This study is on the impact of local government revenue on service delivery. The study determined the general level of revenue generation in the two Local Government Areas under study by examining the two major sources (internal and external) of revenue available to local government in Nigeria. It also examined the relationship between revenue generation and service delivery. The study used survey research method where data was generated through both primary and secondary source. The primary data was collected through the use of questionnaire in soliciting information from the respondents about the management of revenue generated and services delivered. The secondary data was collected through the two local government annual estimates, treasurer’s reports, etc. Pearson chi-square was used for data analysis to show the relationship between effective management of local government revenue and level of service delivery in the local governments. Pearson Correlation was also used to measure the relationship between the amount of revenue generated and service delivery in the two local governments. However, it was found that effective management of local government revenue positively impacted on the efforts of local government in promoting development. And there is a positive correlation between the amount of revenue generated and the level of services delivered. This means that the ability of local governments to provide effective services to people depends on its ability to generate revenue from its internal and external sources. This is achievable through proper collection and remittance of revenue by revenue collectors and financial discipline in budgeting processes. In line with the findings of the study it was recommended that more revenue sources should be identified and adopted in order to increase and improve the revenue base of the local governments. Property and tenement rate as potential sources of local government revenue should also be tapped fully to improve the revenue base of the local governments.
Local government finance is one of the aspects of public finance. It deals with the generation of revenue, expenditure and utilization of financial resources in order to bring the impact of government closer to the people at the grassroots. Put differently, finance is essential at enabling local governments transform the lives of the rural dwellers through the provision of social services and rural infrastructures like the construction and maintenance of rural roads, markets, schools, health centers, etc.
Finance is the heart of the major activities of government. Government units at all levels-national, State and Local are daily engaged in the production and distribution of public goods and services in areas such as agricultural extension, education, healthcare, social welfare, security, all of which involve huge amounts of money. The mobilization of the financial resources or revenue to meet the diverse welfare needs of the people has in effect become an important responsibility which governmental authorities have to shoulder. This responsibility not only includes the generation of revenue but also its allocation among competing needs of the local governments. It is within this context that we can appreciate the task of revenue collection at local government level (Abubakar, 1999).
Generally speaking, revenue accruing to any tier of government may be classified as recurrent or capital. While the former is generated on day-to-day basis throughout the year, the latter arises once in a while and in a larger proportion. They are also described as internal and external sources of revenue respectively. Barber (1978) remarked that the principal sources of local government revenue are local rates, federal government grants and trading receipts. The 1976 Local Government Reforms (in Nigeria) recognized the fact that if meaningful local government is to be expected in Nigeria, much larger financial resources are needed. 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 Governments as third tier of Government, Orewa and Adewumi (1983) stated that one of the main reasons why a local council exists is to collect various forms of revenues from its citizens and to use these to provide social services in an efficient manner as possible. These sources are summarized into the following revenue heads: Tenement rate/property rating, local license, fines and fees, earnings from commercial undertakings and rent on property, interest payment, and dividends and miscellaneous (Orewa and Adewumi,1983).
According to Abubakar (1999) Local Government units today are assigned a wide ranging number of functions and of reaching responsibilities for which they are statutorily empowered to raise revenue from local sources to supplement their allocations from the Federation Account and other intra-governmental sources.
A development oriented local government system is therefore expected to be a vehicle for the provision of goods and services, which are necessary prerequisites for sustained development.
In the 1976 Local Government Reforms, the Federal Republic of Nigeria articulated four basic objectives for establishing local government. These are:
i. To make appropriate services and development activities responsive to local wishes and initiatives by developing or delegating such services to local representatives bodies.
ii. To facilitate and bring the exercise of democratic self-employment close to the local level of our society and to encourage initiative and leadership potentials.
iii. To mobilize human and material resources through the involvement of members of the public in their local government, and
iv. To provide a two-way channel of communication between local communities (both state and federal) (Fajobi, 2010:3).
For local government to perform these enumerated functions, it has a history of revenue allocation in Nigeria. Prior to 1979 constitution local governments were given occasional grants for the funding of health and primary education.
Over the years, the percentage allocation of local government revenue to capital expenditure which is meant for the provision of services is very low. Specifically, 40.20% in 2006 was allocated to capital expenditure, 17.38% in 2007, 17.35% in 2008, 34.0% in 2009 and 39.28 in 2010 (CBN, 2010). This means that over 50% of the revenue received by Nigerian local government is allocated to recurrent spending at the expense of service delivery.
The report of the CBN, (2012), shows that the statutory allocation to local government accounts for 57.5%, in 2011 and 59.4% in 2012 of their total revenue. This percentage is very high compared to the Internally Generated Revenue (IGR) of 1.6% and 1.9% respectively in the same years (CBN, 2012).
1.2 Statement of the Problem
Nigeria operates a federal system of government where power is constitutionally shared between three tiers of government. Local government was created as a means of promoting development and bringing government closer to the people. Nigeria’s experience in local government administration, whether in military regimes or in democratic era has clearly shown that local governments are faced with daunting challenges in their mandate to promote development and provide essential services to the rural dwellers. Local government, which is statutorily established to be the closest tier of government to the people, is not doing its bidding coupled with the fact that resident population in the local government has no significant access to the benefits of its existence. The failure of the local governments in the area of service delivery has made the citizens to lose their trust in government as an institution. In some areas, council officials are better known for the harassment of citizens than service delivery (Ajibulu, 2011). It is common knowledge that local government has the weakest capacity to initiate and manage rural development programme. Most of the officials are performing their functions without the relevant qualification to perform effectively. As a result, the available resources for accelerated and sustainable rural development are inefficiently utilized for the purpose intended (Ocheni. et al. 2012:131).
In spite of the increase in total amount of funds available to Local Governments from early 1990s to date, their economic and financial profile have been very poor, relative to its development due perhaps to false declarations of statements of revenue by revenue collector‘s and treasury staff, political instability and lack of socio-political philosophy among others. Mope, (2015) argued that in nominal terms, the allocation which stood at N597.2 billion in 2005 jumped to N1, 379 billion in 2008, reflecting a marginal revenue increase of 130.9%. However, some challenges which served as impediments to Local Governments‘ efforts to generate adequate revenue from various sources. Many factors have been identified to be responsible for the inadequate internal revenue effort. Chief amongst them are corruption and weak machinery for check and balances in the generation of revenues. Preliminary survey has shown that the inability of the local governments to provide adequate services to the people within their areas of jurisdiction is attributed largely to inadequate revenues. The researcher was therefore motivated to conduct research in order to investigate the impact of local government revenue on service delivery in Kudan and Sabon Gari Local Government Areas.
1.3 Research Questions
The study seeks to answer the following research questions:
i) What is the level of revenue generation in Kudan and Sabon Gari Local Government Areas?
ii) What is the relationship between revenue generation and service delivery in Kudan and Sabon Gari Local Government Areas?
iii) To what extent does revenue affect service delivery in Kudan and Sabon Gari Local Governments Areas?
iv) How effective is revenue management in Kudan and Sabon Gari Local Government?
v) What are the challenges of revenue generation and service delivery in Sabon Gari and Kudan Local Government Areas?
1.4 Objectives of the Study
i) To determine the general level of revenue generation in Kudan and Sabon Gari Local Government Areas;
ii) To examine the relationship between revenue generation and service delivery in Kudan and Sabon Gari Local Government Areas;
iii) To determine the extent to which revenue affects service delivery in Kudan and Sabon Gari Local Government Areas;
iv) To examine the effectiveness of revenue management in Kudan Sabon Gari Local Government.
v) To identify the challenges of revenue generation and service delivery in Sabon Gari and Kudan Local Government Areas.
1.5 Hypotheses of the Study
Ho1: The amount of revenue generated by the local government has no significant relationship with the level of service delivery in Kudan and Sabon-Gari Local Government Areas.
H02: Effective management of local government revenue does not affect the performance of local government in service delivery.
1.6 Significance of the Study
Previous studies like that of Jumare, (2008) focused on statutory allocation to local government and service delivery and Youbi (2008) associated the failure of service delivery by local government functionaries with bad local politics. This study focused on the two sources of local government revenue and service delivery.
The study provided the basis for developing various ways of improving revenue generation in Sabon Gari and Kudan Local Governments Areas and in other local governments‘ areas in Nigerian. With an improved revenue generation, Kudan and Sabon Gari Local Governments will be able to meet the demands of the people and will be able to perform their primary functions of provision of essential services more efficiently. The study also revealed the extent to which an improved revenue generation will impact on development generally. The study is an added contribution to the existing knowledge on revenue and service delivery in Local Government and ways of improving the two. The research will also help other researchers who may wish to carry out research of similar nature.
1.7 Scope and Limitations of the Study
This dissertation focused on the study of local government revenue and service delivery in Kudan and Sabon Gari Local Government Areas of Kaduna State. The scope of the study is restricted to a period of seven (7) years i.e. (2007-2013).
Limitations of the Study
As with any other research, there were restrictions or constraints that the researcher encountered. The limitations of this study include:
i. Financial constraint:
It is an established fact that every research work consumes a lot of money. Therefore, the financial requirement for gathering data, typing of the project subsequently and other related expenditure served as a major constraint to this research work.
ii. Responses while gathering data
For some reasons best known to the officials of the Local Government, the authorities were not willing to release some information which is relevant to this research project, even after persuasion and being assured that the information sought will only be used for academic purposes alone. This refusal to release some vital information by the Local Government was as a major constraint to this research work.
1.8 Definition of Concepts
From our analysis of the statement of the problem and hypotheses stated above, there are some key concepts that need to be conceptually defined for better understanding. These concepts include: Local Government Finance, Financial Management, Revenue Generation, IGR, Development, Service Delivery and Local Government.
Impact: Impact in this study refers to the effect of revenue generated on service delivery by local government. It also determined the extent to which local government was able to deliver local services with resources at its disposal.
Local Government is defined as Government at the local level exercised through representative council established by law to exercise specific powers within defined areas. These powers should give the council substantial control over local affairs (including staffing) and institutional and financial powers to initiate and direct the provision of services and to determine and implement projects so as to complement the activities of the state, and Federal Government in their areas, and ensure, through the active participation of the people and their traditional institutions, that local initiative and response to local needs and conditions are maximized (Federal Republic of Nigeria, 1976).
According to this research, service delivery refers to all the goods and services delivered by the local government in responses to the public needs in order to address societal problems. The services here include provision of schools facilities like books and chairs; hospital facilities like beds and drugs; agriculture, farm inputs and machines like tractors, fertilizers and seeds.
Financial management is defined as the act of total management function concerned with the effective and efficient raising and use of funds. As processes and responsibility, financial management consists of decision making regarding the following major activities among others.
1. Determination of funds requirement of the organization revenue generation and mobilization.
2. Seeking and obtaining the right amount of funds at the right time for cash flow management
3. Deploying available funds to the needs of the organization revenue application and control, and
4. Giving proper stewardship for funds obtained and utilized (Abubakar, 1999).
According to 1999 constitution, revenue is defined as any income or returns accruing to or derived by the government from any source and include any receipt however described arising from the operation of any law, and receipt however, described from or in respect of any property held by government, and any returns by way of interest or loans and dividends in respect of shares or interest held by government in any company or statutory body. However, revenue can also be regarded or referred to as tolls, taxes, rates, fees, royalties, rents and other receipts of government from whatever sources such as proceeds from loans given out (Section 162(10) of 1999 Constitution).
Revenue accruing to any tier of government may be classified as recurrent or capital. While the former is generated on day-to-day basis throughout the year, the latter arises once in a while and in a larger proportion. They are also described as internal and external sources of revenue respectively. Nevertheless, the word revenue will be used in the context of this research to mean any amount of money coming into the local government from whatever sources and which the local government has power of appropriation.
This consists of financial allocations approved by the constitution, to the different tiers of government from the federation account and share of the state government revenues that is allocated to the local governments.
These are sources of Revenue that are sourced outside the local government e.g. Donation, Aid, Loan et cetera.
Internally Generated Revenue (IGR)
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 (Abubakar, 1999).