Problems of revenue generation in local government areas in Nigeria (2)

The sources of revenue to local governments in Nigeria are derived from two sources which are External and Internal sources according to Olaoye et al (2009;24).

External Sources

This include: 1. The Statutory monthly allocation from the federation purse in line with the 1999 constitution of the Federal Republic Nigeria section 162(3). 2. Allocation from the State government to the local governments in its state. 3. Grants –in-aid from the Federal. 4. Grants –in- aid from the State government. 5. Borrowing from financial firms and State Government and 5. Value added tax (VAT) share.

Internal Sources

Local Government councils can generate income internally through various services to the public. According to their statutory functions derived from the 1999 Constitution of the Federal Republic of Nigeria and others which are (a) Motor park levies (b) Customary burial permit charge (c) Domestic and license fees (d) rents, fees on private institutions, (e) fees realized from tourist centers organized by the local Government, (f) refuse disposal and public toilet fees, (g) Parking fee, (h) Radio and TV license, (i) Vehicle license, (j) Signage and Advert permit fees, (k) road closure levy, (l) cattle tax paid by farmer only, (m) right of occupancy fee, (n) street naming registration fee, (o) birth, death and marriage fees, (p) slaughter slab fees, (q) liquor license fees, (r) shop/kiosks lockup fees, (s) tenement rates, (t) local government business investment, (u) permits and fines charged by customary courts, (v) Market levies etc.

Aside from the mentioned above sources, other could be in form of donation from philanthropist or individuals, with a view to supporting the Local Councils to carry out some specific project. Though, it is not an exaggeration to say that of all the statutorily revenue sources allocated to the grassroots governments, the combination of rates, fines and fees, licenses and accruals from commercial dealings accounted for about 75% of the Local Government internally generated income (Ola & Tonwe, 2005;122).

It is pertinent to examine the obstacles of revenue generation in our local governments having established the vital avenues open for revenue generation by the grassroots governments.

Problems of Income Generation in Local Government Councils in Nigeria

Some of the challenges are highlighted as follows:

A.State Joint Local Government Account (SJLGA):  The Nigeria constitution has it that funds from the federation account for both state and local councils should be maintained in a single account by the State Government. In most cases, the State Governments make several deduction from the fund that is due to the local councils like income tax (upfront) by local government employees (payee), funding of local projects before remitting the remnant to the local governments.

B.Corruption at the Local Level: Misappropriation of revenue by council officials has also resulted in widespread refusal by communities to pay taxes. There have been reported matters of revenue collectors not remitting collected revenue into the purse of the local councils, thus discouraging the tax payers from performing their civic functions seriously. Therefore, tax evasion becomes the order of the day. The lack of seriousness and fraudulent act of some revenue collectors has contributed majorly to this phenomenon. Revenue staff of councils under collects rates and levies after being tipped by the payers and surprisingly some possesses and issue their own payment receipt, hence depriving the local councils of the much needed funds. Leakages in fund allocation are another major factor to this.

C.Diversion of council funds by the Executive Chairman of the councils is another key problem. The officers deposited local government’s funds into private account and some finance houses with no existing account for the councils. This is carried out in order to collecting the accruable interest on such funds at maturity.

Conclusion

This research has recognized and evaluates various sources of income generation as well as the problems of revenue generation to Local Governments in Nigeria. It discovered that local governments in the country are confronted with numerous problems which include corruption, none remittance of fund by the state Governments amongst others. It is clear that corruption is the main issue in the developmental study of the third tier of governments in Nigeria. The internally generated revenue of the local councils can only be on the high if officials of the councils are sincere, committed to discharging their duties. But most times, the workers of the councils engage in shady deals either by misappropriation of funds or under disclosure.

Recommendation

This study has recommended the followings in order to eliminate the challenges and problems of income revenue generation in the local government councils in Nigeria.

1.The use of contractor, as revenue collectors for local governments should be abolished.

2.Local governments should live up to expectation by providing basic amenities to the community thereby indigenes will be encouraged to pay their taxes and levies.

3.Adequate legislation on revenue rate is very essential. Therefore, the local government should ensure that a proper up –to date legislation is made on the tariffs to discourage the use of discretion by revenue collectors in determining rates and levies.

4.Council officials should be used as revenue collectors. Well trained staff should be employed by the local governments to complement the efforts of the various revenue units of local councils

5.Council officials should be inspected on regular intervals by a special independent monitoring team and any erring staff should be dealt with according to the law.

6.Local government service employment should be conducted professionally.

Olanrewaju Usman