The severity of Nigeria’s economic crisis dictates, that all available resources be effectively mobilized to reverse the deterioration of the economy. In recent time, the local governments in Nigeria have been assigned specific development roles by the constitution. But this should not be taken to mean or suggest that in the past local government did not contribute to economic development, for example, between 1955 and 1966, local governments were responsible for an average of twelve percent of total expenditures in the country.
In a federal system like Nigeria, local governments are close to the people and hence could effectively alter socio economic and political conditions within their jurisdictions. Apart from providing and maintaining basic infrastructures, local government can complement the economic activities of other levels of government.
Budget preparation and implementation at local government level becomes significant if macro-economic stability is necessary in the wider economy because if fiscal imbalance appears rampant at the local level, it could pose problems for macro-economic management of the economy.
Though the revenue allocation system mandates that certain fraction of the federation account be allocated to the local governments, these funds are never enough to meet expenditure requirements. This is so because the size of the account is related to revenue from oil, which is subject to fluctuations and the expectation of local governments far exceed the available resources. In a system characterized by ethnic and clan conflicts, state government have attempted for political reason, to frustrate their existence and defaulted on their statutory allocation local government now become financially and politically impotent, therefore, for all the problems that hinders the effectiveness of local governments, there must be a sound budget preparation and implementation.
