CHAPTER
ONE

1.0     INTRODUCTION:

BACKGROUND OF THE STUDY:

Nigeria has three- tiers of
government systems,

These are;   (i)      The federal
government

          (ii)     The state government and

          (iii)    The
local government.

The essence
of this division of government into federal, state and local levels is to
enable the government exercise her administration easily and effectively.
However the 1979 constitution spells out the functions of each level of
government. Generally it can be said that the governments are responsible for
the provision of the collective (social) goods and services on a non-
commercial basis as well as the provision of other social and economic
services.  In order to meet up with the
foretasted goals and services, the government needs to collect revenues.

Local
government, which this work emphasizes on, can be described as the government
at the local level, exercised through representative council, established by
law to exercise specific power within definite areas. The government of such
body is selected or otherwise locally selected.

The
administering of government at local level in Nigeria traced as far back as
colonial period, when native authorities were established in their rudimentary
forms, that is in their own ideas. They represented a system of indirect rule,
which sought to establish a form administration through traditional authorities

Between 1950
and 1955, the first elected local government council based on the model was
shadbushes in logos and in the former Eastern and western Region. Though, the
traditional members constituted a maximum of 25 percent in most of the
councils, the emergence of members elected on a political basis instigated the
traditional rulers to gradually withdrawn from active participation in local
administration in Nigeria.

Presently,
local government administration is still in existence assigned with numerous.
Responsibilities like, bawling of market square, provision of pipe-born water,
motor parks, rehabilitation of local and rural roads, sanitary and health
inspection, maternity home and dispensaries e t c.

Finally,
local governments have two (2) main sources of revenue or fund. They are

(i)      External
sources of fund.

(ii)     Internal
sources of fund.

The
External sources of fund include;

(a)             
Statutory allocations from the federal
and state government (i.e., 20% considered federal revenue and 10% of
internally generated state revenue).

(b)            
Special grants which aim at assisting
local government finance their aforementioned projects. In addition, local
government source fund internally through receipts on rent and rates on their
properties, tenement tax, earning from commercial undertaking, interest payment
and dividend, licenses, fees and fines e t c.

1.1     STATEMNT OF PROBLEM:

The
problems that confront most local governments on revenue generation cannot be
over-emphasized. Hence local government having numerous means of sourcing fund,
are also, faced with a lot of problems and difficulties in generating its
revenue. These problems affect mostly its internal sources of revenue.

Tax
avoidance and delinquencies are among the problems confronting most local
governments on revenue generation, as most people of the society device some
means source maximum reduction in the amount to be paid as tax obligation on
the date it is due, there by, escaping tax liabilities.

Inability
of most people of the society to pay up amount due for rent and rates on local
governments properties. This hinders local governments as regards revenue
generation, as most people lack fiancé and others not willing to pay – up.

Inadequate
operational vehicles and other facilities confront local governments as a
problem in generating revenue. Revenue generation needs mobilization and most
local government do not have enough, which would have enable them to move
easily from one part of the area to another for the collection of various fees.

Another
problem hindering local government revenue generation lies among the staff.
Many staff lack job related in service training, and some have poor educational
background, some are not dedicated, deligent and honest. Often they do collude
with tax or ratepayers to defraud the government.

All
these problems will not only affect the local governments but, every member of
the society and the nation in general. This ids because, these problems will
not enable most local governments to carry out or problem their statutory
assigned functions effectively thereby, leading to and definitely, affects the
economic growth and development of the nation (Nigeria).

1.2     OBJECTIVE
OF THE STUDY:

From
experience and the prevailing circumstances or situation of the economy, it can
be clearly observed that no central government can carry-on or exercise her
administration effectively without the assistance of the state, and mostly, the
local governments as to reach easily to the welfare of the people in the rural
areas, that is, people at local level.

          Hence,
the objectives of this study are:

–        To critically examine and know why most
people of the society do not comply in payment of tax, rent and rates and other
fees or charges.

–        Also to examine how staff of local
governments contribute to the problem of revenue generation, and as well, to
know how inadequate operational vehicles/machines contribute to the problems of
revenue generation in local government areas.

–        To know the effects or impacts of these
problems, that is, how they will affect the cost and standard of living of the
people, as well as, economic growth and development.

–        To make recommendations or prospects on
these problems of revenue generation in local governments in order for them to
perform their statutory assigned function effectively.

1.3     SIGNIFICANCE
OF THE STUDY:

The
inhabitants of the various local government areas of the nation (Nigeria) will
have the course to enjoy the affirmative results to certain extent if all or
part of these problems to revenue generation in local governments are properly
tackled. Hence, such myriad of problems of revenue generation, which also, give
rise to untold hardship will generally be under control or a thing of the past.

This
will become a tool for most local government areas to a speedy set-up of some
strategies which will enable them to generate their revenue easily, and as well
as executing their projects effectively. This study will be of paramount
significance to the society, mostly to those students in school of financial
studies (Banking and finance) who are making or intending to carry out research
in the problems that confront most local governments in Nigeria on revenue
generation.

This
will also give potential market men and women as well as other residence of
various local government councils as regards payment of tax, rates, charges,
etc.

Finally,
it will enable the researcher to have an in-depth knowledge of the study.
Therefore, the significance of this study is by no virtue, exhaustive.

1.4     SCOPE,
LIMITATION AND DELIMITATION:

Nigeria
has been in existence, colonized by the colonial masters, had her independence
in 1960 with total population 88.5m people as at “census 91” and today,
consisting of over 100m people. It is made up of 36 states including Enugu
State, which the researcher has taken as his scope of study.

It
may not augur well if the researcher fails to record some of the limitations
encountered during the study within the aforementioned scope. These include:
time, finance, un-cooperative attitude by the respondents to some relevant
data.

The
very time left for the researcher to carry on this very work was very limited,
which could not give chance for everything needed. The finance disposed was too
small and restricted the researcher in visiting many places.

The
unco-operation   attitude of some of the
respondents hindered greatly the effective gathering of relevant data. Some
feel much reluctant to answer some question posed to them, while others doubted
the sincerity of the researcher and the usefulness of the study.

1.5     DEFINITION
OF TERMS:

(i)      TAXATION: This is one of the ways
local government generate revenue. It is a compulsory levy imposed by the local
government on most of the entire members of the society who are capable of
paying tax or who are expected to pay tax.

(ii)     PERSONAL INCOME: This is a form of
direct tax, which is levied on the wages, salaries and other earnings of
individuals. In assessing   this kind of tax, certain allowances (wife,
children, dependent relative allowance, etc) are deducted; the balance is then
taxed to determine the amount to be paid as tax.

(iii)    LOANS: Loan can be described as a
financial aid with interest payable. Sometimes local governments borrow money
in form of loan from other bodies like: Banks, State Government, Federal (if
possible) etc to enable them execute their projects when they are in short of
fund. However, this loan is payable at a given interest rate over a specified
period of time.

(iv)          
RENT AND ROYALTY: these
are payments made to local government properties or revenue, such as land,
building, etc.

(v)    GRANTS: Grant are said to be
financial aids without interest. This simply means that grants are form of gift
granted to local governments by a body (federal, state or any other body)
without paying back.

(vi)    CHARGES, FINES & FEES: These are
among the means of generating revenue by the local government. They are
payments made to local governments by those who indulge in one commercial
activity or the other. Such fees are: motor license fees, Road / bridge tolls,
market fees etc.