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CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Internally Generated Revenue (IGR) is the revenue that the local government generates within the area of its
jurisdiction. The primary source of local government sustenance is from Federal Allocation. It is the livewire of
a local government. The extent to which a local government can go in accomplishing its goal will largely depend
on its IGR strength. The capacity of local government to generate revenue internally is one very crucial
consideration for the creation of a local council. But various studies as Akindele and Obiyan,(2002), Ekpo and
Ndebbio(1998), have shown that local governments in Nigeria depend solely on statutory allocations from the
federal government. In recent times though, there have been dwindling pattern in the federal allocation because
most of the federal government revenue is from petroleum proceeds. There is less demand for petroleum in the
world as other developed nations of the world are shifting away from petroleum as source of energy to other
sources such as gas, solar energy e.t.c. Then the onus lies on the local government to work on their internal
revenue efforts to be able to accomplish its goals in the local community. Local governments now face more
challenges in terms of struggling to be less dependent on the Federal and the state governments for financial
resources. Though, the revenue allocation system mandates that a certain fraction of the Federation Account be
allocated to local governments, these funds are not enough to meet expenditure requirements. This is because the
size of the account is related to revenue from oil which is subject to fluctuations and the expenditures of local
government far exceed available resources. The problem of lack of fiscal transparency as a result of
mismanagement of funds, corruption, poor internal control and lackadaisical attitude to government work and
property still abounds. The question that comes to mind is that if the statutory allocation is not forthcoming, if
oil is de-emphasized in the economy what would be the lot of local governments? How are they to survive if this
should occur?
Orewa (1986:180), in his book titled “Local Government Finance in Nigeria”, described and discussed various
sources of revenue open to local governments and problems in the collection and management of their finance.
Such problems are-shortage of trained manpower, ignorance of the councilors over their duties and noncommitment
to duty on the part of the staff and councilors alike. Adediji (1979:87) , blames poor internal
revenue generation of local government on the following reasons
a. Lack of proper structure
b. Low quality of staff and
c. Lack of mission and comprehensive functional role. According to him, these problems lead the local
government into vicious circle of poverty. This is due to the fact that inadequate funding results in employment
of low skilled and poorly paid staff. Bello- Iman (1990:134), in the same vein states that “ the major constraint to
internal revenue generation in local government is the shortage of well trained and qualified personnel which
supposed to serve as tool for collection of taxes and rates at the local level”. According to him, even the few
available are not properly trained in efficient budgetary and financial Management systems. Also most of the local governments are short-staffed to carry out their duties”. R.A (1959:89), noted that “poor auditing has
contributed immensely to problem of internal revenue generation of local governments”. According to him,
“local governments should have a means of ascertaining whether it’s financial operation is properly conducted,
this can only be done through audit”. Therefore the research seeks to investigate the impediment of revenue
generation in Eket local government.
1.2 Statement of the Problem
The local government is the third tier of government which largely depend on the federal and state government
for subventions and allocations for the administration and development of the local communities. However it is
expected that local government generate internal revenue to augment the revenue received from the state and
federal government especially in the face of the dwindling and lean federal and state government revenue. For
there to be a local government, it must be ready and be seen to be able to meet its obligations through internal
sources. However this is far from what is obtained in practice hence the gross dependence on statutory
allocations from the federation account. Then the onus lies on the local government to work on their internal
revenue. Adediji (1979:87), blames poor internal revenue generation of local government on the following
reasons; Lack of proper structure; Low quality of staff and Lack of mission and comprehensive functional role.
According to him, these problems lead the local government into vicious circle of poverty. This is due to the fact
that inadequate funding results in employment of low skilled and poorly paid staff. Therefore the problem
confronting this research is to investigate the impediment of revenue generation in Eket local government.
1.3 Objective of the Study
1 To determine the nature of Revenue generation in local government Areas
2 To determine the impediments to Revenue generation in the local government areas
3 To determine the impediments of Revenue generation in Eket local government Area
1.4 Research Questions
1 What is the nature of Revenue generation in the local Government Area?
2 What is the nature of impediments of Revenue generation in the local Government Area?
3 What is the nature of the impediments of Revenue Generation in Eket local government Area?
1.5 Significance of the Study
The study shall proffer a structural appraisal of the nature of Revenue generation in the local government Area.
It shall analyze the nature of the impediment of Revenue generation in the local government Area
The study shall provide significant information on issues of Revenue generation and its impediments in the local
government Area.
1.6 Statement of Hypothesis
1 Ho Revenue generation in Eket is low
Hi Revenue generation in Eket is high
2 Ho The impediments to revenue generation in Eket is low
Hi The impediments to Revenue generation in Eket is high
3 Ho The effect of the impediments on revenue in Eket is low
Hi The effect of the impediment on revenue in Eket is high
1.7 Scope of the Study
The study is focused on the appraisal of the impediment of revenue generation in Eket local government.
1.8 Definition of Terms
INTERNAL GENERATED REVENUE.
Internally Generated Revenue (IGR) is the revenue that the local government generates within the area of its
jurisdiction. The primary source of local government sustenance is from Federal Allocation. It is the live wire of a local government. The extent to which a local government can go in accomplishing its goal will largely depend
on its IGR strength. The capacity of local government to generate revenue internally is one very crucial
consideration for the creation of a local council.
FINANCIAL AUTONOMY DEFINED
Financial Autonomy is literally defined as to be self-governing in matters of money. It is a right or the power to
engage in certain actions without externally imposed restraints and interference.
REVENUE GENERATION
Revenue generation entails generating and exploring all the sources of revenue for the local councils. Internally
revenue generating sources as we have mentioned earlier are those sources by which the local government raise
revenue constitutionally aside from the statutory allocation and government grants to local governments. The
extent to which these revenue sources can yield to the benefit of the local government council depends on the
ability and vibrancy of the local government leadership
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