CRITICAL ANALYSIS OF THE SOURCES OF REVENUE AND EXPENDITURE PATTERN OF LOCAL GOVERNMENT
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The study of Local Government in Nigeria is traceable to the traditional political system in the country local government administration. It was through the instrumentalists of tradition authorities. By this is meant the Igwe, Chiefs, age grades and village councils. It was through the societal interaction that authoritative allocations of values were made for the society. In the past, most of these local governments were created to score cheap political points without due regard for their viability. Apart from political and administration considerations that ought to be carefully examined in determining the viability of a local government in Nigeria, financial consideration is also a relevant factor that must be scrutinize and ascertained before considering a certain geo-political entity for a local government. Local administration was strengthened further when Britain made its presence felt in Nigeria, in 1900 Lord Laggard introduced the system of direct rule into Northern Nigeria and by 1914 the system has spread to other parts of the country. The colonial native authorities were established with the traditional rulers having absolute powers. The native authorities provided form of stable local administration which strengthened the base of the colonial government. However the concept of the local administration charged to that of local government in 1946 aer the defect of conservatives and the coming into power of the labour party.
Before the coming of the Britain into Nigeria as mentioned above the institution of the traditional authorities were held sacred and is legitimized their actions and decision. In the North, the Emirs ruled in the emirates and developed a well organized fiscal system, a definite scheme of land tenure, a regular scheme of local rule and established judiciary with trained personnel interpreting the Islamic laws in the Southern part of the country. Local rulers with defined administrative system through the fiscal system were less organized. Administrative consideration will include a number of factors, one of which is purely government annually. This item includes councilor’s allowances, personal emoluments of sta and miscellaneous expenditure like pensions and granitites etc. The financial considerations include a number of factors. One is the revenue base the size and major sources of revenue such as taxes, rates and fees including market and motor part fees, etc. Since tax is paid by the taxpayers resident in the local government area of authority. The amount of revenue derived from tax depends on the number of tax payers in the area. Thus, the size of the local government in terms of taxable population becomes important. There is also the ability of the area to execute development projects from its internal sources or from short and medium term loan. The magnitude of the council, reserves or end of year surpluses is another factor.
This research work is on the analysis of the sources of revenue and patterns of expenditure of Enugu North Local Government Area of Enugu State for the period of 1999 – 2001. Enugu North Local Government Area is one of the Local Government Areas in Enugu State. It was created in 27th August 1991 by the administration of General Ibrahim Babangida. The Local Government Area was carried out from Old Enugu Local Government Area. They have secondary schools and primary schools. Still before the creation of Enugu North Local Government, the view of the society later became oicial position of labour party, a policy which favoured and advanced the demoralization of local Government. Thus, Local Government in this area was to become a means not only of political but also of economic development, performing functions which of had hardly concerned itself within the previous period. The Local Government therefore assumed a development oriented posture. The structure and working of the native authorities in the fears before 1950 all over the country had not pleased a number or educated Nigerians. The Local Government is not richly endowed with many economic resources which should form basis of income generation for both the people and local government. With the establishment of town planning Authority of Enugu North, it is hope that residential, commercial and industrial layouts will be developed for the greater goal of the local government. Markets and motor parks have been traditional sources of revenue for local government. Mostly every local government and the surrounding communities have been provided with pipe born water. It is necessary to single out the problem of erosion, perhaps as the most dangerous of all problems facing the Local Government Area. Even though none of the autonomous communities has escaped the wrath of erosion on its soils, roads and farms, some towns have sulfured more than the others. Particularly noted is Obiagu under Enugu North Local Government where almost half of the town has been gulped by gully erosion. The situation demands a comprehensive study of the problem in the local government area and conscious intervention by both the state, federal and international agencies.
1.2 STATEMENT OF THE PROBLEM
The sources of revenue available to local government are both internal and external. The identifiable internal sources are community tax, rate or property tax. License and fees, commercial undertakings, while loans, grants and statutory allocation constitute the external sources from the revenue generated, local government incurs expenditure in the form of recurrent and capital expenditure. The extent generated internally and externally is inadequate and therefore greatly affects the provision of basic services by the local government. Not only are the available funds hardly adequate and sufficient to meet with these expenditures, there also a general apathy on the part of local government to explore new sources or revenue outside their traditional bases. This project, therefore, will seek to analyze the available and potential sources of patterns of expenditure of Enugu North Local Government area with a view of ascertain whether such makes for grassroots development.
1.3 PURPOSE PF THE STUDY
1. The purpose of this study is to examine the extent to which the revenue pattern sources of the local government are managed.
2. To bring out the need for an in-depth appraised of a project before it is embarked upon.
3. To analyze the problem associated with the generation of revenue and the reasons for inadequate of funds available to Enugu North L.G.A.
4. To analyze the expenditure pattern of Enugu North Local Government Area.
5. To ensure the prospects of Enugu North L.G.A and make appropriate recommendations based on the findings.
1.4 SCOPE OF THE STUDY
A study of this nature is quite a broad one. There are 774 local government areas in Nigeria. Within the local government area there are many aspects that could have been accommodated under this study. However, the scope of the study shall be centered on the Enugu North Local Government Area of Enugu State to the exclusion of the others further and expenditure patterns of the council for period of 2 years 199 – 2001 to the exclusion of other aspects.
1.5 RESEARCH QUESTION
The research work will try to find answer to the following questions.
1. To what extent does the shortage of experience sta constitute a problem in the internal revenue generation of the Local Government?
2. Are the environments in which they operate suitable?
3. To what extent does fraud and mismanagement constitute a problem in the internal revenue generation of Local Government?
1.6 SIGNIFICANCE OF THE STUDY
As no previous study has been undertaken on the finance and expenditure of Enugu North Local Government Area, it is hoped that the results of the research will be valuable to the following categories of people. The outcome of this study will be beneficial to the inhabitants of the Enugu North L.G.A. They will gain insight into the constraints that militate against the execution of certain projects that would have enhance their taxes and rates as at when due. In other words, it reduces the incidence of tax evasion. It will also guide them in their future demands for facilities in their localities from the local government. Secondly, present and future administration of the local government area will find the result of this study to be very useful especially on the recommendation on new sources of revenue in order to strengthen their financial base. Again it will help them to formulate foolproof policies to over come some, if not all the constraints affecting the generation of revenue even from the traditional sources. Still it will be a grid such that the expenditure pattern will be geared towards the provision /improvement of new/existing facilities to stimulate grassroots development in the area. Thirdly, other research student interested in local government affairs may find this work to be a variable source to guide further research into other aspects of the local government; such as financial management accountability and control. Finally, the result of this study may compel the research to seek employment in Enugu North Local Government in order to translate some of the funding from this study into reality thereby improving on the welfare of the rural populace.
1.7 DEFINITION OF TERMS
Local Government political subdivision of a state which is constituted by law and has substantial control over local affairs including the power to impose taxes; Indirect Rules: -
A system where by administration is affected through the administrative machinery which had been created by the natives themselves and under which the chief, the natives court, native laws sand institutions are recognized and controlled by the natives themselves.
Finance: - Money resources available to a person private or public enterprises use in its maintenance and discharge of its duties.
Cost – Benefit Analysis: - The attempt to calculate all the direct and indirect cost and benefit of a set of alternative projects or policies, subject only to the provision that all cost and benefits be expressed in terms of common denominator money.
Revenue: - The funds available to the local government from different sources for the purpose of meeting its expenditures.
Expenditure: - Cost incurred by the Local Government in carrying out the administration of the area.
Budget: - A budget is a comprehensive financial plan setting forth the expected route for achieving the financial goals of an organization for a specific period.
Tax Avoidance: - It involves the use of loopholes in the prevailing tax laws to avoid the payment of tax. Its is not a criminal act.
Tax Evasion: - It is done either making fraudulent and incorrect tax returns or not making any at all, true or untrue its is a criminal act
1.8 REFERENCES A. Adedeji and L. Rowland (1972), Local Government Finance in Nigeria Problems and Prospects; University of Ife Press. G.O. Adenigo. (1977), A New System of Local Government (Government by the Community in the North Central State of Nigeria) Enugu Nwanife Publishers Ltd Lecture Notes on Introduction to Finance Oered by the Department of Finance, University of Nigeria Enugu Campus 1990 – 1991 session. M. Blavy (1977), Public Expenditure: Allocation Between Competing Ltd. Edited by M.V. Posner London, Cambridge University Press. R. S. Edwards (1959), Building in Public Authorities; London George Allen and unwin
