Automated Market Makers (AMMs) are a decentralizedDecentralization refers to the property of a system in which nodes or actors work in concert in a distributed fashion to achieve a common goal.
Click to read more → exchangeBusinesses that allow customers to trade cryptocurrencies for fiat money or other cryptocurrencies.
Click to read more → protocol that allows users to trade cryptocurrencies without needing traditional order books.   Instead of relying on buy and sell orders placed by users, AMMs use smart contracts and liquidityLiquidity indicates how easy it is to convert a cryptocurrency into cashCash is the most liquid form of money: physical coins and banknotes in the most narrow sense of the term.
Click to read more → quickly — and whether this can be achieved without the assetAssets are the resources that an organization can use to generate revenue or benefit.
Click to read more →’s value suffering.
Click to read more → pools to facilitate trades.   If the term “Virtual Automated Market Makers (vAMMs)” has emerged since my last update, it could refer to an evolution or extension of the AMM concept with additional virtual or programmable features.    These decentralized exchange protocols utilize liquidity pools and algorithms to enable users to trade digitalDigital technologies are these electronic tools that have the ability to generate, store or even process data.
Click to read more → assets directly from their wallets. Popular examples include Uniswap […]
Click to read more →Indirect tax is one of the most commonly applied forms of taxation in modern economies, yet most people don’t consciously recognise when they are paying it.

Unlike direct tax, where money is deducted from your salary or business income and paid directly to government, indirect tax works through consumption.

That means the tax is embedded into the prices of goods and services that people buy every day. When a buyer pays money for those goods or services, the business or seller that collected the money later remits part of that amount to government as tax.

So, indirect tax is a form of tax that is not collected from your income directly, but from the money you spend.

This means even people who do not work in formal employment, are self-employed, or do not earn regular salaries still contribute to government revenue through indirect taxation.

It is built into the economy in such a way that almost every purchase triggers some tax contribution. This makes indirect tax extremely powerful, particularly in consumer-based economies.

Indirect taxes are applied at the point of consumption. In Nigeria, one of the most popular forms is Value Added Tax (VAT). Telecom charges, import duties, excise on alcohol, tobacco, and petroleum products are also important examples. All these categories demonstrate how indirect tax operates.

This type of tax is called “indirect” because the party paying the tax (the buyer or consumer) is not the same party remitting the money to government.

The responsibility of remittance lies with the seller or service provider. They collect the money embedded in the transaction, then forward the government’s portion periodically to an authorised tax authority.

How Indirect Tax Differs from Direct Tax

In direct taxation, government deals directly with the taxpayer. Salaries are taxed directly through PAYE systems, small business profits are measured and taxed directly through assessments, and large corporate bodies pay company income tax on their declared profit.

This means the tax liability lies directly with the person or business paying tax.

Indirect tax does not operate like that. Government protects its revenue by placing tax obligations on the distributor, the merchant, the service operator, or the importer. So government indirectly transfers the tax burden to the final consumer.

For example, when you buy soft drinks in a supermarket and the price is ₦400, the VAT included in that ₦400 is not automatically seen separately unless the business chooses to break it down on receipt. You only see a final price.

That final price already contains tax. So, the consumer pays tax without seeing themselves as a taxpayer.

That is why this system works smoothly. People consume without conscious awareness that they are contributing revenue. Government collects tax without the administrative burden of collecting individually from millions of citizens one-by-one.

Major Categories of Indirect Tax in Nigeria

The most visible form of indirect tax is Value Added Tax (VAT) which is imposed on almost all consumer goods and services except those exempted by law.

Other indirect taxes include:

• Customs Duties on imports
• Excise Duties on production of certain categories of goods
• Levies charged on petrol and diesel
• Telecom taxes added to recharge values
• Consumption tax by certain states for hospitality industry transactions

These categories function through different government channels and are controlled by different institutions such as FIRS (Federal Inland Revenue Service), Nigerian Customs Service, and sometimes state Government revenue agencies.

The presence of multiple indirect tax channels makes indirect tax a diversified revenue stream. Even when oil revenue fluctuates, indirect tax stabilises a portion of government revenue because consumption continues daily.

Why Countries Use Indirect Tax

Government uses indirect tax for several reasons. First, indirect tax reduces the pressure on direct taxation.

If government only relied on direct tax such as personal income tax, it would be forced to find ways to aggressively extract revenue from workers’ salaries or corporate profit margins. Indirect tax helps cushion that dependency.

Another reason is convenience. It is more convenient for government to ask a few large companies, import distributors, telcos, and fuel marketers to collect small amounts from millions of customers than to collect from those millions individually.

Businesses act as the middle channel. Government supervises fewer collectors, instead of dealing with every individual citizen.

Indirect tax also encourages broad-based contributions. Everybody buys product. So even small-scale consumption contributes.

People are automatically part of the tax system whether they intend to or not. This expands government revenue net beyond formal workers.

Indirect Tax and InflationA general increase in prices and fall in the purchasing value of money.
Click to read more → Relationship

One important relationship that exists between indirect tax and daily cost of living is inflation. When an indirect tax is applied, it automatically increases the cost of the taxed good or service.

So, when government adjusts indirect tax rates, such as increasing VAT percentage, retailers respond by increasing the retail price.

This means indirect tax can directly contribute to inflation. When prices of basic consumption items rise, the general price index rises too.

In a country like Nigeria where majority of residents depend on regular food purchases, phone data, transportation, and small consumer items, indirect tax channels affect daily expenditure patterns directly.

This is why economists sometimes caution government against aggressive indirect tax increments during periods of national inflation.

When exchange rate is unstable, cost of food is high, fuel price fluctuates, and business survival is tense, increasing indirect tax can worsen cost of living. Indirect tax behaves like a multiplier, it amplifies price pressures across the economy.

Indirect Tax and Government Strategy

Indirect tax revenue is used to fund government activities. Some of the expenditure categories include infrastructure, national healthcare, education, security, administrative operations, road construction, debt servicing, and welfare programmes.

With increasing global debt pressure, many countries now rely more heavily on indirect tax because consumer spending is easier to capture than profit declarations.

Government adjusts indirect taxes based on policy direction. For instance, if government wants to discourage consumption of harmful products such as tobacco or alcohol, it increases excise duty.

The aim here is both revenue generation and discouragement effect. Indirect tax thus becomes not just a source of revenue but also a behavioural control instrument.

In international trade, customs duty controls national protection interest. If government desires to reduce the importation of a particular product which competes with local production, it increases import duty.

At the same time, government might reduce customs duty for critical items such as raw materials to support local manufacturing.

Is Indirect Tax Fair?

This is a popular debate topic.

Indirect taxes are easy to collect, but they are regressive in nature because they affect low-income earners more. When a wealthy person buys phone airtime or bottle water, indirect tax is the same as that of a low-income person.

The financial burden is heavier on the poor because larger percentage of their small income is spent on consumption.

That is why some analysts argue that indirect tax is unequal. However, governments argue that indirect tax allows voluntary tax participation through consumption without surveillance and administrative complexities.

Finding balance is important. Fair tax systems often combine direct and indirect tax in different proportions.

Real Life Examples in Nigeria

1. When you recharge ₦500 airtime, indirect tax is applied.
2. When you buy a soft drink, VAT is contained in the price.
3. When you buy imported electronics, customs duty already influenced its retail price.
4. When alcohol or cigarettes are expensive, excise duties contribute to the cost.

So, indirect tax is constantly affecting final consumer cost.

Conclusion

Indirect tax operates through price mechanisms and consumption patterns. You don’t see the tax directly, but you bearSomeone who believes that prices in a given market will decline over an extended period. Such a person might be referred to as “bearish.”
Click to read more → the burden through buying.

Government uses this mechanism for revenue generation, policy regulation, consumption influence, and economic control. Nigeria applies numerous indirect tax types through VAT, customs, excise duty, telecom levies, fuel levies, and hospitality charges.

Understanding how indirect tax works helps individuals and businesses understand price behaviours, cost transmission effects, inflation factors, and revenue policy logic.