The Importance of Equitable Allocation of Revenue Resources in Nigeria


In a business context, revenue resources refers to the money generated from the sale of the business product.  But in a Federal State like Nigeria, revenue resources refers to the sources of income available to the government in the state.  These sources or revenue, resources determine the levels of social, political, economic growth and development in any given state.  Under developed nature of African countries is as a result of their limited sources of income not that they enjoy poverty.

The government of any sovereign state needs as many sources of revenue as possible too proper implementation of its policies and other governmental functions.  Even as the provision of basic facilities that fluctuate the structure of the economy which leads to economic development.

In Nigeria, the revenue resources available to the government can not be compared with its sources of expenditure which is the basis of its underdevelopment.  This is stimulated in an attempt by the government to provide infrastructural facilities, increase in standard of living and welfare of the citizenry.  This is also as a result of its increase in population without a corresponding increase in the provision of employment opportunities for the masses, which should have yielding some money for the government through tax, which is one of the sources of revenue generation to government and enables government to perform its functions effectively and economically.




Taxation is a system whereby individuals and corporate bodies make compulsory levy to the government on periodic basis.  Tax is obligatory in nature, imposed by the government on individuals and firms in order to generate fund for the accomplishment of its objectives.  Taxation came into existence through the effort of lord lugard’s administration as a British high commissioner who amalgamated the northers and the southerners.  He passed certain laws in the north to enhance the collection of the tax.

Such as:

  1. Land Revenue Proclamation in 1904 which traditional rulers collected and shared between the government
  2. Native Revenue Proclamation in 1906 which replaced the former.
  3. Native Revenue Ordinance 1917 which also replaced that of 1906.

Lord Lugard found it difficult to extend the tax to the Easterners because there was no traditional rulers, but he succeeded in 1928.

In 1937, native and non-native ordinances were passed which formed the basis of direct and indirect taxes that are in existence now in Nigeria.


The two major types of taxation that are in operative now in Nigeria are thus:-

a.                 Direct Tax.

b.       Indirect Tax.


a.       DIRECT TAX

These are those levied on income and property of individuals and business enterprises.  The burden of the incidence of the tax is borne by the payer.  This type of tax include the following:

i.        Personal Income Tax:   This is a form of direct tax which is levied on the wages, salaries and other earnings of individuals.  During assessment allowances are granted to the payer and the balance is taxed.

  1. Company Income Tax: This is also levied in gross profit of companies after certain allowances.

iii.      Capital Gain Tax: This is imposed on the value of resold assets.  When a person acquired a landed property and later resold it, a tax impossible on it is capital gain tax.

  1. Capital Transfer Tax: This is imposed on the assets of a deceased person and paid by the person who takes possession of the asset.
  2. Poll or Flate Rate Tax: This is where the payers pay some amount as tax.



These are those tax levied on import and export commodities, which could either be specific or advalorein.  They include duties on bears, cement, etc.  Purchases tax on furniture, motor cars, etc.  The burden is not directly on the payer but on the consumers of such commodities.  This form of tax also include the following:-

  1. Sales Tax: This is imposed on the sale of a commodity either at a wholesaling or retailing points.  It is usually paid by the consumer of commodity.
  2. Custom Duties: These are taxes levied on imports and export commodities.  The tax on import is import duty while tax on is export duty.

iii.      Excise Duties:      These are taxes imposed in the goods produced in a country.

  1. Purchase Tax: These forms of taxes are imposed on some selected goods such as electronic equipment, automobiles, furniture etc.  The tax controls the use or consumption of some commodities
  2. LOAN: This is a financial aid, given by the government to its citizens, in order to enhance the standard of living and development at various levels in the economy.

Government always implement this function through the institutions of capital market example, development bank.  During indigenisation the Federal Government provided prospective investors the required fund to invest and become part owners of certain comprise through the establishment of money market in Nigeria.  All these efforts of the government are geared towards development.  All the potential investors who benefited from the decree paid a specified rate of interest together with the amount borrowed.  These interest paid to the government forms part of the revenue resources of the government.



Oil was discovered in Nigeria by shell-Bp petroleum development company of Nigerian in 1956 during colonial administration.  This led to the diversion of foreign exchange and revenue of the government from agriculture to petroleum products.  As a result of the high demand of the petroleum products and revenue to be generated federal government decided to establish the Element refinery in Port Harcourt.  This gave the government the power to expand its mine and power department to regulate the activities of oil companies.

It is worthy to note that oil prospecting and exploration was the highest contribution to the sources of government revenue.  The increased government activities in this field started paying of as oil rose from N735 m in 1972 to N1368.6m in 1973.  Official records also resources increased from N1,368.6m to N8,184m which in 1981 the oil financial record increased to N11,563 billion.  Today oil revenue has multiplied itself many times when compared to those of the olden days.



This is the major sources of revenue to the government of Federal republic of Nigeria before the discovery of invention of petroleum products in the economy.  Nigerian government neglected agriculture in preference to petroleum immediately it was discovered.  This has contributed to the underdeveloped nature of the economy.  The recent democratic government has set out various strategy that could lead to proper reformation of agriculture in future.  Through the exportation of certain crops like cocoa, timber, etc and other agricultural produce, revenue is being generated to the government to enhance its policies implementation.



In this context, both state and federal government generate a gigantic sum of money from the use of its property by the masses.  many government parastatals have its estate which it allocate to its worker or public for the purpose of occupancy.  Government collects its rent through its machinery at periodic intervals.  Some of the state government have theirs example, New Housing Estate in Enugu State, Isheri Housing Estate in Lagos state to mention a few.  The money generated through this source also from part of the revenue of the government



Government charges fines in an attempt to forgive its citizen for any offense committed.  Fees are also charged by the government, such as motor vehicle license fees, market fees etc.  All these are some of the sources through which government generate revenue to execute its project to enhance the development of the economy and other governmental functions.


Government participates actively  in the buying of shares of companies in the economy for the purpose of revenue generation.  The same way individuals and corporate bodies   participate in the ownership  of certain public companies so as  the government does. Some of the states government also participate in the ownership of certain viable companies example, Delta state government and River state counterpart have 15% and 25% shares respectively (FAMO) rubber company  which has branches in Delta state, Edo state, and Calabar in Cross River states.

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