10 Major Sources of Government Revenue In Nigeria

Oasdom Sources of government revenue in Nigeria
Oasdom Sources of government revenue in Nigeria

What are the major sources of government revenue in any given country? I’m sure you’re not reading this post because you don’t have a clue; but you want details, isn’t it?

When you think about it, the structure of Nigerian government for example is one elaborate system that makes you wonder; “how does the government finance itself and other huge projects in the country?

More so, when you hear about passing the budget at the senate, you begin to sniff through business news or political news to understand how exactly trillions are been allocated throughout all sectors in the economy.


You’re being inquisitive my friend and that’s a good one. Every information you get will help you make informed judgement.

So, how about we find questions to your answers? Oh, I mean answers to your questions (yes, i won’t delete those, sometimes I like seeing my imperfection *winks).

Let’s take it from the beginning.

What Is Government Revenue?

Revenue in business terminology is the total amount of income generated from sale of goods or services, or any other use of capital or assets, associated with the main operations of an organization before any costs or expenses are deducted.

In governance or public sector, Government revenue is the money received by a government from taxes and non-tax sources to enable it to undertake government expenditures.

Hmm, government expenditures? We’ll talk about that in detail soon in this detailed article about sources of Government revenue.

Government revenue as well as government spending are components of the government budget and important tools of the government’s fiscal policy.

In this article, you’ll understand the:

  • Sources of government revenue in Nigeria
  • Classification of government revenue
  • Government expenditure
  • Classification of government expenditure
  • Government financial officials
  • Government funds and more..

Major Sources of Government Revenue In Nigeria

If you’ve gone through our detailed article where we discussed the relationship between the three levels of government in Nigeria, you’ll have a clue on how things work.

There are 3 levels of government in Nigeria:

  • The Federal Government
  • State Government
  • Local Government

levels of government revenue in Nigeria

Hence, the sources of government revenue will be analyzed on the basis of the above level of government.

A. Federal Government Sources of Revenue

As the aim of the Federal Government is to provide public amenities like power supply, electricity, education, security, one of it’s major responsibility is to generate revenue for the country and its states.

It goes without saying that the Federal Government earns revenue from mineral resources extraction.

Sources of Federal government revenue include:

1. Direct and Indirect Taxes

When it comes to tax systems, taxes are of various types. The Federal Government get revenue via Direct taxes through the Federal Inland Revenue.

Government sources of revenue through Direct taxes include:

  • Personal Income tax: one levied on the income of individuals in the country.
  • Company income tax: tax levied on the profit of companies in the country
  • Petroleum tax: The tax imposed on the profit from mining petroleum in Nigeria,
  • Capital gains tax: The gains accruing to any person on the disposal of a chargeable asset.

Also, revenue is derived from indirect taxes such as:

  • Education tax
  • Import duties: Levee imposed on goods imported into the country
  • Export duties: The tax paid on goods sent to another country.
  • Excise duties
  • Withholding tax: an advance payment of tax, deductible at the point of payment or when credit is effected,
  • Value Added Tax: a tax on spending and it is borne by the final consumer of vat-able goods and services, because it is included in the price paid.
  • Tariffs
  • Stamp Duties: These are taxes on instruments (instruments here include bills of exchange, share capitals of companies, debenture stock, property valuation, promissory notes and policy of life assurance, payment receipt, bank notes, etc.).

2. Mining

Sources of government revenue in Nigeria can be via mining activities such as:

  • Royalties on mineral resources e.g tin, gold, limestone, etc.
  • Revenue from oil sales: Definitely top oil and gas companies in Nigeria pay tax to the federal government.
  • Quarrying licenses
  • Mining fees

3. Earnings and Sales

  • Federal government investments
  • Sales of government properties e.g land, building
  • Proceeds from prison farms

4. Licenses and internal revenue

  • Arms and ammunition licenses fees
  • Registration and license fees e.g company registration, club registration fees, churches registration fees

5. Fees

  • Court fees
  • Passport fees
  • Visa fees
  • Advertisement fees (bill board)

6. Armed Forces

  • Income from armed forces educational receipts
  • Sales of small weapons
  • Sales of armored tanks, aircraft

7. Interest and Repayment

  • Interest and repayment of loans granted to state government and government workers.
  • General loan interest.

8. Tax Remittances from Betting Companies Like Those Listed on Betting Bonus Nigeria

B. State Government Revenue Sources

The state government is the second tier of government. Sources of government revenue at the state level include:

Statutory allocation: Grant from the Federal Government to the states. The revenue allocation by statute is as follows:

  • Federal government (56%)
  • State government (242%)
  • Local government (20%)

Other revenue sources of the state government include:

  • Income tax
  • Fees
  • Licences of car, motor cycle, vehicles etc
  • Interest and repayment on loans
  • Internally Generated Revenue IGR from state government investment
  • Rent on government properties

C. Local Government Revenue Sources

As seen above, major revenue source of the local government is 20% allocated by the Federal government.

Other sources include:

  • Special grants
  • Donations
  • Tenement rates
  • Fines e.g courts
  • Renewal of licences e.g radio and television
  • Park collection
  • Interest on investment

Learn more: How does the government allocate revenue?

Classification of Government Revenue

classification and sources of government revenue in Nigeria

The Government revenue estimates can be classified into 2:

  1. Recurrent Revenue
  2. Capital Receipt


This is the amount of money collected by the government from their regular sources of revenue. It is the day-to-day revenue expected by the government in a particular year.

Examples are taxes, fees, rates, rent on government property, licences, custom and excise duties.

Capital Receipt

Capital receipt is the revenue that accrues to the government through loans and grants from local and foreign sources which are tied to certain projects.

So far, in this article, you’ve come to know about oil revenue sources like petroleum profit tax, rent, royalty, NNPC earnings from direct sales, penalties for gas flared. Also, non-oil revenue sources are direct and indirect taxes.

Right now, let’s talk about government expenditures.

Government Expenditures

So, what is government expenditure?

Government spending or expenditure includes all government consumption, investment, and transfer payments. It could be government acquisition of goods and services intended to create future benefits, such as infrastructure investment or research spending.

Classification of Government Expenditure

Government expenditure is classified into 3:

  • Capital expenditure
  • Recurrent expenditure
  • Special expenditure

Government Expenditure and revenue types

Let’s take it one after the other:

Capital Expenditure

These are expenditures of capital nature. They are expenditure which add to the value of fixed assets.

These include; purchase of vehicles, machinery, construction of roads, school buildings, flyovers, hospitals, railway lines, airports and seaports.

Special Expenditure

These are payment for central items for the long term use of the government, for the purpose of altering its pre-determined objectives e.g purchase of heavy plants and generators, furniture and equipment, motor vehicle, aircraft for the presidency, etc.

Recurrent Expenditure

These are the costs of running the day-to-day activities of the government departments. It includes wages and salaries, transport, maintenance of building, purchases of drugs for hospitals, servicing of cars, etc.

Recurrent expenditure comprises of:

Personnel Cost: This include personnel emolument of government employees like basic salary, rent, and transport allowances, leave bonus, etc.

Overhead Cost: These are day to day expenses of a general nature and include general repairs and maintenance utilities.

Sources of Government Revenue (Summary)

Just like businesses, the government of every country needs funds to finance the smooth running of the affairs of the country and to ensure this, revenue realization must be on point.

In most cases, taxes are one of the major sources of government revenue in Nigeria and it is the same for many countries.

What if taxes are not paid by citizens and company income taxes are not received? Well, that’s why the Federal Inland Revenue Service are put in place.

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