Evaluation Of Challenges Of Financial Management In Nigeria Local Government System

Project and Seminar Material for Accountancy / Accounting

Evaluation Of Challenges Of Financial Management In Nigeria Local Government System


The third tier level of government in Nigeria is tier called “Local Government” it was established with the aim and the specific function to assist the higher s of government thus, the federal and state to bring effective rural development and good governance at the grassroots level. Both fiscal and physical evaluation of the performance and effectiveness of the third tier level of government carried out revealed that this tier of government has performed below expectation. This research work which is challenged of financial management in Nigeria local Government system: A case of Ivo local Government council of Ebonyi State was undertaken to anticipate and comprehensively entrench or discuss those inhibitive factors to proper financial management in Nigeria local Government system. It recommended that local Government council should adapt and put in place efficient financial management to maximize the utilization of the available scarce financial resources. This is necessary for good and fascinating infrastructural development and provision of social amenities which will in are way or the other promotes the living standard of the grassroots level.

Chapter One


1.1 Background of the Study

According to aborisade, (2003) in his write up defined or state that financial management in any local government involves the inflows of payment, it can also be said to be the art of raising and spending money which is ever prominent facts to any local government.

Financial management in any local government system is like a vehicle as whole with many parts, that when one part of it most especially the engine part is not properly perfectly maintained and guild not strictly adhered to can cause damage to the vehicle thereby and therefore affectively the various other part and will prevent the vehicle from functioning, in relate to our topic which will prevent the local government even organization from performing it’s function. Part of the responsibilities of local government is to ensure efficient service delivery to the people, and for any organization to deliver it’s function efficiently, huge amount of money is needed and efficiently financial management must be adopted.

This therefore, follows Orewa, G.O (1991) whom states that finance must be handled with care and disturbed according financial regulation. The ideal is to analyze the efforts, made by the council to regenerate funds internally to supplement those from the state and federal source and finally make recommendation on some possible course of action that will enhance improving the situation. It is said that resources are limited want are uncountable. The same thing can be said of any government, be it rid federal is appreciated that the place of financial accountabilities can be recognized fully in attaining other objective of local government.

Again, the issue of participatory democracy can not be consolidated fully in financial management is not well studied. The masses are represented by representatives since it is not possible for all to be in government. The only way the masses participate in government is any time their representatives are called to give account of their stewardship. The highest stewardship is financial accountability.

This is necessary because governments are established to bring good welfare to the citizen. So, the stewards are always made to do this to those they are representing i.e. the masses.

Finance is the backbone of any functional organization depends on the effectiveness of management of its finance to achieve the aims and objective of establishing such organization. If finance is well managed in our local government then there is no doubt that the organization will not attain it goal and objectives.

The reverse is the case when there is mismanagement of finance in the local government. Lack of funds which are experienced in the local government are caused by such function such as those posed by depressed state of the nations economy. Management has to do with the aggregation of planning, organization, staffing, directing, leading and controlling.

According to Pendey (1996) financial management is that management activity which concerned with the planning and controlling of firms financial resources, for the attainment of sound financial management in any organization, the functions of financial management must be well executed.

This research work therefore focuses on the challenges facing financial management in Nigeria local government, which our case study will focus on local government council in Ebonyi State. Also, the importance of finance in Nigeria local government system cannot be over took, because of its contribution to the growth and development of any functioning organization which Nigeria local government is one of them.

1.2 Statement of the Problem

This study has been undertaking in order to identify and analyzed the low internally generated revenue and the challenges that hinder efficient and effective management of the council’s financial resources.

This research tends to solve the following problems.

  1. To find out what was responsible for mismanagement of local government finance.
  2. To know those who are involved in the mismanagement of the local government finance.
  3. To know whether enough revenue is appropriated in the local council.
  4. To design strategies that will ensure proper accountability in the council.

1.3 Research Question.

  1. What challenges inhibit the effective and efficient management of local government Finance?
  2. What are the main sources of revenue generation in local government council in Nigeria?
  3. What the consequences of financial mismanagement in local government administration.

1.4 Objectives of the Study

The following shall constitute the objective of the study.

  1. To identify the problems or challenges that inhibits the financial management of ivo local government of Ebonyi state.
  2. To examine and expose the prevailing consequences of financial mismanagement in Nigeria local government.
  3. To determine source ivo local government generate its funds, in order to carry out it local responsibilities.

1.5 Significance of the Study.

  1. To stimulate further research.
  2. To help policy makers.
  3. It serves as literature to the general public.
  4. Finally, this study is a great importance to local government workers as it is going to bring their activities into time light through showing some areas of defects and strength.

1.6 Scope of the Study.

The study was restricted to Ivo local government area. However, the study looked at the various source of financing in the local government system in Ebonyi state in particular and Nigeria in general.

1.7 Limitation of the Study

In the course of conducting this research work, a lot of constraints were encounter.

The problem of procuring accurate, relevant and current data, constituted the major constraints that affected the study.

1.9 Definition of Terms

Our definition of terms will focus on local government, finance, management, financial management, challenges and local government.


This is relating to the particular area you line in.


This is a large societies special institution for making and enforcing collective decision.

Local Government:

This is the government of smaller units within nations or state mostly at the level of the country, town or district.


This is a term applied to purchase and sales of legal instrument that give owners specified right to a series of future cash flows.


This is defined as the process of combining and utilizing allocation organization inputs(men, material and money) by planning, organization, directing and controlling for the purpose of producing outputs(goods and services) desired organizational objective or accomplished.

Financial Management:

This is that fact of management which is concerned mainly with raising funds in most economic and suitable manner.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Summary

In this study, our focus was on the evaluation of challenges of financial management in Nigeria local government system using Ivo local Government council of Ebonyi State as a case study. The study specifically was aimed at highlighting the problems or challenges that inhibits the financial management of ivo local government of Ebonyi state, examine and expose the prevailing consequences of financial mismanagement in Nigeria local government and determine source ivo local government generate its funds, in order to carry out it local responsibilities. A total of 30 responses were validated from the enrolled participants where all respondent are drawn from local government accounting staff , treasurers and financial secretaries in Ivo LGA.

5.2 Conclusion

Based on the finding of this study, the following conclusions were made:

  1. The challenges inhibiting the efficient and effective management of fund in the local government is managing the budgetary demands of decreased revenues, increased service demands and the costs of unfunded state and federal mandates.
  2. The sources of revenue generation in local government is 30 percent from property taxes, 5 percent from general sales taxes and gross receipts taxes and 2 percent from selective sales taxes on purchases such as alcohol, motor fuel, and tobacco products.
  3. The consequences of financial mismanagement in the local government is lack of infrastructural growth, Lack of regular payment of staff salary and cash-reserve and reserve rates.

5.3 Recommendation

Based on the responses obtained, the researcher proffers the following recommendations:

  1. Financial planning and control should be seen as an important aspect for effective financial management.
  2. Financial adviser (Council treasurer) should ensure adequate revenues are achieved for meeting the expected expenditure of the local government.
  3. The local government should prepare accurate and reliable budget are prepared with good budget monitoring and budget plan, for effective implementation and enhancement of good financial management.
  4. Good and sound internal control mechanism should be put in place to minimize fraud and wastage’s in financial resources and also to enhance performance in the provision of public goods and services.
  5. Local government should have full financial and administrative autonomy by stopping of state joint local government allocation account in order to forestall financial resources and administrative independence

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