A Critical Analysis Of The Sources Of Revenue And Expenditure Pattern Of Local Government In Enugu State (A Case Study Of Enugu North Local Government Area)

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A Critical Analysis Of The Sources Of Revenue And Expenditure Pattern Of Local Government In Enugu State (A Case Study Of Enugu North Local Government Area)


The purpose for this research is to determine the relevance of a critical analysis of the sources of revenue and expenditure pattern of Enugu North Local Government Area, with reference to Enugu North Local Government. The research was carried out to discover the availability of expenditure and revenue in the Local Government; this involved going to Enugu North Local Government to administer questionnaire and interview on some key staff of the local government.

It was revealed among others that revenue and expenditure is available for all categories of staff. Unfortunately, critical analysis of the sources of revenue and expenditure pattern has not enhanced productivity of the local government.

It should therefore, be recommended that the local government should try as much as possible to encourage those staffers who put their effort to enable them contribute meaningfully to the advancement of the local government sources of revenue and expenditure in the local government.

Table of Contents

Preliminary Page(s)

  • Title Page
  • Declaration
  • Approval
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of Content

Chapter One

1.0 Introduction

  • 1.1 Background of the Study
  • 1.2 Statement of the Problem
  • 1.3 Purpose of the Study
  • 1.4 Scope of the Study
  • 1.5 Research Question
  • 1.6 Significance of the Study
  • 1.7 Definition of Terms
  • References

Chapter Two

2.0 Review of Related Literature

  • 2.1 History on Enugu North Local Government Area
  • 2.2 Internal sources on Enugu North
  • 2.3 External sources on Enugu North
  • 2.4 Motor Parks and Market Fees
  • 2.5 Commercial Undertakings
  • 2.6 Patterns of Expenditure
  • References

Chapter Three

3.0 Research Design and Methodology

  • 3.1 Research Design
  • 3.2 Area of the Study
  • 3.3 Population of the Study
  • 3.4 Sample and Sampling Procedure
  • 3.5 Instrument for Data Collection
  • 3.6 Validation of the Instrument
  • 3.7 Reliability of the Instrument
  • 3.8 Method of Data Collection
  • 3.9 Method of Data Analysis

Chapter Four

4.0 Data Presentation and Analysis

  • 4.1 Presentation and Analysis of Data
  • 4.2 Summary of Result

Chapter Five

5.0 Discussion, Recommendation and Conclusion

  • 5.1 Discussion of Results/Findings
  • 5.2 Recommendation
  • 5.2.1 Internal Control Procedures
  • 5.2.2 External Control
  • 5.3 Conclusion
  • 5.4 Implication and Research Finding
  • 5.5 Suggestion for Further Research
  • 5.6 Limitation of Study
  • Bibliography
  • Appendix

Chapter One


1.1 Background Of The Study

The study of Local Government in Nigeria is traceable to the traditional political system in the country local government administration. It was through the instrumentalities of tradition authorities. By this is meant the Igwe, Chiefs, age grades and village councils. It was through the societal interaction that authoritative allocations of values were made for the society.

In the past, most of these local governments were created to score cheap political points without due regard for their viability.

Apart from political and administration considerations that ought to be carefully examined in determining the viability of a local government in Nigeria, financial consideration is also a relevant factor that must be scrutinize and ascertained before considering a certain geo-political entity for a local government.

Local administration was strengthened further when Britain made its presence felt in Nigeria, in 1900 Lord Laggard introduced the system of direct rule into Northern Nigeria and by 1914 the system has spread to other parts of the country.

The colonial native authorities were established with the traditional rulers having absolute powers. The native authorities provided form of stable local administration which strengthened the base of the colonial government. However the concept of the local administration charged to that of local government in 1946 after the defect of conservatives and the coming into power of the labour party.

Before the coming of the Britain into Nigeria as mentioned above the institution of the traditional authorities were held sacred and is legitimized their actions and decision. In the North, the Emirs ruled in the emirates and developed a well organized fiscal system, a definite scheme of land tenure, a regular scheme of local rule and established judiciary with trained personnel interpreting the Islamic laws in the Southern part of the country. Local rulers with defined administrative system through the fiscal system were less organized.

Administrative consideration will include a number of factors, one of which is purely government annually. This item includes councilorโ€™s allowances, personal emoluments of staff and miscellaneous expenditure like pensions and granitites etc.

The financial considerations include a number of factors. One is the revenue base the size and major sources of revenue such as taxes, rates and fees including market and motor part fees, etc. Since tax is paid by the taxpayers resident in the local government area of authority. The amount of revenue derived from tax depends on the number of tax payers in the area.

Thus, the size of the local government in terms of taxable population becomes important. There is also the ability of the area to execute development projects from its internal sources or from short and medium term loan. The magnitude of the council, reserves or end of year surpluses is another factor. This research work is on the analysis of the sources of revenue and patterns of expenditure of Enugu North Local Government Area of Enugu State for the period of 1999 โ€“ 2001.

Enugu North Local Government Area is one of the Local Government Areas in Enugu State. It was created in 27th August 1991 by the administration of General Ibrahim Babangida. The Local Government Area was carried out from Old Enugu Local Government Area.

They have secondary schools and primary schools. Still before the creation of Enugu North Local Government, the view of the society later became official position of labour party, a policy which favoured and advanced the demoralization of local Government. Thus, Local Government in this area was to become a means not only of political but also of economic development, performing functions which of had hardly concerned itself within the previous period.

The Local Government therefore assumed a development oriented posture.

The structure and working of the native authorities in the fears before 1950 all over the country had not pleased a number or educated Nigerians.

The Local Government is not richly endowed with many economic resources which should form basis of income generation for both the people and local government. With the establishment of town planning Authority of Enugu North, it is hope that residential, commercial and industrial layouts will be developed for the greater goal of the local government.

Markets and motor parks have been traditional sources of revenue for local government.

Mostly every local government and the surrounding communities have been provided with pipe born water.
It is necessary to single out the problem of erosion, perhaps as the most dangerous of all problems facing the Local Government Area. Even though none of the autonomous communities has escaped the wrath of erosion on its soils, roads and farms, some towns have sulfured more than the others. Particularly noted is Obiagu under Enugu North Local Government where almost half of the town has been gulped by gully erosion. The situation demands a comprehensive study of the problem in the local government area and conscious intervention by both the state, federal and international agencies.

1.2 Statement Of The Problem

The sources of revenue available to local government are both internal and external. The identifiable internal sources are community tax, rate or property tax. License and fees, commercial undertakings, while loans, grants and statutory allocation constitute the external sources from the revenue generated, local government incurs expenditure in the form of recurrent and capital expenditure. The extent generated internally and externally is inadequate and therefore greatly affects the provision of basic services by the local government. Not only are the available funds hardly adequate and sufficient to meet with these expenditures, there also a general apathy on the part of local government to explore new sources or revenue outside their traditional bases.

This project, therefore, will seek to analyze the available and potential sources of patterns of expenditure of Enugu North Local Government area with a view of ascertain whether such makes for grassroots development.

1.3 Purpose Of The Study

  1. The purpose of this study is to examine the extent to which the revenue pattern sources of the local government are managed.
  2. To bring out the need for an in-depth appraised of a project before it is embarked upon.
  3. To analyze the problem associated with the generation of revenue and the reasons for inadequate of funds available to Enugu North L.G.A.
  4. To analyze the expenditure pattern of Enugu North Local Government Area.
  5. To ensure the prospects of Enugu North L.G.A and make appropriate recommendations based on the findings.

1.4 Scope Of The Study

A study of this nature is quite a broad one. There are 774 local government areas in Nigeria. Within the local government area there are many aspects that could have been accommodated under this study.
However, the scope of the study shall be centered on the Enugu North Local Government Area of Enugu State to the exclusion of the others further and expenditure patterns of the council for period of 2 years 199 โ€“ 2001 to the exclusion of other aspects.

1.5 Research Question

The research work will try to find answer to the following questions.

  1. To what extent does the shortage of experience staff constitute a problem in the internal revenue generation of the Local Government?
  2. Are the environments in which they operate suitable?
  3. To what extent does fraud and mismanagement constitute a problem in the internal revenue generation of Local Government?

1.6 Significance Of The Study

As no previous study has been undertaken on the finance and expenditure of Enugu North Local Government Area, it is hoped that the results of the research will be valuable to the following categories of people.

The outcome of this study will be beneficial to the inhabitants of the Enugu North L.G.A. They will gain insight into the constraints that militate against the execution of certain projects that would have enhance their taxes and rates as at when due. In other words, it reduces the incidence of tax evasion.

It will also guide them in their future demands for facilities in their localities from the local government.
Secondly, present and future administration of the local government area will find the result of this study to be very useful especially on the recommendation on new sources of revenue in order to strengthen their financial base. Again it will help them to formulate foolproof policies to over come some, if not all the constraints affecting the generation of revenue even from the traditional sources. Still it will be a grid such that the expenditure pattern will be geared towards the provision /improvement of new/existing facilities to stimulate grassroots development in the area.

Thirdly, other research student interested in local government affairs may find this work to be a variable source to guide further research into other aspects of the local government; such as financial management accountability and control.

Finally, the result of this study may compel the research to seek employment in Enugu North Local Government in order to translate some of the funding from this study into reality thereby improving on the welfare of the rural populace.

1.7 Definition Of Terms

Local Government political subdivision of a state which is constituted by law and has substantial control over local affairs including the power to impose taxes;

Indirect Rules:

A system where by administration is affected through the administrative machinery which had been created by the natives themselves and under which the chief, the natives court, native laws sand institutions are recognized and controlled by the natives themselves.


Money resources available to a person private or public enterprises use in its maintenance and discharge of its duties.

Cost โ€“ Benefit Analysis:

The attempt to calculate all the direct and indirect cost and benefit of a set of alternative projects or policies, subject only to the provision that all cost and benefits be expressed in terms of common denominator money.


The funds available to the local government from different sources for the purpose of meeting its expenditures.


Cost incurred by the Local Government in carrying out the administration of the area.


A budget is a comprehensive financial plan setting forth the expected route for achieving the financial goals of an organization for a specific period.

Tax Avoidance:

It involves the use of loopholes in the prevailing tax laws to avoid the payment of tax. Its is not a criminal act.

Tax Evasion:

It is done either making fraudulent and incorrect tax returns or not making any at all, true or untrue its is a criminal act.

Chapter Five

5.0 Discussion, Recommendation And Conclusion

5.1 Discussion Of Result Findings

The data analyzed in chapter four has shown the following facts.

  1. Financial management function in local government has not been properly carried out.
  2. Financial management in local government has not been beyond the point of exercising control over expenditure.
  3. Political decision may sometimes be taken into consideration in exercising financial functions.
  4. That there is insufficient expenditure on the social and economic activities. That is the local government spend more on general administration than on the productive, sector of the economy.
  5. That wrong estimates are sometimes made of the items of expenditure which givens wide many in between the actual and the budgeted amount.

The local government lack good estimates as there is always a wide margin between estimates and the actual amount in cursed on the expenditure items.

It is also found that wrong estimates of expenditure may give rise to undesirable practices like embezzlement of funds as a result of actual expenditure being far below the estimates in most cases.

Also a revisitation of all the information generated in the course of the study revealed that there are some obvious capes on the patterns of expenditure in the local government. There are still some factors that are militating against revenue sources which when solved will help in the problems of financial management not being properly carried out.

Some identified problems and lapses are stated individually or the sake of presentation and clarity, yet it should be borne in mind that most of the problems are not isolated as such. They are so interrelated and interdependent that only a system approach type of solution will suffice.

5.2 Recommendation

Ever before this time, local government had been relegated to the back ground with the most of their revenue basis taken over by the state government. However, the Babangida administration did a lot to sup-lifts the states of local governments, to their true positions as the third tier of government. To enhance this, the revenue base of the councils have been defined and broadened. Some of the measures include is percent share of the federation account, now paid direct to the local governments and the 10 percent share of the state internally generated revenue available to each local government. Financial management is at present being referred to in the local government as financial council and it is so important that adequate attention must be given to it. To safeguard against fraud extravagance and inefficiency which financial management in local government should aim at the under mentioned recommendation are made through the following medium.

5.2.1 Internal Control Procedures

There should be an internal audit unit in local government; Internal audit operation as a continuous check as revenue and expenditure procedure as a safeguards against frauds, inefficiency or misappropriation of funds, stocks and materials.

5.2.2 External Controls

External Controls related to the control mechanisms used on the local government by the state and federal government.

A public expenditure survey scheme could be established whose duty would be to re-cost existing politics, make submission and ministerial decisions in the total public expenditure and its allocation. The local government accounts should be subject to annual independent external audit. The auditors may b civil servant or professional practitioners approved by the state government. The audits should ensure that expenditure and income are both authorized by laws, proper accounts have to be kept and the internal and external audit controls as to provide reasonable safeguards against losses arising from fraud, waste, extravagance, inefficiency, mistake or inadequate purchasing.

5.3 Conclusion

Since revenue bases of local government have been broadened from their hitherto level there is need for good revenue at local government level in order to safeguard fraud waste, inefficiency and misuse to assets. Adequate revenue is particularly necessary these days of scarce resources in order to make maximum use of available resources.

Therefore attention must be given to this important aspect of the local government organization, if all the recommendations are carried out with all seriousness they deserve, there is no doubt that there will be an improvement in the financial management of local government over its present level of merely exercising control over expenditure.

5.4 Implication Of The Research Findings

From the research so far carried out. It is pertinent to say that for proper revenue and expenditure to be motivated, there should be workforce, good will building and many other things and if those finding are not well conducted, it might lead to managerial incapacity.

Human wants are insatiable because of their social in nature because of this dynamic nature of these wants, however sources of revenue and expenditure pattern in Enugu North local government area is rest assured by strict adherence to the principles lay down in the councils of yield success.

5.5 Suggestion For Further Research

During the course of this research work, I discovered some gray areas that need to be exposed. The following areas could be research on.

  1. The accounting system of local government
  2. The extent of revenue generated in local government.
  3. Local government finance in Nigeria

5.6 Limitation Of Study

The first limiting factor is that some original manuscripts could not be traced easily due to death of accounting records and proper accounting which leave the imprint of inefficiency in the several offices visited.

Another limiting factor is the hostility of respondents attributed to the fact that most Nigeria public servants are still less than favourable disposed to any activity that tends to lay bare their official performance. Hence, even a harmless academic work such as; this is not given its required cooperation.

Furthermore, the study was limited to the above outlined scope due to the unbearable financial involvement of a more extensive study while considering the limited funds at my disposal to attend to other academic needs.

Yet another limiting factors is time considering the fact that his work is only a part of an academic programme, coupled with the fact that work on its is limited to one semester within which period other courses are taken, it becomes clear that one does not have all time in the world to permit a more elaborate work.

Thus, any evaluation of this report should be done with these limitations and scope in mind.

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