THE EFFECT OF LOW REVENUE GENERATION ON THE DEVELOPMENT OF MBAITOLU LOCAL GOVT AREA OF IMO STATE.

ABSTRACT:This study examined the effect of low revenue generation on the development of Mbaitolu Local Government Area. The study subjects consist of a limited number of sampling units, which represent the target population of the Mbaitolu Local Government Area Imo State. Revenue comprises of receipt from taxation as well as those which are not the proceeds of taxation, but of either the realization from the sale of government properties or other interests and returns from loans and investment earning. A sample of 177 staffs was selected from the population using simple random sampling technique method. Data were collected from both primary and secondary sources presented in tables and analyzed using percentages and frequencies. Hypotheses were formulated and tested using Chi square method. It was discovered among other things that, there are problems responsible for low revenue generation in Mbaitolu Local Government Area; it was also revealed that utilization of generated revenue has a positive effect on substantive development in Mbaitolu Local Government Area; the study further revealed that There are measures that can be put in place to ensure effective revenue collection in Mbaitolu Local Government Area. The researcher has recommended that Mbaitolu Local Government Area must consider tax as the most important, reliable, beneficial, and sustainable source of finance for development of the local government area. It is recommended that for balanced fiscal federalism to exist, each federating unit must respect and stay clear from revenue jurisdiction of other tiers. There should not be any interference and intervention of any level of government in the affairs of others. Local government councils will be accorded full administrative autonomy and allowed to operate in accordance with the spirit and letter of the constitution.

AN OVERVIEW OF THE EFFECT OF LOW REVENUE GENERATION ON THE DEVELOPMENT OF MBAITOLU LOCAL GOVT AREA OF IMO STATE.

CHAPTER ONE

• Introduction
  • Background of the Study

The primary responsibility of every government all over the world is to ensure security, freedom and welfare of its citizen. For instance, Section 16(1b) of the 2011 Constitution of the Federal Republic of Nigeria states that “the government has the responsibility of ensuring the maximum welfare, freedom and happiness of its citizens” (Federal Government of Nigeria, 2011). To effectively carry out its primary function and other subsidiary functions, governments need adequate funding. Unfortunately, Government responsibilities continue to increase over time especially in developing countries; as a result of growing population of citizens, and technological development.

In Nigerian, the government has depended so much on oil revenue for execution of its primary functions and economic development programmes. Presently, there is a general fall in the price of crude oil which has adversely affected the Nigeria economic (Anyaehie and Areji, 2015; Uzonwanne, 2015). To this effect, the former Minister of Finance, Ngozi Okonjo-Iweala and other concerned citizens have called on governments at various levels to look for other means of revenue generation for the sustainable economic development of Nigeria. Kiabel and Nwokah (2009) corroborate this idea by saying that the dwindling revenue and increased cost of running government require all tiers of Nigeria government to look for alternative means of improving their revenue base. It is obvious that the country’s revenue from oil can no longer fully support its development objectives.

The local government is recognized by the 1999 constitution of the Federal Republic of Nigeria as the third tier of government within the tripartite federal structure of governance in Nigeria, with the state and federal government as the
super ordinate government. This government in Nigeria which exist at tripartite arrangement (federal, state and local government) play commentary roles to each other to meet the needs of the people which include infrastructural facilities
(Okpata 2004). By virtue of its recognition by the constitution (1999) of the Federal Republic of Nigeria, avails her the opportunity of living up to its constitutional responsibility. Local government is seen as a public sector organization, the third tier government with assigned functions and responsibilities, administrative structure and financial management both for maintaining itself and rendering its statutory assigned functions to its citizens (Uguru 2011).

Local government authorities as a third tier of government in Nigeria are very important in the execution of both central and component government policies and programmes. The 1976 local government reforms in Nigeria provided for the promulgation of state government edicts, thus embodying uniform provisions in the laws of all the state in the Federal Republic of Nigeria. The Reforms therefore, saw the emergence of a uniform structure of local government in Nigeria. The local government was recognized, their functions clearly defined and the human and financial resources were increased and guaranteed. Rotimi (2012) capped it all when he declared that the failure of local government to discharge their role well was as a result of the council officials who squander the funds meant for service delivery at the grassroots. The central administration in the other hand complains of inadequate finance to meet up with the numerous responsibilities yearning for attention.

Over the years, meaningful local government developmental efforts in Nigeria, have suffered a lot of setbacks due to excessive control of this level of government by the state and federal governments. This development has restricted the fiscal jurisdiction of local governments as well as negatively rubbed on their autonomy. As such, the financial resources available to them as a level of government have continued to dwindle, hence, remain grossly inadequate to carry out the functions for which they have been created (Nwosu, 2015). The catalogue of problems faced by local governments in Nigeria remained those of inadequate financial and other resources, frequent transfer of functions to and from local governments, lack of autonomy definable in terms of excessive control exercised by both central and state governments and inadequate involvement of the community in decision making (BelloImam, 2007). All these, in one way or the other have seriously affected the financial autonomy of local governments in Nigeria, as well as their performances. The prevailing federal government revenue allocation formula stipulates that local government is entitled to twenty percent of the revenue accruable to the federation account and ten percent of the internally generated revenue of the state governments, in addition to their own internally generated revenue, which though, in most cases are usually small. The local governments are therefore in a situation where they depend almost entirely on the federal and state governments for funds for the performance of their statutory functions (BelloImam, 2010).

However, the problem of local government revenue management is traceable to the Nigerian federalism and this problem has been provoked by a number of factors. According to Akindele, (1995), these problems include overdependence on statutory allocations from both the state and the federal governments, deliberate tax evasion by local citizenry, creation of non-viable local government areas, differences in the status of local governments in terms of the rural- urban dimension, inadequate revenue and restricted fiscal jurisdiction. Revenue generation in Nigeria local governments is principally derived from TAX. Tax is however, a compulsory levy imposed by government on individuals and companies for various legitimate functions of the state (Olaoye, 2008).

Local governments in Nigeria have developed over a number of years. Historically, the development of direct taxation in local government in Nigeria can be traced to the period before the British pre-colonial period. Under this period, community taxes were levied on communities (Rabiu, 2004). A major thesis advanced as the reason for the existence of local governments is to bring administration nearer to the people. Because it is at the local government level that local initiatives could be tapped for the administration of the people. The ordinary man on the street sees himself as part and parcel of the government at the local government level of governance. The impact of internally generated revenue in local government in Nigeria is felt on the provision of clean water, construction of good roads provision of health centres and electricity for the rural communities. Paradoxically however, the abysmal way and manner by which local government authorities mismanage funds due to lack of skilled personnel makes a mockery of local government administration in Nigeria. Additionally, avoidance of tax by the private sectors and rich individuals raises a fundamental challenge to revenue generation and local government administration in Nigeria.

• Statement of the Problem

The development ratio between the urban cities and the rural dwellings in this country is abnormally lopsided and highly unacceptable for even and sustainable development of this nation in particular and Africa in general. This lopsided development policy has created many avoidable problems some of which are massive rural-urban migration thereby over congestion and heating up the lives in the cities, infrastructural decay at the rural areas due to total neglect and abandonment, mass poverty in the country due to lack of proper harmonization of the nation’s resources (Ibhawaeghele, 2012).

It is not disputable that the revenue generation in Nigeria Local Government is far below expectation. It has become imperative to diversify areas of revenue generation especially with the dwindling federation allocation which has
been the major sources of revenue to the local government. Since inadequate revenue remains one of the devastating challenges hindering effective local government administration in the country, it then necessitated the general outcry by the administrators (chairmen) of local government for a change in Revenue Allocation Formula which is the only major source to increase the percentage of the share for the local governments. This problem of poor revenue base has almost led to the collapse of most grass root government.

Local government in Nigeria is faced with myriads of problems ranging from corruption and embezzlement, poor financing, mismanagement of funds to poor leadership. This has deterred the development of local government in Nigeria. The major issues are; what has contributed to the non-performance includes; total dependence on federal and state statutory allocation, poor internally generated revenue drive, ineffective utilization of available scarce resources or mismanagement by public office holder, among others. Certain percentage of the
statutory allocation has always been deducted by the state government thereby causing the local government. The inability of the local administrators to use in–sourcing techniques for funds to finance the council through internally generated revenue is a thorn in the flesh of meeting up their constitutional responsibilities and as such led to gross underperform which has resulted to; dilapidated infrastructural facilities, unavailability of social services to rural populace, and underdevelopment of local communities, inability to  make payment of the worker’s salary and so have given rise to whether to scrap or restructure local government systems in Nigeria (Onwe, 2009).

In the words of Oguonu (2013) “what makes the difference between local governments is the ability of a local government to internally generate revenue”. The inability to generate income apart from resources from the federal government has been a persistent problem in Mbaitolu local government. Revenue generation entails generating and exploring all the sources of revenue for the local councils. Mbaitolu government relies heavily on external sources for funds: it is evident that Mbaitolu local government area has failed to explore the various sources of internal revenue generation open to the local government; hence the problem of internally generated revenue.

• Objectives of the Study

This major objective of this study is to examine the effect of low revenue generation on the development of Mbaitolu Local Government Area. Specifically the study will;

1. Examine the problem responsible for low revenue generation in Mbaitolu Local Government Area.
2. To ascertain the effectiveness in utilizing generated revenue for substantive development in Mbaitolu Local Government Area.
3. Determine if there are measures put in place to ensure effective revenue collection.
4. Examine the major source of revenue for Mbaitolu Local Government Area.
   • Research Questions
5. What are the various problems responsible for low revenue generation in Mbaitolu Local Government Area?
6. Has the utilization of generated revenue in Mbaitolu Local Government Area, produced positive or negative effects?
7. What measures can be put in place to ensure effective revenue collection in Mbaitolu Local Government Area?

• Research Hypotheses

In a bid to facilitate this research and make it more purposeful, the study will test the following hypotheses;

Hypothesis One

H_o: There are no problems responsible for low revenue generation in Mbaitolu Local Government Area.

H_i: There are problems responsible for low revenue generation in Mbaitolu Local Government Area.

Hypothesis Two

H_o: Utilization of generated revenue has a positive effect on substantive development in Mbaitolu Local Government Area

H_i: Utilization of generated revenue has a negative effect on substantive development in Mbaitolu Local Government Area

Hypothesis Three

H_o: There are no measures that can be put in place to ensure effective revenue collection in Mbaitolu Local Government Area.

H_i: There are measures that can be put in place to ensure effective revenue collection in Mbaitolu Local Government Area.

• Significance of the Study

A study of this nature will help Mbaitolu Local Government Area and other related organizations to adopt measures in the context of low revenue generation and development in relation to effective revenue collection. It will also be beneficial to the Federal and State governments and decision makers who deal directly with the Local Government to make meaningful proposals and suggestion to improve the revenue generation and allocation policies and process in Local Governments in Nigeria.

Furthermore the study will serve as existing literature to those who want to delve much into human resource planning and development. Finally this will give fore knowledge to management of Mbaitolu Local Government Area before embarking on effective revenue collection in the Local Government Area.

• Scope of the Study

The study is meant to investigate the effect of low revenue generation in Mbaitolu Local Government Area. The participants of this study are delimited to employees of Mbaitolu Local Government Area.

• Limitations of the Study

In the course of carrying out this study, the researcher encountered some difficulties, the researcher discovered that the resources needed to carry out this research was limited, moving from one library to another. Also the questionnaire had to be typed and administered to selected respondents of the organization not as one thought process, it required the personal involvement of the researcher to motivate the worker to fill the questionnaire, explain certain words and answer. Another constraint is lack of total cooperation from the respondents in Mbaitolu Local Government Area, who was unwilling to co-operate with the researcher because they felt that they had nothing to gain from the study. Another serious constraint is finance, because of economic difficulties Nigeria is passing through, it was difficult to get enough money to achieve ones crucial desires. A research of this nature involves a lot of fund e.g for typing, distributing and collecting the questionnaire, and other necessary data for the study.  Others, when interviewed refused to disclose certain information relating to their organization for fear of victimization from the authority of the organization.

In spite of all these limitations, however, data collected were able to provide enough insight to the research.

• Definition of terms

Development: this refers to the process of developing growth, directed change.

Efficiency: The extent to which a resource is used for the intended purpose; the ratio of useful work to energy expended.

Expenditure: this can be defined as an act of spending or paying out

Local Government: Any form of government whose remit covers an area less than that of the nation, and in some cases less than that of a state.

Revenue: this can be defined as the income generated for some political entity’s treasury by taxation and other means

Tax: this can be referred to as money paid to the government other than for transaction-specific goods and services.

Taxation: this refers to the act of imposing taxes and the fact of being taxed

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