The Impact Of Local Government Internally Generated Revenue On Community Development In Nigeria

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The Impact Of Local Government Internally Generated Revenue On Community Development In Nigeria

Chapter One


1.1 Background to the Study

The ideas behind the creation of local governments in Nigeria are that the people at the local level are assumed to have the fullest awareness of their needs. Every local jurisdiction has its unique economic, social and physical characteristics and its historical tradition which are better understood by its people. Thus, the Local Government Areas are created to provide the services which the Federal and State Governments cannot easily undertake due to their remoteness from the local communities (Uhunmwuangho and Epelle, 2008). Therefore, the only reasonable form of development is the one that comes from within, through the will and desires of the people.

The constitutional mandates of local government are to consider and make recommendations to a State Commission on Economic Planning or any similar body on: the economic development of the state, particularly as far as the areas of authority of the council and of the state are affected; and proposals made by the said commission or body.. Local government areas are also saddled with the responsibility of licensing bicycles, trucks (other than mechanically propelled trucks), canoes, wheel barrows and carts; establishment, maintenance and regulation of slaughter houses, slaughter slabs, markets, motor parks and public conveniences; construction of maintenance of roads, streets, street lighting, drains and other public highways, parks, gardens, open spaces, or such public facilities as may be prescribed from time to time by the House of Assembly of a state. The government at the local level equally carries out the task of naming roads and streets and numbering of houses; provision of maintenance of public conveniences, sewage and refuse disposal; registration of all births, deaths and marriages; assessment of privately owned houses or tenements for the purpose of levying such rates as may be prescribed by the House of Assembly of a States amongst others (Fourth Schedule of 1999 Constitution).

In all these, revenue is central to the optimal performance of local administration because if local governments do not have sufficient revenue, they cannot develop the communities. There are two sources of local government revenue. They are external and internal sources. Statutorily, local governments collect monthly allocation from Federal source which they receive within the content of the joint account with the state government which is referred to as State Joint Account Allocation. But in many instances, federal allocation is very lean. This shortfall in federal allocation is caused by many factors. Among them is the fall in the price of oil which is the main source of income for Nigeria. Therefore, this shortfall in federal allocation has necessitated local administration to look inward for internally generated revenue to complement federal allocation for their developmental programmes.

Finance is the heart of the major activities of government. Government units at all levels-national, State and Local are daily engaged in the production and distribution of public goods and services in areas such as agricultural extension, education, healthcare, social welfare, security, all of which involve huge amounts of money. The mobilization of the financial resources or revenue to meet the diverse welfare needs of the people has in effect become an important responsibility which governmental authorities have to shoulder. This responsibility not only includes the generation of revenue but also its allocation among competing needs of the local governments. It is within this context that we can appreciate the task of revenue collection at local government level (Abubakar, 1999).
Generally speaking, revenue accruing to any tier of government may be classified as recurrent or capital. While the former is generated on day-to-day basis throughout the year, the latter arises once in a while and in a larger proportion. They are also described as internal and external sources of revenue respectively. Barber (1978) remarked that the principal sources of local government revenue are local rates, federal government grants and trading receipts. The 1976 Local Government Reforms (inNigeria) recognized the fact that if meaningful local government is to be expected in Nigeria, much larger financial resources are needed. The internal sources of revenue comprise many major and miscellaneous items aggregated to provide the required fund for financing the enormous functions ascribed to Local Governments as third tier of Government, Orewa and Adewumi (1983) stated that one of the main reasons why a local council exists is to collect various forms of revenues from its citizens and to use these to provide social services in an efficient manner as possible. These sources are summarized into the following revenue heads: Tenement rate/property rating, local license, fines and fees, earnings from commercial undertakings and rent on property, interest payment, and dividends and miscellaneous (Orewa and Adewumi,1983).

The focus of this study is to assess whether local government has been able to generate sufficient revenues to prosecute community development at the local level. If they have, to what extent have they used the generated revenue for the developmental purposes in their areas of jurisdiction?

1.2 Problem Statement

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.

Despite the fact that revenue accrues to Kirfi local government from the statutory federal allocation and internally generated sources, the local government still suffers from inadequate developmental projects. Kirfi local government like other local governments in Nigeria was created for the development of the people at the local area.  The local government is faced with problems ranging from underdevelopment, irregular payment of staff salary and stunted growth (Edogbonya and Ja’afaru 2013). 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 areas of jurisdiction is attributed largely to inadequate revenues..

1.3 Purpose of the Study

The main aim of this study is to ascertain the sources of internally generated revenue for Local Government Areas and the extent to which the resources have been used for community development in the areas. The specific objectives are to;

  1. Examine the sources of revenue to Local governments;
  2. Examine the capacity of Local Government in generating income for developmental programme;
  3. Assess the extent to which the generated revenue has been used for community development in Local Governments

1.4 Significance of the Study

The study provided the basis for developing various ways of improving revenue generation in Local Governments Areas and in other local With an improved revenue generation, 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 service delivery in Local Government and ways of improving the two.

1.5 Study Hypothesis

  • H0: The amount of revenue generated by the local government has no significant relationship with the level of community development.
  • Ha: The amount of revenue generated by the local government has a significant relationship with the level of community development.

1.6 Scope and Limitations of the Study

This study focused on the impact of local government internally generated revenue and community development in Nigeria The scope of the study is restricted to a period of seven (7) years i.e. (2007-2013).

Limitations of the Study

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

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.

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.

1.7 Definition of Basic Terminologies


Impact in this study refers to the effect of revenue generated on service delivery by local government. It also determined the extent to which local government was able to deliver local services with resources at its disposal.

Local Government

Local Government is defined as Government at the local level exercised through representative council established by law to exercise specific powers within defined areas. These powers should give the council substantial control over local affairs (including staffing) and institutional and financial powers to initiate and direct the provision of services and to determine and implement projects so as to complement the activities of the state, and Federal Government in their areas, and ensure, through the active participation of the people and their traditional institutions, that local initiative and response to local needs and conditions are maximized (Federal Republic of Nigeria, 1976)


According to 1999 constitution, revenue is defined as any income or returns accruing to or derived by the government from any source and include any receipt however described arising from the operation of any law, and receipt however, described from or in respect of any property held by government, and any returns by way of interest or loans and dividends in respect of shares or interest held by government in any company or statutory body. However, revenue can also be regarded or referred to as tolls, taxes, rates, fees, royalties, rents and other receipts of government from whatever sources such as proceeds from loans given out (Section162(10) of 1999 Constitution).

Statutory Allocation

This consists of financial allocations approved by the constitution, to the different tiers of government from the federation account and share of the state government revenues that is allocated to the local governments.

External Sources

These are sources of Revenue that are sourced outside the local government e.g.Donation, Aid, Loan et cetera.

Internally Generated Revenue (IGR)

This refers to the revenue or money collected by the local government from its internal sources (within the Local Government Area). The internal sources of revenue comprise many major and miscellaneous items aggregated to provide the required fund for financing the enormous functions ascribed to local government as third tier of government (Abubakar, 1999).

Community Development

Community development is a process where community members come together to take collective action and generate solutions to common problems. The Cambridge dictionary defines Community development as the activity of working with the people from a particular area in order to try to improve their quality of life.

1.8 Organisation of the Study

The study will be organized into five chapters. Chapter one gives an introduction to the study, while chapter two will be a review of of the related literature. Chapter three presents the research methodology, chapter four focuses on the presentation, analysis and interpretation of data. Chapter five gives the conclusion, summary and recommendations.

Chapter Five

Conclusion, Summary and Recommendation

5.1 Introduction

This chapter discusses the summary, conclusion and the necessary recommendations.

5.2 Conclusion

This study identified and examined various sources of revenue generation, the capacity, impact of revenue generation in Kirfi local government of Bauchi State. The study revealed that Kirfi local government generates income from both internal and external sources. The generated revenue is used to dig well water and boreholes in Kirfi Local Government of Bauchi State, Nigeria.

5.3 Summary of the Study

This research is conducted to examine the impact of revenue generation on service delivery. 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, 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 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. 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 local government revenue generation in order to develop the community.

5.4 Recommendation.

The generated revenue should be used to provide basic needs for the populace so as to encourage many people to pay tax. Autonomy should be given to local government so as to enable the council to function appropriately. The use of council staff should be encouraged. Enough staff should therefore be employed by the council to man the various revenue units of Kirfi local government. Adequate legislation on revenue tariff is very necessary therefore; the council should ensure that its legislative body makes an up-to-date tariff to forestall instances of use of discretion by revenue collectors. The local government chairman should ensure that machinery put in place to generate more revenue internally to enable them do more developmental projects.

The State Government/ Bauchi State Internal Revenue service should ensure justice, transparency and accountability in disbursing the generated revenue to Kirfi local government. Kirfi local government authorities should not be over-dependent on statutory allocation from the federal government. Training and re-training programmes for the revenue officials should be organized to enable them meet the challenge of the new millennium. Enlightenment campaigns on the revenue to be paid by individual should be carried out. Communication gadget, vehicle and motor cycles and security should be provided for the revenue personnel.

Provision of good incentive and remuneration should be made available to workers. This will encourage and boost their morale in discharging their duties. There should be periodic monitoring of project so as to ensure that contractors do what is expected of them. Political consideration in the allocation of contracts should be discouraged. Kirfi local government should embark on meaningful project so as to improve standard of living in the community level.

The Impact Of Local Government Internally Generated Revenue On Community Development In Nigeria

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