CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
One area which has remained neglected over time by the local
governments in Nigeria is revenue generation. Revenue generation in Nigeria’s
local government is principally derived from tax. Therefore, taxation is an
internal source of government revenue within the domestic economy. Its
collection and service to the government depends largely on the government
itself. Taxation has been described in many ways and for the purpose of this
study it will be seen as compulsory levy imposed on a subject or upon his
property by the government having authority over his property through its
agencies with the aim of providing, maintaining and improving social facilities
in the communities at large and for which the tax payer has no quid pro que.
Nigeria has three- tiers of government systems, these are; (i) The federal
government (ii) The state government and (iii) The local government. The
essence of this division of government into federal, state and local levels is
to enable the government exercise her administration easily and effectively. However
the 1979 constitution spells out the functions of each level of government.
Generally it can be said that the governments are responsible for the provision
of the collective (social) goods and services on a non- commercial basis as
well as the provision of other social and economic services. In order to meet up with the foretasted goals
and services, the government needs to collect revenues. Local government, which
this work emphasizes on, can be described as the government at the local level,
exercised through representative council, established by law to exercise
specific power within definite areas. The government of such body is selected
or otherwise locally selected. The administering of government at local level
in Nigeria traced as far back as colonial period, when native authorities were
established in their rudimentary forms, that is in their own ideas. They
represented a system of indirect rule, which sought to establish a form
administration through traditional authorities. Between 1950 and 1955, the
first elected local government council based on the model was shadbushes in
logos and in the former Eastern and western Region. Though, the traditional
members constituted a maximum of 25 percent in most of the councils, the
emergence of members elected on a political basis instigated the traditional
rulers to gradually withdrawn from active participation in local administration
in Nigeria. Presently, local government administration is still in existence
assigned with numerous. Responsibilities like, bawling of market square,
provision of pipe-born water, motor parks, rehabilitation of local and rural
roads, sanitary and health inspection, maternity home and dispensaries e t c.
Finally, local governments have two (2) main sources of
revenue or fund. They are (i) External sources of fund. (ii) Internal sources of fund. The External
sources of fund include; (a) Statutory allocations from the federal and state
government (i.e., 20% considered federal revenue and 10% of internally
generated state revenue). (b) Special grants which aim at assisting local
government finance their aforementioned projects. In addition, local government
source fund internally through receipts on rent and rates on their properties,
tenement tax, earning from commercial undertaking, interest payment and
dividend, licenses, fees and fines etc. Revenue generation is the nucleus and
the path to modern development. This is because local government as the third
tier of government and the closest to the people especially in the rural areas
needed revenue to provide basic social amenities to the people. But it is
unfortunate to note that the local government management have not lived up to
expectation especially to provide basic social amenities to the rural people.
Development is a sine qua non for modern civilization. In order to carryout
development at all nooks and crannies of the society, it is the responsibility
of the Local Government to provide direct development to people to a certain
level. Development is associated with funds and much revenue is needed to plan,
execute and maintain infrastructures at the state level. The needed revenue
generated for such developmental projects, like construction of accessible
roads, building of public schools, health care centres, construction of bridges
are generated from taxes, royalties, haulages ,fines, and grants from the
states, national and international governments. These funds could either be
obtained internally or externally. Thus, the Local Government cannot embark,
execute and possibly carryout the maintenance of these projects without
adequate revenue generation.
STATEMENT OF THE PROBLEM
There are a lot of problems that hinders revenue generation
by Local governments in Nigeria. The relevance of the local government councils
as the government at the grassroots is measured by the quality and quantity of
services rendered to the rural dwellers. For the local government council to
render meaningful services, in form of provision of basic amenities,
construction and maintenance of roads, creation of employment opportunities for
the citizens and payment of staff salaries as at when due, money is undoubtedly
required without the availability of revenue, a local government council will
not only be incapable of serving the people but will undoubtedly crumble. It
therefore, follows that for the local government to discharge its statutory
functions effectively, it should not only be adequately funded but such fund
should be efficiently applied. Tax avoidance and delinquencies are among the
problems confronting most local governments on revenue generation, as most
people of the society device some means source maximum reduction in the amount
to be paid as tax obligation on the date it is due, thereby, escaping tax
liabilities. Inability of most people of the society to pay up amount due for
rent and rates on local governments properties. This hinders local governments
as regards revenue generation, as most people lack fiancé and others not
willing to pay – up. Inadequate operational vehicles and other facilities
confront local governments as a problem in generating revenue. Revenue
generation needs mobilization and most local government do not have enough,
which would have enable them to move easily from one part of the area to
another for the collection of various fees. Another problem hindering local
government revenue generation lies among the staff. Many staff lack job related
in service training, and some have poor educational background, some are not
dedicated, diligent and honest. Often they do collude with tax or ratepayers to
defraud the government. All these problems will not only affect the local
governments but, every member of the society and the nation in general. This is
because, these problems will not enable most local governments to carry out or
problem their statutory assigned functions effectively thereby, leading to and
definitely, affects the economic growth and development of the nation
(Nigeria).
AIMS AND OBJECTIVES OF THE STUDY
The major aim of the study is to examine the impact of
revenue generation in Local government in Nigeria. Other specific objectives of
the study include;
To examine the Local Government Administration in Nigeria.
To determine the sources of revenue generation in Local
Government in Nigeria.
To examine the impact of revenue generation on Local
Government performance.
To examine the functions of Local Government in Nigeria.
To examine the relationship between generated revenue and
local government capital projects.
To recommend ways of curtailing revenue generation problem.
1.4. RESEARCH QUESTIONS
How is the Local Government Administration in Nigeria?
What are the sources of revenue generation in Local
Government in Nigeria?
What are the impacts of revenue generation on Local
Government performance?
What are the functions of Local Government in Nigeria?
What is the relationship between generated revenue and local
government capital projects?
What are the recommended ways of curtailing revenue
generation problem?
RESEARCH HYPOTHESIS
H0: Revenue generation has no significant impact on local
government performance.
H1: Revenue generation has a significant impact on local
government performance.
SIGNIFICANCE OF THE STUDY
From the outlook, there is need for the local government to
improve their performance. However, the research is significantly considering
the closeness of local government to the grassroots’ people and the need to
utilize substantial revenue for its various sources in addition to federal and
state statutory allocation for developmental purpose. The study will help to
identifying some means of generating revenue that has been neglected over
years. It will also be beneficial to the grassroots because improved revenue
generation means improved standard of living in form of provision of social
amenities such as road, hospital, park, drinkable water, rural electrification
etc. The study will be educative as it will be a reference point for
researchers.
SCOPE AND LIMITATION OF THE STUDY
The study is restricted to the impact of revenue generation
in Local governments in Nigeria, a case study of selected Local Governments
Areas in Kano state.
LIMITATION OF THE STUDY
Financial constraint: Insufficient fund tends to impede the
efficiency of the researcher in sourcing for the relevant materials, literature
or information and in the process of data collection (internet, questionnaire
and interview)
Time constraint: The researcher will simultaneously engage
in this study with other academic work. This consequently will cut down on the
time devoted for the research work.
DEFINITION OF TERMS
Impact: Impact in this study refers to the effect of revenue
generated on service delivery by local government. It also determined the
extent to which local government was able to deliver local services with
resources at its disposal.
Local Government: Is defined as Government at the local
level exercised through representative council established by law to exercise
specific powers within defined areas. These powers should give the council
substantial control over local affairs (including staffing) and institutional
and financial powers to initiate and direct the provision of services and to
determine and implement projects so as to complement the activities of the
state, and Federal Government in their areas, and ensure, through the active
participation of the people and their traditional institutions, that local
initiative and response to local needs and conditions are maximized (Federal
Republic of Nigeria, 2013).
Revenue: According to 2009 constitution, revenue is defined
as any income or returns accruing to or derived by the government from any
source and include any receipt however described arising from the operation of
any law, and receipt however, described from or in respect of any property held
by government, and any returns by way of interest or loans and dividends in
respect of shares or interest held by government in any company or statutory
body. However, revenue can also be regarded or referred to as tolls, taxes,
rates, fees, royalties, rents and other receipts of government from whatever
sources such as proceeds from loans given out (Section 162(10) of 2009
Constitution). Revenue accruing to any tier of government may be classified as
recurrent or capital. While the former is generated on day-to-day basis
throughout the year, the latter arises once in a while and in a larger
proportion. They are also described as internal and external sources of revenue
respectively. Nevertheless, the word revenue will be used in the context of
this research to mean any amount of money coming into the local government from
whatever sources and which the local government has power of appropriation.
Generation: This is the process of sourcing revenue for the
local government in carryout their aim and objectives.