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INTERGOVERNMENTAL FINANCIAL TRANSFER AND COMMUNITY DEVELOPMENT AT THE GRASSROOTS IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1   Background to the Study

Intergovernmental relations involve the relationship, both vertical and horizontal, that exists between the various organs and departments within the sovereign government of a particular country (Akinsanya, 2005). If we take Nigeria for example, inter-governmental relations would mean the relationships existing between the various levels of government from the federal, state to the local government level; between the various ministries, etc (Usman, 2010).

Evidently, finance has emerged as the most critical policy issue in intergovernmental relations in every federal administrative system since the Second World War. A dominant theme in intergovernmental relations studies as noted by Ademolekun (cited in Sam, Eme and Emeh, 2012) is the different attempts made to administer federal finance to the satisfaction of each level of government. In this manner, Danjuma (cited in Sam et al., 2012) opined that the existence of a federal system with its accompanying political units necessitates a revenue sharing arrangement to enable its units to carry its constitutional assigned responsibilities.

Corroborating this stand, Onuoha (2007) stated that in a federation, the logic underlining the allocation of tax powers (revenue resources) does not always tally with the logic underlining the assignment of constitutional responsibilities and that there is always a gap between the revenue obligation and revenue resources to the levels of government. Financial transfers therefore have been evolved as a mechanism for dealing with this imbalance or gap between expenditure obligation and revenue sources.

Nigeria’s model of fiscal federalism represents a fundamental legal and institutional framework for policymaking in the country. As in other federations, it defines the core rules for financial transfers, distribution of responsibilities for service delivery, and mechanisms for interaction between different tiers of government (Angahar, 2013).

In practice however, there exist some degree of decentralization in what is discernable in a federal states hence Ekpo (2004) averred that among the different levels of government, fiscal arrangement must be worked out to ensure fiscal balance in the context of macro-economic stability and this fiscal arrangement is referred to, in a federal structure as fiscal federalism or intergovernmental fiscal relations. Fiscal federalism, according to Nwankwo (2007) is essentially about the allocation of government responsibilities, as well as the sharing of revenue resources among tiers of government.

In determining how these resources are to be shared among the tiers of government, Ofuebe (2005) is of the opinion that these revenues are to be divided according to fixed principles. These principles’ importance has been heightened by its inclusion in section 162(2) of the Constitution of the Federal Republic of Nigeria as a major deciding factor. This is because Nigerian fiscal federalism has been problematic. Revenue allocation has generated controversy in recent year and at issue has been the allocation between various tiers of government (vertical allocation) and between resource-rich and resource-poor regions (horizontal allocation). More recently, another dimension has been introduced to the vertical issues, namely the allocation between the resource-rich regions, local government and communities. Debates about the distribution of national resources within federal systems are not peculiar to Nigeria. However, the Nigerian case is unique because the criteria used so far have not enjoyed acceptability.

The fundamental challenges battling community development at the grassroot in Nigeria has been one of lack of finance and its twain demons of poverty and economic hardship which have continue in this 21st century to elude sustainable development at the grassroots (Ojo, 2014).

The need to catalyze balanced development touching the grassroots, maximize citizen's participation, and arouse government responsive necessitates intergovernmental setup; where the local government serves as a form of political and administrative structure facilitating decentralization, national integration, efficiency in governance, and a sense of belonging at the grassroots (Agagu in Adeyemi, 2012).

Nigeria’s fiscal federalism arrangements are currently attracting increasing attention from both policy makers and analysts. This is a reflection of the fact that longer term perspectives of economic policy reform in the country are critically dependent upon improvements in the organization of inter-governmental arrangements. Such arrangement shaves direct implications for achieving community development. Simply put, there is a major need to strengthen the incentives of government agencies at all levels of authority to improve cooperation in designing of their policies and delivery of services (Angahar, 2013).

1.2   Statement of the Problem

Financial transfer or the statutory distribution of revenue from the federation account among the different levels of government has been one of the most contentious and controversial issues in the Nigeria’s political life. So contentious has the matter been that none of the formulae evolved at various times by a commission or by decree under different regimes since 1964 has gained general acceptability among the component units of the country.

There are several challenges and contending issues confronting intergovernmental financial transfers and community development in Nigeria: The five principles currently applied in the horizontal revenue allocation formula are far from being acceptable to all the stakeholders. There is usually a lack of correspondence between the spending responsibilities and the tax revenue sources assigned to different levels of government which to a large extent has denied community development across the length and breadth of the country.

Provisions of the 1999 Constitution of Nigeria have in all, emphasized vertical interaction among the three levels of government rather than horizontal relationships. This according to Roberts (1999) could impose limitations to the extent of cooperation among the levels of government and instead promote a dependency structure that would promote the inclusive authority model of IGR. Resistance to the evolution of such structure by sub-national levels of government would result in oppositional politics and negative IGR and thereby hindering local council’s financial capacity to provide healthcare facilities, infrastructural amenities or even say service delivery to the people.

Basically, the Nigerian Fiscal Federalism has been bedeviled to the extent that it is 100% scholarly correct to assert that one of the most protracted and controversial debate in Nigerian economy is the way government revenue is shared among the component tiers of government in the country (Uche and Uche, 2004). This debate has its foundation in the chequered history of community development and evolution of Nigerian federalism. Therefore, the need to explore the role of intergovernmental financial transfer and community development at the grassroot in Nigeria at the time being is needful.

Research on intergovernmental financial transfer and community development are very few. In Nigeria, most of the available studies about intergovernmental financial relations such as Akindele & Olaopa (2002), Alo (2012),Angahar (2013), Oluwole (2013) and Nchuchuwe & Adejuwon (2015) were theoretical studies whose findings were subjectively based on researchers’ personal opinions. It is noted that the past studies did not give adequate attention to intergovernmental financial transfer and community development at the grassroot in Nigeria, as well as highlighting effective intergovernmental financial transfer strategy that can stimulate grassroot development in Nigeria. Hence, the undertaking of this research work will fill in the gap by critically exploring intergovernmental financial transfer and community development at the grassroot in Nigeria with a special reference being made to Ojo Local Government Area of Lagos State.

1.3   Objectives of the Study

The major objective of this study will be to assess the link between intergovernmental financial transfer and community development at the grassroot in Nigeria. While other specific objectives of the study include:

        i.            To investigate if there is any significant relationship between statutory federal allocation and community development in Nigeria.

      ii.            To find out the effect of state statutory allocation to local government and provision of healthcare facilities at the grassroot level in Nigeria.

    iii.            To examine the relationship between intergovernmental financial transfer and infrastructural development at the grassroot.

1.4   Research Questions

This study will be guided be the following research questions:

        i.            Can there be any significant relationship between intergovernmental financial transfer and community development in Nigeria?

      ii.            How will statutory federal allocation impact community development in Nigeria?

    iii.            Will intergovernmental financial transfer have an effect on service delivery in Nigeria?

    iv.            Is intergovernmental financial transfer significantly related to community development of infrastructural amenities?

1.5   Research Hypotheses

The researcher intends to test the following hypotheses at 0.05 level of significance:

Hypothesis 1:

Ho:   There is no significant relationship between intergovernmental financial transfer and             community development in Nigeria.

HI:There is a significant relationship between intergovernmental financial transfer and           community development in Nigeria.

Hypothesis 2:

Ho:       Intergovernmental financial transfer has no effect on provision of healthcare facilities at    the grassroot level in Nigeria

HI:     Intergovernmental financial transfer has an effect on provision of healthcare facilities at      the grassroot level in Nigeria.

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