An Assessment of Local Government Financing in Nigeria (A case study of Karu Local Government Area, Nasarawa State)

An Assessment of Local Government Financing in Nigeria

(A case study of Karu Local Government Area, Nasarawa State)

CHAPTER ONE

INTRODUCTION

1. Background to the Study

Local government is recognized by the 1999 constitution of the Federal Republic of Nigeria as the third tier of government within the tripartite federal structure of governance in Nigeria, with the state and federal government as the super ordinate government. The government in Nigeria which exists at tripartite arrangement (federal, state and local government) plays complimentary roles to each other to meet the needs of the people which include infrastructural facilities (Okpata 2004).

Local government is seen as a public sector organization, the third tier government with assigned functions and responsibilities, administrative structure and financial management both for maintaining itself and rendering it’s statutory assigned functions to it’s citizens (Uguru 2011). Local government authorities as a third tier of government in Nigeria are very important in the execution of both central and component government policies and programmes. It is the nearest government that deals with the problems of the masses of the country, especially the grassroots.

Finance is the fuel of any form of administration, either private or public. At the local government level, it constitutes the lubricants for the wheel of good administration. According to Hassan (2011), finance is a thread that runs round the cloth, if the thread is pulled wrongly at one end, it will affect the design of the cloth and destroy its beauty. Therefore, finance in any organization must be handled with care and must be disbursed according to laid down rules and regulations. A sound financial administration is the core of good efficient, effectives and equity which are the guiding principles of financial management.

Fajobi (2010) argued that the acute dearth of fund currently facing the local government could besquarely attributed to lack of creativity on the part of the local government in seeking alternative sources tocomplement the allocation from the Federation Account. Most local governments are suffering from hang-overof overdependence on the centre assistance, a norm during the military governance. They are yet to break awayfrom the practice of relying almost entirely on hand-out from the Federal Government. The federal government,in turn also depended entirely on revenue from oil and its apportionment of the lion’s share of the FederationAccount to itself. Local government will continue to be one of the prime institutional movers of development inNigeria and their importance and impact on the daily life of citizens cannot be over-emphasized. People areintimately affected by the activities of local government on a day-to-day basis and Nigeria, in particular, localgovernments, have historically provided services of importance to citizens, literally from cradle to grave. Thestandard of living of Nigerians either in rural or urban areas are inevitably affected by local governmentactivities through the provision or non provision of basic services such as water supply, roads, health andeducational services etc. Local governments also remain the focal point of promotion of development andcultural revival through community development projects and mobilization of human and material resources fordevelopments.

In view of the above, finance has remained the most critical policy issue in the local government administration in Nigeria. None of the local government councils in the polity can as a matter of fact survive without a sound financial base. Owing therefore to the development responsibilities place on local governments,there is need for adequate financing of this tier of government. As Adamolekun (1983) had noted, a dominant theme in intergovernmental relation studies is the different attempt made to administer federal finance to the satisfaction of each level of government. Danjuma (1994) also noted that the existence of a federal system withits accompany political units necessitate a revenue sharing arrangement to enable its units to carry out its constitutionally assigned responsibilities.Therefore,this study seek to carryout an assessment of local government financing in Nigeria with particular reference to Karu Local Government Area of Nasarawa State.

1. Statement of the problem

The 1976 local government reform gave prominenceto local government making it possible for them to have legal entities which in turn entitled them to performcertain functions that have since been contained in the 1979, 1989 and 1999 Federal Republic of Nigeriaconstitution. Among the problemsfaced by local government in Nigeria, it is quite clear that the most recurrent ones are finance and sizeablemismatch between their statutory functions and responsibilities; the flow of financial resources available to them;and constraining limits of their tax-raising powers or fiscal jurisdictions.There is no gainsaying the fact that in Nigeria, the degree of decentralization of expenditure is higherthan the degree of decentralization of revenue thereby causing a great divergence between sources of revenueand functional expenditure in the local government hence creating an imbalance between income and expenditure. This study is therefore; set to assess local government financing in Nigeria.

1.3       Objectives of the Study

The broad objective of this study is to assess local government financing in Nigeria –  A case study of Karu Local Government Area of Nasarawa State. Hence; the following specific objectives will be actualized:

1. To identify the source of financein Karu local government.
2. To ascertain the various challenges surrounding revenue generation for development.
3. To evaluate the impact of financing on the development of Karu Local Government Area of Nasarawa State.

1.4       Research Questions

In line with the objectives of the study, the following research questions will pilot the study:

1. What are the various source of finance in Karu local government?
2. What are the challenges of revenue generation for development in Karu Local Government of Nasarawa State?
3. What are the impact of financing on the development of Karu Local Government Area of NasarawaState.

1.5       Significance of the Study

The primary importance of this study is that it assess local government financing in Nigeria with particular references to Karu Local government of Nasarawa State. This will in essence be of great significance to local government administrators, students of public administration and other related departments, other researchers, the state and federal government as strategy can be replicated.

1.6       Scope of the Study

The focus of this study is to assess local government financing in Nigeria but limited to Karu Local Government Area of Nasarawa State.

1.7       Operational Definition of Terms

Local Government: This is defined as Government at the local level exercised through representative council established by law to exercise specific powers within defined areas.

Finance: In the context of this study, is defined as the fund required by the government to perform its functions.

Strategy: In this study, this is defined as a systematic proposed way to achieve a particular aim or objective.

Development: This is defined as the multidimensional expansion in the economic, political and behavioral attitudes of a particular community, state or country.

Internally Generated Revenue: This refers to the revenue or money collected by the local government from its internal sources (within the Local Government Area). The internal sources of revenue comprise many major and miscellaneous items aggregated to provide the required fund for financing the enormous functions ascribed to local government as third tier of government.