Understanding Nigeria's 'National cake'

Guardian Nigeria

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00:00 The term national cake is a familiar phrase for the average Nigerian, often used in discussions

00:07 about the nation's wealth.

00:09 However, it is frequently associated with corruption amongst those managing the country's

00:14 finances.

00:16 So that brings us to the question, how does the government bake this so-called national

00:20 cake?

00:21 Does it just sit there waiting to be divided piece by piece?

00:25 The success of any nation's economy depends on a steady inflow of financial resources

00:30 and Nigeria is no exception.

00:33 Just like any other government, Nigeria relies on various sources of income to prosper.

00:38 Now let's delve into the national cake ingredient.

00:43 Nigeria is oil rich due to its substantial oil and gas reserves.

00:47 Our country heavily relies on extraction and export of crude oil for a significant portion

00:52 of its revenue.

00:53 Oil revenue is derived from exploration, production, refining and exportation of crude oil.

01:00 Both oil and non-oil revenues play significant roles in funding the government.

01:05 Revenue from oil and gas sectors has historically been a major source of income.

01:10 The Nigerian National Petroleum Corporation, NNPC, oversees the oil and gas operations,

01:16 collecting revenue through taxes, royalties and profit-sharing agreements with international

01:21 oil companies.

01:23 The oil revenue contains proceeds from crude oil sales, petroleum profit tax, rents and

01:29 royalties.

01:30 Now, let's delve into the non-oil revenues.

01:34 The Nigerian government has actively pursued diversification by promoting non-oil sectors.

01:40 This strategic move acknowledges the vulnerability of an economy heavily reliant on oil.

01:45 Other industries that contribute to the government's income include agriculture, solid minerals

01:52 manufacturing, income from central banks, capital gains from foreign financial institutions

01:58 and telecommunications.

02:01 As these sectors grow and attract investments, they have the potential to reduce the country's

02:05 dependency on oil revenue.

02:07 The Nigerian government also generates income through other means.

02:12 First and foremost, taxes.

02:15 Taxation is a critical revenue source for the Nigerian government.

02:19 The Federal Inland Revenue Service, FIRS, is responsible for collecting various taxes,

02:24 including corporate income tax, value-added tax, personal income tax and custom duties.

02:32 These taxes are levied on individuals, businesses and imported goods.

02:37 Tax revenue forms a substantial part of the government's income and funding of essential

02:42 public services.

02:44 The most common tax is personal income tax.

02:47 This is the taxation all citizens pay the government from their earnings.

02:51 Nigerian government takes 24% of your net income as revenue, unlike the company income

02:57 tax where 30% of your company's profit must be paid to the government on operations in

03:01 a trading year.

03:03 On top of that is value-added tax, VAT.

03:06 This indirect tax is paid by individuals whenever they purchase goods or services such as dining

03:12 at a restaurant.

03:13 The government levies a 7.5% charge on the total bill.

03:18 Continuing with fines and penalties.

03:21 Individuals or firms pay fines when they violate laws.

03:24 These payments serve as penalties for breaking the law, such as fines for illegal parking,

03:30 overspeeding and expired legal documents.

03:33 In addition, we have licenses and permits.

03:37 The government charges fees for permissions required for activities like business operations,

03:41 events, and using natural resources.

03:45 Also there is fees and payments.

03:48 Citizens pay fees for government-provided services such as school fees, electricity

03:52 bills, water utility payments, rented government houses, court orders, and many more.

04:00 Another crucial way is through grants.

04:03 Grants are non-payable funds that the government receives from another government or organization.

04:08 The government receives these grants to improve its economy or start a project.

04:13 This is a good source of revenue for the government because the government does not have to worry

04:17 about paying this money back.

04:20 Another vital income generator is the telecommunication and ICT sector.

04:25 The Nigerian Communications Commission, NCC, collects fees and levies from telecommunications

04:30 companies operating in the country.

04:33 It is important to note that broadcasting and media houses pay tax.

04:37 The National Broadcasting Commission, NBC, regulates licenses for radio and television

04:42 stations and collects fees from broadcasting stations.

04:46 Who could forget tourism?

04:48 Revenue is generated through entry fees to national parks, cultural sites, tourist attractions,

04:54 and taxes from tourism-related businesses.

04:57 Next we have mining and solid minerals.

05:01 Nigeria's significant mineral reserve contributes revenue through mining activities, royalties,

05:07 and fees.

05:08 Equally important is the import and export levies.

05:12 Nigeria's import-dependent economy generates revenue through custom duties and tariffs

05:16 on imported and exported goods.

05:19 Lastly, we have the Sovereign Wealth Fund.

05:22 The Nigerian Sovereign Investment Authority, NSIA, manages excess revenue from oil and

05:27 gas exports, investing it in strategic assets for long-term economic development.

05:33 Over the years, the federal government and its subnational components have utilized these

05:39 income sources to fulfill various responsibilities, including infrastructure provision, debt servicing,

05:46 social amenities, and judicial services.

05:49 This contributes to the economic development of the nation, ultimately boosting the Gross

05:54 Domestic Product, GDP.

05:58 With this understanding, you now know how the Nigerian government generates its income

06:02 and how it is not a national cake.

06:05 It is your money, my money, and not a treasure chest.

06:08 For more insightful stories and reports, subscribe to our channels.

06:12 I am Lois Oguni for Guardian TV.

06:14 Bye for now.

06:15 [music]

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