Problems Of Revenue Generation In Local Government Area Of Nigeria

Problems Of Revenue Generation In Local Government Area Of Nigeria

Problems Of Revenue Generation In Local Government Area Of Nigeria

The appreciation of importance of revenue is as old as man’s desire to make expenditure possible to improve his existing environment. Man here embraces individual, government and organization (profitable and non-profitable). The purpose of revenue is therefore, to have individual, organization and government disposal financially to cater for their various well being.

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What is doubtful is if enough effort has been made over the years by any of the above mentioned categories against generation (realization) of revenue. It is becoming clearer that individual or government which generates its revenue on a weekly basis is likely to future courageously, little or no prospect exist for such bodies.

Prior to the coming of the Colonial masters, there were some of revenue open to the Northern and Southern regions of the country. These groups of people have centralized system of administration. The bodies led by Emirs and Alafin are the agent that collect revenue from the inhabitants. Also fine and other revenue are taken care of by these bodies. Development plans were embarked upon through communal efforts.

The Colonial masters made the work simple for them because they modified the work for these payers of the revenue to government. Thus, this led to the introduction of the principles of equality.

However, it is difficult to introduce the native revenue ordinance in the eastern regions because of no recognized natural leaders. There were various attempts of improving native revenue generation in a peaceful and careful manner, but it always resists to function.

This led to Aba Women riot of 1929 and claimed about fifty lives and properties worth thousands of money.

In 1976, local government system initiated by the federal military government was remarkable in a number of ways. In the first place, it was the first time local government was introduced in Nigeria. The 1979 constitution improved the situation with more recognition being accorded to local government in the country. This in essence means that in Nigeria, we have the Central Government, State government and the Local government can be a subordinate government. Systematically designed as close as possible to the people at the grass root levels with the objective of facilitating development.

Emphasis on this development, each council is expected to mobilize all resources at its local and even beyond and the development of the area is ensured the spirit of the deformation was jurisdiction basically stated on the line below.

Local government have over the years suffered the continuous showing down of their powers. Lack of adequate funds to appropriate institution had continued to make Local Government ineffective and inefficient. Excessive politics had made even modest progress impossible. Consequently, there has been a problem between the people and the government has therefore realized the role which the Local Government plays to the nation. Then for the Local Government to achieve the objectives of 1976 Local Government reforms which the Federal government made, the Local Government authority has to be autonomous. This autonomy was given in 1989 to this present day. This gives room for the Local Government authority to exploit all available resources for the development and improvement of standard of living for their own jurisdiction. Before Local Government authority were under the umbrella of State Government.

Nwankwo G.O. (1982) in his contribution stated that the government source of revenue can be divided into three sources

Namely: – Taxation, Borrowing and Miscellaneous.

The Local government avenue of revenue generation are four types namely: – Tax, Rate and License, government allocation and miscellaneous. Then Longmans Dictionary defined revenue as the total annual income of the government. Government departments or agents are those delegated with the responsibility of generating revenue for the government through many sources.

This work is limited to Local Government revenue in Nigeria. In the analysis references will be made to three years actual receipt by the local government authorities. Table will be used for clarification when it will come and it will cover from 1995 to 1997.


The study is limited to some local government area of Enugu State namely Nsukka Local Government, Isi–uzo Local Government and Udi Local Government Area.

As a result of limited resources like fund etc., we were restricted to certain number of area of study to the above mentioned.

Also owing to limited time as a result of academic time table, the resources were limited in both scope and wider research.

There are restrictions on the side of respondents with the fear of exposing their privacy. This also limits the study to the free response of respondent.


Revenue generation is not easy task in Local Governments of Nigeria. It entails interacting with the communities. There must then be available stop equipment for this purpose. According to the Local Government revenue officers, the local government are encountering much problems in their task of revenue generation. Some of these problems include:

MIGRATION: – Inhabitants of the local government tend to move to urban areas in search of white-collar jobs this movement of their adults tends to affect their revenue. However, it was observed that migration is not only for white-collar jobs, but to enjoy social amenities in other areas which the local government are deprived of.

Transportation hinders the movement of revenue officials in the area. Lack of vehicles and bond network of roads also poses some problem. These of course, causes rapid wear and tear on the few vehicles available.

It is known that market stallages give substantial revenue to the local government authorities. Market stallages are also another problem. This reduces the amount realized from market stallages. This reduces the amount realized from market stallages. This reduces the amount realized from market stallages. This can be read from the table to be seen later in this work. It will show the total number of market stallage in a particular local government area of Nigeria as 7711 stalls. Out of this stalls almost one third of it did not pay revenue.

Communication link is totally lacking. There is no telephone system for quick response to problem.

Attitude of revenue official towards public fund is another major problem. This is becoming rampant some revenue collectors direct the money collected into their private purse. Some also collect with the members of the public to defraud the Local Government revenue.

Moreover, workers are not trained well in collecting of revenue. The programme of In-Service Training (I.S.T.) among the workers is not encouraged. So there are no skilled labourers. Even when anybody is against the law, the revenue collectors will not know.

Another problem is that the lives of the agents that the local government sends into the village are in danger. Some of them are attacked by the villagers and accused of robbery; even if the agent show them their identity card because there is no policeman to execute them.

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The delay of High Court in the judgment of local government cases against any defaulter. It was made to believe that some of the tax defaulters are not only the illiterate group but also the social ruling class like doctors, engineers and industrialists. This people dodge the payment of tax.


With this study, state and federal government will be spending less on local government because the revenue collection officers in the local government will know how to make good use investment of their revenue. Their ignorance will be eliminated.

Also the revenue collected will be controlled in the sense that there should not be any fraud in local government. Moreover, the staff of the local government will be trained on the issue of revenue generation.

Also the study will ensure that the various channels of generating revenue are utilized. Example: to make sure that all the open stalls pay their revenue.

There should be no undue, interference with the work of the revenue collection in the local government to the constitution.

The officers will moreover eliminate conflict complicating and difficult situation.


Revenue generation in local government is the total annual income, which are collected to cater for the well being of individual, organization and government and also for public funds. It is generally known that the main sources of government (local) revenue are taxes, receipts from republic enterprise, fines, fees and voluntary gift and grants, license fees, profit from public.

Tax according to Dr. Raton is a compulsory contribution imposed by a public authority, irrespective of the exact amount of service rendered to the tax-payer in return.

Professor Seligmen E.A.R. in his own contribution said “ a tax is a compulsory contribution from persons to the government detray the expenses incurred in common interest of all, without special reference to benefit conferred”.

Tax is also a sum total of money that must be paid by citizens on a percentage of their income, property value fees or possession for the support of the government.

Tax can also be defined as a compulsory levy on properties and income of individuals and non-human being e.g. company. Tax also defined a non-punitive but yet a compulsory levy on properties and income of individuals and corporate bodies.

Adam Smith (1976 in his book said that “ tax is a liability imposed upon the essence by a public authority, to pay a specified amount within a specified period “.

These three definitions point towards one direction, that is the characteristic of tax. Firstly, it is a compulsory contribution imposed by the government on the people within her jurisdiction. Since this is a compulsory payment, any person that refused to pay a tax is liable to punishment.

Secondly, it is also compulsory payment imposed by the government agent on the people that is able to pay.

Third, a tax is a payment made by the tax – payer which is used by the government for the benefit of the citizens. The government uses the revenue collected from taxes for providing hospitals, schools and other amenities to the public.

Fourthly, a tax is not levied in return for any special service rendered to the tax – payers by the government. Thus, tax – payers cannot get any special benefit from the government in return for the tax paid by him.

However, Anderson O. (1979) said that “tax can be divided into two – direct and indirect tax. Direct tax is based on income of individual and wealth of the tax payers which are paid directly to the government as a result of the income being earned – both earned and unearned. Indirect tax is paid by the producers of goods and services.

The burden is finally not borne by the tax – payer, but the ultimate consumers.

The profit from public revenue generation also forms a part of the government revenue. The local government and government bodies operate commercial enterprises and public utilities. Such enterprises may be run on monopolistic or competitive bases.

Example includes National Electric Power Authority, Radio Nigeria, Water Works, Railways and Post Offices etc. The price charged in excess of normal cost of production is like tax.

Fee, fines and license are also sources of revenue to the government. A considerable amount is flown into the government pocket through these means.

LICENSES: However, license fee is different from a fee. A fee is paid for some services actually rendered while a license fee is chargeable by the public authority to grant a permission to a person to perform service controlled and regulated over the various activities.

FINES: These are penalties imposed to collected revenue and also to punish the people for the infringement of the state laws. They resemble taxes, only that they are compulsory payment without any claim or something equivalent to tax paid.

GIFT AND GRANT: Gifts are voluntary contribution by individuals and societies to the government. It is also given by the Federal Government to the State or Provincial Government to meet the cost of specific projects or schemes in public interest. Such as the provision of drinking water, drainage, irrigation road (etc)

Besides, there are unconditional grants, which can be utilized by the receiptant authority in any manner utilized for the purposes of development. Government sources of revenue is in exhaustive depending on the policies and location of the government authorities concerned.



There is a considerable volume of literature on revenue generation in the Northern, Southern and Eastern parts of the country. The study of revenue generation in the local government is not an exclusive preserve for any particular discipline.

Discipline such as economist, Town Planning Authority, Engineering Population Commission etc. have over the years reported quite extensively on this phenomena.

However, their investigation have lended to concentrate on the problem of revenue generation, the sources of revenue and how it is utilized. The geographical aspects of such studies have not been very much emphasized despite the very clear epidemiological interest of revenue generation in the local government and their links with the economic advancement of the nation, for the purpose of this study, we will review work on.

(a) Effect of incompetent revenue collectors.

(b) Local Government sources of revenue generation in Nigeria.


According to Obinna (1985) Revenue Generation refers to the sharing of the central collected funds, first between the relevant tiers of government and then amongst units of the same tier. There are three tiers of Government, made up of Federal, State and Local Government in Nigeria. The sharing of funds between these tiers is often referred to, as the “Vertical Generation”, while the redistribution among the units of the same tires, is known as the ”Horizontal Generation of Revenue”. The sharing of funds among the various forms of government of the federation is normally done in such a way as to reflect the structure of our fiscal federalism.

According to Nosa Igiabor (1990), he says that between 1967 and 1979, twelve states structure had been created and revenue generation also reflected the new structures in the sharing. In 1979, the Federation Account was created to replace the Distributable Pool Account of 1963 Republican Constitution. According to Odoh N.N. (1991) – Analysis of Revenue Generation in Nigeria (1994-1991), the importance of local government role is also broaden. The Abacha’s administration also echoed the position of local government councils, and even raised the percentage share of the federation account from 15% to 20%. Thus, with more now given to the local government councils now enjoys autonomy and a good place to work.

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At the budget speech of 1st Jan. 1999 by the President Abudusalami Abubakar, he retained the existing formula of revenue generation with 36 states in Nigeria.

Onyido B. C. (1991) Even before discussing the derivation principles of responsibility should be seen as a corner stone in determining the principle of sharing the centrally generated fund between the different tiers (Federal, States and Local) of Government and amongst the components that makes up a tier.

In short, the principle is such that each tier will have revenue commensurate with the level of statutory responsibilities bestowed on it.

Also in the terms of concurrent list which the different levels of Government participate in the provision of public goods like education, health facilities, accommodation in terms of housing etc. The residual list left for the government normally x-rays their level of responsibilities in the provision of public goods and services. That is the local government may not be in position to handle it, then all eyes will be on the “Father Christmas” which is the federal government.



In other to carry out these functions, local authorities need money. How will the fund be made available to local government.

The sources of these fund made with reference to local government returns, it was observed that there are many sources of fund for local governments depending on the location of economics development and the administrative bodies.

The sources of local authorities revenue according to Lawal include the following:

1. Personal Income Taxes.

2. Property Rates on owners of building.

3. Grants from government.

4. Miscellaneous sources-fees charged on Investment, court fine so on.

According to Okono P.A. (1994)

PERSONAL INCOME TAXES: – Local government

authorities collect income taxes from those who are not salary earners and also do not earn more than a certain amount per annum.

The councils keep a fractional parts of what is collected and pay the balance to the state government.

However, those who are salary earners do not pay to local government or council.

PROPERTY RATE: – This is tax levied on buildings and

other immovable properties. It is based on the ownership or occupancy of the building. It is annual payment. It is normally levied according to town and cities.

Income generation projects are also a source of revenue to the local government. The purpose of embarking on such project is to make profits and thereby increase the revenue, which the councils can derive. The building of market stalls, motor parks, and running of city transport services are example of income generating projects.

Grevos, G.O. and Adewum J.B. in their own contributions listed ten sources of local government revenue. They include the following:

1. General and community taxes.

2. Cattle tax.

3. Local rates.

4. Administration of local personal taxes.

5. Property rating.

6. Motor parts and market fees.

7. Fees miscellaneous investment and other revenue.

8. Court fines and fees.

Commercial undertakings and grants other fees are collected from local authority facilities such as.

9. The maternity services.

10. Dog licenses, bicycles licenses and slaughter permits and may others.

For the purpose of revenue is divided into four major section. It includes:

1. Government allocation.

2. Tax.

3. Rates and licenses.

4. Finally miscellaneous.

GOVERNMENT ALLOCATION: This is another major

source of local government revenue. Local government obtain allocations annually from the federal and state government. But in 1989 autonomies of local governments made it possible for local government authorities to collect their allocations directly from the federal government.

This provides solution to the problem being encountered by the local authorities when. The obtain their allocation through the state.

Before 1989, the state governments were entrusted with local governments allocation from federal government. And they at times divert the fund to other uses. However, about 40%-50% of the local authority revenue is determined from governments allocations, grants involves statutory allocations from the federal and state government.

This is the major sources of revenue to the local government in Nigeria.

Allocation from the state government also form a great part of the local governments revenue.

This form about 21% of the total revenue in 1995, 21% in 1990 and 43% in 1997 The sum of N2,359,577,92, N2,359,577, – 92 and N5,166,224.41 was received in 1995, 1996, and 1997 respectively.

This shows a reduction of about 25% in 1995 and 1996 and an increase of about 22% in 1997. The decrease can be attributed to the decrease in the local government projected expenditure in that year.

Miscellaneous group is not all regarded as a sources of revenue to the local government if there is no revenue, no project will be carried out in any area of operation.

There will be a decrease in the local government standard of living in particular and the country in general.


This Chapter describes the methodology of the study, which comprises the nature of data needed for the study, the source of the data, the method of investigation, research population and determination of sample, the method of data analysis, the problem encountered during data analysis, the problem encountered during data collection and the reliability of the data.


The main sources of data for this study were recorded receipts obtained from different local governments secretariats and in the revenue generation offices. This is based on the revenue collected between1995 to 1997.

However, some data were also collected through personal interviewed and secondary sources such as maps, publication by some government departments, individuals, lectures and proceedings from conferences.


In order to achieve the objective of this study, the following primary data were collected. The general receipt of different local governments showing the amount received as property rate, cattle rate, market fees, motor park fees, federal government allocations, state government allocation. All these, determines the amount of revenue the local government will be expecting in any given year.


This is secondary source were collected with the primary motive of familiarizing ourselves with study areas. In order to do this, the map of Enugu State was collected and it shows the location of Nsukka Local Government and Udi Local Government and their different headquarters.

This map was carefully studied and it serves as a guide for our study, this secondary sources of data afforded us with a clearer picture of the varieties of road condition in the local governments.

Furthermore, it helped us to identify the major area that constitute a problem to the revenue collectors. Moreover, publication by some government departments, lectures and proceedings from conferences and workshops were also used as secondary sources.


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Revenue generation divisions in local government are the department that collect revenue for the local government in Nigeria.

The primary purpose of collecting the revenue is to help the local governments embark on any project and also to pay their workers.

Thus, on the 1st of July, 1999 the Authors went to the Public Relations Officer (P.R.O.) of the Local Government where they got the permission to collect data from the local government.

They went to The Revenue Generation Division where they collected revenue receipt recorded between 1995 and 1998.


The research population for the study comprises the staff in the local government and some members of the communities in the local governments.

The members of the research population is 115 and loo staff are used as sample survey. This portion used as sample survey is based on the factor that it facilitates the easy collection of data for the study.


This Seminar has been analyzed with reference to the local governments in Nigeria. The purpose of the study was to examine the difficulties the revenue collectors are encountering in their duties, to have individual, government and organization, disposal financially to cater for their various well being; to access the ignorance of some tax – payers and tax collectors and to propose ways of improving the situation.

The main sources of data for the study were the revenue generation division in the government from 1996 to 1998 was collected and authors field survey

(Sept. – Oct.) 1999. The techniques used in analyzing data were by tabulation, percentage and figures.


The following recommendation arising from the finding of the study has thus become pertinent. In other to ensure effective increase in the revenue of the local government and adequate machineries, motor vehicles equipment and other important instrument needed should be provided to the revenue collectors.

Efforts should be made to increase the number of vehicles used for revenue collection and at least the breakdown ones should be repaired.

Efforts should be directed towards identifying many other sources of revenue to the local governments. Many sources of rate and fees are not dated because of economic changes in the country. There is a cause for replacement.

Example cart and truck are not increative source. The property tenement law of 1960 provides a number of ways to collect property rates.

The act required the authority to have a wide knowledge of all properties in each local government authority. The authority can make it unlawful for any person to occupy any building without registration.

Enlightenment campaign should be embarked upon by the local government, to educate the public on the importance of revenue collection, because unless people know what is expected of them in form of tax contributions, they will continue to dodge the tax.

They should be made to know the purpose for which the taxed money is utilized. It is disheartening to note that in this ten that century, some Nigerians are still disagreeing with the idea of paying tax. This is an act of ignorance and a sign of primitivism.

This enlightenment campaign should be a lesson to make sure that no taxable adult claim to be ignorant of the importance of tax.

This should be effective with the help of traditional rulers.

While doing this, the councils should ensure that adequate social amenities are being provided to the communities. This will act as a stimulus to tax payers to pay their tax when due.

No room should be possible punished by Court by the way of fine, which the court may impose on the defaulter and sufficient punishment to force people to pay their tax. The social ruling class professionals such as Doctors, Engineers and others are infact made to register with the council in their jurisdiction.

Moreover, the illiterate tax collectors that believe that the idea of sending them out to perform in their field is to make them corrupt and also divert the local governments money into their personal savings, should be dealt with by the way of withholding their salary.

The revenue agents should be going to the different communities with a policeman so that they can be protected under their hands against aggressive villagers.

Furthermore, the local government should build enough closed stalls in the major market at each local government of the federation and underdeveloped market should be developed quickly because these markets yield most of the local government revenue.

There should be need to up grade the road network. Finally, it is necessary to improve, standardize and modernize a permanent system of collecting and analyzing revenue. There should be good human relationship of the local government and the staff.

Their salary should be paid on time for them to achieve the objectives of the local governments. This should serve as a motivator because of the size and nature of problem, the government should approach it more realistically by establishing research Institute where in depth studies on revenue generation can be conducted.


A number of conclusions were drawn from this study. It is seen that the importance of revenue generation is to meet up the obligation of specific project for public interest such as road, electricity, hospitals, drainage, irrigation and others.

The sources of these revenue are divided into four including taxes, rates, licenses and miscellaneous and government allocation.

The revenue collection is not an easy tax and it involves many problems in the collection process.

1. Inhabitant of the local government tend to urban areas in search of white-collar job. This movement affect the revenue generated by the governments.

2. There is no good means of transportation lack of vehicle and bad network of roads and bad roads also cause a very big problem. This cause rapid wear and tear on the few vehicle available.

3. The lives of the revenue collectors are in danger; aggressive villagers and accused of robbery, because there is no policeman to execute them.

4. The workers are not well trained in the job. They are not skilled in the sense that when anybody is against the law they will not know.

5. The attitude of the revenue collectors was found to be very bad because they divert the fund to their private purse. This is becoming rampart and it is the major problem of the local government.

6. The delay of the High Court in judging the local government cases against any defaulter also constitute another problem.

It is known that the local government is like a house that is built on a stone that is going to last long and the revenue that would be based on efficient management is not available in the local governments. It is justified that this system can be improved if the recommendations above are implemented.

Problems Of Revenue Generation In Local Government Area Of Nigeria

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