Examination Of The Source And Uses Of Local Government Fund In Nigeria

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Examination Of The Source And Uses Of Local Government Fund In Nigeria


Local government is that level of government nearest to the people. It is said to be corner stone of the government system in any country.

The federal government believes that it is only through an effective local government system that the human and material resources of the nation could be mobilized for local government with its objectives is aimed at standard and stabilizing the function and financial resources at the local government level and to encourage initiatives and leadership potential.

The basic procedure of local government is revenue mobilization and its effective utilization especially more that there is no comprehensive study on sources and uses of funds in the local government.

The current trends of inefficiency and ineffectiveness of the local authorities should be considered with the frame work of available resources.

If the financial resources of the local of the local government are boughant and viable than this will go a long way in communicating strength and solidity to offer superstructure of government authorities.

There are no discipline on the part of the leadership, management and staff of the local government in collecting revenue efficiently and also try to put them into effective use.

In the tight of the above, the researcher major objectives as regards this research work was to identity those source of finance available to local government, their uses and problem associated with their finance in Nigeria using Ezeagu central Local government development Council ad my case study.

The problem associated with sources, uses of local government finance was critically examine in this project.

In handling the above research work primary and secondary data was used. The sources of primary data was by the use of questionnaires and oral interviews, while the secondary data sources are text books.

The analysis of data was based on percentages. It is on the strength of the finding that recommendation and conclusion was made.


Local government is that level of government nearest to the people. It is said to be the cornerstone government system in any country.

The basic objective underlying this study or this research work was to identify those sources of finance available to the grassroot government, their uses and problems associated with local government finance in Nigeria using Ezeagu central local government development council as my case study.

This research has been structural into five chapters to make for easy reading and comprehension.

The author, dealt with the bank ground of the research work which gives an overview of the basic procedure of local government revenue mobilization and its effective utilization.
She went further to the review of related literature the author lay hands on various Journals news paper, write various view as regard the sources and uses of local government fund in Nigeria. It also consider the current trend of inefficiency and ineffectiveness of local authorities.

Chapter three. Deals with research design and methodology. Primary and secondary data are used effectively.

Chapter four is presentation of data. The presentation interpretation, analysis of data and test of hypothesis in chapter one are done in this chapter using chi-square method.

Chapter five, dealt with findings, recommendation and conclusion. The authors finding is base on the hypothesis reveals that revenue available to local government authorities functions and the funds readily available to these council are also poorly managed. It is upon- this findings that the author make recommendation and draw conclusion.

Chapter One


1.1 Background of the Study

The term Local government has been defined by many scholars with different view as regards its development. W.A. Robinson (2000) states that ‘Local government’ involves the conception of territorial non-sovereign community processing the legal right and the necessary organization to regulate right of its own affairs. This I turn presupposed the control, Vis-à-vis participation in state affairs.

According to U.N. Akpan (1999), out of various possible conceptions of the local level development, two have been particularly dominants in Nigeria since the colonial time. The first was christened the indirect rule system and is infact no other than a field administration model.

Gboyega Alex (1998), state that nation wide ordinance establishing the model first in the Northern provinces and later in the southern provinces was promulgated by the colonial government in 1916, two year after the analyation of the Northern and Southern protectorates Indirect rule was actually the rule by the British colonial officials through local chiefs in terms of its philosophy and practice, the emphasis of their model was the colonial regulation of conquered people and so did not encourage popular participation and representation in the native authorities. It was therefore, strictly different from the pre colonial structure of Government which emphasis balance of power and popular participation. Indirect rule distorted these pre-colonial institutions. The model was also not human development although it led to the beginning of a net work of infrastructures of roads, schools and dispensaries, through with the collaboration of native authorities, the colonial central government and missionaries.

Local Government has sources of revenue of their own such as community taxes and rates, Licenses and fees, earnings and sales, Federal and state statutory allocation etc. After the Second World War, the political development between Nigeria and /Britain led to the abolition of the indirect rule system and its replacement which emphasized full grown local government which was effuient particularly and relatively autonomous. The eastern region was the fist to embark on the experiment on 1950 while the other regions followed in 1952. A few years after wards precisely in 1976, the federal military government announced the reforms of the nations local announced the reforms of the nations local government system. Essentially, the reform resuscitated the idea of participatory and autonomous government which have access to resources both internally and externally to improve the social the economic of the various communities. The question as to why there was this sudden change of direction from at the earlier emphasis on local rules through traditional rules and bureaucrat was carefully examined. The request for autonomy becomes administration particularly since 1970’s. The anticipation of the autonomy came through the 1976 reforms. Actually 1979 constitution made the anticipated a reality, thus the period between 1976 to 1979 can be defined as the period when the idea of local government in Nigeria came to include autonomy for the level of government.

However, the autonomy expectedly remained circumscribed because of control Viz; financial, administration, judiciary, auditory and even miscellaneous which the various state governments exericed in local governments exericed in local government. The most prominent control is on rinace which affects local government development.

The term “finance” encompases personal finance, business finance, business finance and public finance.

According to mautia joy (2001) finance was defined as the art of providing the means of payment or as a body of facts, principles and theories dealing with the raising and using of finds by individual, business, firms and the government. Our interest in this project lies in the problems of rising and using of funds by the local government will emphasis of Ezeagu Central Local government development council.

Thus, a Uniform system of local government through the guidelines for the local government went on to identify the executive functions of local government.

According 1999 constitution section 7 sub section 1 (b) (e) (j) (i) (vi) of Nigeria constitution states various ways the local government can source its funds, although these ways has remained grossly in adequate for maintaining capital and recurrent council. Lack of adequate finance and subvention has been of the defects responsible for the indecency.

Until the revenue allocation act was biplated and received in 2002 by the revenue allocation fiscal commission, at he federal government has operated a system of block grants and subventions to local government througfh state government. Since the money coming from the federal account to the joint state and Local government did not directly.

1.2 Statement of Hypothesis

To guide research, the following hypothesis was formulated.

  1. Ho: The available funds are able to meet the expectations and serve of the local government.
    H1: The available fund are not able to meet the expectations and services of the government.
  2. Ho: The fund available to the local government authorities are not prudently managed.
    H1: The fund available to the local government authorities are not prudently managed.
  3. Ho: The Local government is under fundered partly. From the federation account
    H1: The Local government is under fundered partly. From the federation account
  4. Ho: There is financial autonomy of the local government.
    H1: There is no financial autonomy of local government

1.3 Significance of the Study

The factors militating against a successful performance by the local government authorities may be dual in native.

They be managerial and financial in native. They be managerial and financial in native. Finance is an important part of most organizations decision, and a clear understanding of the way in which decisions are made is essential if the role finance is to be seen in its true perspectives.

Finance is very crucial because if influences planning and achievement pf set objectives.

Local government being the level of government nearest to the people is the corner stone of the government system in any country. If the financial resources of the local goal area buoyant and viable then this will go a long way in community strength and solidarity to other super structures or government authorities.

The important of local government in the nation must be recognized. It is not a profit oriented organized. But a service oriented one and this will surely affect its revenue. To respective local governments, federal presence level of government.

It has been notice that the allocation to the local government have not been steady. The flunctuational of the statutory allocation always put the local government of their budgets estimate for any given year. In most financial year the realization on revenue is spent on recurrent expenditure for running the council while little or noting is left for capital expenditure. This accounts for the absence of development projects by various local government will be elaborated in table in chapter four.

Location and Area

Ezeagu Central local Government Development area is one out of seventeen local government area and thirty nine development centers of Enugu state, ie the total of fifty six local government area in Enugu state. It occupies a geographical western position in the state. It is located at Mgbagbuowa and also surrounded by Ezeagu South, East and North West local Government area.

1.4 Statement of Problems

The basic problem of local government includes:

  1. The problem of revenue mobilization and its effective utilization.
  2. Accountability of funds and properties of the Local government.
  3. The problem of effective discipline leadership in the local government.

1.5 Objectives of the Study

  1. To examine the problems in local government finance and establish the factors responsible for poor revenue generation and ineffective execution of the local government programs and project.
  2. To identify the problems especially as it affect finance with a view of making adequate recommendation for improvement

1.6 Research Questions

  1. Are the availability of funds able to meet the expectation and services of the local government?
  2. Are the funds available to the local government authority prudently managed?

The Significance of this study is there, to find ways of improving local government finance for effective channeling, implantation and executive of the program with in Ezeagu Central local government Council as my area of concern.

1.7 Limitation of the Study

There are a lot of limitations that surrounded this study. The inanely fact ones was time factors, non availability of funds at the time of this research, poor response to question also bring some difficulties. Majority of the local government staff are semi-illiterates.

Having noticed that such people work in the Local government, measures were taken to the question simply for easy answer.

However, despite these limitation, there was progress in the research since other necessary information was gotten.

1.8 Definition of Terms

Local Government/Authority: The third tier system of government after the state federal government.


A body of fact with the raising of fund by local government authorities it encompass personal, business and public finance.

Local levies:

these include all the internal source of revenue collected within the local government area.

Local Government Allocation:

The percentage of funds, the Local authorities gets from the national fund.

Chapter Five

Findings, Conclusion and Recommendation

5.1 Findings

My findings base on the above hypothesis reveals that revenue available to local government authorities is not sufficient to execute its constitutional functions and the fund reading available to the council are poorly managed.
For example, in Ezeagu Central local government development area, prudent financial management has no place in their model of expenditure hypotant project like water, sanitation and roads were left out. Huge money was spent rehabilitating the local government entrance road, corruption at low and high places the local government council creates room for neglect of constitutional functions even with the insufficient revenue realized. This is due to managerial or financial defuencies.

Admintratvie Control

There is little or no proper control of the local government authorities by the higher authorities especially the federal government in terms of finance.

Lack of Accontability

The Local government chairman now use government fund with recklessness cause they feel autonomous and cannot be accountable to any body. They collect allocation to raise mansion and buy expensive cars.


Local government involve themselves in reckless expenditure like engaging in parties and unnecessary seminar that cost money with little or not productivity and construction of esthetic offices.


Information gathered during interview of those held in almost confidentiality, local government staff steals government properties and carmibalise local government vehicle that this sabotage.

Non – Payment of Salaries

Most local government owe their workers thereby depending their spirit or which will affect productivity.

Lack of Suffedent Regenue

Lack of sufficient revenue has also led to the inability of the council to perform to most of their constitutional objectives.


There is little or no autonomy with respect to local government sources and uses of revenue due to high government intervention. This is due to economic and political influence from the central or state government.

Inadequate Collection of Revenue

Due to bribery and corruption, fake receipt are printed to shyphone revenue with private pockets largely due to untrained personnel.

5.2 Recommendation

  1. There is need to reexamine the criteria for delineating local governments such that prominence will be given to factor which have been neglected in the creation of units rather than the pre- occupation with population. Factors like population density geographical contiguity, community affurmity, revenue capability should be considered in allocation of revenue.
  2. There is need to create ad a matter of urgency a task force on local `government revenue generation with special deference to taxes and property rates which are the major source of internal sources of revenue to the local authorities.
  3. There should be a monitoring team set up by the council to ensure that rules and regulation guiding revenue generation are followed strictly.
  4. Finally, there is need for development of a training package to compliment the efforts for the categories of local government revenue officials and to inject discipline into the local government.

5.3 Conclusion

The Local government should be made more effective. Achievements and performance will remain elusive unless financial performance will remain elusive unless financial prudent and accountability becomes
the watchword of the authorities.

The importance of local government in the nation must be recognized. It is not a profit oriented government but a serous oriented one and this will surely affect its revenues. The sources and improvement of the sources of finance should be exploited and harnessed for effective channeling, implementation and execution of the authorities.

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