INTRODUCTION

1.1   BACKGROUND OF THE STUDY

The federal government of Nigeria creates the local government, which is the third tier of government. The purpose of its creation is for grass root development. The local government is a growing organization whose raison is to provide socio-economic service to, and to contribute to raising the living standard of its people. It is able to achieve these objectives by making good of her existing financial resources. The local government is ought to be primarily involved in the construction and maintenance of trunk roads, plants, and equipments, buildings and other assets. Beyond this, the people of the area normally have expectations of improved service and facilities from the local government. These include tarmac surface roads and concrete drains and bridges incase of earth roads and drains and wooden bridges modern gas fired incinerators instead of the refuse being dumped in barrow pits, concrete structures and asbestos – roofed classrooms to replace dilapidated mud wall buildings.

The local government may also invest in viable projects to earn traditional revenue and provide employments opportunities for the people for these and other purposes; the local government need money as well as annual capital budget to plan and programmed the funding the capital projects and other obligations. According to Adedesi and Row Lang (2010) financial had always been the problem of the local governments in Nigeria. This was more significant when the local government system with compete and self-contained budget that would be effective and effectual. The local government became autonomous body of administration. To attain to objective, the local government assumed the responsibility of generating revenue and utilizing them in solving problems with in its jurisdiction with little assistance from the federal and state governments in forms of grants and allocations. At this point, means of sourcing of revenue and precision in its utilization became a problem in precision in its local governments.

Gboyegar Alex (2013) defined finance as the art of providing the means of payment as a body of facts, principles and theories dealing with the raising and of funds by individual business and the government. Power from both the federal and local governments to source for finance both within and without. The resources of any local governments as well as its administrators to determine its revenue sources and utilization. At this juncture, I will like to say that it is important to restructure and streamline all these activities of revenue effective development.

1.2   STATEMENT OF THE PROBLEM

The proper utilization of local government finance in Nigeria is sometimes not achieved. Any local government around can be used as a typical example; the aim for the creation of local government is to bring government to the grass root, precisely, rural development e.g. maintenance of local roads, market squares, provision of health centers, etc. all these are now neglected by local government authority due to improper utilization of fund. On the other hand, the sources through which these funds are raised are not granted. The federal allocation and state allocation to local government are sometimes not fully given to them because of the level of corruption in Nigeria. These have been a great problem to the local government executives in discharging of their duties.

 1.3   OBJECTIVE OF THE STUDY

The objective of this study is:

i) To analyze the sources and utilization of local government revenue in Nigeria.

ii) To understand the factors that affects the financial health of the local government.           

iii) To under take scientific analysis of the extent of utilization of local government revenue.

1.4   SIGNIFICANCE OF THE STUDY

The study is significant in that of a careful appraised with an intact to reveal all sources and utilization of the third tier of government in Nigeria. How exactly it earns its own revenue, despite the fact that it is last tier of government and how effectively it utilized this finance. The study will be of immense benefit to scholars in the field of banking and financial managers of the local government and students in both secondary and tertiary institution.