Public Revenue

public revenue
Public revenue refers to income generated by government from its activities/operations. In other words,
it is a segment of total funds needed to finance government activities. It may be difficult to provide a
complete list of all the sources of public receipts. However, the common and important ones include
taxes, fees, fines, borrowings, disposal of assets, income from public undertakings, gifts, donations,
licenses, royalties, rents, rates, levies, printing of currency, and so on.
According to Dalton, it may be useful to make a distinction between public receipts and public revenue.
While public receipts cover receipts from all sources, public revenue is a narrower concept and does not
include borrowings, printing of currency, grants, gifts and donations, sale of public assets and
reimbursement.
sources of revenue to the government of Nigeria
The sources can be classified into 2 namely:
(1) Oil revenue, and
(2) Non-oil revenue
The oil revenue sources comprise proceeds of the sale of crude oil, royalties, signature fees as well as
NNPC earnings.
The non-oil revenue consists of excise tax, personal income tax, company income tax, import and export
duties, value added tax, capital gains tax etc. There is also the independent revenue sources like fees,
fines, levies, licenses, rents, rates, investment income.
Oil revenue is the most important source of funding to the government of Nigeria since it provides over
forty percent (40%) of budgetary finance. The reason of this can be traced to advent of oil and
subsequent neglect of other sectors. In addition, the low diversification of the revenue base and lack of
innovation and invention to exploit the potential of the abundant resources turned the country to a
mono- product economy.
Factors responsible for revenue sharing problems
(i) Over dependence on oil revenue

(ii) Conflicts on revenue sharing formula
(iii) Resource control agitation
(iv) Increasing fiscal units
(v) Unstable constitutional framework
(Vi) Lack of political will or sincerity of the part of public office holders
Principles of revenue allocation

(i) Derivation: This principle was originally applied to the proceeds of export taxes on agricultural
produce. The principle asserts that the state from which the bulk of the revenue is obtained should
receive extra share over and above what other states receive.
(ii) Equality of States: The principle asserts that revenue sharing among the states should be done on
equal basis
(iii) Population: This Principle asserts that since government is about people, that development is also
about people and that the essence of government should be the welfare of the people. Therefore, states
with larger populations should receive extra share above others with smaller populations.
(iv) Tax Effort: The principle, which applies in most Federation, is designed to encourage states to exploit
their tax capacities. The realization of a state’s potential in respect of tax revenues will widen its
development possibilities.
(v) Fiscal Efficiency: This principle asserts that states should minimise the cost of fiscal administration or
obtain maximum revenue from a given cost. Fiscal efficiency reflects not only on the ability to raise taxes
and collect them, but it reflects also the structure of the tax base itself as well as the overall
administrative machinery of government.
(vi) Even development: The principle requires that growth and development should be spread so that
serious inequalities or imbalances are reduced in the Federation. These may be achieved by sacrificing
efficiency in the form of a reduced overall growth.
(vii) Need: The rate of growth and development a state is able to achieve depends on the revenue the
state is able to generate. When the need of a state is compared with the need of others, it may be
necessary to transfer financial resources from one state to another in the interest of efficiency.
(viii) National Interest: This principle is used residually by the highest level of government to intervene
and transfer funds to lower levels or units in the lower levels to serve various considerations. It lies
therefore, in the sphere of discretionary grants to be administered by the highest tier, that is,
government of the Federation.
Other means of capital finance

Besides revenue, there are other means of capital finance available to the government.
They include the following:
(i) Debt finance or borrowing
(ii) Public Private Partnership
(iii) Privatisation
(iv) Grants

Public Revenue

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public revenue

sources of revenue to the government of Nigeria

The sources can be classified into 2 namely:

(1) Oil revenue, and

(2) Non-oil revenue

Factors responsible for revenue sharing problems

(i) Over dependence on oil revenue

Principles of revenue allocation

Other means of capital finance

They include the following:

(i) Debt finance or borrowing

(ii) Public Private Partnership

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