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WHAT ARE THE SOURCE OF REVENUE FOR LOCAL GOVERNMENT REVENUE IN NIGERIA?
According to Nigeria’s national budget, the country’s principal revenue sources are classified into two categories:
- crude oil source of revenue
- Non-crude oil source of revenue
All revenues from the oil sector, such as proceeds from oil sales, petroleum sales from the NNPC, gas sales, and remittances from foreign and national oil businesses, are included in the crude oil sources. This is the federal government’s primary source of money.
Non-crude revenue streams are those that aren’t derived from oil, and their share of total revenue has risen dramatically in the recent decade.
They include revenue from federal taxes (although the tax-to-GDP ratio is extremely low at the time of writing; according to this article from the OECD, Nigeria’s tax-to-GDP ratio in 2018 was 6.3 per cent, while the), VATs (there is a legal dispute over whether the federal government has the authority to collect VATs from states), agricultural sector, aviation, federal examination fees, various types of license fees, import duties, and tariffs, and some other sources.
But I believe there are other sources of revenue worth discussing that aren’t included in the budget.
For example, in recent years, the federal government of Nigeria has relied on debt to generate revenue, i.e. borrowing or selling debt (I understand some will argue that this isn’t revenue, but it is a part of how they fund the budget).
Money borrowed from international monetary agencies such as the IMF and other banks is one source; this provides the government with a good opportunity to obtain much-needed foreign exchange (dollar) at cheap interest rates (single digits).
There are also assists from western countries and benefactors, which may be considered revenue to the federal government, however, these aids have recently shifted their working paradigm from donating cash to the federal government to funding projects directly.
The sale of debt through Eurobonds is a recent source of revenue for the federal government. In 2021, the government raised $4 billion with the sale of Eurobonds, while in 2018, it raised $2.86 billion through the sale of Eurobonds.
These are large sums of money that are typically utilized to cover budget shortfalls, hence they are categorised as government revenues.
Revenue streams for the federal government are fluid, changing over time to reflect changing circumstances.
Update 1: Since I originally provided this answer in October of 2020, I’ve done more reading and gained a better grasp of the Nigerian federal government’s revenue, so I’ve added some additional sources.
ANOTHER MAJOR SOURCE OF GOVERNMENT REVENUE IN NIGERIA
Internally generated money and externally generated revenues are the two major sources of government revenue in Nigeria or local government funding in Nigeria.
let find out the revenue from each major source of government revenue in Nigeria
INTERNALLY GENERATED REVENUE
Internal revenue is revenue generated within the company.
It’s a component of local government administration.
- a levy imposed by the local government or the community;
- a poll tax, which is also known as a user fee
- a loan and tenement rates
- Fees, fines, and local licensing
- Profits derived from a business venture
- The cost of renting a piece of property owned by the local government
- Paying interest
The proportion of money generated domestically by each municipality.
The local government’s size is defined by its size.
Commercial activity, the government sector, and the urban environment are all things to consider.
or the rural nature of the council, the tax rate to be imposed, revenue collection mechanisms, and inhabitants’ socio-cultural attitudes toward taxation (Anifowose and Enemuo, 1999).
EXTERNALLY GENERATED REVENUE
The term “externally generated revenue” refers to money earned outside the country.
government funds raised from sources other than local government
The government, for example, is responsible for legislative allocation.
According to the federal constitution of 1999, federal, state, and other sources of grants and loans are available.
The Nigerian Constitution, Section 7(6a – b),
Ascertain that the federal and state governments are legally bound to fund local governments. in the interests of progress and good governance
Their revenue base has risen as a result of better governance.
With the formulation of a suitable annual budget, the importance of finance in local government can be realized. Budgetary importance is emphasized. The data is arranged in a logical order.
By keeping track of terms, the city government can give socioeconomic services.
delivering affordable services to the region’s population
regularity (Ogbonna D. 2013).
The many approaches to The following is a list of the types of expenditures made by local governments:
Roads, water, and clinics are all being constructed.
and the supply of health-related services such as pharmaceuticals, as well as
Construction of market stalls, electricity, and a motor pack are all things that need to be considered.
Assistance in the community, claim and salary processing, and other services are available.
(Nigeria’s 1999 constitution, section 7 (2))
TRANSFERS BETWEEN GOVERNMENTS
Local governments received roughly 32 per cent of their general revenue from state government transfers (including indirect federal assistance), while the federal government provided only 4%.
Education programs receive more than two-thirds of state transfers to local governments. Meanwhile, about 40% of all federal transfers to local governments go to housing programs.
REVENUE FROM OWN SOURCE
In 2017, local governments received $509 billion in property taxes, accounting for 30% of total revenue. For municipalities, this was the single most important source of revenue.
Local governments received $124 billion in general and specific sales taxes, amounting to 7% of total revenue, and $33 billion in individual income taxes (2 per cent).
Corporate income taxes, hotel taxes, and company registration fees together brought in $40 billion (2 per cent).
Charges and other taxes such as water, sewerage, and parking meter prices brought in $385 billion to municipal and county governments (23 per cent of local general revenue).
CHANGING THE SOURCE
Since 1977, the percentage of municipal general revenue obtained from taxes has been relatively constant at around 40%. On the other hand, the distribution of tax revenue has changed slightly.
Property taxes declined from 34% to 30% of total revenue in 1977, then to 27% in 2000, before rebounding to 30% in recent years.
Meanwhile, between 1977 and 2017, sales tax revenue increased consistently from 5% to 7%. (Section 2)