- BACKGROUND OF STUDY
The evolution of local government in Nigeria has undergone 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 areas. 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 (Abba, 2008).
Local governments are also established to encourage grassroots participation in decision making at the community levels. They form the third tier of government under the Nigerian federalism and based on the Local Government Reform Act of 1976. The expectation is that as a third tier of government, local councils act as catalysts for sustainable development at the grassroots level. No doubt, revenue generation in Nigeria local governments is principally derived from tax. Tax is a compulsory levy imposed by the government on individuals and companies for the various legitimate function of the state (Olaoye, 2008). Tax is a necessary ingredient for civilization. Historically, taxes are paid in cash or in kind to traditional local authorities, and later to a form of organized government (Ojo, 2003). No system or regulation can be effective be foreign or local unless it enjoys some measures of financial independence. Historically, the development of direct taxation in local government administration in Nigeria can be traced to the British pre-colonial era where taxes were levied on communities (Rabiu, 2004). Recently, the revenue accruing to local government is derived from two broad sources, viz the external sources and the internal source. An effective Local Government system rests on the availability of human and material resources which the federal government could harness for local governments development. In 1976, the Military Government issued guidelines on local governments reforms. These reforms gave recognition to local governments as the third tier of government where governance at the local levels is established. The 1976 local government reforms stipulate that internal revenue sources of local governments include:
- Rates, which include property rates, education rates and street lighting;
- Taxes such as community, flat rates and poll tax;
- Fines and fees, which include court fines and fees, motor park fees, forest fees, public advertisement fees, market fees, regulated premises fees, registration of births and deaths and licensing fees; and
- Miscellaneous sources such as rents on council estates, royalties, interest on investment and proceeds from commercial activities
Despite this constitutionally assigned jurisdiction, states and local government disagree over sources of internal revenue. In 1988, another local government reform was established. This gave a substantial and unprecedented reform of autonomy to local governments in the country. With this, greater responsibilities devolved on local government hence why most local councils are find it difficult coping with their responsibilities. However, the principal aim of creating local governments include to
- serve as the third tier of government through which appropriate services and developmental program are initiated in response to the wishes of the local community through their representatives.
- serve as an intermediary between the government at the centre and local communities.
- mobilize and utilize both human and material resources by engaging the people at the local level in government activities.
- facilitate the exercise of democratic self -government within the grassroots and to exchange initiative and leadership potential.
Unfortunately, local governments in Nigeria do not perform their responsibilities due to financial constraints arising from inadequate revenue generation. This financial situation is further aggravated by the prevailing inflationary rates within the country. Development is highly associated with financial resources, consequently much revenue is needed to plan, execute and maintain available infrastructures and facilities at the local levels. The required revenue generated for such developmental projects like construction of roads, public schools, health care centres and construction of bridges among others are sourced from taxes, royalties, haulages, fines and grants from states, national and international governments. Thus, local government cannot embark on successfully execute or carryout the maintenance of these projects and other responsibilities without adequate revenue generation.
Development is a sine qua non for modern civilization. In a crusade and struggle to carryout development at all nooks and crannies of the society. The Local Government as the tier of government that is nearest to the people is saddled with the responsibility of direct development of the people to a certain level. Development is highly associated with fund, much revenue is needed to plan, execute and maintain infrastructures and facilities at the local government level. The needed revenue is generated for such developmental projects in this tier of government. Like construction of accessible roads, building of public schools, health care centers, construction of bridges among others are solely carried out from income generated from taxes, royalties, haulages, fines and grants from states, national and international governments.
Thus, the Local government cannot embark, execute and possibly carryout the maintenance of these projects and other responsibilities without adequate revenue generation. This is the basic reason why development is skeletal at some Local Government Councils in Nigeria. The poor revenue generation has however, pronouncedly affected development negatively in many Local Government Councils in Nigeria with the attendant consequences of not being able to bring the much needed development.
- STATEMENT OF THE PROBLEM
A recurrent problem of the three-tier system of governance in Nigeria is dwindling revenue generation as characterized by annual budget deficits and insufficient funds for meaningful growth and sustainable development. Local governments being the nearest to the people in Nigeria are strategically located to carry out specific duties or roles in national development. According to Adedokun (2004), they are responsible for the governance of about 70 percent of the population of Nigeria, they are in a vantage position to articulate the needs of majority of Nigerians and formulate strategies for their realization. Most local councils are financially weak and rely on financial transfers and assistance from the state government (Brosio, 2000). Moreover, the revenue collection system and administrations are often inefficient hence a large sum is left-out while those collected are often inadequately managed (Fjeldstad & Semboja, 2000). For example, most revenue from property rates is not utilized. If local councils generate more revenue internally, a portion can be deployed to developmental projects in the communities instead of relying on either federal or state allocation.
Another problem is the development ratio between the urban cities and the rural dwelling in this country is abnormally lopsided and highly unacceptable for even and sustainable development of this nation in particular and Africa in general. This lopsided development policy has created many avoidable problems some of which are massive rural urban migration thereby over congestion and heating up the lives in the cities, infrastructural decay at the rural areas due to total neglect and abandonment, mass poverty in the country due to lack of proper harmonization of the nation‘s resources (Ibhawaeghele, 2012).
The important question at this juncture thus relates to how much impact local governments have made on the lives of the people in their areas vis-à-vis the high expectations from the latter. No doubt, with the substantial increase in revenue accruing to local governments for quite some time now, some of them have been able to embark on significant projects in various spheres with positive impact on social infrastructure, agriculture, health, industries, and water supply. However, available facts still show that our local governments in Nigeria cannot be counted among the high-performing ones in the world, indeed, not even among the average performing local governments in the third world. Rather, our local governments have been sharply criticized for poor performance in terms of scope, depth and quality of services, particularly in such areas as provision of infrastructure, medical and health services, water supply, waste disposal and many other services listed in the 1999 Nigerian Constitution. In fact, some of the Constitutional functions are not performed at all.
- AIMS AND OBJECTIVES
The main aim of the study is improving revenue generation for development of local government areas in Nigeria. Other specific objective includes:
1. to determine the relationship between revenue generation and the development of local government areas in Nigeria.
2. to investigate the extent to which tax revenue is utilized in the Local Government in Nigeria.
3. to examine the level of tax mobilisation in Nigeria local government areas.
4. to identify the challenges bedeviling revenue generation for development of local government in Nigeria.
5. to proffer solution to the challenges bedeviling revenue generation for development of local government in Nigeria.
- RESEARCH QUESTION
1. what is the relationship between revenue generation and the development of local government areas in Nigeria?
2. what is the extent to which tax revenue is utilized in the Local Government in Nigeria?
3. what is the level of tax mobilization in Nigeria local government areas?
4. what are the challenges bedeviling revenue generation for development of local government in Nigeria?
5. what is solution to the challenges bedeviling revenue generation for development of local government in Nigeria?
- STATEMENT OF RESEARCH HYPOTHESIS
1. H0: improving revenue generation has no significant effect on the development of local government areas in Nigeria
2. H1: improving revenue generation has significant effect on the development of local government areas in Nigeria
- SIGNIFICANCE OF STUDY
The findings of this study will awaken the local government councils on the need to improve upon their revenue generation because if local councils generate more revenue internally, a portion can be deployed to developmental projects in the communities instead of relying on either federal or state allocation.
The study will help in creating awareness especially to the federal government on the need to increase the revenue allocation as the case may be to these local government for increase productivity and development to curb the massive movement of people from rural to urban centers due to lack of basic amenities and comfort thereby over populating the urban areas and depopulating the rural areas.
The study will also 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.
Furthermore, the study will be educative as it will be a reference point for researchers on revenue improvement for development of local government in Nigeria.
- SCOPE OF STUDY
The scope of the study will cover improving revenue generation for the development of local government areas in Nigeria
- LIMITATION OF STUDY
1. 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).
2. 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
Improving: giving moral or intellectual benefit.
Revenue: Public revenue could be defined as the funds generated by the government to finance its activities. In other words revenue is the total fund generated by government (Federal, state, local government/ to meet their expenditure for a fiscal year. This refers also to the grand total of money of income received from the source of which expenses are incurred. Revenue could be internal or external revenue.
Generation: This is the process of sourcing revenue for the local government in carryout their aim and objectives.
Development: According to Ake (2001) Development is thus the process by which people create and recreate themselves and their life circumstances to realize higher levels of civilization in accordance with their own choice and values. It also a type of social change in which new ideas are introduces into a social in order to produce higher per-capital income and levels of living through more modern production methods and improved social organization.
Local government areas: According to Lawal (2000) Local Government as a political sub-division of a nation in Federal system which is constituted by law and has substantial control of local affairs which includes the power to impose taxes or exact labor for prescribed purpose.
According to William Robson (2006) Defined Local Government as involving the conception of territorial, non-sovereign community possessing the legal right and the necessary organization to regulate its own affairs.