government should utilise the funds so received towards ensuring that food is available.”

This allegation has generated a series of comments from different quarters with many demanding explanations from governors on how the said money was spent.

However the governors have denied receiving such money from the federal government with the Oyo State Governor and Vice Chairman of the Nigerian Governors’ Forum, Seyi Makinde saying there is no truth in the claim.

Makinde added that he has been doing everything to cushion the effects of the economic hardship on the people, warning that leaders should instil confidence and hope in the citizenry in this trying time rather than playing the blame game.

He also decried Akpabio’s reliance on unverified reports, clarifying that states couldn’t get funds from the FIRS, since all revenues go into the Federation Account and belong to the FG, states and local governments.

“The only fund that Oyo State got from the Federal Government outside of statutory allocation was N2 billion out of the N5 billion promised to all states in the wake of the removal of fuel subsidy, adding that the Federal Government had even been asking for the refund of the N2 billion,” he stated.

In similar vein the Akwa Ibom state governor, Governor Umo Eno said that the Senate President’s claim is a prophecy that he prays will come to pass.

He said: “We are in a time where people want to be relevant, and they feel that being relevant is to incite the public, tell lies against the government.

“I know no civil society behaves like that. You have to understand how civil society in other climes work and try to balance information.

“The allocation to governments is managed by the state Ministry of Finance. There is a budget and there is always a published account. I would have asked that he wait, let the account be published, then he can ask questions, rather than raise false alarm.”

“On the one that states have been given N30 billion for palliative, I think it is a prophecy, and I pray the prophecy will come to pass.

“We are in the state and people are there in Abuja. Maybe there is a plan like that. So, I join in praying that it should come. It will help us a lot. But as I stand here today, we have not received more than N2 billion from the federal government on palliative, and we are made to understand that it was a loan.” He added.

The Senate President has however said his statement was misunderstood adding that he was only urging state governments to collaborate with the federal government.

Does FIRS Allocate Funds to States? 

The Federal Inland Revenue Service (FIRS) is the agency responsible for assessing, collecting and accounting for tax and other revenues accruing to the Federal Government of Nigeria

According to FIRS Service Charter obtained here, the current tax system in Nigeria administered by the Federal Inland Revenue Service was introduced in 1939 through the instrumentality of the Companies Income Tax

Ordinance. This ordinance metamorphosed through several reforms and amendments

over time leading to the enactment of FIRS Establishment Act No. 13 of 2007.

The act commenced on 16th April, 2007 as “an Act to provide for the Establishment of the

Federal Inland Revenue Service charged with powers of Assessment, Collection of and Accounting for revenues accruable to the Government of the Federation; and for related matters”.

Some of the agencies’ functions includes the following

1. Tax assessment

The FIRS is responsible for assessing the tax liability of individuals and corporate entities in Nigeria. The service uses various tools such as tax audits, investigations, and information gathering to determine the tax liability of taxpayers.

2. Tax collection

The FIRS is also responsible for collecting taxes on behalf of the Federal Government. The service uses various methods such as direct debit, bank transfers, and electronic payment channels to collect taxes from taxpayers.

3. Tax enforcement

The FIRS has the power to enforce tax laws and regulations in Nigeria. The service can impose penalties, fines, and interest charges on taxpayers who fail to comply with tax laws.

4. Taxpayer education

The FIRS is also responsible for educating taxpayers on their tax obligations and rights. The service provides various resources such as publications, workshops, and seminars to educate taxpayers on tax laws and regulations.

5. Tax policy formulation

The FIRS is involved in the formulation of tax policies in Nigeria. The service provides input on tax laws and regulations to the Federal Government and other stakeholders to ensure that the tax system is fair, efficient, and effective.

To this end, it can be concluded that the Federal Inland Revenue Service does not allocate funds to states.

Who Then is Responsible for Allocating Funds to States?

The Federation Account Allocation Committee (FAAC or the “Committee”) is in charge of disbursing allocations from the revenues generated into the Federations Accounts, which comprise multiple accounts specific to an RGA or a sector/ business type.

According to the FAAC website, the Federal Ministry of Finance supervises the activities of FAAC while the Central Bank of Nigeria is responsible for disbursing allocation to state accounts.

Furthermore, the committee ensures that allocations made to the states from the Federation Account are promptly and fully paid into the treasury of each State on the basis and terms prescribed by the allocation of revenue act and to also report annually to the National Assembly in respect of the function specified in the above paragraph.