LOCAL GOVERNMENT ACCOUNTING IN NIGERIA: ISSUES PROBLEMS AND PROSPECTS

Description

LOCAL GOVERNMENT ACCOUNTING IN NIGERIA: ISSUES PROBLEMS AND PROSPECTS

ABSTRACT

In this research work titled “Local Government Accounting in Nigeria: Issues, Problems and Prospects” with particular reference to Enugu North Local Government Area of Enugu state. The researcher examined the financial relationship of local government with state and federal government. Identified the current sources of revenue in Enugu North Local government area and how it is getting fund to execute community projects and services. Identified the shortcomings, if any, of financial management in Enugu North Local government.  And also proffered possible solutions on how local governments in Nigeria can improve on their revenue base. Data for the study was sourced from two main sources which include Primary and Secondary sources of data Collection. Primary data: questionnaires and oral interviews were used to collect information from the respondents. Secondary data: journals, and other relevant materials relating to the area of my investigation will be review. Extensive literature review was carried out on the direct literature and indirect literature on books, journals and past works. The research instrument used in this study includes oral interview and questionnaire. The questionnaire is structural as to contain both close and open ended question. Simple tables and percentages was used in treatment of data. The researcher discovered that there was an ample that the greater number of local governments employees are unqualified. It was also discovered that local governments receive grants from both the state and federal government. Based on the findings the research hereby recommend that Efforts should be intensified in the collection of revenue and continuously seek new avenues for local taxation especially federal and state cannot provide sufficient finance for the needs of the local government given the rising cost and expansion in the  activities of this level of government.

CHAPTER ONE: INTRODUCTION

1.1 Background of the study

Local governments are the third tier administrative structure created in Nigeria to decentralize governance, bring government closer to the people at the grassroots and render social services Agba, (2013) pivotal in engendering national development.

They are purposefully located and responsible for the governance of about 70 percent of the estimated 152 million people of the Nigerian population.

Thus, they are said to be in a vintage position to aggregate and articulate the needs of the majority of Nigerians and facilitate rural development through the application of the needed financial and human resources in their operations. Generally speaking, from 1999 till date, local government operations and performance presents an enigma in terms of justifying the reason for their creation. The demands and expectations from local government councils over the years or within the period under review have been on the increase while the finance required to deliver the dividend of democracy and good administration at the grassroots continue to dwindle, inadequate, mismanaged and misappropriated.

Local government administration in Nigeria have been characterized by bazaar mentality, poor accounting systems, unavailability of reliable data required for planning, over politicization, inadequate finance and poor revenue collection, greed, unnecessary government interference, lack of direction and corruption. The statutory allocations from the Federation Account because of poor management are said to be inadequate to cover the financial obligations of local government councils in terms staff salaries, social services and serving of debts. This shows that finance is vital to the affairs of both public and private organizations to enhance good governance; it involves plan and control of financial resources as a separate activity. Acknowledging this, Adedokun (2014) notes:

Finance is like a thread that runs round the cloth. If the thread is pulled, wrongly at one end, it will affect the design of the cloth and destroy its beauty. That is finance. It must be handled with care. It must be disbursed absolutely according to the financial regulations. One area which has remained neglected over time by the local governments in Nigeria is revenue generation. The usual practice in this country (Nigeria) is that political parties and individual candidates often make promises to the electorate during electioneering campaigns without being explicit on how they intend to finance such programmes. In line with this practice, candidates seeking political offices often unfurl vote-catching programmes with scarcely any attention to the question of funding (King, 2015). The result is that ordinary citizens may witness very little government activities and the impact of the government will be felt in almost all sphere. This may lead to disappointment. It is quite obvious that very little thought, if any, is given to how funds were to be generated to implement the vanous programmes promised to the electorates.

Local governments across the country are particularly guilty in this respect. Chairmen complain of their inability to meet their wage bills with the current level of the local governments. Chief executive often tries without success to slash the wages of their workers while others may result to staff retrenchment in other to save money to implement programmes.

King (2015) argued that the acute dearth of fund currently facing the local government squarely attributed to lack of creativity on the part of the local government in seeking alternative sources to complement the allocation from the Federation Account. Most local governments are suffering from hang-over of overdependence on the centre assistance, a norm the military governance. They are yet to break away from the practice of relying almost entirely on hand-out from the Federal Government. The federal government, in turn also depended entirely on revenue from oil and its apportionment of the lion’s share of the Federation Account to itself Local government will continue to be one of the prime institutional movers of development in Nigeria and their importance and impact on the daily life of citizens cannot be over- emphasized. People are intimately affected by the activities of local government on a day- to-day basis and Nigeria, in particular, local governments, have historically provided services of importance to

Citizens, literally from cradle to grave the standard of living of Nigerians either in rural or urban areas are inevitably affected by local government activities through the provision or non provision of basic services such as water supply, roads, health and educational services etc. Local governments also remain the focal point of promotion of development and cultural revival through community development projects and mobilization of human and material resources for developments.

The various Constitutions of the Federal Republic of Nigeria have accorded local government the status of a third tier of government in Nigeria’s robust federal structure. However, some of these constitutions have inherently whittled down the import of this third tier status (Bello- Imam, 2012 p. 55). Each of the three tiers of government has its assigned financial arrangement. Between 1976 and 1992, the federal revenue allocation formula vis-a-vis local government vacillated from ten percent (10%) of the Federation Account to twenty percent (20%). They are also entitled to ten percent (10%) of the internally generated revenue of the state government. These are in addition to revenue from the traditional but internal sources of local government.

Over the period (1976-1989) it was discovered that the amount internally generated by each local government councils, was very small to depend almost entirely on the federal government for financial transfer for the performance of their statutory functions.

1.2 Statement of the Problem

The local government reform, which drew heavily from the Brazilian experience and which took firm root in Nigeria local government was included in the mainstream of the country’s intergovernmental relations and administrative arrangements. The reform, that was referred to as great and a real breakthrough gave prominence to local government making it possible for them to have legal entities which in turn entitled them to perform certain functions that have since been contained in the 1999 Federal Republic of Nigeria constitution. Even though the reform clearly articulated the idea of a three- tiered federation in Nigeria, its consequence recognition of revenue sharing and administration arrangement has led to many problems which, according to Adamolekun, (2008) it can be broadly classified into six categories environmental conflicts, structural organizational problems, financial problems, shortage of limited manpower, the place of traditional authority in local government and political and bureaucratic corruption. These problems largely remained un-resolvable within the Nigerian political landscape even during this period of the fourth republic. These problems have been more compounded by the 1999 constitution which makes the institution of local government in Nigeria (particularly in its creation and control) a residual matter for state governments. However, of these problems faced by local government in Nigeria, it is quite clear that the most recurrent ones are finance and sizeable mismatch between their statutory functions and responsibilities; the flow of financial resources available to them; and constraining limits of their tax-raising powers or fiscal jurisdictions. There is no gainsaying the fact that in Nigeria, the degree of decentralization of expenditure is higher than the degree of decentralization of revenue thereby causing a great divergence between sources of revenue and functional expenditure in the local government. This means that there is lack of the necessary symmetry hence the problems of non-correspondence or vertical imbalance. This study is therefore; set to appraise local government accounting in Nigeria. To what extent is the chosen local government area (Enugu North LGA) exploit the sources of self-financing (Internally Generated Revenue) available to her? Is Iwo local government area entirely dependent on external revenue from the state and federal government? Can we identify any of the factors that are hindering the improvement of the financial base of this local government area? What other potential revenue sources abound which this local governments could tap to improve its efficiency and effectiveness? All of these shall be investigated and examined in the course of this study.

1.3 Objectives of the study

The general objective of this study is to examine local government accounting in Nigeria and to analyze the viable financing options currently available to local government councils. The specific objectives include:

1.     To examine the financial relationship of local government with state and federal government.

2.     To identify the current sources of revenue in Enugu North Local government area and how it is getting fund to execute community projects and services.

3.     To identify the shortcomings, if any, of financial management in Enugu North Local government.

4.     Proffer suggestions as to how local governments in Nigeria can improve on their revenue base.

1.4 Hypotheses

Hypothesis 1

Ho: There is no financial relationship between local government, state and federal government

Hi: There is financial relationship between local government, state and federal government

Ho: the funds gotten from current sources of revenue of Enugu North Local government is not properly used to execute community projects and services

HI: the funds gotten from current sources of revenue of Enugu North Local government is properly used to execute community projects and services

Ho 1: There is no shortcomings m financial management in Enugu North Local government area?

Hi: There is shortcomings m financial management in Enugu North Local government area.

Ho: there are no ways by which local governments in Nigeria improve on their revenue base.

Hi: there are ways by which local governments in Nigeria improve on their revenue base

1.5 Research Questions

1. What is the financial relationship between local government, state and federal government?

2. What is the current sources of revenue of Enugu North Local government area and how does he get fund to execute community projects and services?

3. What are the shortcomings of Enugu North Local government area?

4. How local governments in Nigeria improve on their revenue base?

1.6 Significance of the study

Our local governments have in these recent times been riddled with financial and accounting problems.  These undoubtedly have stultified the unflinching efforts of most local governments to instill and of course restore sanity in the system, hence the need for a study on the problems and prospects of contemporary local government finance and accounting in Nigeria.

The study leaves no stone unturned in examining the problems confronting the existing revenue sources of the local governments and appraises talent revenue resources which could be used to fortify the overall revenue base of the local governments.

This study therefore points out significantly that improved local government finance and accounting system in the cornerstone to the much desired economic growth and development.  It potentially serves as a guide to policy making in designing a better strategy for the rural development in Nigeria.  The study also forms a source of reference in other related topics and to researchers in similar topics.