Academic journal article Journal of Sustainable Development

Challenges of Expanding Internally Generated Revenue in Local Government Council Areas in Nigeria

Academic journal article Journal of Sustainable Development

Challenges of Expanding Internally Generated Revenue in Local Government Council Areas in Nigeria

Article excerpt

1. Introduction

The major challenge confronting most local government councils in developing countries such as Nigeria is that of having a firm financial base to enable them pay for charges incurred for their respective administrative activities. Experience has shown that the expected financial bases local government councils have tended to become very unauthentic, given the straitened sources of internally generated revenue to complement the federally allocated source. It is not unusual in Nigeria that most local government councils in the country cannot generate sufficient funds internally for their developmental needs. In fact, the central problem has tended to be that of not sufficiently identifying, and adopting appropriate strategies for expanding their revenue bases internally. Achieving this objective would substantially assist in augmenting the apparently grossly inadequate external sources of funding. The issue of the narrow revenue base within the local government system in Nigeria is a matter of serious concern for both policy makers and implementers; because it adversely affects the performance of local government councils' statutory responsibilities as a veritable agent of rapid rural development and transformation. The paper argues as follows: that local government councils in Nigeria have ample sources of generating revenue internally; these sources must be clearly delineated and areas of responsibilities and accountabilities made; what is generated deposited in government treasury; problem of endemic corruption and other related vices tackled robustly; and, dependence on the federal government for "hand-outs" drastically reduced. The other area of critically is the flourishing financial and resource emasculation of local governments by their respective States governments.

2. Statement of Problem

It is an incontrovertible fact that "the extent to which a local government can go in accomplishing its goal will largely depend on its internally generated revenue" Olusola (2011; 2014). The problem however, is that most local government councils in Nigeria lacks the capacity or political will to raise corollary funds to it's statutorily allocated from the states and federal governments as required by fiscal federalism which she operates. In fact, Fiscal federalism entails a clearly demarcated functions as enshrined in the legislative lists of the Federal Republic of Nigeria. According to Kizito and Fadila:

In a federal system such as Nigeria, there exist three tiers of government namely federal, state and local governments. The constitution provides for the functions of the different tiers of government.... Consequently, resources are allocated to the three tiers of government from the federation account to enable them carry out their functions effectively in addition to the revenue generated internally by each tier of government (2015: 2).

From the above it become very clear that both the states and local governments are expected to depend mainly two main streams of resource funding: from the federation account and internally generated revenue. This implies that part of the resource needed the both the states and local governments are to be realized by putting in place robust machinery that would enable the generation the requisite funds to augment their federally allocated finances. In the local government councils the problem of achieving this goal has tended to be an uphill task. This is due to the fact that much of the internally generated revenue are either grossly embezzled or misappropriated by most political office holders. The bureaucrats at all levels are not leftin actuating corruption and other related vices; which have largely contributed to the paucity of funds in the local government councils. Correspondingly, Kizito and Fadila (2015) have reiterated the fact that state/local joint account has tended to become a "vehicle for deducting, diverting and misapplying the allocating to local government councils, and this has continue to drastically reduce the funds of local governments. …

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