Thoughts on The FIRS Chairman's End of Year Letter To Staffers


Friday December 27, 2019 / 06:00 AM / Teslim Shitta-Bey, Managing Editor/Image Header Credit: Voice of Nigeria


Since President Muhammadu Buhari decided not to reappoint Mr. Babatunde Fowler as Chairman of the Federal Inland Revenue Service (FIRS) at the end of Fowler's first five-year term, a number of reasons have been adduced ranging from excessive expenditure by the revenue agency to high-handedness and irregular appointments on the part of the erstwhile FIRS Chairman. However, in a recent end of the year memo to members of staff, the new Chairman, Mr. Muhammadu Lami, noted that the agency had generally seen a decline in revenue performance relative to set budget targets in the last four years.


The memo signed by Lami on December 23, 2019 showed that the agency's revenue per staff steadily fell between 2015 and 2019. Data made available by the new Chairman shows that from N718.23m per staff in 2011, the revenue per staff slid to N605.81m per staff in 2012, a drop of -15.65%, before rising by +11.97% to N678.33m in 2013 and N711.81m per staff in the last year of the Goodluck Jonathan administration in 2014. 


When Fowler became FIRS boss revenue or collection per staff was NN521.02m in 2015 but slid by -11.71% in 2016 to N460.04m before rising strongly to N614.21m or +33.51% in 2017 reflecting an economic recovery from a previous recession that had started in 2016 and continued till 2017.  The recovery represented improvement in international crude oil prices which had fallen from US$114 in the middle of 2014 to less than half of this value per barrel by mid-2015. When oil prices recovered in 2016 federal fiscal revenues also went up although revenues fell -13.70% from N614.21bn in 2017 to N530.06bn in 2019 (see chart 1 below).

Chart 1 Revenue Collections per FIRS Staff 2011-2019

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Source: FIRS, Proshare research


Unlike the tone of the Jonathan era, even with a former Lagos State tax Czar, Tunde Fowler, controlling the federal tax authority, the Muhammadu Buhari administration has had serial failure in meeting revenue projections, and indeed the revenue performance gap has worsened for each successive year between 2011 and 2019 (see chart 2 below).

Chart 2 Difference between Target and Actual revenue FIRS Revenue 2011-2019

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Source: FIRS, Proshare research


To be fair, Fowler cannot be entirely blamed for the revenue flaws of government. A few factors beyond Fowler's control upturned progress. These factors included, but were not limited to the following:

  • In the last four years the global economy has performed underwhelmingly with trade growth shrinking.
  • International crude oil prices have trended downwards in the last half decade meaning slimmer revenues for governments of major oil producing countries such as Nigeria
  • Relatively low value added tax (VAT) rate made revenues from this fiscal source as a proportion of total revenue well below the continental average. VAT was only recently increased from 5% to 7.5% in September 2019.
  • Sharp growth in government revenue expectations. The Muhammadu Buhari administration has taken huge leaps in revenue and expenditure expectations reflecting rising budget numbers that have not been supported by annual revenue growth.
  • Falling oil revenues resulted in lower custom revenues from oil-related activities which in turn led to lower fiscal earnings
  • The restriction of access by some importers to access to the official foreign exchange market of the central bank and other FX windows such as the importers and exporters (IEFM) window led to a reduction in imports and therefore import duties, further cutting down fiscal revenues  

Between 2015 and 2019 the FIRS has found it difficult meeting revenue targets and in the last five years the tax authorities have only been able to achieve the median average for the decade once, and that was in 2017 when revenue achievement was 82.76% of revenue goal. 

Chart 3 FIRS Revenue Target Achieved in % 2011-2019

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Source: FIRS, Proshare research

No Garlands for the Tax Man 

Fowler underestimated the federal fiscal challenge and applied a Lagos paradigm that had its limitations at the national level. In Lagos the tax/revenue challenge was simply one of collection. Widening the tax net and improving collection efficiency. At the federal level, things were more complicated. Most of federal tax revenues were linked to the oil sector and a reduction in oil revenue instantly reduced federal revenue collections, these were revenue threats Fowler had no control over.

Restrictive monetary policy designed to defend the external value of the Naira also had consequences for importers and import duties as revenues from this subhead saw a decline; these external shocks to fiscal revenues were above Fowlers paygrade. The easy revenue train of Lagos could not be duplicated in Abuja. The requirements for success were clearly different between the state and federal revenue administrations.

Apparently, Fowler's falling revenue-to-staff ratio was indicative of a challenge in the fiscal metrics needed to serve as a guide to strategic recruitment and deployment.  Key Performance Indicators (KPIs) appear not have been stitched into the FIRS operations. Staff numbers went up as revenues declined, indeed Nami the new FIRS boss in his end of the year 2019 memo noted that " were able to achieve five trillion, seven billion naira (N5.007trn) even without the active participation of consultants and with moderate inflation and exchange rates. I want to be positive that this impressive performance is achievable again."

Image 1 FIRS Chairman's End of Year Letter to Staffers

December 23, 2019

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Source: FIRS

In other words, without the horde of human support structures adopted by Fowler the FIRS was able to see higher levels of revenue. Nami's argument is not quite accurate. In the year 2012 when the fiscal agency saw its highest revenue performance of 137.74% of that year's target its staff strength was the highest for the years 2011 to 2017. FIRS staff strength in 2012 was 8,265 (see chart 4 below). Between 2015 and 2017 FIRS staff numbers fell from 7,182 in 2015 to 6,589 in 2017 before shooting back up to 9,448 in 2019. 


Chart 4 FIRS Staff Numbers 2011-2019

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Source: FIRS, Proshare research 


The quality of execution of his mandate as boss of the federal tax agency will haunt the erstwhile Chairman of FIRS for months and perhaps years to come, so far one thing seems very certain; until the dust settles there will be no thank you garlands for Mr. Tunde Fowler. 


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