10 Revenue Sources To State Governments in Nigeria other than Federal Allocations (2024)

No government, whether it is the federal government or state government or even local government can succeed in providing basic social amenities to its people without having reliable sources of revenue.

However, although, my focus in this article will be in the area of revenue sources to the state government in Nigeria.

I want to state here that, every government, the level notwithstanding, needs resources for its day to day administration.

Unlike any level of government, the state government in Nigeria generate revenue from a variety of sources in order to meet their administrative need such as sales plus gross receipts taxes.

These sources of revenue are one of the main sources of state governments tax revenue. Others include Tax and Rates, and Fees, and Licence Fee, and Surplus of the public sector units and, Fine and penalties, and Gifts/grants, and Printing of paper money as well as, Borrowings.

Top 10 Revenue Resources For State Governments

These sources of revenue are some of the main sources of state governments revenue. These include; surplus of the public sector, fines and penalties, gifts and grants and, borrowings. and in this article, l will be explaining these revenue sources of state governments in Nigeria. Below are some of them.

1. Tax

Tax is said to be a compulsory levy that is imposed by the relevant authority whereby taxpayers are not permitted to claim anything.

Tax is not a penalty, and as such, it is not imposed on people as a penalty for a legal offence. The actual essence of a tax, which is different from other charges imposed by the government, is simply what is known as ‘the absence of a direct quid pro quo’, in other words, it is the exchange of favour, which is between the taxpayer and the government.

The three important features of tax include the following;

-Tax is a contribution, and it is compulsory that every citizen pays his tax to the state.

-Tax is every citizen’s obligation to the state, and he is expected to pay taxes under any circ*mstance

-Tax payment has no direct relationship with benefit.

Read Also:Withholding Tax in Nigeria; Meaning, Rate, Guidelines on Administration, How to Calculate, Problems, Prospects

2. Rates

Rates has to do with local taxation, by that l mean, taxation that is levied by the state rather than the federal government.

However, rates are something that has to do with the estimated rentable value of businesses, as well as, that of domestic properties, although rates are more often criticised for not being related to income.

Hence, rates are majority revenue source of state governments in Nigeria.

3. Fees

Fees are other revenue sources of state governments in Nigeria. Fee is said to be a payment made in order to defray the cost of all recurring services that the government has made, an this is primarily done in the public interest.

4. Licence Fee

License fee is another revenue source of the state governments in Nigeria. Licence fees are said to be paid, for instance, in a situation, where the state government authority invokes simply for the purpose of conferring permission or conferring a privilege.

So, much of the resources the state governments spent in Nigeria is also derived from a source of revenue known as License Fee.

5. Surplus Gotten From Public Sector Units

Another source of revenue of the state governments in Nigeria is those surplus gotten from the public sector units. In this case, what actually happened is that the state governments will act just like a businessman while members of the public will act as the customers.

And as a businessman, the state government can, for example, sell goods or maybe render some services such as producing trains, and city buses, and electricity, and transport, and posts and telegraphs, and water supply, among other goods and services to the members of the public.

Therefore, for providing these services, the government also stand a chance of earning revenue from members of the public.

Other goods that the state governments produced which also attracted revenue from members of the public include, commodities such as, steel, and oil, and life-saving drugs, and several other commodities.

6. Fine And Also Penalties

Another source of revenue of the state governments in Nigeria is known as, ‘fine and penalties’, and it is received from the members of the public.

Fine and penalties are considered as the charges which are imposed by the state governments in Nigeria on individuals, who have contravened the laws of the land as a measure of punishment.

Actually, the truth behind this revenue source of state governments in Nigeria, is not to actually generate money from the members of the public, but the real reason behind this source of state governments revenue in Nigeria is to make sure that, members of the public are forced to adhere to the laws of the land and also act orderly in the country.

7. Gifts And Grants

Another source of revenue of the state governments in Nigeria is through gifts and grants. When we talk about gifts as a source of revenue generation by the state governments in Nigeria, we are talking about voluntary contribution that is made by private persons or a contribution that comes from non-government donors to the state government fund, specifically for some purposes, for example, relief fund, and defence fund, in the case of war period or during an emergency.

However, although gifts and grants are some of the revenue sources of the state governments in Nigeria, this source happens to generate quite a little amount of state governments revenue in Nigeria.

8. Printing Paper Money

Another source of revenue of the state governments in Nigeria is that of printing of paper money. This is another revenue source of the state governments in Nigeria.

This revenue source of state governments in Nigeria is simply another method of generating some extra resources for the state governments for their administration expenditure.

For the most part, this particular method is usually being put aside perhaps, it has some disadvantages because if this method is fully implemented as a method of generating fund, for the state governments in Nigeria, then the method may prove difficult to stop.

9. Borrowings

Borrowing is said to be a process by which a country loaned funds from another country. In trying to highlight the possible sources of revenue of the state governments in Nigeria, borrowing has been identified as one of the revenue sources of the state governments in Nigeria.

There is no doubt that borrowings from the public has remained one of the sources of state government revenue. And this source of revenue includes loans from the public, which actually come in the form of deposits, and bonds, among others.

This source of state governments revenue in Nigeria can also come from foreign agencies and foreign organisations around the world.

10. Levies

Another source of revenue of the state governments in Nigeria is through levies. When we talk about levy as a source of revenue generation by the state governments in Nigeria, we are talking about revenue that is generating from private businesses to the state government purse, specifically for purpose of assisting the state governments in Nigeria in running their administration.

However, although levies are one of the revenue sources of the state governments in Nigeria, this source happens to contribute to the volume of state governments revenue in Nigeria.

Conclusion

Unlike any level of government, the state government in Nigeria generate revenue from a variety of sources in order to meet their administrative needs such as sales plus gross receipts taxes.

These sources of revenue are one of the main sources of state governments tax revenue. Others include Tax and Rates, and Fees, and Licence Fee, and Surplus of the public sector units and, Fine and penalties, and Gifts/grants, and Printing of paper money as well as, Borrowings.

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