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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Finance is the sinews of wars for all functional organizations in any economic. It is a critical prerequisite which
enables an enterprise, public or private to maintain itself and effectively meet its commitment to individuals and
groups who consume its output of goods and services.
Lagos state ministry of finance is a public sector organization with assigned functions and responsibilities administrative
structure and financial arrangement for maintaining both itself and rendering its statutorily
assigned functions to us citizens. In view of this, the genetic centrality of finance to organizational performances
also applies to public sector.
In Nigeria, the operating 1999 constitution of the Federal Republic accepted local government as a third tier of
government. Like in most countries of the world, the Nigeria public sectors have five easily discernible sources
of revenue open to them. Those are grants, local tax, rates or property tax, user fees and charges and loans. The
prevailing federal government revenue allocation formula stipulates that public sector is entitled to twenty
percent of the revenue accruable to the federal and ten percent of the internally generated revenue of the state
government and of course these are in addition to finance from traditional internal sources of local revenue.
However, the amount internally generated by each of the public sectors is very small.
The ministry of finance is therefore in a situation where they depend almost entirely on the Federal and State
Government for funds for the performance of their statutory functions. Consequently, the federal and state
government have often remained paternal in the financing of this level of government. A function of this
paternalism is the financial uncertainly in the country. Therefore one is not surprised that the little wonder
Nigerian public sector have seasonally suffered pecuniary distress which taxes their operations. The peculiar
circumstance of the creation and existence of public sector coupled with the unpredictability of its political and administrative environment in Nigeria largely account for the appeal of the topic: the role of financial control in
the public sector.
The result of this appeal has been the sustained effort in seeking strategies for evolving stable financial
arrangement for the success of public sector in meeting its dual commitment of maintaining itself and rendering
services of the people.
This part also informs the present study. However, it is clear from the prevailing literature that most of the
findings are not up-to-date hence some of the beliefs and attitudes of scholars to the identified problems of
public sector finance are not supported by both adequate and current data.
In view of the laps that has been identified, another enquiry into ministry finance in Nigeria as become most
imperative. It is hoped that such inquiry will be more intellectually simulative in the area of public sector finance
especially as it highlights the financial policy for public sector in the country in particular and the world at large.
1.2 STATEMENT OF THE PROBLEM
Despite the various efforts and initiatives taken by past governments in ensuring financial emancipation of
ministry of finance and to ensure its smooth functioning, this third tier government is still faced with mirage
problems. Some of them are as follows:
1. Lack of financial autonomy for the public sectors, which hampers the effectiveness of the ministry of
finance.
2. Unstable financial arrangement for the success of public sector.
3. The menace of corruption and mismanagement is still a major concern.
4. The inability of most ministry of finance to improve on their internally generated revenue to complement
the statutory allocation.
5. The gap between income and expenditure vis-à-vis the expenditure pattern of most ministry of finance.
1.3 OBJECTIVES OF THE STUDY
The objectives of the study include the followings:
(i) To examine the existing financial control arrangement relevant to the Nigerian public sectors with
special reference to sources of income.
(ii) To examine the inter–governmental relationship existing between Nigeria’s three levels of government
and by extension ascertain the constraints on the financial autonomy of public sectors.
(iii) To attempt to appraise the existing and potential source of income for public sector.
(iv) To explore citizens for residents attitudes to public sector finances with a view to explaining whether or
not they are ready to pay rates, users fees charges and taxes and possibly find out their perception of local
services in general.
(v) To examine prospects for Nigeria public sector in the light of the finding and logically recommend ways
for effective financial management for public sector throughout the country
1.4 RESEARCH QUESTIONS
Towards attaining the given objectives of this study, a number of pertinent and specific questions were asked.
Some of the questions are:
(i) What are the existing source of revenue of public sector and to what external is their statutory functions
commensurate with the financial implications of their statutory functions.
(ii) What implication has the inter-governmental constitutional relationship between Nigeria’s three levels
of government for public sector.
(iii) What are the factors hindering the improvement of the financial base of public sector.
(iv) Are the people unwilling to pay their taxes while they expect and demand good services.
(v) What other potential revenue sources abound which public sector could tap to improve their efficiency
and effectiveness.
1.5 STATEMENT OF HYPOTHESIS
In order to achieve the objectives of this study, the following hypothesis will be tested.
(1)Ho: Inadequate financial control will not affect the performance of public sector.
HA: Inadequate financial control will affect the performance of public sector
(2)Ho: Financial autonomy will not improve the administration of public sector.
HA: Financial autonomy will not improve the administration of public sector.
(3)Ho: Increasing the internal generated revenue base on public sectors will not stimulate growth.
HA: Increasing the internal generated revenue base on public sectors will stimulate growth.
1.6 SIGNIFICANCE OF THE STUDY
This study is very essential to various classes of people in the area of business. the study will go a long way in
helping both the existing and potential entrepreneurs and management of business organization and public sector
organization towards the undertaking and the knowledge of the uses of the financial control for the expansion of
their businesses and opportunity to the creditors financials and suppliers, to study the usage of the financial
statements in estimating the risk of entering into bad debts in their transactions.
1.7 SCOPE AND LIMITATION OF THE STUDY
This study will focus on the activities of Lagos State ministry of finance (Alausa).
It will examine the financial capacity and capability of the public sector to finance its expenses vis-à-vis its
revenue and various problems.
Difficulties in getting relevant information and materials are the major factors that tend to limit the success of
this research. However, lack of time and financial resources are also major bones of contentions.
1.8 METHOD OF DATA COLLECTION
This research work will make use of PRIMARY DATA that will be the source from the staff of Lagos State
Ministry of Finance, Alausa, through the use of questionnaire and personal interview, (when necessary) for case
of work, the RANDOM PROBABILITY SAMPLING method was adopted, this is to ensure information is
gathered from all the level of workers. Also, varieties of scholarly investigations of subject matter will be
exploited.
1.9 METHOD OF DATA ANALYSIS
The method of data analysis and interpretation would be based on analysis of variance and tabulation will be
used, this is to ensure that proper analysis at various variables are examined as exemplified in the hypothesis. It
also ensure that every problem units of analysis of the research work has equal chance of being dually
represented by the analysis. Pilot study will be conducted to pre —test the study schedule.
The Chi-square test is given by the formular.
X
2
= ∑(O-E)2
E
Definition of variables
X
2
= Chi - square sign
∑ = Summation sign
E = Expected frequency
0 = Observation frequency
1.10 DEFINITION OF TERMS
Financial Control: It refers to facts that show whether or not the business has the right to control the economic
aspects of the worker’s job.
Public Sector: Is the state sector, is a part of the state that deals with either the production, delivery and
allocation of goods and services by and for the government or its citizens, whether national, regional or
local/municipal
Finance: Is often defined simply as the management of money or “funds” management.
1.11 HISTORICAL BACKGROUND OF THE CASE STUDY
The Ministry of Finance is a unique agency that provides the financial backbone that helps government translate
its vision of providing the dividends of democracy to the teeming population of Lagos State.
Designated the ministry of Finance and Economic Development at inception in April 1968, the Ministry had
Aihaji Chief I. A. S. Adewale as its pioneer Commissioner.
Late in 1995, the Economic Development was separated from Ministry of Finance and merged with Budget to
become the Ministry of Economic Planning and Budget while Ministry of Finance stands on its own.
The Finance Ministry then was structured into six Directorates consisting of the three common services
personnel Management, Planning, Research and Statistics as well as Finance and Supplies and three other
professional Directorates Public Finance, Computer Services and Central Internal Audit.
At inception, the Ministry operated through three (3) Agencies: Finance Headquarters, the State Treasury Office,
and the Board of Internal Revenue. However, the Board of Internal Revenue, which is saddled with the
responsibility of collecting tax-related Internally Generated Revenue (IGR) for the State Government, was
upgraded and became semi autonomous in Year 2006 to enhance revenue generation, transparency and
accountability.
Also, the PF/DMO, hitherto a Department in the Ministry was equally elevated to an Agency status in 2005 with
a Permanent Secretary as head. This autonomy has however not diminished the performance of the
responsibilities of the Ministry of Finance.
The Finance Headquarters is one of the arms of the Ministry of Finance and is headed by a Permanent Secretary.
The Headquarters serves as the coordinating arm of the Ministry. It currently has staff strength of 112 Officers.
The Office is also the pool house of all Internal Auditors; who are deployed to other Government Ministries,
Departments and Offices in the State. There are 154 Internal Auditors working in different Government
Agencies in the State who ensure compliance with laid down financial guidelines and early detection of financial
malpractices.
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