I was reading a post on Twitter recently on how Peter Obi utilized Anambra state funds. A lot of people on the thread do not understand how a state is funded and most just thought that they get funds from the federal government. Also, they also believed the federal government just prints money.
Yes, I understand that recently, a serving Governor made that claim, but that’s not how Government funding is done. The fact that a lot of us do not know, also says a lot about our primary education system.
But that is a story for another day. Today, I will be peeling the onions of Government Revenue with emphasis on how it is generated or sourced.
The government has a lot of ways in which it gets its revenue, not just taxes or crude oil, (I’m sure a lot of people don’t know any other apart from the two mentioned).
Also, these revenues when generated are allocated into specific accounts and then utilized for their specified purpose by law. These accounts are established by the constitution, and they are:
- The consolidated revenue fund
- The federation account
- The development fund
- The contingencies fund
The consolidated revenue fund
All income derived by the government except those that are specified for other funds (Accounts) are paid into this account. The incomes are:
- Share of the federation account (48.5%)
- Direct taxes- This only includes taxes from FCT residents and PAYE from all armed forces.
- Licenses and Internal revenue- This includes:
- Arms and ammunition license fees
- Company registration fees
- All other income arises from the registration and license fee in the country.
- Mining- This relates to the mining of all other minerals apart from crude oil.
- Fees- This relates to the income from court fees, fines, probate fees, etc.
Other forms of revenue in this fund include Earnings and sales from government investment, rent of government property, interest and repayment of loans, reimbursements, and any miscellaneous income.
The federation account
This account is quite special (most would say it’s our biggest problem), it includes revenues from:
- Direct & Indirect Taxes- All taxes in the country apart from those mentioned above.
- Mining- All sales derived from crude oil
This is the main account that services the country. That is, the federal, state & local governments, also give oil-producing states additional funds, then reserve some for natural disasters and general ecological problems.
I’m sure if they audit this account, the earth will not contain some Nigerians, that’s where you’ll hear that some disguised as another gender to escape to the moon or maybe Pluto.
The development fund
This was set up for the purpose of capital development projects. It includes revenue from:
- Yearly transfers from the CRF
- External grants and loans
- Internal loans- Yes, internal loans, these are the treasury bills the government sell to Nigerians with an annual return of 5% now. Previously, it used to be as high as 15%, but well……
The contingencies fund
This was established to take care of all natural disasters, and its only inflow is from the CRF.
So, while we cannot confirm that these accounts are used as intended, let us understand that Nigeria has a lot of ways to fund its expenditures. And if these revenues when collected, makes it into its specified account, then I really don’t understand why we are borrowing to the hilt — pun intended.