This article is extracted from review of literature.
2.0 Development of Local Government in Nigeria
The evolution of local government in Nigeria has under gone a lot
of changes. These are all geared towards making the local government a
system that could serve the purposes for which they are created, before
the emergence of the British Colonial/ Administration; various
communities in Nigeria were governed through the instrumentality of
their traditional political Institutions. These institutions were
anchored on the people’s habits of thought, prestige and custom which
are adapted to meet the new conditions for general development of their
Local authorities were empowered to charge and collect
developmental rates based on a certain percentage of the income of the
rate payers. The council enjoyed the social autonomy of providing
certain social services to the community, for instance the local
government was vested with the responsibility of healthcare services
delivery with the transfer of primary healthcare delivery system.
In the 1950s, election was introduced according to the British
model in the western and eastern parts of the country with some measure
of autonomy in financial, general administration and in personnel which
gave rise to tide of progress, growth and development experienced in
the local government.
Prior to this period, the British introduced native courts chaired
by Chiefs, native treasuries where taxes collected from people were
paid in for use by the local government. Native authorities were
created with traditional rulers at the head of each authority. The
traditional rulers continued to dominate local government’s
administration until the military took over power. In 1966, from then
the powers of the traditional rulers, especially in the northern
region, reduced gradually. The newly created states in the Northern
region increased popular participation in local government
administration. Larger local authorities were broken to smaller ones
and native authorities were changed to local governments.
The local government reform of 1976 provided the guidelines for
local governments in Nigeria. The reform created large-sized local
government areas throughout the federation based on a certain minimum
population requirements, these results in uniform local government
areas. The federal government for the first time was involved in the
funding of local governments. The local government gets statutory
percentages share of Federation accounts and state revenue. The local
government was made a third tier of government, which means the local
government has its own powers. There were about 301 local government
councils as at 1976.
In 1986, the Babangida Administration made local government an
effective third tier of federal system, introduced reforms aimed at
enhancing their autonomy and strengthening their administrative
framework. All elected councilors now constitute legislative arm of the
local government which the executive arm consists of the chairman and
vice-chairman and supervisory councils.
The local government witnessed several reforms between 1991 to
1992. The reforms snows a fundamental implications for local government
administration, especially in regard to the reforms to the local
government service. 589 local government areas were in existence as of
1991 local government reforms and there was establishment of the
executive chairmanship of local government with functions firmly
entrenched in schedule four of the constitution.
The federal government established the local government service
commission aimed at preserving the independence of the local government
staff. The federal government increased the local government share of
the federation accounts to twenty percent. This increase in revenue base
gave local governments high degree of confidence and power to equip
them for the challenging role, facing them.
According to 1999 constitution of Nigeria, not only recognizes,
but also guarantees the existence of a more powerful and independent
local government areas section 162 of the 1999 constitution guarantees
the right of the local government to receive statutory allocation of
the revenue from both the federation account and state resource. The
fourth, schedule of the same constitution spells out the functions of
the local government.
The federal government increased the local government share of the
federation accounts to twenty-five percent. In the present local
government administration, there are about 774 local government areas
in Nigeria with the rights and power of providing certain social
services to the communities, such social services like provision of
healthcare centers, electrification, provision of pipe bore water and
accessible roads etc.
2.1 Sources of Taxation in Local Government
In an attempt to marshal out the functions of the local
government, the fourth schedule of the constitution of the federal
Republic of Nigeria 1999 implicitly specified some of these sources of
taxation to the local government.
However, Ogunna (1996). Posited that generally the local
government has eight main sources of revenue which includes rates,
grants, statutory, allocations, fees and charges, fines, earnings and
profits, loans and miscellaneous.
As one of the independent sources of revenue, people residing
within a local government area pay some money to it in form of rates.
Rate is, thus a local tax of the local government which is of three
types namely property rate, special rate and capitation rate otherwise
known as poll tax. Property rate is a fixed percentage amount of the
current value of a private property levied on the owner of such a
properly. Capitation rate which is also a fixed amount of money levied
on all rateable adults living in the local government. It is not only
fixed but equal for every payer and like the property rate, it is paid
As a flat rate, it is generally low so that the low income people can conveniently pay.
Special rate is a fixed amount meant to be paid by all rateable
adults residing in the local government area. Special rate is usually
levied for specific and priority projects like Education, water supply
and rural electrification which the local government has inadequate fund
for its provision.
2. Statutory Allocation
As the third tier of government, the local government receives
statutory allocation from the federation account just like the state
and federal government. This share of revenue is as fixed by law, part
of it also comes from the state government total internally generated
revenue based on percentage formula because it is fixed by law, it is
not voluntary but mandatory and does not depend on the whims and
caprices through a legitimate process of change of the law that
provides it. Statutory allocation is definite and certain.
These are penalties imposed by the customary courts on individuals
for the contravention of the bye-laws of the local government to
regulate and control services allocated to them within their areas of
jurisdiction. Note that revenue accruing to the local government
through this source is relatively very insignificant.
4. Earning and Profits
These are profits, interests and premiums accruable to the local
government from its investment of funds in private or public economic
In other words, they are money realized by the local government
from commercial ventures and industrial establishments such ventures
includes mass transit services, soap industry, bakery, Agricultural
farms, shares owned in companies. If such business is effectively
managed with minimum local government interference and political
influences, the higher revenue could be realized.
5. Fees and Charges
Revenue is generated through payments for the services which the
local government provides such fees are in some cases designed to
regulate and in other cases to maintain these services.
Fees and charges are imposed and revenue realized from the
issuance of various types of licenses like bicycle, wheelbarrow, canoe
and cart licence, others are charges on bakeries, sale of liquor in
restaurant and public places, errection of sign-boards registration of
births and marriages, motor parks and markets, personal identification,
public urinary and toilets etc.
The imposition of fees and charges on these services by the local
government always requires enabling laws for them to be lawful.
The federal and state government give grants often called
grants-in-aid, to the local government to enable it discharge its
functions effectively particularly in the area of the provision and
maintenance of certain basic amenities for the people such basic
amenities like water and electricity supply, building of educational
and health facilities. The maintenance of roads attract grants four
main types of grants which includes general or block grant, specific
grants, equalization grant and matching grant.
Local governments are expected and are indeed meant to embark on
certain development projects that are listed as priorities of
government. Consequently any local government of that embarks on such
priority projects is given a matching grants which is designed to
simulate and encourage development.
Local governments are empowered to obtain loans from the federal,
state and other local government. They are also allowed to raise loans
from financial institutions like bank and from individuals. They raise
loans for incurring capital development projects that are within their
Educational, Agricultural and Industrial development Projects,
drainage schemes, health and market development are good examples of
developmental projects for which loan can be raised.
The fact is that no local government can make any reasonable giant
stride in rapid community development without borrowing. It is however
important to note loans are necessity provided that they are prudently
applied on capital projects for which they are obtained, on capital
projects which are expected to be of immense benefits to the people
including the coming generation which incidentally are reasonably
expected to pay for such loans in future, our of the rates and other
forms of taxes they will pay.
Revenue can be generated from the payment of levies like
developmental and educational levies. Money can also be realized from
rents paid for using any land or building belonging to a local
government. Gifts and donations from individuals, philanthropists and
corporate bodies also form sources of revenue of the local government.
In conclusion, local government are empowered to generate revenue
to enable them carryout their statutory and permissive functions. It is
therefore necessary to enhance taxation of the local government to
enable them, carryout their duties.
2.2 The Need for Taxation in the Development of Local Government Areas.
According to Abba Ugoo E. (2008) the need for taxation can’t be
overemphasized, the management of revenue generated in the local
government constitutes the crucial and central component in the
Administrative process of the local government. This is largely so
because finance determines the services rendered by the local
The following gave rise to the need for taxation in the local government:-
1. To Solve Diverse Functions Allocated to the Local Government
In the same way, where the local government is allocated diverse
functions, as it now has in Nigeria, some of which are large in scope
like education, health, water supply and rural electrification. The
revenue sources to be provided should correspondingly be large in
scope, viable and rich in content to match the diverse functions.
2. To be able to pay Their Highly Skilled Personnel.
Related to the above is a wide variety and meningitides of
functions require a large body of high skilled, professionally trained
and technically competent staff that must also be regularly motivated.
The employment of such staff would necessitate the purchase of a lot of
costly equipment and materials for use in the discharge of their
3. To Tackle Large Territorial Landmass and Population of the Local Government Area.
Most local government in Nigeria are very large both in terms of
territorial and population sizes, in such a circumstance, a greater
need for revenue arises to enable such a local government cope with the
developmental problems of such a large area and at the same time be
able to meet satisfactorily the diverse needs of the large population.
Adedji (1979) capped it all when he declared that the success or
the failure of the local government depend on the financial resources
available to the individual local government and the way those
resources are utilized. This fact is further recognized and emphasized
in the guideline for local government reforms of 1976 which stated that
it must be recognized that if meaningful local government is to be
expected in Nigeria, much larger financial resources are needed in the
development of such local government area.
2.3 The Problems of Taxation
Local government in Nigeria enjoyed an improved revenue from
1976 till date due to reforms introduced by different regimes all aimed
at making local government effective and efficient in discharging
statutory responsibilities to the people. This was achieved through
increased sources of taxation; this problems is multifarious ranging
from over-dependency of local government on statutory allocation of
federal and state government, low borrowing capacity, corruption,
mismanagement and misappropriation of local government funds,
ineffective strategies for enhancing internally generally generated
revenue, lack of skilled and technical personnel.