Nigeria’s tax revenue fell short of its first-quarter target by N2.24tn in 2026 despite the rollout of major tax reforms and the transition from the Federal Inland Revenue Service to the newly established Nigeria Revenue Service.
Documents presented at Federation Account Allocation Committee meetings showed that the NRS generated N7.44tn between January and March 2026 against a projected target of N9.68tn, representing a performance rate of 76.87 per cent.
The figures mark a weaker performance compared to the same period in 2025 when the former FIRS exceeded its quarterly target.
Although tax collections increased year-on-year by N1.40tn from N6.04tn in Q1 2025 to N7.44tn in 2026, the revenue still failed to meet the ambitious targets set under the new fiscal framework.
Analysis of the report showed that the biggest shortfall came from Companies Income Tax and related non-oil revenues.
The NRS generated N3.75tn from Companies Income Tax, Capital Gains Tax and Stamp Duties against a target of N5.05tn, leaving a deficit of N1.30tn.
Performance in upstream oil-related company taxes also weakened, with collections standing at N349.95bn compared to a target of N523bn.
However, Petroleum Profits Tax and Hydrocarbon Tax recorded stronger performance, generating N1.62tn against a target of N1.30tn.
Value Added Tax collections also remained relatively stable despite missing projections slightly.
The NRS generated N2.42tn from VAT in the first quarter against a target of N2.49tn.
Meanwhile, petroleum royalties and other oil and gas revenues recorded major underperformance.
The category generated N1.28tn against a target of N2.12tn, leaving a deficit of over N840bn.
The report further showed that mineral royalties and other mining-related revenues failed to generate any inflow during the quarter despite official targets.
Amid the weak performance, the Nigeria Revenue Service warned states, ministries, departments and agencies that unremitted taxes could now attract direct deductions from their FAAC allocations under the new tax laws.
Speaking at a national workshop in Abuja, Executive Director of the Government and Large Taxpayer Directorate, Amina Ado, said the Nigerian Tax Administration Act now empowers authorities to deduct unpaid taxes directly from government allocations.
“Unremitted revenue can be deducted from allocations,” Ado warned.
She explained that Section 80 of the new law authorises the Accountant-General of the Federation to deduct unpaid tax obligations from any government institution after due process.
According to her, government agencies must now treat tax remittance as a critical responsibility tied directly to their allocation survival.
“If a federal, state, or local government treats that withholding tax as someone else’s responsibility, the law provides a mechanism for that neglect to return immediately through deductions from allocations,” she stated.
Ado disclosed that the NRS is targeting about N40tn in tax revenue and warned that compliance failures among government institutions could undermine the target.
She said ongoing field audits had exposed major leakages involving delayed remittance of VAT and Withholding Tax by some agencies and state institutions.
“Our field monitoring and audit activities have revealed that while many sub-national entities are exemplary in their civic duties, there are still some significant structural leakages,” she said.
The NRS official stressed that all levels of government are legally required to deduct and remit VAT on taxable supplies before the 14th day of the following month.
She also revealed that tax identification numbers and tax clearance certificates have now become mandatory for contractors dealing with government agencies.
“A tax ID must be stated on all documents,” Ado added.
Chairman of the NRS, Dr Zacch Adedeji, represented by Executive Director Muhammad Lawal, said the agency’s priority remains raising sustainable revenue for the federation.
“The stakes are higher this year as the NRS is faced with the Herculean task of raising about N40tn in tax revenue for the Federation,” he stated.
Adedeji said the service would intensify compliance enforcement across federal, state and local government institutions while also recognising the most tax-compliant states from 2026.
Finance Minister Taiwo Oyedele also defended the reforms, describing them as part of broader efforts to create a more stable and transparent tax system.
“The opportunity is to reform our tax space, expand the tax net without increasing the tax burden, encourage voluntary compliance, and use technology to plug leakages,” Oyedele said.
He added that stronger collaboration between all tiers of government remains critical to improving revenue generation and achieving long-term economic stability.
