LOCAL GOVERNMENT FINANCE AND LOCAL GOVERNMENT DEVELOPMENT

CHAPTER ONE

INTRODUCTION

1.1            Background of Study 

Local government plays a crucial role in the delivery of services to the  citizenry. The success of any local government is its ability to utilize its human and material resources to achieve the desired objectives i.e. rendering needed services to the community. Local government is a government in which popular participation both in the choice of decision makers and in its recognition of a third tier of government. Prior to 1976, however, Nigerian local government has passed through various reforms. These reforms and reorganizations have affected the system financially, administratively, politically and functionally.

The historical evolution of the local government system in Nigeria dates back to the colonial era when it was called the colonial native authority system which existed between 1920’s and 1930’s (Orewa and Adewumi 1983). In their form, they represented a system of indirect rule whose aim was to establish a system of local authorities through traditional authorities. The main task of local government in this era was maintenance of law and order at grass root level. Also the issue of revenue generation in the local government system has been in existence since in this traditional system of local government. In pre-colonial Nigeria the Chiefs, Obas and Emirs were responsible for revenue generation. This they usually did through levies and taxes, which they used in managing their communities. During the colonial era the British especially in the North introduced a system of indirect rule in which direct taxes were introduced in various local communities for running their affairs. By 1933, the powers of the local authorities were extended to cover expanded functions due to reliable performances. After the independence in 1960, local governments acquired more responsibilities that were assigned to them by the constitution. For instance, section 6 of the 1979

Constitutions of Nigeria provides that:

The functions to be conferred by law upon local government council shall include those spelt out in

fourth schedule to this constitution 

 Also the constitution made provision for substantial funds to local councils. This is because there is no doubt that sound financial base is a prerequisite for effective performance of the roles assigned to local government. For instance, section 7(6) of the 1999 Constitution makes provision for the funding of local government as follows;

a)         The National Assembly shall make provision for statutory allocation of public revenue to local government councils in the federation; and

b)        The House of Assembly of a state shall make provisions for statutory allocation of public revenue to local government councils within the

state.

More specifically, provision was made under the Revenue Allocation Act of 1981 for statutory allocation of 10 percent of national revenue to local government, became operational in 1989 and 20 percent in 1992. (Idike 1995:1). In addition, state governments were required to contribute 10 percent if their internally generated revenue to local government (Dasuki Report, 1985). 

Under this fiscal arrangement, local government depended mainly on State and Federal Governments for revenue and grants. This source of revenue is in some cases unreliable and unstable. This is due to the fact that most state government have failed to release 10 percent of their internally generated revenue to their local governments. In addition, some State Governments interfere with the statutory allocations to local governments.