Assessment of the Factors affecting Low Revenue Generation and Utilization

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

This study sought to examines the factors affecting generation and utilization of revenue in Ganye Local Government Area. Nigeria runs a federal system of government that consists of three tiers, that is, the federal, state and local governments. Each of these spheres has constitutionally assigned responsibilities to discharge. According to Orewa, (1983), it has been generally agreed that no central government can satisfactory conducts administration wholly from the capital through civil servants, based at the headquarters. Thus, the need for a form of decentralization, according to him, such as will enable the government to reach out to the people at the local level, becomes imperative.  The introduction of decentralization framework in the service delivery among developing countries devolved responsibilities for public services, planning and delivery to local governments (LGs). Decentralization policy and system of governance in Nigeria was signed into law in the year 2020 with the main objective of building a more democratic government that is responsible and accountable to the public to promote capacity building to collect local revenues and support local choice into service (Langseth, 1996). 

Local Governments, which is our focus in this study, are the nearest governments to the people at the grassroots in Nigeria. In fact, 70% of the Nigerian population reside in the Local Government areas. Consequently it has the responsibility to articulate the needs of these people and formulate plans and strategies to realizing them. Even the urbanized cities are broken into Local Government areas such that the activities of State Governments are interwoven with those of the Local Governments.  However, LGs face challenges in raising local revenues to support their development needs due to capacity of the local communities and the local authorities to manage the handling systems of revenue collection in developing countries. Dang, Bako and Lalu (2017) defines local revenue as the sub total of all categories collected from a number of sources like market dues, fines and penalties, parking fees and the like. LGs to a large extent depend on central government (CG) transfers, which are highly conditional and limit their discretionary powers (Carroll & Johnson, 2010). Elsewhere in the world, local revenue collection helps to achieve service delivery in the local government by co-funding development projects (Fjeldstad & Heggstad, 2012). 

1.2 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.  The spending of most local governments is not only characterized by waste but also by very pervasive corruption. Although corruption is described as a cankerworm found in every facet of the Nigerian society, it is particularly worrisome at the local government level. Most Nigerians believe that public funds are just shared among government officials, cronies and their political associates. This may appear exaggerated. But what is clear though is that corruption is so entrenched at the third tier of government that it is obvious to everybody that there is not much development to show for the huge financial resources that have accrued to the councils. Thus, the views of Nigerians collated in the Political Bureau Report in 1987 still remain valid up till today: that despite the strategic importance of local government to the national development process, its contribution has been minimal.

Therefore, a study of this kind pushes the frontier of existing knowledge in this area. This study therefore is poised in finding out factors affecting low revenue generation and utilization in Ganye Local Government Area.

1.3 Objectives of the Study

The main aim of the study is to assess factors affecting low revenue generation and utilization in Ganye Local Government Area.

The following are the specific objectives:

1. To examine factors responsible for low revenue generation 

2. To assess factors responsible for low revenue utilization

3. To suggest possible ways of improving low revenue generation and utilization in Ganye Local Government Area.

1.4 Research Questions

The following questions will guide the study:

1. What are the factors responsible for low revenue generation in Ganye Local Government Area?

2. What are the factors responsible for low revenue utilization in Ganye Local Government Area? 

3. What are the possible ways of improving low revenue generation and utilization in Ganye Local Government Area?

1.5 Significance of the Study.

The study will benefit Ganye local government by helping them formulate policies and strategies to develop programs to increases local revenue collection. This research work when successfully carried out will be of immense value to policy makers as it will help them towards adopting better strategies in their policy strategies. The study will be beneficial to policy makers of Ganye Local Government Area and other local governments in finding solutions to the problems of fluctuations in the local revenue collections and appraise their performance. The research will be beneficial to other academicians as they use it for literature review while carrying out research in the similar area. 

1.6 Scope and Limitation of the Study   

The scope of this research project will be confined to Ganye local council only. The sample and sub-sample of the research population is due to financial difficulty, time and short-term services of those handling logistics to overcome difficult village terrains. All these foreseen constraints form the project limitations.

1.7 Research Methodology

Data for this study were derived from both primary and secondary sources, primary data was collected through questionnaire administration and the secondary data were sourced from published and unpublished materials from the library in form of Journals, textbooks, magazines, maps as well as the internet etc.

1.7.1 Sampling and Sampling Techniques

Ganye Local Government Area which has an estimated population of 216,990 (NPC, 2006) is made up of ten wards each which include Timdore, Sugu, Yebbi, Jaggu, Gamu, Sangassumi, Ganye 1, Ganye II, Bakari Goso and Gurum of which five (5) wards were selected and they include Sugu, Ganye I, Bakari Goso, Gurum and Yebbi. Purposive sampling technique was employed to sample the above stated wards with a sample size of 150 respondents. 

1.7.2 Instrumentation

The primary data will be obtained through structured questionnaire. The questionnaire consists of two sections; section ‘A’ is the bio-data of the respondents and section ‘B’ consist of the main questions for the study. The recommendations made by the supervisor will be duly noted and corrected, which will validate the instrument and be used for the research work. 

1.7.3 Administration of Instrument

The questionnaire will be personally administered to the respondents and will be collected after due completion by the respondents.

1.7.4 Rate of return

The instruments for this research work will be directly administered by the researcher to the respondents. The researcher will collect the questionnaires back from the respondents after completion; this was to ensure a 100% rate of return.

1.7.5 Method of Data Analysis

Frequency and simple percentage in the tabula form will be employed because Statistical analysis will be used.

1.8 Definition of Terms

The following terms and concepts are hereby defined within the context of this study:

Local Government: This is a delimited territory that stands as the third tier of the government that is headed by an executive chairman

Revenue: revenue as the total income generated from federal, state and local government 

Revenue generation: these are the means and methods used in generating revenue.

1.9 Organization of Chapters

This work is organized into five chapters. Chapter one deals with the introduction, background to the study, statement of the research problem, objectives of the study, significance of the study, scope and limitations of the study, research questions, methodology, definition of terms and lastly organization of chapters.

Chapter two will comprise of literature review and theoretical frame work. Chapter three will concentrate on the historical development of the study area (Ganye local government council) as well as the subject matters. Chapter four will deal with data presentation and analysis. Chapter five will deal with summary, conclusion and recommendations.