The economic challenges facing Nigeria, have multiplied over time because the nation spends more than the revenue it generates.
Nigeria spends all it makes without saving or planning for the rainy days. So, even though blessed with a lot of resources, the economy is in a bad state.
You see many may not agree but the economic problems hampering Nigeria’s growth are self-inflicted.
Nigeria boasts of so many resources that some thriving nations do not have. What’s the difference? It is planning, leadership, and political will.
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In Africa, Nigeria is considered a giant, but how can you be a giant when you are considered an underdeveloped country in the world?
Nigeria has what it takes to be great but has not lived up to that expectation because it squanders its revenue, and constantly goes begging.
How Does Nigeria Generate Revenue
As a nation blessed with so many resources, Nigeria generates its finance from both oil and non-oil revenue.
Nigeria’s main source of generating revenue internally is crude oil. The oil-rich African nation is considered one of the major producers of crude.
Proceeds From Crude Oil Sales
The proceeds from crude oil sales have been the backbone of the government’s spending for many decades now besides borrowed funds.
In the first five months of 2023, Nigeria made $11 billion from crude oil sales, while exporting about ₦5.6 trillion worth of crude oil.
Challenges facing crude production include pipeline vandalism and corruption in the Nigerian National Petroleum Company Limited (NNPCL).
Petroleum Profit Tax
Petroleum Profits Tax is a tax imposed on the income of companies in petroleum operations. The tax is governed by the Petroleum Profits Tax Act, Cap P13 LFN 2004.
This PPT on companies operating in petroleum operations varies between 15% and 30%, depending on where the company operates.
According to the Federal Inland Revenue Service (FIRS) ₦1.73 trillion was generated from the oil sector between the first six months of 2023.
Non-Oil Revenue
The FIRS said it collected ₦3.76 trillion in non-oil tax revenue for Nigeria during the first half of the year.
Here are other ways through which the government generates revenue internally.
Companies’ Income Tax
The Federal Government’s revenue from company income tax (CIT) more than tripled to ₦1.53 trillion in the second quarter of 2023.
CIT is governed by the Companies Income Tax Act (CITA). Also, it is a tax imposed on the profit of a company from all sources.
Every company that falls under this umbrella is expected to pay a tax rate of 30% of the total profit of the company.
Customs and excise duties
Every country generates revenue from customs duties and tariffs paid on goods entering or leaving Nigeria.
Excise duties are taxes paid on the domestic sale of certain goods and activities, such as alcohol, tobacco, motor fuel, and betting but customs duties are only levied on imports.
The rates vary for different items, typically from 5% to 35%. In 2023, Nigeria imposed a 0.5% levy on all goods imported from outside Africa.
Personal income tax
Nigeria also generates revenue from tax levied on individual’s income known as personal income tax.
A personal income tax can be imposed on the income of an employed individual and it can also be imposed on a self-employed person.
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Though some have argued that not all Nigerian companies and individuals pay tax, the question, however, is what they have done with the money they have collected.
One thing that has become more than obvious to all is that Nigeria has no business being broke if the government spends judiciously.
