How The Nigerian Government Makes Money

Generating revenue is very essential, not just in the private sector but also in the public sector. The economy of any nation survives on inflow of fiscal resources to succeed and Nigeria is not an exception. Every government depends on revenue sources to thrive including the Nigerian government. This article will let you know how the Nigerian government makes money.

An Exposition On How The Government Makes Money In Nigeria

What then is government revenue?

Government revenue refers to the income generated by the government, from its citizens and other sources.

The ways in which the government generates revenue are not so far fetched. The government has many streams of income that enables it provide a developed and economically friendly environment for its citizens.

The revenue streams consist of taxes, social contributions, grants receivables and other revenue. Revenue increases the government’s net worth, which is the difference between its assets and liabilities.

In Nigeria, all the revenue that the government earns from multiple streams flow into two major accounts. The consolidated revenue funds and the federation account. The accountant general distributes the funds from the accounts to various areas where they are needed.

Let’s analyze the various ways a government generates income:

How Does The Government Make Money?

1. Grants:

Grants are non-payable funds that a government receives from another government and organizations. The government receives this grant with the aim of improving its economy or starting a project. This is a good source of revenue for the government because they don’t have to worry about paying the money back.

2. Taxes:

This is the major way the government makes money. Taxes are compulsory levies that the government imposes on its citizens. The levy is usually payable at different rates and percentages. There are different types of taxes, and they include:

  1. Personal Income Tax : Personal Income Tax is a tax that you pay to the government from your personal net income as a citizen. The tax rates will vary depending on the tax policies of your government. In Nigeria, the government takes 24% of your personal net income as revenue.
  2. Company Income Tax: Company Income Tax is a tax that companies remit to the government from their profits on operations in that trading year. In Nigeria, 30% of profits that they generate is remitted to the government.
  3. Value Added Tax: Value Added Tax is an indirect tax that individuals pay the government whenever they buy goods or services through vendors. The government charges this payment at 7.5%.
  4. Capital Gains Tax: Whenever you sell or lease a capital property or an asset, you will also have to remit some money to the government. The government deducts 10%
  5. Petroleum Profit Tax: This tax is one of the major way the government earns money. When petroleum or its by-products are sold, a total tax of 65.75% is charged on its proceeds.

3. Fines And Penalties:

These refer to the penalties that the government imposes on individual who violate laws. A person or firm makes these payment when they are guilty of breaking a law. The following are examples of fines payable to the government.

  1. No parking fines
  2. Urinating in specific areas
  3. No loitering fines
  4. Over speeding fines
  5. Expired Legal document fines
  6. Destruction of properties fines
  7. Disobedience of traffic lights fines, e.t.c

4. Foreign Investments:

Furthermore, the government may also decide to invest in other countries and economies. When these investments are made, they come back as returns or cash flow. The obtained amount after operation constitute revenue for the particular government.

5. Fees And Payments:

Fees are payments made by people who use public services. When government provides services for the public to use, they pay bills and fees. This flows in as a revenue to the government. Some services provided by the government that citizens have to pay for include;

  1. Revenue from hospitals in the form of Medical bills, Payment for hospital cards, Health insurance through NHIS and Certificates
  2. Income from federal schools in the form of school fees, Boarding fees, etc
  3. Revenue from electricity bills
  4. Payments from water utility
  5. Revenue from rent of government houses and real estate
  6. Inflow from the court in the form of court orders, Affidavits, change of name fees and so on
  7. Revenues from stadiums and government-owned museums
  8. Revenues from amusement and leisure parks through sale of tickets and activities, cleaning and sanitation, etc.

6. Sale of Commodities:

Government also raises money from the sale of commodities. Some commodities that government sells to get income includes:

Crude oil, government farm produce, Liquefied petroleum gas and other by-products of petroleum.

7. Licenses:

License is a permit from an authority to own or use something or carry on a trade. These permits come with a fee. Therefore, payment for licenses is also another way government earns revenue. Examples of licenses that citizens pay to government include:

  1. Driving license
  2. Liquor license
  3. Shop license
  4. Signpost license
  5. Nigerian Communications Commission (NCC) License
  6. Business operational license
  7. Petroleum drilling license
  8. Offshore/onshore license
  9. Pipeline license

8. Import and Export Duties:

Another way government makes money is through import and export duties. There are different types of taxes and levies charged for goods leaving the country and when they are imported into the country.

This is how the Nigerian government makes money.

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