LOCAL GOVERNMENT FINANCE IN NIGERIA (A CASE STUDY OF ISIALA-NGWA SOUTH LOCAL GOVERNMENT AREAL ABIA STATE)

INTRODUCTION

BACKGROUND TO THE STUDY

                Essentially local government are created to perform certain functions especially at the grassroots level. By rural transformation and for the people in the areas in which they operate and in accordance with national policies, three characteristics distinguished local governments form other tiers of government namely proximity to the people, responsiveness to the local needs and simplicity of operation.

                From the foregoing, a local government guideline for local government reform of 1976 can be defined as “Government at the Local level exercised through representative councils established by law to exercise specific powers within defined areas, these powers should give the council substantial control over local affairs as well as the staff and institutional and financial powers to initiate and direct the provision of services. Stated briefly, local governments perform protective regulatory, assistance services, proprietary and development and other functions that may be assigned to them from time to time by the authority establishing them. Because of this, local government are usually empowered to source revenue independently in addition to periodic statutory allocations from other superior bodies like the federal government or state government in the case of a federation.

                In Nigeria, local government evolved from the finances and skilled manpower for planning collection and management of tax revenues as absence of grants – in-aid from other higher level of the government, incapable of providing the drive for rural transformation and development in particular Isiala Ngwa south local government.

 STATEMENT OF PROBLEM

                Over the years, these have been a lot of controversies as regards the poor performance of local governments in the country. While some view the dismal performance of local authorities as brief direct outcome of lack of finance and low revenue capacity, others have also argued that the problem of the local government is finance as but right of the right calibre of manpower necessary for effective management of resources.

                It has also been argued that most council especially in the rural areas relies on the statutory allocations of their major source of revenue, they are viewed as not viable in the sense that they cannot generate revenue internally to enable them execute some of their projects and policies, the revenue yielding machinery and system of revenue collection have been flawed on the grounds of non-availability of qualified of qualified manpower, lack of public enlightenments, over ambitious and corrupt revenue officers in addition to other factors, in some cases, there has been lacks of proper paining and budgeting which would have helped councils to operate sound financial system.          

The above factors have always resulted to lack a finance as there are no appropriate procedures to collect revenue from various sources thereby leading to a situation whereby the bulk of internally generated revenues goes into private pockets instead of coffers of the government the question therefore remains.

What are the appropriate ways in increase local government revenue beside the periodic statutory allocations from the federal revenue and to what extent has lack of planning affected the finances and performances of the local government? Moreover what steps should be taken to ensure the effective and efficient planning and financing the local government. These questions are inevitable in a study of this nature.

 OBJECTIVES OF THE STUDY

                This study examines past and present developments in the system of financing local government. It also examines the problems and prospects of planning at local government level especially those in the rural areas as well as the financial relations existing between the federal and state governments on one hand and the local councils on the other hand. It also examines how these financial and fiscal relation affect the finance and performance of local governments.

                The revenue generation capacity of local governments is also fully taken into consideration as well as the various way of enhancing the financing of local government in the country. This has become so obvious in view of the changing patterns of local government financial and the increased responsibilities imposed o them by the federal and state governments specifically, Isiala Ngwa south Local government area in Abia state is chosen as a case study since to a reasonable extent it mirror the financial problems encountered by councils in the rural areas.  

DEFINITION OF TERMS

                The academic ideals attached to the operationalization on concept or concept is basically to offer specific semantic meaning of the terms used in the course of study, the need for the definition of terms is to make specific reference and the application of the construct so used in the work understandable and to aid for effective communication. It is also to avoid nebulous understanding of the work and grammatical ambiguity.

                Such words as local government, structure, financial, local government development, all needs to be defined based on their usage in this study.

1.                   Local: The term “local” could be defined to be with a particular place or district, the term is used tin this study to represent a part of a whole state and entire country such as Nigeria, as such it could be defined as a subunit of a whole country.

2.                   Government: Government as an institution arm of a state may be defined as an agent or machinery of administration through which the goals, will and principles of the state are formulated expressed and attained.  According to Anyaele (1991:1) government is a process or an art of governing. It could be defined as a body of people vested with both political powers and authority for maintaining law and order.

3.                   Structure: This is a way in which part of a whole are synthesized to form a whole unit, structure is referred to as anything that has a component unit and are assembled together to form a whole.

4.                   Finance: As it relates to this project work or research work, finance refer to arranging credit or payment for something (local government).

5.                   Local Government: Local government is an organ of the state put in place to peddle the developmental activities of a particular palace or distribute with a view to making the impact of governance be it political or military being felt at the grass root level.

6.                   Development: The term development is used in this study to relate to economic growth and expansion and the process of bringing tolerable levels of living within the grasp of the ordinary people.

FUNCTIONS OF LOCAL GOVERNMENTS

                In order to do justice to our review, let us state by examining the virus functions of real government as well as the resources of local finance, the local government system as a third tire of government in Nigeria is charged with enormous responsibilities as contained into fourth schedule of the Federal Republic of Nigeria (1999) include on this responsibilities are:

1.                   Establishment and maintenance of cemeteries burial grounds and homes for the destitute or in firm.

2.                   Establishment, maintenance and regulation of slaughter houses, slaughter slabs markets, motor parts and public conveniences.

3.                   Construction and maintenance of roads, stress lighting drains and other public highways, park gardens, open spaces, or such public facilities as may be prescribed from time to time by the House of Assembly of a State.

4.                   Naming or roads, streets and numbering of houses.

5.                   Registration of all births, deaths and marriages assessment of privately owned houses or tenement for the purpose of levying such rates as may by prescribed by the house of Assembly of a state.

6.                   Control and regulation of:

i.                     Out-door advertising and boarding

ii.                    Movement and keeping of pets of all description

iii.                  Shops and kiosks

iv.                  Restaurant, batteries and other places for sales of food to the public.

v.                   Laundries and

vi.                  Licensing, regulation and control of the sale of liquor.

The local government council under paragraph 2 of the fourth schedule is also required to participate government of the states as respects the following matters.

a.                   The provision and maintenance of primary adult and vocational education.

b.                   The development of agriculture and other natural resources other than the exploitation.

c.                    The provision and maintenance of health services and

d.                   Such other functions as may be conferred on a local government council by the house of assembly of the state.

  SOURCES OF LOCAL GOVERNMENT REVENUE

                The above responsibilities which the constitution charges the local government council of a state, require availability of enough revenue to discharge. No wonder why the same constitution (1999) under 7 (6) provides for statutory allocation to the local government councils as follow subject to the provisions of the constitution.

a.                   The National Assembly shall make provision for statutory allocation of public revenue to local government council with the state.

b.                   The House of Assembly of a state shall make provision for statutory allocation of public revenue to local government council within the state.

The above sources of revenue (statutory allocations) for the local government council are described as constitution the external course while the internal sources compress (but not limited to) fines and fess from market stalls, motor parts, dogs and ratio licenses and so on.

  LOCAL GOVERNMENT STATUTORY ALLOCATION (EXTERNAL SOURCE)

                This is the allocation the local government receive from the financial resources of the federal government as empowered by 5.7(6) (9) of the constitution (1999). The process involves the slicing of these resources first vertically among the three tiers of government (federal, state and local) and thereafter horizontally among the states (states 1, state 2, state 3, state 36) and among the local government council (local government 1, 2, 3, … 77).

                The state government makes a mandatory contribution to the local government in line with the 5.7(6) of the contribution to the local government in line with the 5.7(6) of the constitution (1999) which empowers the House of Assembly of a state to make provision for statutory allocation of public revenue to local government council within the state the above provision of the constitution makes it mandatory for the allocation of public revenue to contribute 10% of its internally generated revenue to the local government council within the state. This 10% is shared among the local government councils equally.

INTERNAL SOURCES OF LOCAL GOVERNMENT REVENUE

                In addition to the external sources comprising statutory allocation from the federal government and certain percentage share of the internally generated revenue of the state, the local government is charge with the responsibility of collecting revenue from the following sources.

a.                   Rate radio and television licences

b.                   Fees from cemeteries, burial grounds and home from the destitute established by the local government.

c.                    Licensing of bicycles, trucks (other than mechanically propelled trucks) canoes, wheel barrows and carts.

d.                   Fees from slaughter houses, slaughter clab, market stall, motor parks and public conveniences.

e.                    Naming of streets registration fees

f.                    Births, deaths and marriages fees etc.   

REVENUE AND EXPENDITURE PATTERN OF ISIALA-NGWA SOUTH LOCAL GOVERNMENT AREA

                In this section, we shall focus on the problem of revenue and expenditure in our area of study in order to understand the sources or revenue and among other things the magnitude as well as the patterns of expenditure and their effects on the provision of expenditure and their effects on the provision of service and development of infrastructure. Usually, the budget of any local government take the shape of capital and recurrent expenditure, recurrent expenditure relates to expenses on the provision of services which are recurring in nature. These include employee’s salaries, allowances, and administrative over head costs. Capital expenditure is incurred on area like construction of building road, streets and other facilities which are of investment value.

                Jagun observes that while recurring expenditure are allowed regularly, usually on a yearly basis capital expenditure is non – recurring although a capital project may span several years.

1.                   Capital expenditure generally utilizes the largest chunk of total revenue. In other words, any local government that reflects a reserve pattern may be said to be experiencing management practice and the setting of priorities.

2.                   Part of the problems also arise when a local government spends greater part of its revenue on personal emoluments or when budgetary allocation are made in a disproportionate manner in terms of setting of priorities. On the other hand, local government derive their revenue from rates, federal and state grants. This means that expenditures is not meet by reducing or deducing grants from the total expenditure using internally generated revenue in the form of rates and taxes to offset the balance.

3.                   Bust as a general lend, the budgeting process of local governments in done without much planning which hampers fiscal efficiency. In most cases whatever little revenue that is available is expanded on personnel emoluments leaving such areas as capital expenditure to suffer. These are also no grants either from the federal or state government available to their local governments beside statutory allocations, the above observations are particularly true inch case of Isiala Ngwa south local government area of Abia state.