THE IMPACT OF INTERNALLY GENERATED REVENUE OF THE DEVELOPMENT OF THE LOCAL GOVERNMENT IN NIGERIA. A CASE STUDY OF NDOKWA WEST LOCAL GOVERNMENT AREA
BACKGROUND OF THE STUDY
Nigeria has three tires of government in line with the federal system of government. The federal system is the first followed by the state government as the second tier and the local government as the third tier. It came into existence in the year 1900. When the British indirect rule was introduced. Consequently each tier of government has its sphere of functional competence and influence. However, constitution has provision within which they can generate revenue respectively. The creation of local government was vested on the federal government and however seen as an effective channel to reach out to the citizens at the grass root. It is also vested with the responsibility of maintaining law, justice, peace and order as well as bringing some basic social service and public amenities to the grass root. Thus, to encourage corporate participation of habitants towards improvement of their standard of living and development of those areas, the need for the levle of government to enjoy the monopoly of self independence, thus, establishing enough fund internally and externally.
Bello Iman (1922) emphasized the relevance of finance to the development of every levy of the government. Thus stated that finance is the sinew of war for all functional organization in any economy consequently in implies that for the local government in particular to meet its mandate to individual s and groups who consume is output of public goods and services, the relevance of revenue generation should not be undermined.
The realization of local government goals have been characterized with several problems ranging from lack of adequate revenue base, manpower shortage rate, evasion fraud, malpractices amongst local government officials and poor response of the federal and state government in carrying out their statutory obligation towards the local government. Meanwhile, the primary function and purpose of local government are strictly in form of service supplied to the development of the economy. Such economic services are very imperative in the day to day activities. As a matter of fact the effective and efficient function of their administration is determined by certain factors. Hence it is observed that the relevance of revenue Have been a subject of conflict since the creation of local government in Nigeria. Thus the researcher seeks purposely to attempt looking into the various sources of revenue accruing o the local government and mostly how this revenue are managed and controlled internally and above all how they influence the development of this local government at large. Over the years it has been observed that local government has constituted a great problem in respect to the internally generated revenue and how they are managed, consequently several practitioners and expert has attempted to resolve through seminars and conferences. It is further state that success or failure as well as effectiveness or ineffectiveness of local government administration is dependent on financial resources available to respective local government and the way these resources are been managed or used.
On the 14th of December 1996 the Abacha administration created six (6) new additional states. This brought the total number of state to 36 state in Nigeria. Following this development new local government were also created. Consequently the number of local governments was increased from 574 to 774 (seven hundred and seventy four) presently. Delta state is one of the states in which new created local government area were created. One of the newly created local government in Delta State is Ndokwa West in kwale. It was created on the 27th of August 1991 by the Bendel state which is the study area. It generates its revenue from various sources these includes taxes, fees, fines property rate and grants from state and federal government allocations which are used in carrying out its obligation of providing some basic social and economic services to the people.
However, to confirm the relevance of this study the researcher will subsequently attempt to explain the various problems confronting the local government revenue generation and to proffer constructive solution to them. In this regard the study argues that
The local government can not impact or perform property as a third social economic structure of Nigeria with an inadequate internal revenue generation.
The local government constrain not only on the reliance on state and federal government for fund but on its ineffective machinery to tap the various sources adequately and also the image associated with is poor managerial control of it resources.
1.2 STATEMENT OF THE PROBLEM
The sphere of influence and functional competences of the local government have widened by the autonomy granted to them by the federal government. Thus in Nigeria the sources of revenue at the federal level classified into two broad categories. These include direct and indirect tax and revenue under sec 149 of the 1979 constitution as amended.
However it implies that the only way in which the local government could achieve its revenue generation effectively and to ensure a firm base for development is to go down to the individual communities as well as the tax payer themselves.
For this reason, the following questions are to be answered
What are the various sources of local government revenue?
What are the best alternate means of improving the sources of revenue generations?
To what extent is the revenue generated appropriated and administered?
What are the draw backs or constraints militating against the generation of revenue?
The significance of these questions are important in discovering the various problems confronting the generation of revenue in the local government, also the machinery for the management and improvement of the resources generated.
1.3 PURPOSE OF THE STUDY
The following are the major objectives to be accomplishes upon the completion of this research work carried out in Ndokwa West local government of Delta State, Nigeria.
i) To identify the various revenue to the state and local government. Invariably this may enable an examination into the management as well as it improvement on the local government finance.
ii) The study seeks to determine how the local government intends to close the revenue expenditure gap. This is very important considering the meager revenue base of local government councils.
iii) To emphasize the need for indebt exploration of new sources of revenue.
iv) Finally, the study emphasizes the importance of local government in controlling, coordinating, supervising, planning and development.
1.4 SIGNIFICANCE OF THE STUDY
It is hoped that a study on the impart of internally generated revenue on the development of local government in Nigeria will be of great significance to the federal government in Nigeria will be of great significance to the federal government as far as development of the country is concerned. In otherwise the general development and growth of an economy depends partly on the level of competence and performance of local government as one of the tiers of government. As a matter of fact local government like any other level of government needs the exploration of finance through its sources and understanding to the fundamental government to facilitate a more significant and persistent reforms that will strengthen the financial base of the local level.
Also the result from the findings will help as guidance to the state government as well as the local government council, staff. Counselors and chairman of local government. Thus the local government should not congratulate themselves agreeing to the fact that the federal government is in the position of relieving them from their financial crises perhaps through increasing the revenue allocation, when the performance in their own internally generated revenue remains as meager as 25% of their revenue. It is a sad experience as most local government councils in Nigeria depends totally on the federal and state allocation for meeting both their recurrent and capital expenditure objectives.
It is expected that that result of the study will have a great contribution on the improvement of internally generated revenue as well as providing machinery for these local government s to step out of financial crisis especially the local government in delta state.
1.5 RESEARCH QUESTIONS
The following questions were raised to guide the researcher on this study;
How adequate is the internal revenue generation of local government
Is there any gap between revenue and expenditure of local government
Do the local government ventures into extra business activities in order generate additional revenue?
What percentage and number of staff does involve in fraud amongst revenue collecting staff?
Is the local government important in planning and development?
Do local government in planning and management have understanding on how to engage in more significant project that will foster social economic development?
1.6 SCOPE OF THE STUDY
This study been delimited to Ndokwa West Local Government council. It will concentrate the generation of data from the local government council.
The research is not intended to verify or investigate their system of accountability and keeping of record with the view to detect misappropriation. It is limited to appraisal of the revenue generation models, the problem and prospect as well as to recommend means of improvement.
LIMITATION OF THE STUDY
In carrying out the study the research were faced with the following constraint.
Time Factor: The intention of the researcher were to cover wider scope in the cause of the investigation, however the short period sated for the project, coupled with class work and examination preparation restricted the scope of the investigation.
Financial Constraint: The researcher was faced with financial challenges in putting the project work together.
Other problems are one encountered in the process of distributing questionnaires and data collected through interview. Some respondents were reluctant to co-operate with the researcher for fear that the outcome of the study might be used adversely against them, others after collection of questionnaire do not supply and answer or return them.
OPERATIONAL DEFINITION OF TERMS
Words have different meaning in different contexts, it then becomes imperative to define some of the basic terms used by the researcher as it relates to the topic under investigation.
To avoid semantic difficulties the following terms are operationally defined in this study as follows:
Local Governments: This is a geographical entity created by two fundamental governments for the purpose of carrying out administrative work at the local level. They are some times referred to as intra-source until contained within a sovereign nation used administratively to reduce congestion of work at the centre local government is among the three tiers of government.
Revenue: This refers to the grand total of money or income received from all sources in which expenses incurred are defrayed. Revenue are either internal or external. They are internal when it is generated within the effort of the local government. E.g taxes, tenement rate, fines etc. however they are external when the local government receives allocation from the state and the federal government in form grants.
Expenditures: This includes all expenses, costs undertakings by the local government in meeting the social economic needs of the populace and other related expenses for the running of the local government.
They are either capital or revenue expenditures. They are said to be revenue expenditure where expenses borne in the day to day business activities of the local government. E.g salary, rents, electricity bills etc. meanwhile expenditure are said to be capital expenditure when they borne in acquisition of fixed assets or the addition value to the existing assets, such as purchasing of car, land and other structures.
Management: This is concerned with the application of skills and control in the treatment of resources and revenue generated to achieve optimum returns.
Improvement: This is the process of securing and increasing the revenue available to the local government in the accomplishment of its aims and objectives.
Expenditure Incidence: This is concerned on the impact of government expenditure on the distribution of real income.