Nigeria Records N2.24tn Tax Revenue Gap

By Babatunji Wusu

Nigeria recorded a N2.24 trillion tax revenue shortfall in the first quarter of 2026 as ongoing fiscal reforms and the transition from the Federal Inland Revenue Service (FIRS) to the Nigeria Revenue Service (NRS) continued to reshape the country’s revenue collection system.

According to documents from the Federation Account Allocation Committee (FAAC), gross revenue collections reached N7.44 trillion during the period, falling below the projected target of N9.68 trillion. This represents a performance rate of 76.87 per cent and highlights the growing challenge of meeting government revenue expectations.

The tax revenue shortfall comes at a critical time as the Federal Government seeks to strengthen non-oil revenue sources, improve tax compliance and support an ambitious national budget amid lower oil earnings and rising borrowing costs.

An analysis of the figures showed that weaker-than-expected Companies Income Tax collections played a major role in the revenue gap. Lower petroleum royalty receipts also affected overall earnings, reflecting persistent challenges in the oil and gas industry, including production limitations and changing global market conditions.

Despite the decline, Value Added Tax (VAT) and Petroleum Profits Tax (PPT) collections remained relatively strong, helping to reduce the overall impact of the revenue deficit.

The first-quarter performance coincides with efforts by the newly established Nigeria Revenue Service to modernise tax administration and improve collection efficiency under the government’s broader fiscal reform programme.

Officials have repeatedly emphasised the importance of strict compliance by government agencies, private companies and state governments. The NRS has warned that organisations collecting taxes without remitting them to the federation account could face sanctions.

Sources familiar with the reforms revealed that authorities may begin deducting outstanding liabilities directly from FAAC allocations due to defaulting states and public institutions.

As part of its long-term fiscal strategy, the government aims to generate about N40 trillion in revenue in 2026. Achieving that goal will be crucial in reducing budget deficits, funding infrastructure projects and lowering reliance on public debt despite the current tax revenue shortfall.