ASSESSMENT OF LOCAL GOVERNMENT AND SERVICE DELIVERY

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CHAPTER ONE

INTRODUCTION

1.1 Background of Study

Local government plays a crucial role in the delivery of services to the

citizenry. The success of any local government is its ability to utilize its

human and material resources to achieve the desired objectives i.e. rendering

needed services to the community. Local government is a government in

which popular participation both in the choice of decision makers and in its

recognition of a third tier of government. Prior to 1976, however, Nigerian

local government has passed through various reforms. These reforms and reorganizations have affected the system financially, administratively,

politically and functionally.

The historical evolution of the local government system in Nigeria

dates back to the colonial era when it was called the colonial native authority

system which existed between 1920’s and 1930’s (Orewa and Adewumi

1983). In their form, they represented a system of indirect rule whose aim

was to establish a system of local authorities through traditional authorities.

The main task of local government in this era was maintenance of law and

order at grass root level. Also the issue of revenue generation in the local 2

government system has been in existence since in this traditional system of

local government. In pre-colonial Nigeria the Chiefs, Obas and Emirs were

responsible for revenue generation. This they usually did through levies and

taxes, which they used in managing their communities. During the colonial

era the British especially in the North introduced a system of indirect rule in

which direct taxes were introduced in various local communities for running

their affairs. By 1933, the powers of the local authorities were extended to

cover expanded functions due to reliable performances. After the

independence in 1960, local governments acquired more responsibilities that

were assigned to them by the constitution. For instance, section 6 of the 1979

Constitutions of Nigeria provides that:

The functions to be conferred by law upon local

government council shall include those spelt out in

fourth schedule to this constitution

Also the constitution made provision for substantial funds to local

councils. This is because there is no doubt that sound financial base is a

prerequisite for effective performance of the roles assigned to local

government. For instance, section 7(6) of the 1999 Constitution makes

provision for the funding of local government as follows;3

a) The National Assembly shall make provision for statutory allocation

of public revenue to local government councils in the federation; and

b) The House of Assembly of a state shall make provisions for statutory

allocation of public revenue to local government councils within the

state.

More specifically, provision was made under the Revenue Allocation Act

of 1981 for statutory allocation of 10 percent of national revenue to local

government, became operational in 1989 and 20 percent in 1992. (Idike

1995:1). In addition, state governments were required to contribute 10

percent if their internally generated revenue to local government (Dasuki

Report, 1985).

Under this fiscal arrangement, local government depended mainly on

State and Federal Governments for revenue and grants. This source of

revenue is in some cases unreliable and unstable. This is due to the fact that

most state government have failed to release 10 percent of their internally

generated revenue to their local governments. In addition, some State

Governments interfere with the statutory allocations to local governments.4

It is in recognition of this that the originators of 1976 Local Government

Reform made genuine efforts to assist the local government system

financially. For instance in 1976, the Federal Military Government after the

reform as it was contained and noted in the Guidelines for Local Government

Reform 196:11) stated that:

Lack of adequate funds and appropriate institution

has continued to make local government ineffective

and ineffectual. In embarking on the reforms, the

Federal Military Government was essentially

motivated by the necessity to stabilize and

rationalize government at the local level. This must

entail the decentralization of some significant

functions of state government to local levels in

order to harness local resources for rapid

development.

This gave rise to provision of different sources of internal revenue

generation for Nigerian local government in our subsequent constitutions.

Also various measures were taken to take care of the financial problems of

the local system. For instance there are many Edicts in various states like

Anambra State Edict (1976) in favour of other sources of revenue for the

local government system..

The aim for provision of internal sources of revenue generation to

Njikoka local government is to supplement the statutory allocations from5

both federal and state government. It is assumed that if local government can

satisfactorily generate a large proportion of its revenue internally, it will

cease relying heavily on the statutory allocations. Despite these constitutional

provisions for sources of internal revenue, Njikoka local government and

some other local government s in Nigeria are still unable to tap all these

internal sources. Hence, the problem of poor internal generated revenue in

most local government in Nigeria.

It is on this background that this study tends to examine factors that

constitute impediments to maximum generation of internal revenue in

Njikoka local government of Anambra state.

1.2 Statement of the Problem

In the words of Oguonu (2000:136) “what makes the difference

between local governments is the ability of a local government to internally

generate revenue”. The inability to generate income apart from resources

from the federal government, has been a persistent problem in Njikoka local

government. Revenue generation entails generating and exploring all the

sources of revenue for the local councils. Njikoka government relies heavily

on external sources for funds: it is evident that Njikoka local government area 6

has failed to explore the various sources of internal revenue generation open

to the local government; hence the problem of internally generated revenue.

Some factors are accountable for the poor internal revenue generation in

Njikoka Local Government Area. It is in this light that we asked this broad

research question-what then are the causes of poor internally generated

revenues in Njikoka local government of Anambra state?

The study attempts to provide answers to the following questions.

1. What accounts for the inability on the part of revenue collectors to

collect internally generated revenue in Njikoka Local Government

Area

2. Does lack of financial autonomy constitute a problem to internal

revenue generation in Njikoka local government area.

1.3 Objectives of the Study

The broad objective of this study is to examine the problem of internal

revenue generation in Njikoka local government. The specific objectives of

the study are as follows:7

1. To determine what accounts for the inability of revenue collectors to

collect internally generated revenue in Njikoka local government.

2. To find out if lack of financial autonomy constitutes a problem to

internally generated revenue in Njikoka local government; and

3. To proffer solution to the problem of poor internal revenue generation

in Njikoka Local Government Area.

14 Literature Review

There are reasonable number of existing literature on local government

finance and internal revenue generation in Njikoka local government Some

scholars have made one or two contributions in this area

The aim of this literature review was to familiarize ourselves with what

other scholars have said about the subject matter, see how they approached

the issue and determine whether the scholars have answered the question(s)

we intend to answer satisfactorily The literature review was specifically

aimed at discovering the gap in the existing literatures It was to know what

other scholars have either said or not said8

For instance, L Rowland (1977:77), made some comments on the desirability

for local governments to have their own sources of revenue He state’s that

“an effective local government system cannot exist where the local authority

has no power to improve and collect its own taxes” Certainly, in many

developing countries such as Netherland, local authorities have fewer sources

for revenue generation”

Orewa (1986:180), in his book titled “Local Government Finance in

Nigeria”, described and discussed various sources of revenue open to local

governments and problems in the collection and management of their

finance Such problems are-shortage of trained manpower, ignorance of the

councilors over their duties and non-commitment to duty on the part of the

staff and councilors alike

Adediji (1979:87), blames poor internal revenue generation of local

government on the following reasons

a Lack of proper structure

b Low quality of staff and

c Lack of mission and comprehensive functional role9

According to him, these problems lead the local government into vicious

circle of poverty This is due to the fact that inadequate funding results in

employment of low skilled and poorly paid staff

Bello- Iman (1990:134), in the same vein states that “ the major

constraint to internal revenue generation in local government is the shortage

of well trained and qualified personnel which suppose to serve as tool for

collection of taxes and rates at the local level” According to him, even the

few available are not peoperly trained in efficient budgetary and financial

management systems Also most of the local governments are short-stuffed to

carryout their duties”

Nkala (1985:60), talking about the problem of personnel in internal

generation of local governments states that “at the inception of democratic

local government system in the former Eastern region of Nigeria in 1950,

early recruits into the local government service were mainly ‘sons of the

soil’, party stalwarts, relations of councilors” He blamed shortage of trainedstaff in local government on politicization of recruitment, selection and

placement

Mugrave, RA (1959:89), noted that “poor auditing has contributed

immensely to problem of internal revenue generation of local governments” 10

According to him, “local governments should have a means of ascertaining

whether it’s financial operation is properly conducted, this can only be done

through audit”

In a more recent study, Ebo (2000:123), did a thorough work on how

to enhance internal revenue of local government, using Nsukka as a test case

He corroborated the evidence of other scholars to the effect that there is a

great loss of council’s revenue due largely to the loopholes in the

management of revenue sources He noted that collection procedure of the

council could be streamlined in many areas especially where their facilities

were used Citing motor parks for instance, he observed “motor parks fees

paid by taxis can be good money earned for local government councils if

properly managed But as of now (2000) each of these taxis pays #10 a day to

the local government no matter how many loads they made In contrast to

this, each taxi pays touts up to #30 per load and there may be several loads

per day Thus, the local council receives #10 per taxi daily What a flagrant

case of robbing peter to pay paul”

As Ikejiani-Clark (1995:53) pointed out that,

the growing prominence of corruption and fraud in

local government as evidenced from massive data

from the various parts of the federation has 11

coincided with increased academic interest in

corruption and fraud in our public life

Still in the same view, Obi (1996) and Ikejiani-Clark (1995) produced

massive data on cases of corruption and fraud in Nigerian local governments;

for instance, Obi observed that

the poor state of accountability in the local

government studied was as a result of interwoven

tragedy emanating from the Nigeria factor, weak

accounting control mechanism lack of prosecution

of offenders, dishonesty, absence of adequately

maintained financial records, conflict in role

perception by the chairmen and many others He

concluded that “unaccountability was the major

cause of poor internal generated revenue and low

development in the local communities’ in Nigeria

(Obi 1976:179)

Further, Ezeani (2004:120), states

corruption remains a major problem which has

constrained local government especially in

developing countries from contributing

meaningfully to the upliftment of the standard of

living of the local people It is rife in the areas of

revenue generation and declaration by collectors to

embezzlement of local government funds by

officials of local government

To stress the point, Obinna had (1995:47) stated that

some unscrupulous revenue collectors and senior

financial officers of the local government defraud 12

the local government by printing fake receipts

which they use to collect unaccounted revenue

On the side of lack of adequate manpower for revenue generation by

Nigerian local government, Nwankwo (1995:154) observed that why local

governments have not paid proper attention to internal generation of revenue

was due to poor staffing, sharp and fraudulent practices of the revenue

collectors, lack of logistic support for revenue collectors and refusal of most

citizen to cooperate in paying the necessary fees due to the local government

Wraith (1972:68) stated that

lack of foresight and entrepreneurial skills on the

part of key local government function arises

especially the revenue officials have contributed

heavily to the failure of internal revenue

generation for the local governments

He maintained that local government functionaries who should look inwardly

to identify and exploit fully more viable sources of revenue in their areas of

jurisdiction unfortunately fail to do so mainly because they are not

enterprising

On the issue of the auditing system in Nigerian local government,

Musgrave (1959:39) noted that poor auditing system in Nigerian local

government has contributed immensely to problem of internal revenue 13

generation of local government To him, local government should have

means of ascertaining whether its financial operation, are properly conducted,

this can only be done through audit In this view, Oguonu (1995:143) pointed

out that:

the dearth of qualify staff to conduct audit has

resulted in using people who do not possess the

requite experience and knowledge to face the

challenges of the work

Supporting this view, Ezeani (2004:124) pointed out that “inefficient

supervisors do not effectively supervise the revenue staff and records”

Again, internal auditors lack independence required for effective

performance of their duties As Ezeani (quoting Oguonu 1993:860)

succinctly put it:

The administrative set up in such that the internal

auditor can hardly exercise his powers

independently because; he depends on his

superiors for recommendations, for promotions

and career advancement

Again, Oguonu (2003:135) pointed out that another fundamental

reason for poor internally generated revenue is that Nigerian local

governments were not created on the basis of their viability She maintained

that they are mere political creations Further she stated that: “some of the 14

newly created local governments were as a result of political patronage to

ruling party loyalists”

Other reasons for poor revenue collection by Onyisi (1999), Adewale

(1998) and Ezeani (2004) are the fact that most of local governments cannot

enforce bye laws on revenue collection In some cases the law of revenue

collection is not updated They also maintained that there is also poor

communication network especially in the riverine areas

Finally, Omopariolar and Adewale (1998:247), stated that

high incidence of tax evasion also plays a major

role in poor internally generated revenue in the

local government system Most Nigerians are not

willing to pay taxes

Despite all these arguments presented by these scholars, the issue of

poor internally revenue generation in Nigerian local governments has not

been properly addressed The scholars have failed to touch on the kind of

fiscal relationship that exists between the local government and other levels

of government and how this intergovernmental financial relations either

enhances or undermines internal revenue generation in Nigerian local

governments For instance, the 1976 Local Government Reforms put into 15

consideration the relationship that exists between state and local government

Local Government Guideline states

the defects of previous local government system

are too well known to deserve further elaboration

here Local government has over the years suffered

from the continuous whittling down of their

powers The state governments have continued to

encroach upon what would normally have been the

exclusive preserve of local government Lack of

adequate funds and appropriate institutions have

continued to make local government ineffective

Cameron (2001:213) defined intergovernmental relations “as an array

of structures, processes, institutions and mechanisms for coping with the

inevitable overlap and interdependence that is a feature of modern life”

Odugbemi (1989:175) defines it “as a system of transactions (behaviour

patterns) among managers of hierarchically, structured levels of government

in a state” He goes further to argue that the objectives for intergovernmental

relations is the achievement of the division of work, authority, resources

sharing among levels of public and sometime extra government authorities in

state

Olaokun (1979:97) stated that:

there are variations in the capacity of the different

levels of government may not have enough

capacity to raise enough revenue when it is 16

realized that in a federation it is desirable for every

state or locality to attain minimum level of

services It becomes imperative that for these areas

that have low revenue-raising capacity to meet up

with the national minimum they have to impose

heavier taxes on inhabitants of such areas

These existing literature have failed to explain the impact of state –

local government intergovernmental relations on internally generated

revenue

15 Theoretical Framework

Theory of fiscal federalism is applied in this work as our theoretical

framework The “theory of fiscal federalism” as originally developed by

Musgrave (1959) and Oates (1972), concerns the division of public sector

functions and fiancés in a logical way among multiple layers of government

(King 1984) Fiscal federalism, as it is called, is used to refer to the fiscal

arrangement among the different tiers of government in a federal structure

(Ekpo, 2004)

Initially, stabilization and distribution were considered the cardinal

points in federal arrangement The focus in federalism then was always on

how to divide functions among the federating units in order to avoid

functional overlapping and conflicts Recently, attention in federalism has 17

shifted to revenue mobilization and allocation among different tiers of

government This is due to the recognition of the fact that adequate finance is

requisite condition for effective delivery of service by the federation units

According to Bello-Iman (1990:44), the most dominant area of

intergovernmental relations is finance This is because no level of

government can perform its functions without strong financial base In this

perspective, the main analytical task of fiscal federalism is to define the

appropriate functions and fiancés of different tiers of government as

efficiently as possible that is in such a way as maximize community welfare

The theory of fiscal federalism applies to local service units in metropolitical area as to states in a federation (Gramlich 1977, Rubinfeld 1987) In

principle, however, there are important analytical and policy differences, not

only between local metropolitan problems and federal state problems but

even between tight federal state problems but even between tight federations

such as Germany and “Loose” federation such as Canada –with the United

States somewhere in between These differences arise in part from the

differing nature and rigidity of the constraints imposed by political

institutions The question has attracted considerable attention in recent years

in part because of the emergence of nascent “federal institutions” especially 18

in third world countries For instance, in Nigeria, there are statutory

provisions for revenue sharing an powers to generate revenue through

specific sources The 1999 Constitution of Federal Republic of Nigeria,

established the type of fiscal relationships that would exist among the various

levels of government For example, section 149(2) of the 1979 Constitution

or section 162(3) of the 1999 Constitution stipulates that any amount

standing to the credit of the Federation Account shall be distributed among

the federation, state governments and the local government councils in each

state on such terms an in such manner as may be prescribed by the National

Assembly

Similarly, the 1999 Constitution provided for state-local financial

relationship under section 162 sub-sections 8 This section states that the

amount standing to the credit of the local government councils of a state on

such terms and in such manner as may be prescribed by the House of

Assembly of a state

Apart from the constitutional provisions of external revenue to local

government, the 1999 Constitution as contained in forth schedule and Model

Financial Memoranda for Local Government (1991) and section 45 of Decree 19

No 36 of 1998 provide for internal sources of revenue generation by Nigerian

local governments

Despite all these constitutional provisions, in the words of Owens and

Panella (1991:54), “Local governments almost invariably depend in part and

sometimes very heavily upon transfers from upper-level governments to

finance the services for which they are responsible” This is due to the fact

that in most countries whether formally federal or not, there is clearly vertical

competition between levels of government for revenue; perhaps because as

rule local government have access only to those revenue sources that higher

level of governments do not want for themselves

16 Hypotheses

To answer our research questions, hypotheses were formulated The

formulated hypotheses are:

1 Negligence on the part of revenue collectors is a major problem to

Internal Revenue generation in Njikoka Local Government Area

2 Lack of financial autonomy constrains generation of revenue via

internal sources in Njikoka Local Government Area 20

17 Method of Data Collection

Both direct and indirect methods were used in collecting data for this

research work For instance, indirect method of reviewing was used by going

through textbooks, journals, periodicals etc written by other scholars on the

same subject matter The direct observation was also used by going through

government documents or publications like financial reports and annual

estimates of Njikoka Local Government

Population of Study, Sample and Sampling Techniques

The population of this study comprises of the staff of Anambra State

Local Government Service Commission, members of Audit Alarm

Committee, Auditor General of Anambra State, staff of Njikoka Local

Government Council and some of Anambra State Government Officials

A stratified random sampling technique was used to select the

departments to be included in the study Five departments were selected from

Anambra State and Njikoka Local Government respectively; making it a total

of ten departments Ten respondents were chosen from each of the selected

departments; and that will give us a total of one hundred (100) respondents

The respondents were mainly finance staff with some staff in management

position that could influence the activities of finance staff For instance, ten 21

respondents were drawn from Account Departments, ten from Planning and

Statistics Units, ten from Audit Units, ten from Personnel Department, ten

from the Anambra State Local Government Service Commission, ten from

the Office of the Governor on Local Government Affairs and ten from the

Office of Auditor-General of Anambra State

The self-report techniques were used to obtain information from these

respondents Unstructured interview was conducted on fifteen (15) workers

in Anambra State and (15) in Njikoka Local Government Staff The

respondents interviewed were not randomly chosen, but selected through

judgmental sampling

Research Design

Ex Post facto (X O1 O2) was used in this research to obtain data we

used to test our hypotheses or answer our research questions According to

Asika (1991:24); “ex post facto research is a systematic empirical study in

which the research does not in any way control or manipulate independent

variables because the situation for study already exists or has already taken

place”

According to White (1990), “ex post facto is often called simple

experimental design It is developed to provide alternative means for 22

examining causality in situations which were not conducive to experimental

control and also to control as many threat to validity as possible”

In this research, we hypothesize the relationship between y, dependent

variable and x, independent variable We say that there exists a form of linear

relationship between x and y and y changes directly with any change in x

There is relationship between X1 Negligence on the part of revenue collectors

– Independent variable (x) and internal revenue generation in Njikoka Local

Government Area (y) X2 Lack of finance (Autonomy (x) and Internal

Revenue generation (y)

Since ex post facto research lacks control or manipulation in

hypothesis testing; it is faced with the problem of precision In words of

Kerlinger (1973) “in spite of its lack of precision ex post facto research still

finds a place in scientific business research This is because it is a realistic

approach to behaviourial science research Since experimentation often does

not take place in real life situations and may need one type of contrivance of

research situation or another”

Method of Data Analysis

In the area of method of data analysis, statistical tables or data

tabulation is applied Tabulation in the words of Asika (1991:114) “is the 23

process of creating data for further analysis by the use of tables Unanka

(2002:20) states that “statistical tables are commonly used in summarizing

socio-political data They are devices for organizing or presenting statistical

information in a concise and comprehensive manner

Quantitative descriptive analysis is used to summarize a mass of

information generated in the study so that appropriate analytical methods

could be used to further discover relationship among the variables

Chi-Square is used in testing of independence among the variables in

our hypotheses Chi-square is a measure of the discrepancy frequencies It

serves as a test of significance or independence

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