The Effect Of Revenue Generation In Rural Development In Nigeria (A Case Study Of Ihiala Local Government, Anambra State)

Project and Seminar Material for Political Science

Abstract

This study is on the effect of revenue generation on rural development. The study determined the general level of revenue generation in the Local Government Area 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 rural development. 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 chi-square was used for data analysis to show the relationship between effective management of revenue generation and level of rural development in the local governments. Pearson Correlation was also used to measure the relationship between the amount of revenue generated and rural development in the Local Government s. However, it was found that effective management of revenue generation 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 governments 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 governments. Property and tenement rate as potential sources of revenue generation should also be tapped fully to improve the revenue base of the local governments.

Chapter One

Introduction

1.1 Background of Study

Revenue generation is the nucleus and the path to modern development. Thus, the study was to assess the effect of revenue generation in rural development in Nigeria a case study of Ihiala Local Government Area, Anambra state This is because local government as the third tier of government and the closest to the people especially in the rural area needed revenue to provide basic social amenities to the people.

But it is unfortunate to note that the local government management has not lived up to expectation especially, to provide basic social amenities to the rural people. Thus, the objective of the research was to analyze the extent to which poor revenue generation had affected the development of those area. The researcher used primary and secondary methods of data collection to generate the needed data. The data obtained through questionnaire was presented in tables and expressed in simple percentages.

The following were some of the findings which included poor rural development of the area, lack of basic social amenities to the rural people and lack of revenue to maintain the existing infrastructures. The researcher therefore recommended that the local government should provide basic amenities of high quality. By doing so, the people’s interest would be geared towards giving their maximum support to the local government which would lead to the development of the rural area.

Over the years, the percentage allocation of revenue generation to capital expenditure which is meant for the provision of services is very low. Specifically, 40.20% in 2006 was allocated to capital expenditure, 17.38% in 2007, 17.35% in 2008, 34.0% in 2009 and 39.28 in 2010 (CBN, 2010). This means that over 50% of the revenue received by Nigerian local government is allocated to recurrent spending at the expense of rural development.

The report of the CBN, (2012), shows that the statutory allocation to local government accounts for 57.5%, in 2011 and 59.4% in 2012 of their total revenue. This percentage is very high compared to the Internally Generated Revenue (IGR) of 1.6% and 1.9% respectively in the same years (CBN, 2012).

1.2 Statement of the Problem

Nigeria operates a federal system of government where power is constitutionally shared between three tiers of government. Local government was created as a means of promoting development and bringing government closer to the people.

Nigeria’s experience in local government administration, whether in military regimes or in democratic era has clearly shown that local governments are faced with daunting challenges in their mandate to promote development and provide essential services to the rural dwellers. Local government, which is statutorily established to be the closest tier of government to the people, is not doing its bidding coupled with the fact that resident population in the local government has no significant access to the benefits of its existence. The failure of the local governments in the area of rural development has made the citizens to lose their trust in government as an institution. In some area, council officials are better known for the harassment of citizens than rural development (Ajibulu, 2011).
It is common knowledge that local government has the weakest capacity to initiate and manage rural development programme. Most of the officials are performing their functions without the relevant qualification to perform effectively. As a result, the available resources for accelerated and sustainable rural development are inefficiently utilized for the purpose intended (Ocheni. et al. 2012:131).

In spite of the increase in total amount of funds available to Local Governments from early 1990s to date, their economic and financial profile have been very poor, relative to its development due perhaps to false declarations of statements of revenue by revenue collector ‘s and treasury staff, political instability and lack of socio-political philosophy among others. Mope, (2015) argued that in nominal terms, the allocation which stood at N597.2 billion in 2005 jumped to N1, 379 billion in 2008, reflecting a marginal revenue increase of 130.9%.

However, some challenges which served as impediments to Local Governments ‘efforts to generate adequate revenue from various sources. Many factors have been identified to be responsible for the inadequate internal revenue effort. Chief amongst them are corruption and weak machinery for check and balances in the generation of revenues. Preliminary survey has shown that the inability of the local governments to provide adequate services to the people within their area of jurisdiction is attributed largely to inadequate revenues. The researcher was therefore motivated to conduct research in order to investigate the effect of revenue generation on rural development in Ihiala Local Government Area.

1.3 Research Questions

What is the level of revenue generation in Ihiala Local Government Area?
What is the relationship between revenue generation and rural development in Ihiala Local Government Area?
To what extent does revenue affect rural development in Ihiala Local Governments Area?
What are the challenges of revenue generation and rural development in Ihiala Local Government Area?

1.4 Objectives of the Study

To determine the general level of revenue generation in Ihiala Local Government Area;
To examine the relationship between revenue generation and rural development in Ihiala Local Government Area;
To determine the extent to which revenue affects rural development in Ihiala Local Government Area;
To identify the challenges of revenue generation and rural development in Ihiala Local Government Area.

1.5 Hypotheses of the Study

Ho1: The amount of revenue generated by the local government has no significant relationship with the level of rural development in Ihiala Local Government Area.

1.6 Significance of the Study

Previous studies like that of Jumare, (2008) focused on statutory allocation to local government and rural development and Youbi (2008) associated the failure of rural development by local government functionaries with bad local politics. This study focused on the two sources of revenue generation and rural development.
The study provided the basis for developing various ways of improving revenue generation in Ihiala Local Government Area and in other local governments ‘area in Nigerian. With an improved revenue generation, Ihiala Local Governments will be able to meet the demands of the people and will be able to perform their primary functions of provision of essential services more efficiently. The study also revealed the extent to which an improved revenue generation will impact on development generally. The study is an added contribution to the existing knowledge on revenue and rural development in Local Government and ways of improving the two. The research will also help other researchers who may wish to carry out research of similar nature.

1.7 Scope and Limitations of the Study

This dissertation focused on the study of revenue generation and rural development in Ihiala Local Government Area of Anambra State. The scope of the study is restricted to a period of seven (7) years i.e. (2007-2013).

1.8 Limitations of the Study

As with any other research, there were restrictions or constraints that the researcher encountered. The limitations of this study include:

1.7.1 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.

1.7.2 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.

Chapter Five

Summary, Conclusion and Recommendations

5.1 Summary

This research is conducted to examine the effect of revenue generation on rural development. The research is divided into five main chapters.

Chapter one is apparently introductory in nature which provides the basis upon which the whole research is carried out. The chapter includes, among others, the background to the study, statement of the problem, hypotheses, research question, objectives of the study and significant of the study.
Chapter two reviews the various literature relevant to the study in terms of conceptual issues, theoretical issues and empirical studies and the theoretical framework of fiscal decentralization was adopted as the foundation upon which the study was based.
Chapter three deals with the methodology of the study whereby the various research design and methods of data collection were discussed. Not only that, the methods of data analysis and population, sample size and sampling techniques were also highlighted.
Chapter four presented the historical background, development and the economies of the Local Government s under our case studies. However, the organisational structure and operational pattern of the Local Government s question were also discussed.
Chapter five was on data presentation and analyses whereby all the data collected from the survey and that obtained from the secondary sources were summarised, organised, presented and analysed using both descriptive and statistical tools. All the hypotheses formulated were tested under this chapter.
Chapter five which was the concluding chapter dealt with summary, conclusion and recommendations. The chapter summarised the whole work and conclusions were drawn while recommendations were made on how to improve revenue generation generation in order to provide more services.

5.2 Conclusion

Based on the data collected, presented and analysed and the result of statistical tests, the following conclusions are discernable:

That service provisions by local government is the product of the ability to generate revenue. Therefore, based on this, the higher the revenue the higher the number/quantity of services provided and vice versa;
That commercial/economic activities are great determinants of revenue generation and subsequently service provision.
That effective management of generated revenue is also a fundamental issue in the provision of services to the local populace. Therefore, revenue generation is not an end in itself in determining service provision, but proper utilisation is also a great determinant.

5.3 Recommendations

Having summarised and concluded the work, the following recommendations among others would serve as ways through which revenue generation generation should be boosted in order to improve the level of rural development to the local citizenry.

Having established that the more the revenue generated the more services are provided to the citizenry, more revenue sources should be identified and adopted in order to increase and improve the revenue base of the local governments. The present revenue sources should also be fully tapped to improve the revenue base of the local government. Here, it is strongly recommended that the local government should adequately be involved in commercial transportation. By this, it means that commercial vehicles (cars, buses and trailers) should be purchased and operate, not on a subsidised bases but purely on commercial bases i.e. profit maximisation. However, this commercial vehicle should not be managed by any official or any department of the local government council, but a management consult be given to manage. For example, Afribank, and other transport consults on contract management basis. This will undoubtedly improve the revenues of the Local Government Area under study.
Diversification of income sources should be made in the Local Government under study.
In order to ensure that taxpayers pay their taxes as at when due, a public enlightenment campaign should regularly be organised explaining the importance of paying tax not only for revenue generation but also for rural development. There has always been reciprocity between tax payers and the government (Local Government). Tax payers refusal to pay local taxes was as a result of poor services or lack of services rendered by local governments. The higher the services, the higher the taxes and vice versa.
Efforts should be enhanced by the local government towards generation of internal revenue so as to meet the yearnings and aspiration of the people at grassroot level.

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