IMPACT OF POOR REVENUE GENERATION ON THE DEVELOPMENT OF LOCAL GOVERNMENT AREA IN NIGERIA: A CASE STUDY OF SABON GARI LOCAL GOVERNMENT AREA IN KADUNA STATE
ABSTRACT
This study is on the impact of local government revenue on service delivery. The study determined the general level of revenue generation in the two Local Government Areas under study by examining the two major sources (internal and external) of revenue available to local government in Nigeria. It also examined the relationship between revenue generation and service delivery. The study used survey research method where data was generated through both primary and secondary source. The primary data was collected through the use of questionnaire in soliciting information from the respondents about the management of revenue generated and services delivered. The secondary data was collected through the local government annual estimates, treasurer’s reports, etc. Pearson Correlation was also used to measure the relationship between the amount of revenue generated and service delivery in the local government. However, it was found that effective management of local government revenue positively impacted on the efforts of local government in promoting development. And there is a positive correlation between the amount of revenue generated and the level of services delivered. This means that the ability of local government to provide effective services to people depends on its ability to generate revenue from its internal and external sources. This is achievable through proper collection and remittance of revenue by revenue collectors and financial discipline in budgeting processes. In line with the findings of the study it was recommended that more revenue sources should be identified and adopted in order to increase and improve the revenue base of the local government. Property and tenement rate as potential sources of local government revenue should also be tapped fully to improve the revenue base of the local government.
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
In delivering services to the citizenry, local government plays a crucial role. Any local government’s success is its capacity to use its human and material resources to achieve the desired objectives, i.e. to provide the community with the necessary services. Local government is a government in which both the choice of decision-makers and its recognition of the third tier of government are popularly involved. However, prior to 1976, various reforms were passed by the Nigerian local government. The system has been affected financially, administratively, politically, and functionally by these reforms and reorganizations.
The historical development of Nigeria’s local government system dates back to the colonial era, when it was called the system of colonial native authority that existed between the 1920s and 1930s (Orewa and Adewumi 1983). They represented, in their form, a system of indirect rule whose aim was to establish, through traditional authorities, a system of local authorities. Maintaining law and order at the grass-root level was the main task of local government in this era.
In addition, as in this traditional local government system, the problem of revenue generation in the local government system has been in existence for a long time. The Chiefs, Obas, and Emirs were accountable for revenue generation in pre-colonial Nigeria. They usually did this through levies and taxes, which they used in their communities’ management. The British, particularly in the North, introduced a system of indirect rule during the colonial era in which direct taxes were introduced for the management of their affairs in different local communities. By 1933, because of reliable functions, the local authorities’ powers were extended to cover expanded functions happenings. Performances After independence in 1960, local governments gained further duties which were delegated by the constitution to them. Section 6 of Nigeria’s
1979 Constitution, for instance, states that:
The tasks that will be delegated to local governments through legislation. Those listed in the governing council are to be included.
The Constitution also made provision for large funds for local authorities. This is because there is no question that a sound financial basis is a requirement for the successful performance of local government-assigned positions.
More precisely, the Revenue Allocation Act of 1981 provided for the legislative allocation to the
local government of 10 percent of national revenue, which became effective in 1989 and 20 percent in 1992. Furthermore, if their internal revenue was created for local government, state governments were required to contribute 10 percent (Dasuki Report, 1985).
Local government depends mostly on state and federal governments for revenue and grants under this fiscal system. In some situations, this source of revenue is unreliable and unpredictable. This is due to the fact that 10% of their internally generated revenue has not been released by most state governments to their local governments. In addition, the constitutional allocations to local governments are messed with by certain state governments.
It is in recognition of this that the originators of the Local Government Reform of 1976 made sincere attempts to financially fund the local government system. For example, after the reform in 1976, the Federal Military Government, as contained and noted in the Local Government Reform Guidelines 196:11), stated
that:
The lack of sufficient funding and an appropriate institution has continued to make it inefficient and ineffective for local government. The Federal Military Government was fundamentally driven by the need to restore and rationalize government at the local level when embarking on the reforms. In order to leverage local capital for rapid growth, this must include the decentralization of certain essential functions of state government to local levels.
This gave rise to the provision in our subsequent constitutions of various sources of internal revenue
generation for the Nigerian local government. Various steps have also been taken to take care of the local system’s financial issues.
The purpose of providing the state of Sabon Gari Local Government Area Kaduna with internal sources of revenue generation is to complement both federal and state government legislative allocations. It is presumed that if the local government can produce a large proportion of its income internally satisfactorily, it would cease to rely heavily on the statutory allocations. Sabon Gari Local Government Area and some other local government in Nigeria are also unable to access all these internal sources despite these constitutional requirements for sources of internal revenue. Therefore, the issue of low internal revenue produced in most of Nigeria’s local government.
It is on this basis that this study tends to explore factors in the Sabon Gari Local Government Area of
Kaduna State that constitute obstacles to full internal revenue generation.
1.2 Statement of the Problem
In the words of Oguonu (2000), “the ability of a local government to generate income internally is what makes the difference between local governments.” In Sabon Gari Local Government Area, the inability to generate income apart from federal government resources has been a persistent problem. Generating revenue includes generating and exploring all the sources of the local authorities, tax. Sabon Gari Local Government relies heavily on external funding sources: it is obvious that the Local Government Area of Sabon Gari has failed to explore the different sources of internal revenue generation available to the local government; hence the question of revenue produced internally. The weak internal revenue generation in the Sabon Gari Local Government Area is responsible for some variables.
1.3 Research Questions
The aim of this research is to answer questions.
- In the Sabon Gari Local Government Area, what accounts for the inability of revenue collectors to collect internally generated revenue and service and delivery?
- Does the lack of financial autonomy in the Sabon Gari Local Government Area constitute an issue for internal revenue generation and service delivery?
- In the Sabon Gari Local Government Area, what are the solutions to the problem of low internal revenue generation and service delivery?
1.4 Objectives of the Study
Against the backdrop this study is set to examine the causes of poor internal revenue generation in sabon Gari local government area of Kaduna State.
Each analysis must have clear goals that guide the direction of the research. The broad aim of this study is to explore the problem of generating internal revenue and how it affect service delivery in the local government area of Sabon Gari Local Government Area. The specific objective of the research include the following:
- To discuss what accounts for the inability of revenue collectors to collect internally generated revenue.
- To examine if the lack of financial autonomy in the Sabon Gari Local Government Region presents a problem with internally generated revenue.
- To proffer solution to the problem of generating low internal revenue in the Sabon Gari Local
Government Area.
1.5 Research Hypotheses
- In Sabon Gari Local Government Area, the amount of revenue raised by the local government has no significant relationship with the level of service delivery.
- Efficient local government revenue control does not impact local government efficiency in the delivery of services.
1.6 Scope/Limitation of the Study
The scope of the study focuses on the weak generation of revenue for the creation of the Kaduna State Local Government Area of Sabon Gari. The scope of the study is limited to a four (4)-year period, i.e. (20152019).
As with any other research, there were restrictions or constraints that the researcher encountered. The limitations of this study include:
- Financial constraint:
It is an established fact that every research work consumes a lot of money. Therefore, the financial requirement for gathering data, typing of the project subsequently and other related expenditure served as a major constraint to this research work.
ii. Responses while gathering data
For some reasons best known to the officials of the Local Government, the authorities were not willing to release some information which is relevant to this research project, even after persuasion and being assured that the information sought will only be used for academic purposes alone. This refusal to release some vital information by the Local Government was as a major constraint to this research work.
1.7 Significance of the Study
In the Sabon Gari Local Governments Area and in the areas of other local governments in Nigeria, the study provided the basis for developing different ways of improving revenue generation. Sabon Gari Local Government will be able to meet people’s demands with improved revenue generation and will be able to perform their primary functions of providing essential services more efficiently. The study also showed the extent to which an improved generation of revenue will generally have an impact on development. The study is an additional contribution to the existing knowledge on revenue generation and ways of improving the development of local government areas in Nigeria. The study will also assist other scientists who may wish to conduct research of a similar nature.
1.8 Definition of Operational Terms
Impact: Impact in this study refers to the effect of revenue generated by local government on service delivery. It also determined the degree to which local government was able to provide resources at its disposal for local services.
Local Government LocalArea: At the local level, government is defined as government exercised by a 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 identify and implement projects in order to complement and ensure the active participation of the people and their traditional institutions in the activities of the state and the federal government in their areas (Federal Republic of Nigeria, 1976). Revenue: Public revenue could be defined as the funds that the government generates to finance its operations. In other words, revenue is the total government generated fund (Federal, State, Local Government/ for a fiscal year to meet their expenditure. This also refers to the large sum of revenue money received from the source of which expenses are incurred. Internal or external revenue could be revenue. Generation: In carrying out their goals and objectives, this is the process of sourcing revenue for the local government.
Expenditure: Public expenditure refers, in the interest of society and the economy, to the costs incurred by the government for its own maintenance in order to help other countries.
Tax: Tax can be defined as the government’s compulsory levy on goods, services, income and wealth. This provides a definite source of revenue for public spending. (Udeh, 2008) It is the way extra money is obtained by the government. It was spent on individual and company income. Direct or indirect taxation could be a tax. A tax is a payment made by taxpayers and used for the benefits of all citizens by the government.
Development: Development is therefore the mechanism by which people establish and reinvent themselves and their living conditions in order to realize higher levels of society in accordance with their own choices and values, according to Ake (2001).
1.9 Organization of the Study
This research work is organized into five chapters. Chapter one is concerned with the introduction of the research study and it presents the preliminaries, statement of the problem, aim and objectives of the study, significance of the study, scope of the study, organization of the research and definition of terms.
Chapter two focuses on the literature review, the contributions of other scholars on the subject matter is discussed, Conceptual Framework of Local Government, Empirical Analysis Theoretical Framework. Chapter three is concerned with the Research methodology. It presents the research methodology used in this research.
Chapter four presents the data presentation and analyses.
Chapter five focuses on the summary, constraints of the study, conclusion and recommendations are provided in this chapter based on the study carried out.
IMPACT OF POOR REVENUE GENERATION ON THE DEVELOPMENT OF LOCAL GOVERNMENT AREA IN NIGERIA: A CASE STUDY OF SABON GARI LOCAL GOVERNMENT AREA IN KADUNA STATE