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Wednesday, April 10, 2013

THE LOCAL GOVERNMENT SYSTEM IN NIGERIA



Different author’s and scholars have given various definition to the term “Local government” if it is viewed from a legalistic point of view, it may be referred as “Body corporates” having perpetual succession with power to save and be saved”

Administratively, it is referred to as a body that has three essential characteristics these are:

1. Local election or selection.

2. Operating in a restricted geographical area within a nation or state.

3. The enjoyment of a measure of autonomy

From the above definitions, it is possible to define functions that are purely local character and which therefore should concern only those living in the locality. Thus the very objective of having local representation is to ensure that those do not share with the general body of their country, men may manage that joint by themselves.

Local government therefore, bring government nearer to the people at the grassroots level with a view to bringing the unnecessary gap-normally created by a centralized system of administration and allows them to participate in the running government affairs. Perhaps, it will not be out of place to mention that local government is established primarily to provide social service such as good roads, dispensaries, clinics, primary schools and so on.


1.1 BACKGROUND OF STUDY

In view of the significant roles attached to the local government system, especially in the areas of rural development as well as bringing government nearer to the grassroots level. It will therefore, be appropriate for one to say that “local government is the government of the people”

From the fore going, one could see the brain behind the establishment of local government system of administration is to perform some vital roles in areas of societal development. In this regard one question that readily comes to mind is “HOW CAN THIS AIM BE ACHIEVED”? This aim can actually be achieved by the local government being financially okay.

Local government source their finance from both internal and external sources;

1. EXTERNAL SOURCES: These are financial sources of which local government don’t have full control of the inflow, amount and some times is unsure of its time of arrival. They include statutory allocation, loans, grants, Aids and so on.

2. INTERNAL SOURCES: These are sources which are within the statutory preview of local government financing . They include tax rates, licence fee among others.


1.2 STATEMENT OF PROBLEMS

In the process of local government financing the following problems were encountered.

i. Determination of viable projects.

ii. Procedure to monitor and ascertain external funding



1.3 OBJECTIVE OF THE STUDY

The objective of this research is to investigate the impact of local government activities in Illorin west local government area. In the course of this study efforts are made to;

i. Identify and explain the factors that will influence the local government financing activities of Ilorin.

ii. Investigate the extent to which the local government financing activities have contributed to the finance department.

iii. Examine the problems facing local government activities.

iv. Make conclusions and provide adequate recommendations.



1.4 SIGNIFICANCE OF STUDY

The importance of the study is derived from the ability to analyze the local government expenditure and their ability to build up special funds. Its ability to act as meaningful indicators depends on certain characteristics, which are enumerated thus;

i. The analysis tells us the amount of funds needed to finance capital projects.

ii. Fund secured through revenue each year and money received from the sale of assets or by launching of and appeal from its country.

iii. The analysis the move about the statutory revenue allocation formula, loans and investment etc.





1.5 SCOPE OF STUDY

It is virtually impossible for one to deeply research into a lot of organizations and understand their various system of financing.

This project work will therefore consider the ways in which local government finance policy of formulated and applied in that organization.

In this paper however, attempts would be made to cover mainly the present day system in Nigeria as applicable since, “1976 local government reforms.



1.6 LIMITATION OF STUDY

In the preparation of this research work various problems were encountered and are stated thus;

i. Non-availability of adequate resource material.

ii. Inadequate statistical data

iii. Lack of record keeping by the local government authority

iv. Lack of transparency



1.7 PLAN OF STUDY

The project comprises of three chapters, chapter one is the introduction, chapter two consists of review of relevant literature while chapter three is the summary, conclusion and recommendations of findings.


CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 INTRODUCTION

From the past years not less than 75% of Nigeria population live in what could termed rural areas. Therefore these people are referred to as rural dwellers. Although, these pay their taxes regularly and do other civil duties expected of them as true Nigerians, their mode of living is very unbearable. They are unable to enjoy modern social amenities conducive to better standards of living.

Infact, various attributes have been given to rural dwellers. They are the illiterates, the under fed, the unawared etc.

They are the neglected ones, no good roads, no healthcare facilities, no schools, no electricity, talkless of drinkable water, instead, there are forth paths and warn infected ponds.

Instead of taking care of deplorable conditions of the rural masses, modern social amenities have over the years excursively preserved for the so called urban dwellers many of who hardly pay their taxes but continuously demand for more and better from the government.

In recent years however, it is with the realization of the deplorable condition of the rural areas that calls have been made for a viable local government system in Nigeria with a view to promote economic and social developments in all the nooks and corners of the country.

To achieve this vital aim, there were elected representatives from several districts in the country (who are in the better position to determine and decide the priorities of their communities)

From the above analysis therefore local government system has been related to habits, modes of life and surrounding of a particular locality. This, it is not surprising that local government will differ from one country to another or even within a country, take for instance, southern and Northern Nigeria.

“Local government is surely one of the best organizational mechanism for generating, motivation and encouraging mobilization for self help, as well as inducing wider participation of the local population in the decision making process at the local level. To guarantee the satisfaction of basic needs, local responsibility and co-operation must be encouraged. Any realistic development effort must be from the grass root level of the society. The masses who live in rural areas need to be involved”.

In another development, the need for local government system is recognized thus.

Government at the local level exercised through representative courials established by law to exercise specific powers within defined areas. These powers should give the council substantial control over affairs as well as the staff and institutional and financial powers to initiate and direct the provisions of services and to determine and implement project so as to complement the activities of the state and federal government in their areas, and to ensure through devolution of functions to these councils and through the active participation of the people and their traditional institutions that local initiative and response to local needs and conditions are maximized.


2.2 SOURCE OF REVENUE

If the local government is to be other than a locally based arm of the state executive, it must not only be governed with wide discression in those fields, it devolves upon them. It must also be given a considerable degree of financial freedom, this does not mean that all local government finances should be raised locally but rather that local authorities should have freedom with broadly determined financial resources to spend money as they see fit and that resources should be sufficiently to allow the local government authorities to perform effectively.

Local government have two types of expenditure namely: Capital and revenue expenditure.

Capital Expenditure: Results in some project of benefit to more than one year.

Revenue Expenditure: Are those expenditure which benefit only within one year.

The provision of health center in an area would be a capital expenditure, whereas the cost of the medical and paramedical personal would be a revenue expenditure. Revenue expenditure is also known as recurrent expenditure which means an expenditure recurs within each year of operation.

Local government expenditure especially capital expenditure is being monitored by the state government through the ministry of local government. The local government must fit into the overall economic policy of the state government. No matter how desirable a project might be to the local government, the state government will not sanction it, if the overall economic policy of the state will be affected adversely. In other words if the government (state) feels that there is a need for a cut back in expenditure it requests the local government to spend less.

Local government authority in Nigeria generates funds from two sources, Internal and External sources.

1. Internal Sources

This as the name implies constitute all amount accning to a local authority from within its personal activities and some of these are:

a. Development Tax: This is the oldest source of income it is traceable back to the traditional nature authorities during the colonial period. It is usually a fixed sum to be paid all male adults and who are indigenes or are residing in a particular local government area. It is an annual payment for development.

b. Tenement Rate: This is a type of tax paid on properties by residents to the government, it is mostly paid on building.

c. Cattle Tax: Cattle rearers within a particular local government area pay this type of tax. It is levied on the number of cattle owned, it is collected mostly during the rainy season of every year.

d. Payee (pay as you earn): This type of tax is the one being deducted from the monthly salaries of civil servants. Only 21/2 of such deducted is normally retained by local government, while the rest goes to the state government purse.

e. Local licence fees: Certain trades cannot just be carried out in a particular locality, unless with licenses, e.g selling gold blacksmithing, bakery, bicycle repairing etc payment for obtaining such licences go to the local government.

f. Miscellaneous sources: In addition to the above mentioned, there are still some other sources through which local government authority generate funds (internally but which are difficult to classify under heads.

These types of revenue fall under miscellaneous sources. A typical example of this is interest paid on loan advances to individual workers of a local government.

2. EXTERNAL SOURCES:

These are financial sources to the local government, out for which local government don’t have full control of how inflow of the funds will be, how much it could be and sometimes cannot be cure of when it will come. These sources are inclusive of (a) statutory allocation (b) loans (c) investment.

a. Statutory allocation: A major external generated revenue for Nigeria local government is the federal government statutory allocation which has been in existence since the inception of local government reforms of 1976. this is to ensure an easy take off of the reform.

b. Loans: this is being resulted to by local government authority, for execution of project while the statutory allocation is still audited. Banks and other financial institutions gives facilities to local government authority, such money can be borrowed usually within the limit of the amount of revenue local government can generate internally.

c. Grants: This is another important external sources of revenue for local government authority. Among these is grant-in-aid which can be federal or state. The federal grants-in-aid is that which comes directly from the federal, while the state grants-in-aid come from the state government account to the local government. While the statutory allocation, grant-in-aid goes to the local government at regular internals and in most cases, are meant for specific project, such as sinking of bore-holes, motor parks etc.

d. Investment: This is a way of helping the state government in its industrialization programme. Some of these investments are either directed by the state government or made by the local government itself. Investment in such project as market stores, tractors, etc brings money into local government account.



2.3 REVENUE ALLOCATION

In an attempt to make local government more effective, the federal government in Nigeria make certain modification in the revenue allocation.

This modified revenue allocation came with degree No 36 of February 1985 whereby 55% of the National federal account was allocated to the federal government 32-5% of the state government while the remaining 49% local government were entitled to 10%.

A provision of 1% was made for a disaster relief fund and (one and half) 11/2 % of the mineral area.


2.4 STATUTORY ALLOCATION

These are income accruing to the local government from both federal and state government. The recent review of the revenues allocation formular raised local government allocation from 20% to 30% state government are also to pay 20% of their respective internally generated revenue to the local government.

Between 1977 and 1990, these had been series of review in revenue allocation to local government with effect from 1/4/77, it was fixed at 10% but raised to 15% effective from 1/1/90.

The bulk of the local government revenue are derived from statutory allocation from the federal and state government. This is quire critical source what ever accrues to the local government is a function of the financial fortunes of the central purse. For example federation account provide 87.06% while government provided 1.00% of this local government revenue in 1989 in Kwara state in 1990, it was 91.13% and 1.39% respectively in the same state.

The statutory allocation forms the largest position of funds available to the local government to finance its operations especially in term of capital expenditure requirement.

The allocation is made from the federation account where all revenue collected by the government of the federation except revenue from personal income tax of the personal of the Armed forces of the federation, the Nigeria police force, the ministry of department of government responsible for external affairs and the residents of the federal capital are excepted.

All allocation from the federation account is then, paid to a special account called “state joint local government account” “from where amount standing to the credit of each local government councils in the state is then paid to them according to the existing terms and manners, this account is under the control of the state ministry of local government at the ministry, a department is assigned the responsibility of determing and payments of dues toe each local government from the allocation, this department also controls the expenditure of the local government.


2.5 LOANS

These are borrows funds possibly from commercial and or development banks. Local government could equally have access to borrowed funds. Short term loans and or over draft could be obtained from commercial banks while such development banks like federal mortgage bank, Nigeria Agricultural and Co-operation Bank could be approached for facilities intended residential buildings for commercial use and industrial use etc.

Loan bonds or debentures stock could be floated by local government areas for specific economically viable projects

However, a comprehensive prospectus with the approval of security and exchange commission has to be prepared to enable members of the public to subscribe to such stock or shares.

Usually, any form of loan internally or externally must be approval by the state government through the state ministry local government, the state government serves as guarantor for any loan raised by the local government. Approval is therefore given only where the expenditure is for an asset of a considerable benefit to the community.

The local government must make enough arrangement on the payment of the loan and this must be by setting aside money from revenue each year, the period within which the loan must be repaid must be shorter than the useful life of the asset.

Borrowing is invariably adopted where the cost of a capital scheme is considerable, the annual contributions from revenue towards the repayment serve to spread the cost of the asset over its period of life and this distribute the burder over the year which benefit from the existence of the asset.


2.6 SPECIAL CAPITAL FUNDS AND CHARGES

Local authorities have power to build up special capital funds, by setting aside the sum from revenue each year or by launching of an appeal from its country. These funds can be used as an alternative to borrowing to finance capital project

CHARGES: For some services, local government are to charge a fee, this eliminating or reducing the cost to the rates.

Currently, is tending towards an increase in the number of such services. Partly due to the feelings that it is unjust that rich men should receive local services without paying the fill cost.

There are three main groups of services from which charges can be levied:-

i. Trading Service: These service do not specifically serve a town at all and which benefits a well defund group of persons. For example, local government are empowered to provide markets and slauter houses both of which give a service to a business country which is well able to pay the full cost of the services without a subsidy from rates, charges for trading services.

ii. Social services: Social services are provided primarily for the benefit of the country at large but one given to specific individuals. Some services can be specific individuals e.g grants to students at universities for social services therefore, it is usual to find that the beneficiary is assessed: the poor pay nothing, the rich pay the whole cost, and the others pay a fair share of their income where the cost of the services is small..

iii. Miscellaneous Services: There are a collection of services for which charges can be made but which partake partly of the nature of social services. For example the provision of public conveniences and refuse disposal is partly a commercial venture but partly also in the interest of public health, for services like these, local government tend to fix a flat rate charge which does not fully cover the cost. Unless a law is specifically made for a charge, local government have no power to make one, most laws prescribed that the consent of the ministry of local government shall be obtained to the scale of charges. Despite all the attention paid to charges, the income from this source forms only a small part of the income.



2.7 STRUCTURE OF REVENUE ADMINISTRATION

In order to understand the revenue performance of the local government, the agency used for its administration is worth being described briefly.

At the head of the revenue administration machinery is the revenue department local government secretariat, which sees to the drawing and implementation of all the revenue polities of the local government, also the office of the district heads. This are the traditional heads of a political division of the area, there are 3 districts these could therefore easily identify every body within their localities. Finally, the revenue offices established at various centers in the local government area assist in no small ways in the collection of revenue, this they do by enlightening and educating the people on the purpose and uses of collecting various levies imposed by the government and what they gain by paying their dues on time and they loose by failing to pay.

The head of the revenue department is the treasurer who is an employees of the local government commission responsible for the administration of taxes in the local government, he has other powers relating to the penalties for defaulters and other offences which he exercised personally. He is also responsible for liasing with other establishments on matters affecting the local government finance, the treasurer also acts in an advisory capacity to the local government on taxes and other financial polities.

Directing under him there are revenue officers, whose duties includes the co-ordination and inspection of the field, revenue officers (collectors

And revenue clerks in the secretariat they coordinates the preparation of reports and collection of data for future performance for casts on revenue. Also in the revenue machinery set up is the cashier who is custodian of valuable documents and returns of collections are made to him by field revenue officers for payment into the local government bank account, also he does the payment and collection of all monies due to the local government after an approval might have been given by the treasurer.

The revenue field collectors, these are employees who are stationed at various points within the local government area to collect various levies and charges from the people of their respective localities, this collectors are divided according to their assignment group, charged with the collection of poll tax, another from market rates etc. Each of this groups is headed by a clerk who prepares and forwards returns of collections to the local government cashier.

Finally, in the arrangement are the office clerk in charged of revenue, this group collect the returns submitted by the field collectors and balance the revenue books of the local government for the purpose of audit.



2.7

ILORIN WEST LOCAL GOVERNMENT ADMINISTRATION STRUCTURE OF THE TREASURY DEPARTMENT


2.8 THE CITING OF ADVERTISEMENT

This otherwise known as the erection of commercial signboards which should attract annual charges of N1500 collected from those engaged in the citing advertisement annually, for instance many legal practitioners, doctors, engineers or other professional business men, manufactures and all have their signboards in Ilorin West local government and each pay for its own signboards.



2.9 REGISTRATION OF BIRTH AND DEATHS

This should be enforce in all local government because of its main advantages. In the first instance, the exercise will enable local government to realize revenue and secondly, it will provide basis to collect statistical data for socio-economics planning in the development of Ilorin west local government.

The newly born baby is N100, for whose age is above 15 year is N350.



2.10 CATTLE TAXES

This is also a fixed amount of money (flat rate charged on every head of cattle and paid to the local government treasurer by the owners). It is N300 per head of cattle per annually while the sum of N50 per head per annum is paid on sheep.



2.11 MARKET RATES

This is another important sources of revenue administered by the local government, rate is collected from sellers who bring their goods to the markets in the local government area for sales. These are major important market in the Ilorin west local government area, they are Ojaoba market, Boboko market and Pakata market. All these mentioned are those from which the local government collect these revenue.



CHAPTER THREE

3.0 SUMMARY, CONCLUSION AND RECOMMENDATION

3.1 SUMMARY

The essence of any research work of this nature is to find out the strengths and weakness of the subject-matter with a view to suggesting some possible remedies to its existing abnormalities and inconsistency to enable forecast for future analysis.

The first chapter serves as a prologue to the whole work. These, the subject matter of this research was explained with specific regards to the introduction, background of the study, statement of problems, objective of the study, significance of the study, scope of the study, limitations of the study and plan of the study.

In the second chapter, related literature were reviewed in essence, the chapter talked about the local government reforms of the federal republic of Nigeria 1976. various sources of local government revenue and expenditure were given so as to distinguish between the two terms.

More so, an overview of Ilorin west local government was dealt with in chapter two. Its structure of revenue such administration as the citing of advertisement, Registration of Births and Death, cattle, taxes and market rates.

Finally, the third chapter which serves as the epilogue to the work,

Conclusion were also drawn based on the facts gathered some important recommendation were also suggested to the problems of local government financing in Ilorin west and other local government in the country.



3.2 CONCLUSIONS

In the light of the finding made by the researcher in the last two chapters, the following conclusion were drawn there from.

Having the foregoing in mind, local government in Nigeria are created to perform some multifarious function as the lowest tier of Government. They have thus been helping to considerably bridge the unreasonable gap between the government and the governed local government, serve as a two-way channel of communication though which the government and the people under their exchange hope and yearning with policy and decisions, thus, creating mutual understanding.

With government at the door-step of the people, their awareness is fast increasing. This is because they can actively participate in the running of their locality. Local government in Nigeria have not been able to perform up to expectation due to shortage of funds and this is the result of the following

i. That a large number of those who are expected to pay tax indulge in some sorts of tax avoidance and evasions and these are due to ignorance as to what their actions means and lack of confidence in the government that their money will not be judiciously spent for their welfare.

ii. Complexity in the filling of tax forms by some tax payers

iii. Inefficiencies on the part of tax-collectors and the practice of nefarious acts by some of them.

iv. Statutory allocations and grants-in-aid are inadequate as compare with the number of functions left to be performed by local governments

v. There are usually land disputes between communities leading people to reluctance in paying taxes.

vi. Non-provision of innovative schemes and training for tax officials.

vii. Statutory allocations and grants in-aid from the federal to the local governments undergo a lot of processes before they get to their destination which may at times lead to reduction in such packages.



3.3 RECOMMENDATIONS

The researcher hopes that the findings of the study would help the government the three tiers to know their short comings and struggle towards better improvement.

In the light of the investigation carried out so far, the following are the researchers recommendations:

i. The public should be enlightened on need to pay tax as is meant for development of their locality and also be made to erase from their mind the beliefs that their money will be embezzled by the government workers. To achieve this local government authorities must be discharging their duties promptly by improving their peoples welfare via the provision of social and infrastructural facilities.

ii. Tax force should be simply designed in such a way as to enable tax payers or their children full them.

iii. There should be adequate check on the tax collector and penalties should await anyone fund in any type of malpractices.

iv. There should be an effective by-laws from time to time so as to give room for the prosecution of those who engaged in tax relenting.

v. Motivation and training boosts the moral and enhance the skills of workers respectively. At least, these must be provided for workers adequately in order to make them to be effective and efficient in discharge of their duties.

vi. There should be well defined land boundaries between one community and the other so as to arrest any possible land disputes.

vii. The federal government should be increasing their allocation and grants to local government from time to time as situation demands.

viii. The federal government should ensure that any allocation or grant it wants to give to local governments do not pass through any other hand till they get to their destinations.



BIBLIOGRAPHY

1. Ackah – Nyanike E.E: Fundamentals of Efficiency in administration, Communication and training, Abiara commervial printers, Ilorin, 1985.



2. Abubakar Abdul – Salam: Financing Human and Materials resources in local governments.



3. Ackah – Nyanike E.E: Principles of public finance in west Africa POAB commercial Printer, Ilorin 1985



4. Mr. Bolaji Azeez: Oral interview from Mr. Bolayi of Ilorin local government.



5. Ejisin J.A: A brief note on the historical Development of local government in Nigeria with particular reference to its finance.

6. Wraith Ronald: Local Administration in West Africa, George Allen and Unwin publishing company limited, London 1972.

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