Sources and Uses of Local Government Fund in Nigeria

Sources and Uses of Local Government Fund in Nigeria

Much has been written on Local Government finance, source, uses and the problem with special reference to Local government area in Nigeria and other countries. The existing literature dealt much on both the subject matter However, the researcher was able to lay hand on most of the write-ups on the subject matter.  On of the commendable book on Local government Administration is the one written and edited by Ugwumba C. O. Ezeh (2001) “the book current issues in public and Local government administration”. This book has dealt on a wide range of issue as it affect Local government finance, uses and the problems

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Outside this book, there are other write ups. Notable among them are those ones completed by Odoh, N.N (1998) Public finance for polythnics. Local government source of revenue by Agbo I.O. (1995) and many others.

At this point of this research work, it is of Important to review some of these and problems already said and written. This literature will be reviewed long with the following lines that   portray the objective of this research work.

1.           The meaning of Local government

2.           Functions

3.           Method of revenue generation/source available

4.           Uses of find generated important

5.           Approaches to Improve on the local government finance source and uses.

THE MEANING OF LOCAL GOVERNMENT

Local Government is a system of political sub-division of a modern state which is constituted by law with a given territory and population for administrative purposes. At present it is generally accepted that the terms local government refers to political sub division of a country or a state which is constituted by and has sebstaritial control of local affairs including the right to improve taxes and exert labour for prescribed purposes. The governing body of such activities are elected or locally selected.

 

Agbo I.O (1995) maintained that local Government is the government at local exercised through democratically elected representative council which, while subject to the general control of the central government , are given autonomy and specific power within defined areas which they can exercise without control by the higher authority.

Roboson M.K. (2000) defined Local government as a system of local administration under which Local Communities and town are organized participation of inhabitants in joints endeavor towards the Improvement to their condition of things.

Further more, Adebayo A.C. states that Local government is a theoretical abstraction  referring to a system of local authorities whose identifying features are its lack of sovereignty being a creation of the central geographical  based giving power as well as the institutorial structure necessary for achieving its purpose.

Governing at Local level is exercised through representative councils established by law to exercise specific power within defined areas. These power should within defined areas. These power should gives the council substantial control over local affairs as well as the staff and institutional and financial power to initiate and direct the provision of service and to determine and Implement project as to complement the activities of the state federal government in their areas and to ensure through devaluation of functions to these councils.

FUNCTIONS OF LOCAL GOVERNMENT

Based on the 1999 Nigeria /constitution section7 (1) gives the main functions of a local government council as follows:

a.            the consideration and the making recommendations to a state commission on economic  planning or any similar body on-

i             The economic development of the state, particularly in so far as the state are effected and

ii            Proposal made by the said commission or body:

b            collection of rates, radio and television licenses;

c.            establishment and maintenance of cemeteries burial grounds and homes for the destitute or infirm;

d            Licensing of bicycles, truck (other than mechanically propelled trucks,) canoes, wheel barrows and carts;

e             establishment, maintenance and regulation of slaughter houses, slaughter slabs, markets, motor parks and public conveniences.

f.            Construction and maintence of roads, streets lightings, drains and other public high ways,  parks, gardens, opern speces, or such public faclitives as may be prescribed from time to time by the house of Assembly of a state.

g.            naming of roads and streets and numbering of houses;

h.           provision and maintenance of public conveniences sewage and refuse disposal;

I             assessment of preately owned houses or tenant for the purpose of levying such rates as may be prescribed by the house of Assembly of a state; and

K            Control and regulation of –

i             out –door advertising and hoarding,

ii            movement and keeping of pets of all description,

iii           shops  and kiosk,

iv           restaurants, bakeries and other paces for sale of food to the public.

v.           Laundries, and

vi           licensing, regulation and control of the sale of leguor.

Again section 7(2) of 1999 constitution also state the functions of a local government council which shall include partocpants of such council in the government of a state as respect of the following matters-

a.            the provision and maintenance of primary, adult education,

b.           the development of agriculture and natural resources, other than the expolitaion of minerals

c.            the provision and maintence of health services and

d.           such other functions s may be conferred on a Local government council by the house of Assembly of the state.

SOURCES OF REVENUE AVAILABLE TO LOCAL GOVERNMENT AUTHORITIES:    

What promoted the local government reform in Nigeria was the need for a more purposeful and effective Local government system couple with Local financial autonomy. The edict stipulated internal and external of revenue for local government in such areas.

              INTERNAL SOURCES:

i.            Community taxes and rates

ii            Libenses and fees

iii           Farming and sales

iv           Federal and state statutory allocation

v.           Project grants and non- statutory receipts from state government and agencies

              COMMUNITY TAX

According to Ezeh U.C.O (2001) Community tax forms the major sources of local government internal revenue. It is a poll tax paid by every male adult of tax paying age and varied from Local council to local council. Infant, it is a capitations tax ie it is paid by every ale adult whether the person is unemployed, self employed. Artisan or mechanism economic activities pattern of the society.

              PROPERTY RATES:

This tax is levied on veterable value of property which limits its potential as property which limits is potentials as local revenue generation. It is only urban local government have the privilege of taking advantage of property rates as source of revenue.

              LICENSES FEES AND SALES

Local authorities derive substantial revenue from fees, such fees are in respect of the use of council property such as municipal hall for social activities, market premises and stalls motor parks slaughter houses, wheel barrow and liquor shops charges are also made in respect of marriage, bicycle and dog licensees birth and death registration.

LOCAL TAXES: NON PROPERTY:

Several local government have instituted various non-property taxes on previously non tax item such local governments in Enugu etc levy an advertisement tax on every sort of advertisement sign boards, street names and display boards. Ebo, -C. (2001). The taxes are paid by the person who advertises. A proceeds from this type of tax has increased revenue fro some local government in the recent pears for instance advertisement alone is estimated at N2000 in Ezeagu central local government development central in 2004. It is an aspect of local revenue worth exploration by other local authorities.

Another possible source of internal revenue worth consideration by local government could generate substantial funds by levying average of N 3 and N 50 annually on every school child of age (Ezeh, U.C.O 2001)

              FEDERAL AND STATE STATUTORY ALLOCATION

              This is another source whereby the Local government generates revenue. This is a percentage of the local government get from national cake.

 

The new statutory allocation are as follows Federal government 54.68 percent state government 20.60.  Percent (Chief Olusegun Obasanjo)

THE EXTERNAL SOURCE OF FUND TO LOCAL GOVERNMENT

The main external source of local government revenue include:

1.           Statutory allocation from federation account as well as the state power to do thing in manner which snits its own need and desire and which may be different from one followed in as the area within the same state.

 

6.           STATUTORY AND NON SOVEREIGN STATUS

              Authority which run local government of a country are neither sovereign nor self created for self contained entries- They have only statutory statues which implies that they depend upon state/ Central government for their creation grades, functions and powers. The fundamental aspect of there are defined and can be redefined by competence state/ central government authority general by the legislative the constitution of federal republic of Nigeria 1999 4th schedule  refers.

THE IMPORTANCE/USES OF REVENUE GENERATED BY THE LOCAL GOVERNMENT.   

The Importance of finance to a local government which is accomplished through the preparation of a realistic annual budget into effective use cannot be over emphasized.

*             The resources put together in monitoring terms enables the council in providing socid economic services to the people of the area at acceptable standard (ogbonna D.N. P 24)

*             The local government finance also help the council to invest in project which would contribute the raising the standard of living of the people

*             The term finance comprises personal finance, business finance and public. These titles indicate the wide range covered by finance

*             Finance is the means of provided the means of payment. It is also a principle fact with raising and raising fund by individuals business forms and the government. All these definition about inconcionsely but definitely without jurisdiction, give the erroneous impression that local government or at least the idea modern state and primarily in the 20th country.

PROBLEMS OF LOCAL GOVERNMENT FINANCE

              A number of factors have been identified as having impoverished local governments in recent years. Some of these factors are?

a.            STATE GOVERNMENT ENCROACHMENT ON LOCAL GOVERNMENT FUNDS.

 

As earlier discussed, the innovative formula stipulated for the channeling of federal allocation to local government through the state governance 20/0 of consolidated federal revenue and 10% of internally generated state revenue.

ii            Special grants which aim at assisting local government finance  urgently required service e.g. Ecology/environment problems. Examples in recent past include drug supply, road work natural disaster etc (Odoh N.N 1991. P.144)

EXTERNAL ATTRIBUTES OF LOCAL GOVERNMENT FINANCE

                            The most essential attributes of local government is its representative and responsible nature. The executing of local administration power must be controlled by elected or otherwise locally selected representative who are responsible to the local community.

1.           LOCAL AREA

Local government in its geographical predictions is restricted potion of the state or nation its operation are coned to a location, territorial restricted are comprising, cities, town, village or a group of a neighboring village or even distress. The guiding principles is that the residents of a place have a Community social and civil problem which are peculiar to their  counterparts in the other area for example the problem of water supply in Udi may be entirely different from that in Ezeagu.

2.           MANAGEMENT  

              It is the creation and maintenance of internal environment whereby individual working together as a group can perform effectively and efficiently towards the attainment of set goal.

3.           FINANCIAL MANAGEMENT

              This means raising and administering funds under the guidance of a body of knowledge and a discipline way of proceeding

4.           LOCAL LEVIES/FEES

Local government service are financial wholly largely out of locally raised funds. The local financial resources constitute the life – blood of local government. Equity demands that  services rendered exchsively or mainly to a limited population in a certain area and according to its own wishes and needs are expressed by its own local authority should be paid for by it

5.           LOCAL AUTONOMY

              Autonomy is the legally guaranteed power to manage affairs according to self made laws or rules. But in contact of local government, It is the privilege of being left alone so long as the council does not over-stop the rules and limit laid down in advance by the competent authority.

Thus local government must have a definite

 D            POOR QUALIFIED STAFF

              Local government authorities lack the fund to attract competent and qualified personnel who could assess and collect taxes. As a result, huge amount of money are cost by local authorities in either wrong tax assessment, or tax evasion. This problem hinders revenue generation, Impair accounting procedures and encourages general financial mismanagement. The brutal reality falling local authorities today is that they cannot do the things that need to be done due to lack of funds, especially as the pattern of their financing is neither stable nor predictable. The critical problem to be addressed, therefore, is how to ensure that local government received the statutory allocation from the federal and state government.

 E            OTHER PROBLEMS

              The main sources of internal financing are property tax, poll taxes and development levies. Local governments have not been able to raise much due mainly to the following reason:

i             The rural people are poor and can therefore not pay what they are expected to pay. There are very few people, teachers, government staff and few traders who are able to pay their levies and taxes in addition to the few fairly well to do farmers. Although, local government sometimes put a lot of pressure on poor inhabitant to pay their taxes and levies,                      they are just able to pay.

The houses which these local people have are in most cases not for commercial purposes, rents are hardly received from them and therefore the owners feel they should not pay takes on them and therefore the owners feel they should not pay taxes on them.

ii            Apart from inability to pay the inhabitants of the rural areas feel alienated on many grounds. Political promises not are not fulfilled by politicians (Nebedum 1999, P148) or even by appoint local government administrators.

As Amucheazi (1998) right put it, those feel that they so not received equitable proportion of these goods feel relatively deprived and consequently do not readily pay their taxes or discharge civic duties required by the state.

Performance of the state is therefore circuital for mobilization of people cheated is alienating and does not make for easy mobilization of the citizen.

iii           The non-Usage of improper usage of monies collected from the citizen for development purposes also explains the lukewarm attitude of the citizens to contribute financially or even physically towards to contribute financially or even physically towards local government finances and development project. Amucheazi (1998, p. 79) recounts two instances when powers and thereby obviously contributing to the people future attitudes government. The state government took advantage of  the arrangement to direct the money meant for local government of other usage and/or release same at depleted amounts, Under this situation, the local government were never sure of their revenue at any time. Planning budgeting and payrolling were   thus exercise in futility as the government became poorer and poorer with continued spending of local governments funds by state government (Nzeribe C.G.O.1991: 216)

B.           THE STATE GOVERNMENT INTERFERENCE WITH LOCAL GOVERNMENT SOURCE OF REVENUE

              The encroachment and erosion of local sources of revenue have been discussed in details in this paper. The federal government in enacting a law which allocated 20% now 20.60 percent of federal account to local government simultaneously burned the collection of community and cattle taxes by the local authorities. This sugularaction erdded base of northern state, and greatly paralyzed their internal revenue generation. In Anambra State for example , the local internal revenue sources such as registration of business premises, market fees and vents, sanitation rates and fines were encroached upon the state government through an agency known as Anambra state environment sanitation authority. The local government does not have either the power nor enabling law to complete with the state government in the scramble for revenue sources, thus wakening further the fiscal status of the local government. Ejimofor C. (1999)

C.           POLITICAL INTERFERENCES

              Local government activities were highly politicalised during the second republic general, taxation is a part of politic, hence community and cattle tax became weapons for the electioneering campaigns.

Between 1979-1982 not only did politicians promised voters the abilities of community and cattle tax, but some state  government such as  kano and kaduna abolished cattle tax in 1983, while the central government being controlled by the national party of Nigeria abolished cattle and poll tax not only in the NPN controlled state but throughout  the federation. The consequences of such act was grave. It dismissed the level of internal revenue generation cattle and community tax constitute the single large source of internal revenue in the north. With this abolition and without alternative sources to replete at least the same amount a revenue that could have been generated from it, the local government finance were weakened further and thus they were financial dependent and thus they were financial dependent on the state and federal government Nzeribe (C.G.O. 1991, p.217)  In the first instance during the days of the divisional administration system is eastern central state, Communities were compelled to deposit all monies collected for village development project with the government treasury and to with draw the money even when the conditions given  by the appropriate government authorities had been met. The second instance which is similar to see first occurred over the statutory established community development was set up for each, a community development was set up for each village by the law and charge to raise funds for development projects. The government promised matching grants for communities which collect over N7, 000. All monies collected were to be paid into designated banks. According to Amucheazi, in the end only a few communities received the matching grants whilst in some instance it was not even possible for some communities to withdraw their deposits.

 

iv.          The non-involvement of the citizens in decision making in matters concerning local government development programs and the implementation of such program marginalized the people. As a reaction, they becom apathetic and therefore not some times even discourage others from paying such monies. Also somehow related to this is the non-involvement of the citizen and their associations in the collection of taxes and levies. Although some local government involve chiefs and community leaders in tax collection, this has not been quite effective. There have been instances, infact, when these collectors not accounted properly for monies collected.

APPROACHES OF THE IMPROVEMENT OF LOCAL GOVERNMENT FINANCE.

                            Finance is the greatest impediment in service delivery of the local government. Therefore, there is need for enhanced and expanded revenue sources/based and most importantly an improvement in the strategies for revenue generation and collection. Additionally, the problems posed by the grants from the federal and state government to the local government has to be tackled seriously. Investigation reveals that statutory grants through the government have not been very effective as they are subject to diversion or total non-remittent to solve this problem some countries such as Nigeria have decided to experiment on direct grain  to the local government council so s to circumvent the tendency for diversion and tampering off the funds. It is also hoped to make for consistency and stability as well as enhance efficient planning. Akpan N. (1999).

1.           REVENUE  GENERATION

To enhance its financial base the local government should explore more avenues for revenue generation  quite outside the formalized and known traditional source in

i             Budgeting of shares in private enterprise

ii            Embarking on commercial ventures like co-operative and commercial agriculture as well as getting involve in commercial rural/urban transportation system.

This means that local authorities could provide commercial vehicle for intra and inter community and inter-local government transportation services. This, if properly managed, could enhance their generation effort. Ebo .C.

2.           REGISTRATION OF SOCIAL ORGANISATION 

              Town Unions, age grades, social clubs and women organization based on the local government. This is done by a few local government now but it is suggested that others should follow suit.

3.           CULTURAL ACTIVITIES AND FESTIVAL PROMOTION AND DEVELOPMENT OF TOURIST ATTRACTIONS

                            Local government council can get involve in the promotion and organization of the rich culture and festivals of the communities and make some out of them. Similarly, certain landmarks of ancient event could be presented and refurbished to serve as tourist centers where interested visitors could be taken to be paying some token fees. Ejimofor C. (1999).

4.           ESTABLISHMENT OF CLOTAGE INDUSTRY:

Local authorities should be in a position to float/establishment cottage industries like garri making Industries, grain and oil milling machines, weaving centre which will not only provide basic essential services to the rural provide but also generated some revenue.

5.           COMMODITY RATES

              This has provide to be useful in some local government Area of Ebonyi state of Nigeria, commodity rates of rice which is produce in abundance there has greatly buffed up the local government revenue. Other local government can as impose similar dues on their major production.

(Roboson M.K 2002).

6.           PRUDENT FINANCIAL MANAGEMENT

Another important aspect of productivity improve venent is the question of financial management in the local government system. Any financial allocation or generation not properly managed is as good as wasted. Therefore, competent financial personnel should be deployed to help in the administration and management of local government finance. The importance of prudent. Financial management of local government finance has been underlined by ensure proper accountability experts. To ensure proper accountability, the local government should be monitored on how it spends its funds and fund should be tied to project. Adebay A. (1981)

 

—This article is not complete———–This article is not complete————
This article was extracted from a Project Research Work/Material Topic

AN EXAMINATION OF THE SOURCE AND USES OF LOCAL GOVERNMENT FUND IN NIGERIA (2000-2004) (A CASE STUDY OF EZEAGU CENTRAL LOCAL GOVERNMENT DEVELOPMENT COUNCIL).

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Comments

  1. jerryphax says:

    pls can i get d references of dis work?

  2. Onyiloha Nchedo Linda says:

    Pls can i get the reference of this?

  3. Floxy Gold says:

    I find this article very current and useful in Local Government administration. I will introduce it to my friends on the group “NEW GENERATION POLICAL SCIENTIST OF NIGERIA” on Facebook. May God bless the writter

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