The Problems Of Revenue Generation And Utilization

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The Problems Of Revenue Generation And Utilization


This work shows the problems of Revenue Generation and Utilization in Nigeria Local Government system particularly in Udi Local Government area of Enugu State. The sources of Revenue of the Local Government were looked into. This study X-rayed how they generated their Revenue. The study used interview and questionnaire techniques to collect data. Percentage used to answer research questions. However, the researchers made some findings as regards how the revenue were been sourced. These include; Federal Government Allocation, State government grants and internally generated Revenue.

Chapter One


1.1 Background of Study

Local government in Nigeria came into existence as a result of indirect rule system, introduced by Colonial master during the colonial era. Since that period local government system has undergone series of reforms processes such as national conferences, workshops and seminar on different parts of the country as regards to local government administration. The purpose of these seminars and conferences was to ensure an effective and dynamic system of local government in Nigeria.

Inspite of series of seminars and conferences on local government in Nigeria, yet there were recurring inefficiency and mismanagement of resources especially on revenue generation and utilization in Nigeria local government areas. As a result of this, we were motivated by the desire to find out the reason why financial inefficiency is still rampant in local government despite the series of measures applied to ensure effective administration in local government system.

Although, the introduction of 1976 local government reform in Nigeria specified the duties of local government, which contributed in, no small measure towards making people feel the presence of strong and vibrant government. Local government as the third tier of government is a process through which social economic activities are carried out in different localities, thereby making it possible for even development. Local government help to provide government at the grassroots level.

The involvement of the local government through out the country is a way of making government meaningful to them thereby making government an instrument for development. But unfortunately, the local government has not been able to achieve most of these obligations as a result of inadequate financial resources, which has been a major problem leading to ineffective administration in some part of local government in Nigeria.

With the introduction of 1976 reform, there was an improvement in local government as a result of grant which they receive from federal and state government but there dependent on the grant as most of their revenue affect the effectiveness of their service. Local government also receive revenue through internal source such as license fees, tax and rate but some times those revenue are not effectively collected and utilized as a result of embezzlement of the fund by staff members of the L.G.A., who are responsible for collecting the revenue and also by those that manage the revenue.

Despite the arrangement made for local government reform in 1976, the issue of revenue generation and utilization continues to be serious problem.In such situation, we decided to conduct a research into revenue generation and utilization of local government system in Nigeria using Udi Local Government of Enugu State as a case study.

We hope that the solution suggested to the problem will ensure effect and efficiency realization of our aim and objective for futures development in Nigeria.

Statement of the Problem The researchers focused on the prevalent problems that led to the problem of revenue and utilization in Nigeria local government. This problem militates against efficiency generation and effective utilization of local government revenue in Udi Local Government. This problems were: –

  1. Limited revenue resources or inadequate sources of revenue.
  2. Ineffective management of revenue raised.
  3. Poor revenue generation.
  4. Inability of local government to discharging the duties assign to them by federal government.
  5. Poor attitude of the citizen in discharging their responsibilities like payment of tax.

1.2 Purpose of the Study

Local government as a third tier of government has many financial obligation and responsibilities to perform and our intention for this study is to ensure that this obligations are discharge effectively. This work sought to;

  1. To determine how revenue is being generated in the local government.
  2. To examine both the internal and external source of revenue of local government system in Udi Enugu State.
  3. To investigate the problem of revenue and utilization in Nigeria local government in order to find out how the government official manages the fund.
  4. To identify the causes of the problem.
  5. To suggest a possible solution to the problem of revenue generation and ultilization.

For every purpose to be actualize, there must be management by objective.

According to Ikechuku (1995) management by objective is a system where an organization jointly identify it common goals, define each individual work and use this measure as a guide line for operating the unit and asses contribution of each of it members.The application of this theory within the context of this research ensures that we (as input) work hand in hand as unit in order to produce effective and efficient result (output or objective).

Ejiofor (1987) also saw management by objective as a techniques whereby an organization agree on a broad goals translate these goals into a chain of specific short terms goals and define each individual major area of accomplishment. The application of this theory in this context ensure that each individual becomes optimum committed, achievement motivated and outcome oriented.

Likewise in every local government system, there must be a demand and support from citizen (as input) into the local government, who in turn convert this support as (output). There are times when the demand out weighs the output from local government as a result of lack of support from the citizen.

This support from the citizen can be, being obedient to the law, payment of tax and rate and having understanding and sense of belonging. This will help to minimize the demand on local government. Therefore, effective organization and management of local government can be achieved by mutual co-operation of the local government as a system. as a system, the structure is made up of political unit, administrative unit and the entire models. When these structures works hand in hand as an input, they will produce an effective and efficient result (output).

1.3 Significance of the Study

Right from the colonial period, people have been complaining about the poor developmental state of local government in discharging their duties. We hope that this research work will definitely enlighten the staff and management of local government. It will brings about more noticeable contribution and improvement in local government administration. This study will serve as means to tackle most of the problem of revenue generation and utilization and the result of the finding will be of benefit to all local government in different country in Nigeria and also to the student that conduct similar research work on the same topic.

1.4 Research Questions

  1. What are the internal and external sources of local government revenue?
  2. To what extent are the local government revenue being exploited?
  3. What are problems responsible for inefficient and mismanagement of revenue in Udi Local Government?
  4. What are the causes of the problem?
  5. How can we minimize the identified problems in revenue management?

1.5 Scope of the Study

The study was carried in Udi Local Government of Enugu State. The study covers all sections involved in revenue government and disbursement in the local government.

1.6 Limitations of the Study

This research would have been broaden but there are some factors that constrained the research for further expansion of the study.

These factors are as follows; –


The limitation placed on the researchers in this regards cannot really be over emphasized. The period of time for collecting data, completion of the study, submission of the project was not enough to carryout more extensive research for study.


The researchers was stressed by huge financial involvement such as cost of materials, traveling expenses, sour secondly, revenue utilization can be useful in policy formulation on regarding the funding of local government in view of their increased statutory functions.

Thirdly, utilization of revenue is useful in the controlling the expenditure of the local government in view of their internal and external source of revenue through the aid of budget (revenue budget).

1.7 Definition of Terms and Acronyms

Some key concepts in this research work need to be clarified in order to enhance the understanding of the purpose.

This key concept include: –

  • Local Government
  • Revenue
  • Utilization
  • Generation
  • Loan
  • License
  • Tax
  • Allocation
  • Grant
  • Financial Management
Local Government

In this work “Local Government is defined as third tier of government or political constituted by law to carry out the responsibility of government at the grassroots level. They can impose tax through the statutory power they have over local affairs.


Revenue can be defined as money that government realized from taxes or sales of a product. It is all the income or finance derived from both internal and external source by local government.


This is means of using the available resources effectively in order to achieve a desired objective.


This is means of collecting revenue to local government either from internal or external source.


This is the sum of money borrowed by local government for extension of their project like provision of social amenities.


This is the money paid for registration, properties and services of local government.


This is a compulsory payment impose on individual, firms and economic unit by local government, though the statutory power they have our local affair.


This is the amount of money which local government received from state or federal government.

It can be statutory or non – statutory allocation. Statutory allocation is the money from state government while non – statutory is the money from local government.

Financial Management

This is the ability to utilize the available resources such as men, material and money in order to achieve a common purpose.

It is also the ability to accomplish a greatest output from a given input. It important to local government administration cannot be over emphasized because it help to ensure that policies and programmes of local government is successfully implemented.

The Problems Of Revenue Generation And Utilization

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