THE EFFECT OF INTERNALLY GENERATED REVENUE ON ECONOMIC GROWTH OF LAGOS STATE (2010-2014)
1.1 Background of the study
generation in Nigeria local governments is principally derived from tax. Tax is
a compulsory levy imposed by government on individuals and companies for the
various legitimate function of the state (Olaoye, 2008). Tax is a necessary
ingredient for civilization. The history of man has shown that man has to pay
tax in one form or the other that is either in cash or in kind, initially to
his chieftain and later on a form of organized government (Ojo, 2003). No
system or rules can be effective whether foreign or nature unless it enjoys
some measures of financial independence. Local governments in Nigeria have
developed over a number of years. Historically, the development of direct
taxation in local government in Nigeria can be traced the British pre-colonial
period Under this period, community taxes were levied on communities
(Rabiu,2004) recently the revenue that accrues to local government is derived
from two broad sources, viz the external sources and the internal source An
effective Local Government system rests majorly on the availability of human
and material resources which the nation could mobilize and harness for local
governments development. In 1976, the Federal Military Government then issued
guidelines on local governments reforms. The reforms which gave recognition to
local governments as the third tier of government whereby government activities
at the local level were taken care of. In 1988, another reform of local
government was established. This gave a substantial and unprecedented reform of
autonomy to the local governments in the country. With this autonomy, greater
responsibilities devolved on the local government therefore, became a common
knowledge that most of the local government are finding it difficult to cope
with the present level of responsibilities.
state governments in Nigeria do no longer perform their responsibilities simply
because of poor finances arises from internally generated revenue. The bad
financial situation is further aggravated by the prevailing inflationary
situation in this country which erodes the value of funds available to render
essential social services to the people. Economic growth is highly associated
with fund, much revenue is needed to plan, execute and maintain infrastructures
and facilities at the state government level. They need revenue generated for
such developmental projects like construction of accessible roads, building of
public schools, health care centers, construction of bridgesamong others are
sources generated from taxes, royalties, haulages, fines and grants from
states, national and international governments. Thus, state government cannot
embark, execute and possibly carryout the maintenance of these projects and
other responsibilities without adequate revenue generation.
1.2 Statement of the problem
state government is faced with myriads of problems ranging from corruption and
embezzlement, poor financing, mismanagement of funds to poor leadership. This
has deterred the development of state government in Nigeria. The major issues
are; what has contributed to the non-performance; is it because of total
dependence on federal statutory allocation? Is it as a result of poor
internally generated revenue drive? Is it because of ineffective utilization of
available scarce resources or mismanagement by public office holder? Among
others, state government has always been over dependent on the statutory
allocation thereby causing the state government to underperform which includes;
Dilapidated infrastructural facilities
Unavailability of social services to
Underdevelopment of local communities.
on the above stated problems, it has become necessary to conduct an analysis on
revenue generation in Lagos State.
of the study
the outlook, there is need for the state government to improve their
performance. However, the research is significantly considering the closeness
of state government to the grassroots’ people and th eneed to utilize
substantial revenue for its various sources in addition to federal 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.
1.4 Objectives of the study
broad objective of this research is to evaluate the effect of internally
generated revenue on the economic growth of Lagos State.
specific objectives are;
examine the relationship between internally generated revenue and economic
growth in Lagos State.
ascertain the extent which value added tax has contributed to government
evaluate the extent to which internally generated revenue has contributed to
the economic growth in Lagos State and it various sources.
1.5 Research questions
1. Is therea
significant relationship between internally generated revenue and economic
growth in Lagos State?
2. Does Allocation
from Value Added Tax (VAT) significantly contribute to government developmental
Is there a significant relationship between statutory allocation to the state government
and economic growth in Lagos State?
1.6 Research hypotheses
hypothesis is a theoretical conceptualization or an idea or guest regarding how
researcher thinks the result of his study will look. It consists of a set of
assumptions accepted previously as a basis of investigation. It is a
proposition that is yet to be tested for its validity. For the purpose of this
research study, three null hypotheses were formulated.
There is no significant relationship between internally generated revenue and economic
growth in Lagos State.
There is no significant relationship between statutory allocation to the state
Government and economic growth in Lagos State.
1.7 Limitations of the study
study has some limitations most especially in the area of data collection which
is to be covered and has time duration of five years (i.e. 2010–2014).
Financial constraints as well as time available for the completion of the study
are among other factors that would limit the scope of the study.
1.8 Scope of the study
study would appraise the revenue generation for the period of five years (1999-2014)
in Lagos State. The research is intended to be carried out using secondary
data. Secondary data will be obtained from the monthly revenue generation
account from the office of Accountant General of Lagos State.