Project Topic – THE PROBLEM OF REVENUE SOURCES IN THE LOCAL GOVERNMENT ADMINISTRATION

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CHAPTER ONE

INTRODUCTION

Background of the Study

The Local Government is the third tier of government which is the tier of government closest to the citizens. Local Government occupies a strategic position in the administrative and developmental processes of every state, especially the rural areas. Since it is practically impossible for the central government to control every detail of the state’s functions, it is necessary that local governments are established to attend to the details of local administration, giving full weight to local preferences and prejudices on every issue. Thus, this study will focus on the problem of revenue generation in the Abeokuta-North Local Government area. Besides, it will articulate the introductory aspects of study which includes background, statement of the problem and the scope of the study.

Bello-Imam(1986) asserts that “countries all over the world have appreciated the fact that it is cumbersome to administer and manage the affairs of the state by central government authority”. Consequently, they have established local government or structures of subsidiarity at the local levels. The United Nations in its conception of Local Government asserted that “it is a political division of a Nation (or in a federal system) which is constituted by law and has sustained control of local affairs, including powers to impose taxes or exact labour for prescribed purposes. The governing of such an entity is elected or otherwise locally selected” (Abubakar, 1993). According to Ojofeitimi (2000), the word “local” suggests that councils are meant for small communities and “government” means that they have certain attributes of government. Agbakogba and Ogbonna (2004) define the local government from a legal perspective. They see it as a “political administrative unit that is empowered by law to administer a specific locality”.

The practice of local government in Nigeria is traceable to the pre-colonial era which was characterised by local authorities managing the affairs of their localities and communities independently. The local authorities included the Obas, Emirs, Council of Elders and other such traditional arrangement. This was met with gradual transformation upon the emergence of the colonial period. Based on available record, the first local administration ordinance was the Native Administration Ordinance No 4 of 1916 which was designed to evolve from Nigeria’s old institutions, the best suited form of rule based on the people’s habit of thought, prestige and custom.(Bello-Imam 1990). While the colonial government managed the affairs of the Nigerian state at the centre, they introduced native authorities under the policy of association/indirect rule to see to local administrations at the grassroots. Macpherson constitution of 1946 initiated some remarkable changes; the regions introduced some reforms in their local administrations in the 1950s which aimed at enhancing performance.

From Independence and through the period prior to 1976 reforms, local government in Nigeria varied in form and structure from various regions of the country. Also, there was decline in the responsibilities and effectiveness of the existing local governments. This was not unconnected with and yet not limited to the heated political climate and excessive politicking with struggle for power and dominance. The regional governments were not left out as they took upon themselves most of the responsibilities of the local government through deliberate encroachment on their activities. It is in this sense that Aworawo and Akpan noted that before the introduction of the 1976 Local Government Reforms, the local governments in Nigeria were quite deficient in structure, size, staffing and finance- a development which inhibited their effectiveness as agents of national integration and grassroots development.

Local government administration in the country experienced fundamental changes in 1976. Local government reform created for the first time, a single-tier structure of local government in place of the different structure in the various states. The main focus of the 1976 reforms is the restructuring of the financial system and revenue of local government. Statutory allocation from the federation account and states revenue was made mandatory and was entrenched in the recommendations of the Aboyade revenue commissions of 1977.

With the entrenchment of 1976 reforms in to the 1999 Constitution, the efforts of reviving the local government system in the country proved quite productive as the constitution formally recognised the local government. Nonetheless, the potential ability of the 1976 reform to fully transform the local government system was cut short. Despite the constitutional force and unified system feature of local government with respect to 1976 reform, the constitutional procedure of voting in at least 75% of local council representatives was neglected and sole-administrators were appointed to manage the various existing local governments between 1979 and 1983. Awofeso in his book “Issues in Local Government Administration” revealed that by the time General Buhari ascended political power, local government authorities were begging for urgent attention. The local government existent in the country were financially handicapped and were virtually under-functioning. The new local government created between 1979 and 1983 were later dissolved and subsequently, a 21-man committee was set up under the chairmanship of Alhaji Ibrahim Dasuki by the Federal Military Government on the 28^th of May, 1984 to look into the problems of the local governments which include; re-examining the existing structures, functions and financial resources available to local governments for the performance of those functions; look into the accounting/management of local government, including the standardization of various departments off the councils; propose how best to manage inter-governmental relations between federal, state and local governments and also between local governments and ministries for local governments, local service commissions among others.

The 1988 local government reform takes its bearing from the 1988 Civil Service Reform and since the inception of the fourth republic up till the present administration, local governments in Nigeria is continually faced with difficulties of allocation/revenue generation and administration of overall finance of the local governments. It is therefore necessary to address the challenges of revenue generation, local spending and overall management of the affairs of the government at the grassroots. This study will at such seek to address these issues and seek prospects to ensuring increasing stability in local government avenues for revenue generation.

Statement of Problem

In recent years, it has become increasingly difficult for local governments to fulfil their statutory obligations because of the costs involved. The general concern over the seemingly slow development of the rural areas in Nigeria has created a doubt as to the relevance of local governments in Nigeria whose primary function is to effect a representative government faster and closer to all the areas of state land. Inadequacy of funds for various developmental projects stands as the cause for these shortcoming despite the increasing revenue allocation from the federation account to the local governments. Hence, the reasons for the various avenues granted the local governments to generate revenues themselves. The most severe problem facing public institutions is a fiscal one, particularly in the local government. The fiscal problem is often birthed by factors including over-dependence on statutory allocations from the state and federal governments, deliberate tax evasion by the local citizenry, creation of non-viable local government areas that is not self-sustaining and cannot cater for its local populace, differences in the status of local governments in terms of rural-urban dimension leading to variation in internal revenue, inadequate revenue and fiscal jurisdiction.

For financially healthy local governments to exist, responsibilities and functions must be allocated in accordance with their taxing power and ability to generate funds internally. The constitutional provision that recognizes local government’s power in this regard must give them full freedom to operate and this must be well granted and adequately protected. These measures, coupled with a review of the revenue sharing formula, the granting of fiscal autonomy and fiscal discipline as well as making local governments responsive, responsible and accountable to the people will set local governments free from fiscal stress promoted and strengthened by the 1999 constitution.

The local government is faced with myriads of problems ranging from corruption and embezzlement, poor financing, mismanagement of funds to poor leadership. This obviously has deterred the development of local government in Nigeria. However, the most important problem of local government is the revenue generation. Hence, the problem statement of this study. The major issues to be considered are; what factors have contributed to non-performance of local governments; is it because of total dependence on federal and state statutory allocation? Is it as a result of poor internally generated revenue drive? Is it because of ineffective utilization of the available resources or mismanagement by public office holders? Certain percentage of the statutory allocation has always been deducted by the state government thereby causing the local governments to underperform. Noteworthy is the fact that;

1. Without revenue independence, the goal of local government cannot be achieved.
2. Absence of resource mobilization is by far the greatest problem of local government administration.

Based on the above slated problems, it has become necessary to conduct a research analysis on the problem of revenue generation in Nigeria of which Abeokuta North Local Government will be a case study.

Objectives of the Study

The broad objective of this research is to evaluate the problem of revenue sources in the local Government Administration. The specific objectives are:

1. To examine the relationship between the statutory allocation to the local government and internally generated revenue (IGR) of the local government.
2. To ascertain the extent to which the restriction of local government fiscal autonomy has affected the effective functioning of the local government.

• To ascertain factors responsible for ineffective implementation of local government projects.

1. To evaluate the reasons for low internally generated revenue and how it has contributed negatively to local government developmental efforts.

Research Questions

The Research Questions are;

1. What are the critical issues in revenue generation in local government in Nigeria?
2. How has the total dependence on federal and state statutory revenue contributed to the dearth of internally generated revenue (IGR)?

• How has the deficit on revenue generation affected the developmental efforts in Abeokuta North Local Government?

Significance of the Study

From historical precedence, it is obvious that there is underperformance of the local government and there is need for the local government to improve their performance. However, this research will significantly consider the actions and inactions of the government at the grassroots as regards question of revenue generation and the need to utilize substantial revenue from its various sources in addition to federal and state statutory allocation for developmental purpose. The study will also help in identifying some means of generating revenue that has been neglected over the years. It will also be beneficial to grassroots because improved revenue generation means improved standard of living in form of provision of social services and amenities such as roads, hospitals and primary health centres, local parks, drinkable water, rural electrification, etc. The study will most importantly take into consideration the fiscal issues, deficiencies and challenges of generating and utilizing revenue in the Abeokuta North Local Government of Ogun State, analyse facts and figures about revenue status of the local government and make recommendations which will be invaluable for educationists, researchers and political office holders.

Theoretical Framework

Ola and Tonwe(2009) stated that in attempting to formulate theories about the performance of local governments, one can evolve a well distilled list of criteria of what local governments ought to be functionally concerned with and what it theoretically ought to be engaged in.

There are three major theories of local government. These are the democratic participatory, efficient-services, and developmental schools of thought.

Democratic participatory School

The democratic participatory school of thought holds the view that local governments exist solely for the purpose of promoting democracy and participation at the grassroots level thereby bringing government nearer to the people (Adamolekun, et al 1988).

This theory holds that local governments function to bring about democracy and to afford opportunities for political participation to the citizens as well as to educate and socialize them politically. This viewpoint has been corroborated by Keith-Lucas, David Bulfer and William Machenzei. This school asserts that the local government is a prime element of democracy and demonstrates the intrinsic values of democracy, insisting that, irrespective of the service it offers, the local government offer the closest thing to the widespread consultation and participation. A very important part of this democratic role is the opportunity it creates for political activity and social interaction. The crux of this theory is that local government must continue to uphold democracy through the provision of political education, participation and political socialization for its citizens.

Efficiency Services School

The opinion of this theory is that the main purpose of the local government is to provide services to the local people. The efficiency services theorists believe that the local government occupies the best position for the efficient performance of certain functions. This is made possible because of the nearness of the council to the people and because of the smallness of the population.

According to this school, the local government is to be more efficient than the state in providing these services since it is closer to the people (Livingstone, 2008).

The Developmental School

The developmental school emphasizes how local governments in the developing world can be an effective agent of a better life, an improved means of living, socially and economically and a means to have a better share in the national wealth. The proponents of this school contend that far more than in developed western countries, the local government in developing nations can and should have the function of helping to reduce the congestion at the centre.

If the local government is well articulated to stimulate initiatives, it can more easily identify available local skills, interests and capitalize on developing them (Olojede and Afegbua, 2011).

Methodology

This research work is approached through empirical and  descriptive approaches. However, because of the peculiar nature of the Nigerian local government system, the research method is restricted to empirical and descriptive research, through personal inspection, observation, personal interviews of civil servants and political office holders in the Abeokuta North Local Government. Secondary sources such as library study, articles, records, and statistics relating to fiscal revenue including LGA reports will be subjected to descriptive and empirical analysis.

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Project Topic – THE PROBLEM OF REVENUE SOURCES IN THE LOCAL GOVERNMENT ADMINISTRATION