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THE PROBLEMS OF REVENUE GENERATION AND UTILIZATION

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Revenue has been considered as a significant issue in the economic development of any nation, its importance cannot be over emphasized, be it the federal, state or local government. It serves as a life wire of every business which helps the organization to attain its goals. Revenue is of great importance to national planning and development.

The origin of revenue generation and utilization in the local government started with local government reform of (1976) constitution where local government was established to create an impact in the generation of revenue for the development of people in the local government area. This (1976) constitution gave the rural people a sense of belonging in the allocation of “national cake,” since Nigeria constitution provides local government authorities with unique opportunities and challenges to achieve self generation of income for economic growth and development Akpan (1985: 43)

Again, the “1985” Nigeria constitution equally provides that local government authorities should benefit from the federal state government revenue to have these supplemented with their self generation revenue. All the efforts are aimed at making local government viable and self reliant.

These are a total of seven hundred and seventy four (774) local government councils in Nigeria including Imo State which has twenty seven (27) local government councils.

These local government areas are trying to generation enough fund to sustain themselves financially in these covers, these are many hindrance on the way to their success ranging from instability and poor condition of the economy, poorly conflicted road for revenue collection, uncooperative attitude of payee, insufficient industrial units, inadequate supply of social amenities etc. these problems standing against revenue generation government including Owerri municipal as a case study.

These problems have stimulated the researcher to move into a great mission through research in order to set up strategies to achieve these goals.

Poor revenue generation will no doubt prevent the council from rendering good services to the public. The researcher's work is therefore set to examine the prospect and problems encountered in revenue generation in karu municipal and proper solutions.

In fields like agricultural extension, education, health care, social welfare, security, and others, government entities at all levels National,State, and Local are regularly involved in the creation and delivery of public goods and services, all of which require significant financial investments (Mello & Lago-Penaas, 2011). Governmental authorities now have a significant duty to bear in the mobilization of financial resources or revenue to satisfy the different welfare demands of the populace. This duty entails the creation of revenue and the distribution of it among competing demands.

As the third tier of government and a public sector institution, local government is charged with maintaining itself and performing its statutory  mandated activities for its constituents while also managing its financial resources (Uguru, 2011). In Nigeria, local government authorities serve as the third tier of government and play a crucial role in the implementation of both central government policies and initiatives. It is the closest government to the people and deals with their issues. It serves as a strong connection between state and federal governments. The Federal Republic of Nigeria's the 1999 constitution recognized it, designating the federal government as the supreme authority over the states.

The provision of social services and rural infrastructure that directly affects the masses at the grass roots is one way that local government finance works to bring the impact of government closer to the people at the grassroots by transforming their lives. This is one of the aspects of public finance that local government finance deals with. Revenue accruing to any tier of government may be classified as recurrent or capital. While recurrent revenue, also described as internal source, is generated on a day to day basis throughout the year. Capital revenue on the other hand, is described as an external source and is realized once in a while and in a larger proportion.

The principal sources of local government revenue are statutory allocation and grants from the Federal and State governments while the locally generated revenue also known as internal source of revenue is summarized into the following heads: Taxes; Rates; Local Licenses; fines and fees; earnings from commercial undertakings; Rent on Local Government property; Interest payments and dividends; and miscellaneous receipts. Effective internal revenue mobilization and generation at the Local Government level have become central issues on its performance and successful operations, this is because most of them are insolvent and unable to finance their programs, projects and even sometimes unable to pay staff salaries due to the decline in their allocations from the federal accounts. It is based on the above background that this study is put in place to assess the effect of internal revenue generation on the performance, using Karu local Government in Nasarawa state as case study.

1.2 STATEMENT OF THE PROBLEM

It can be observed that revenue generation is an achievement that needs a skilled and experienced head in the sense that it deals with several dependent and intendment various things such as time, energy and labor. Again due to the problem of the limited research of the people to satisfy their living very very well; revenue generation becomes difficult. These problems includes insufficient industrial unit, poorly consisted road for revenue collection, micro- operative attitude of payee, inadequate.

1.3 OBJECTIVES OF THE STUDY

The main objective of this study is to determine the problem of revenue generation and utilization in Nigeria. Specific objectives include;

1. To examine the impact of revenue generation and utilization in the local government system.

2. To investigate the effects of inadequate revenue generation on local government councils.

3. To assess how improper revenue generation influences productivity and the provision of social amenities in the local government.

1.4 RESEARCH QUESTIONS

1. What are the consequences of revenue generation and utilization in the local government system?

2. How does inadequate revenue generation affect the functioning of local government councils?

3. In what ways does improper revenue generation impact productivity and the delivery of social amenities within the local government?

1.5 RESEARCH HYPOTHESES

1. H0: There is no significant impact of revenue generation and utilization on the local government system.

H1: There is a significant impact of revenue generation and utilization on the local government system.

2. H0: Inadequate revenue generation does not affect the functionality of local government councils.

H1: Inadequate revenue generation negatively affects the functionality of local government councils.

3. H0: Improper revenue generation does not reflect on productivity and the provision of social amenities in the local government.

H1: Improper revenue generation negatively reflects on productivity and the provision of social amenities in the local government.

1.6 SIGNIFICANCE OF THE STUDY

This research work is of paramount importance to Karu municipal authority and other similar local government areas because of the role of finance in the organization and institutions.

The work will help to advise the researcher's knowledge and enable him to contribute in finding solutions to the problem for which the research is based. The work will also enable to determine the possible course of failure in revenue generation and hereby guiding the government on the steps to take in solving them it will also be of immense benefit to the local government if it takes the findings and recommendations of this research into consideration when making policies and decisions concerning revenue generation. This work will be a reference document or further research.

Finally, the research will contribute to the stock of knowledge and stimulate further research into the student matter by students and lecture in the family of and management sciences.

1.7 SCOPE OF THE STUDY

This study focuses on analyzing the problems of revenue generation and utilization within the local government area (LGA) of Karu in Nasarawa State, Nigeria. The scope encompasses various aspects related to revenue generation, including tax collection, fees, grants, and other sources of income available to the local government. Additionally, the utilization of generated revenue will be examined, particularly in terms of budget allocation, expenditure patterns, and the delivery of public services and infrastructure within the Karu LGA. The study aims to identify specific challenges hindering effective revenue generation and utilization practices within this specific administrative region, providing insights into potential areas for improvement and policy intervention.

1.8 LIMITATIONS OF THE STUDY

Limitations of the study include potential constraints in accessing accurate financial data and documentation from the Karu Local Government Area (LGA) authorities. Limited resources may restrict the scope of data collection and analysis. Additionally, the study's findings may be influenced by the dynamic nature of revenue generation and utilization practices, as well as contextual factors specific to the Karu LGA in Nasarawa State. Generalization beyond this specific locality may be limited due to variations in governance structures and economic conditions across LGAs.

1.9 DEFINITION OF TERMS

1. Revenue Generation: The process of obtaining income, typically through taxation, fees, or other sources, by a governmental body or organization to fund its operations and services.

2. Revenue Utilization: The allocation and management of generated income or funds by a governmental entity or organization for various purposes, including public services, infrastructure development, and administrative expenses.

3. Fiscal Federalism: The division of financial responsibilities and powers between different levels of government within a federal system, including revenue generation, allocation, and expenditure.

4. Decentralization: The distribution of administrative and financial authority from a central government to regional or local governments, allowing them greater autonomy in decision-making and resource management. 

5. Economic Growth: The increase in the production of goods and services within an economy over time, typically measured by changes in gross domestic product (GDP), employment rates, and other indicators of economic activity.

6. Expenditure Responsiveness: The degree to which government spending patterns adjust or respond to changes in revenue or external economic conditions, reflecting the ability of policymakers to allocate resources effectively in accordance with fiscal priorities.

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