Introduction
In this unit, we shall
examine the meaning of local government from different perspectives; the
reasons for creating of local government as well as the importance of local
government. We are able to establish that local governments are developmental
intermediary between grassroots people and national scheme of things.
It is a
system of government that fosters democracy. It is grassroots based consisting
of small units of local communities upon which political power are developed to
cater for then needs. It engenders greater participation of the people in the
process of government.
It is designed to serve as a viable instrument for
repeal and even development of local government as their areas serve as units
for sharing government amenities and offices for instance, sitting of
government establishment, appointment of commissioners, ministers and sharing
of federation accounts.
Local government serve as a powerful instrument for
rapid transformation, it should possess a solid financial base. Finance is the
life-wire of an organization. It is the lubricating element which greases and
makes the administrative machine of an organization move. It therefore follows
that for the local government to discharge its statutory functions effectively,
it discharge adequately fund. Generally, sources of revenue allocated to the
local government vary from country to country and from time to time.
Now let use, Nigeria
local government system as a case study,
Nigeria local government have so many sources of revenue. These include
statutory allocation, rates, grants, fees and charges, fines, earnings and
profits, loans and miscellaneous sources etc.
The founding fathers of
1976 local government reform and framers of 1979, 1989 and 1999 constitution
recognized the importance of finance in the “life” and “blood” of local
government. They recognized that money or finance is the bedrock and the sinews
of any organization. To give meaning to this realization, section 7 sub-section
6(a) and (b) of the 1999 constitution direct that;
1. The National Assembly shall make provisions for statutory allocations
of public revenue to the local governments in the Federal and
2.
The House of Assembly of a State shall make provisions for statutory
allocations of public revenue to the local governments within the State.
Also
section 162 sub-sections (3) – (5) of the 1999 Constitution state that:
Any
amount standing to the credit of the Federation Account shall be distributed
among the Federal and State Governments and the Local Governments in government
either in whole or in part.
1. Rents derived from letting or leasing any building or land belonging
to a local government either in whole or in part.
2. Statutory allocations or grants-in-aid out of the general revenue of
Nigeria or of the state, or of the public revenue;
3. Any sum of money which may lawfully be assigned to a local
governments by any public corporation.
4. Interest on the investment funds of a local government
5. Such sums of money as may be granted to a local government by any
other local government.
6. Such sums of money as may be paid to a local government by a joint
board.
7.
Any other moneys lawfully derived by a local government form any other source
not herein before specifically mentioned shall be and form part of the revenue
and funds of such local governments.
Each
state, on such terms and in such manner as may be prescribed by the National
Assembly.
Any
amount standing to the credit of the State in the Federation Account shall be
distributed among the States on such terms and in such manner as may be
prescribed by the National Assembly.
Other strategies to improve the financial base of local government
1.
Statutory Allocations: The Nigerian constitution
stipulates that the revenue of the federal shall be shared between the three
tiers of government i.e. the federal state and local governments. Consequently,
local governments receive a percentage of 100 the
federally generated revenue annually. This percentage changes with time,
according to acts and decrees.
2. Loans from Banks: A local government can obtain
loans from financial institutions to enable them to finance development
projects such as water supply, rural electricity, and construction of roads and
provision of health facilities.
3. Rates: Rates refer to the levies collected by local
government authority from the services the council provides. The rates are
collected on market stalls, motor parks, supermarkets and shops. Some rate are
also collected from bicycle and motor-cycle licenses television, radio, sets
etc.
4. Special, Levies: This refers to levies imposed on
the residents of local governments as a means of generating internal revenue.
5. Income from Commercial Ventures: One of the sources of
revenue to local governments is income from their commercial activities. Some
local governments maintain transport services, farm, holiday resorts;
consultancy services guest houses, etc.
6. Income from Investments: Local governments derive
revenue by investing their money in profit yielding economic ventures such as
buying of shares entering projects that could provide good revenue in return.
7. Personal Income Tax: Local government council collect
income taxes from non-salary earners keep some percentage of what is collected,
and pay the balance to the state government salary earners are excluded from
payment of personal income tax as a result of the Pay As You Earn (P.A.Y.E)
system, in which their taxes are deducted at source by their employers and
paid directly to government.
8.
Court Fines: court fines are imposed on individuals that
violate local government bylaws, sanitary regulations and ban on street trading
and hawking
9.
Grants from Federal or State Government: Grants are money made
available to local governments to help them carry out their programmes. These
could be block or general grants. Matching grants or special grants. A block
grant is based on population; the matching grant is to aid local governments on
large projects or provision of infrastructure, while special grants are made to
assist local governments in providing some services of national importance, eg.
Education and health
10. Registration of emblems for
motor vehicles, registration permits, haulage permits,
delivery permits for pick-up vans
11. Licenses: for
bicycles, canoes, wheelbarrows, liquor of all types, supermarkets, hawkers,
palm-wine tapping/selling.
CONCLUSION
Research has shown that
the Local Governments proved incapable or generating adequate revenue to
discharge their numerous functions. Many factors were responsible for the poor
finances of the Local Governments. In the first place they were not able to
exploit fully all their internal revenue sources as a result of low quality of
Local Government staff particularly the Treasurer and revenue officials, high
incidence of rate evasion and avoidance. There is the factor of embezzlement of
public funds. Corruption and fraudulent
practices by revenue officials. Generally, the Local Government areas are poor
and this affected adversely the financial viability of these sources. Another
factor responsible for the poor financial base of the local governments was
that the State government did not pay Local Governments their statutory 10 per
cent share of the State Governments’ total internal revenue. Moreover some
State Governments often appropriated a significant portion of the 10 percent
statutory allocation from the Federation Accounts which passed through them.
This is added to the fact that some State Governments encroached upon some of
the money-yielding functions of the Local Governments. Finally, the revenue
source of loan from which Local Governments were empowered to raise funds was
an empty source as Local Governments lacked the collaterals with which to raise
loans from commercial banks.
REFERENCE
Agbakoba, R and Ogbonna, M. (2004)
Local Government Administration and Development in Nigeria, Lagos: The Human
Rights Law Services
Ani, E.I. (2003) Advanced Local
Government Finance, Enugu Spring Time Press
Awotokun, K. (2005) Local
Government Administration under 1999 Constitution in Nigeria Journal of Social
Sciences 10(2) 129-134
Barber, M.P. (1974) Local
Government (Third Edition) London: Macdonald and Evans Ltd
Imam, I.B.C. (1990) Local
Government Finance in Nigeria, Ibadan: NISER
Murana, A.O. (2015) Local
Government Finance in Nigeria: A case study of Iwo Local Government Area of
Osun State, International Journal of Politics and Good Governance. Vol. vi No.
6.1 (1-29)
Obinna, E. (1988) Local
Government Financing Obosi, Pacific Publishers.v
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