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CRITICAL ANALYSIS OF REVENUE AND EXPENDITURE OF LOCAL GOVERNMENT ADMINISTRATION IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Local government is the third tier of government in Nigeria. The Local government system was entrenched in the 1979 constitution via part 11, section 7, sub section (1)………5. However, the origin of local government administration in Nigeria was empowered through the 1976 local government reform. When president Olusegun Obasanjo was the then Military Head of state, which terminated in 1979. this is to say that 1979 and 19989 Federal Republic of Nigeria constitution recognized the local government as the third tier of government and its function and role written in black and white. In the current dispensation of the 5th republic, which is less than 3 months now, the president Chief Olusegun Obasanjo has not been pleased with the way and manner in which the local governments were administered and consequently alleged financial reckless amongst local government chairmen. This gave rise to a 28n men technical committee to determine the tenor and texture of local government reform. This committee has been inaugurated by president Obasanjo and has the ETSU at NUPE, Achaji Umane Ndayoko as its head / chairmen, its terms of reference include the following.

1. To review the performance of local councils within the last four years and consider the desirability or otherwise of retaining them as the third tier of government. In that regard consider, among other optims the adoption of a modified version of pre 1976 local government systems of Nigeria.

2. To examine the problems of inefficiency and high cost of government with a view to reducing costs and wastages in the three tiers of governments.

3. Examine the high cost of electioneering campaign in the country and consider among other options, the desirability of whether political parties, rather than individuals office seekers should canvass for votes in elections.

4. Consider any other matters, which in the opinion of technical committee  are germane to the goal of efficient structure of governance in Nigeria. 

In anticipation of the technical committee to determine the tenor and texture of reform of the councils, the People’s Democratic Party (PDP) cancus suspended indefinitely the June 12, 2003, Local Council election pending the outcome of the 28-man Technical Committee inaugurated in June 2003 to be headed by the ETSU of NUPE. Alahji umaru Ndayoko. This is to say that up till date the 5th republic government has taken off without the democratic elected local government chairman. But rather, an appointed caretaker committee by the state government administration pending the conduct of such election. Other reasons deduced by the government over the indefinite suspension of the local poll was to have time to harmonize about 500 newly created councils since 1999, so that the National assembly shall make provisions for allocation of revenue to the councils as prescribed by section 7(6) of the constitution. However, this project emphasis on “critical analysis of revenue and expenditure pattern of Local government administration ( a case study of Mbanabo North local government from 2000 –2004.  Within the period under review (2000-2004) president Obasanjo has not really believed so much on the integrity, transparency and accountability of the local government administration in Nigeria especially during his regime as the 4th republican president from May 29, 1999 – May 29, 2004. the president has in so many causes alleged mismanagement of resources and unjustifiable expenditure by the third tier of government which most often gave rise to zero allocation. This implies that the intently generated revenue (IGR) of the third tier of government has been grossly inadequate to enable the council perform its statutory role efficiently.

1.2  STATEMENT OF PROBLEM

Despite the importance of revenue to government and any other structural organization it appears as the life of any government administration in Nigeria. The same formal systemic and constitutional sources formal systematic and constitutional sources of revenue are accorded to each local government in Nigeria subject to contain variations in their respective areas of jurisdiction. However, the  local government through the constitution has been mandated to explore certain areas (within its juridction) economically to arrangement the federal allocation. The research problem is to highlight the inefficiencies and loopholes associated with revenue and expenditure pattern. In addition financial irregularities and other economic crimes are said to be out of the set back of local government administration in Nigeria.  

1.3  OBJECTIVE OF THE STUDY

The purpose of the study is to reasonably ascertain the following. 

 To evaluate the revenue and expenditure pattern of local government administration in Nigeria.

 To carry out a comparative study of such pattern and to see if there is any variance amongst other local government.

 To determine how effective is the financial control of the local government and to know the state of its internal control measures.

 To determine and explore other avenues of internally generated revenue (IGR) and to ascertain how often do they receive statutory allocation.

 To identify other areas of assistance in which help is needed and to know if the finance and account records are kept properly.

1.4  RESEARCH QUESTIONS

In the course of carrying out the research the following research questions were formulated.

1. What is the relevance of revenue and expenditure to local government in Nigeria.

2. What are the implications of this revenue to the administration of local government. 

3. To what extent is the derivation principle been applied to revenue and expenditure pattern of local government.

4. How can constitutional provision create problem in the application of revenue sharing formula to local government administration.

5. How can Nigeria evolve an appropriate revenue and expenditure pattern of local government.

In the course of developing this research work the following hypothesis have been formulated.

1.5  RESEARCH HYPOTHESIS

1. Ho: There is relationship between revenue and expenditure pattern in local government administration.

Hi:There is no relationship between revenue and expenditure pattern in local government administration.

2. Ho: The survival of local government is in doubt without the 

assistance of federal government.

Ho: The survival of local government is not in doubt without the assistance of federal government.

3. HYPOTHESIS 111

Ho: There is a relationship between internal control and efficient management of resources / funds.

Hi: There is no relationship between internal control and efficient management of resources / funds.

4. HYPOTHESIS IV

Ho:Budgetary instrument is very vital in local government.

Hi:Budgetary instrument is not very vital in local government.

1.6  SIGNIFICANCE OF THE STUDY

The significance of this study is numerous and very  important both to government corporate bodies and individuals as this.

1. This study will reveal the importance and significance of local government as the third tier of government.

2. It will show the variable revenue and expenditure pattern and possible areas of expanding the scope and operation of local government.

3. it will asses the internal control measures and determine how effective is the financial control in the public sector.

4. this study will explore other economic and viable avenues of internal generated revenue (IGR) so as to rely less in the federation allocation.

5. The study will also highlight the importance of budget and the benefit associated with adherence of the financial strategy of the local government operation effectively.

6. Students of higher institutions especially the area of finance and management agencies will find this study as an additional data bank and reference materials.

1.7  SCOPE AND LIMITATION

This project intend to critically analyses the revenue and expenditure pattern of local government (a case study of Mbanabo North Local Government Area. In pursuance of this venture, some selected local government were visited within the Enugu Metropolis. Below were some of the constraint encountered.

1. RESPONDENTS ATTITUDE

It was very few respondents that gave me audience in this regard. Most of the staff approached were not co operative in giving their view as required by the structured questionnaire. Perhaps, the current clamor by president Obasanjo to restructure/scrap the local government compounded the case of free and unbiased response.

2. TIME:The time allocated to this project was inadequate which many institutions were on strike and the possibility of using their libraries were not available.

3. FINANCE:There is no doubt that finance was a major constraint. Presently the like in petroleum products gave rise to increase of transportation fare and photocopying of relevant materials. 

1.8  DEFINITION OF TERMS

Below are some of the itemized definition of terms which will aid the user to apprehend some terminologies without ambiguity some terminologies without ambiguity or being biased in line with the context of this research topic.

Audit alarm committee:This means a committee set up under a section of the law to prevent irregular and illegal payments in the local government 

Federation Accounts:This is the accounts into which is to be paid all revenue collected by the government of the federation except the proceeds of the personal income tax in respect of residents of the federal capital territory (FCT).

Internal auditor:This refers to an officer of the local government charged with the responsibility of conducting internal audit of the management of the finance of a local government.

Revenue collectors:This means any person duly authorized to collect revenue of other monies payable to the local government.

Non – statutory allocation:Non- statutory allocations are allocation not supported by legislation like grants.

Local government: Refers to a local government establishment under a section of the law or constitution of the country

Treasure:This means the head of local government finance and supplies department.

Vote:A vote is the limit of authorized expenditure  expressed in monetary terms.

Revenue earning book:This is the only means  by which a local government officially acknowledges the receipt of monies paid to it and the expression include carbon receipt books, metal and plastic, dishes and license forms.

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