The Problems and Prospect of Generation and Management of Revenue in Nigeria Local Government

1.0 Introduction

1.1 Background of Study

Historically, revenue generation and management in Nigerian local governments dates back to the colonial era when the British administration introduced various forms of taxation to finance local governance. The Native Revenue Ordinance of 1917 marked the beginning of a formalized system of revenue collection in Nigeria, primarily through direct taxation imposed on individuals and businesses (Ekpo & Ndebbio, 2019). Following Nigeria's independence in 1960, local governments were granted more autonomy in revenue generation under the 1976 Local Government Reform, which aimed to strengthen their financial independence and improve service delivery. The reform introduced a uniform local government structure across the country and provided them with statutory allocations from the Federation Account to supplement their internally generated revenue (Ola & Tonwe, 2009).

According to Ekpo & Ndebbio (2019), local governments serve as the third tier of government in Nigeria and are responsible for grassroots development, provision of essential services, and maintenance of infrastructure. To effectively discharge these responsibilities, they rely on revenue generated from internal and external sources (Ekpo & Ndebbio, 2019). Internal sources include taxes, levies, and fees, while external sources consist of allocations from the federal and state governments. However, many local governments, including Asa Local Government in Ilorin, face significant challenges in revenue generation and management, limiting their ability to provide adequate public services (Bello-Imam, 2017).

Revenue generation according to Ekpo & Ndebbio (2019) refers to the process through which a government or organization collects funds from various sources to finance its operations and services (Ola & Tonwe, 2009). In the context of local government, revenue generation involves collecting funds from taxes, fees, grants, and other sources to meet the financial needs of grassroots governance (Ekpo & Ndebbio, 2019). Revenue management, on the other hand, entails the efficient planning, collection, allocation, and utilization of these funds to ensure sustainable development and effective service delivery (Bello-Imam, 2017).

Olusola & Akinyemi (2020) stated that the reliance on statutory allocations from the Federation Account has created a situation where local governments struggle to generate sufficient internally generated revenue (IGR) to fund their operations (Ola & Tonwe, 2009). Asa Local Government, like many others, has encountered difficulties in mobilizing revenue from its local sources due to inadequate enforcement mechanisms, tax evasion, and public resistance to taxation (Olusola & Akinyemi, 2020). Corruption and financial mismanagement further exacerbate the problem of revenue generation in local governments. Studies have shown that leakages in revenue collection and poor accountability in financial management contribute significantly to the inability of local governments to effectively utilize available resources (Adeyemi et al., 2021). The misappropriation of funds, lack of transparency, and weak institutional frameworks hinder the effective management of public funds, thereby limiting the impact of government spending on community development. Therefore, this study aims to provide an in-depth analysis of the factors affecting revenue collection and management in the local government while offering viable solutions to enhance financial sustainability and service delivery.

1.2 Statement of Problems

Investigation revealed that many residents in Asa Local Government do not fully understand the importance of paying taxes and levies, which is affecting voluntary compliance (Ola & Tonwe, 2009). The lack of education on tax responsibilities is making it difficult for the local government to create a tax culture that supports sustainable development. When citizens do not see the direct benefits of tax payments, they are more likely to resist taxation. Also, many businesses and individuals within the local government area are reluctant to pay taxes due to a lack of trust in the government's ability to use public funds responsibly.

In addition to financial mismanagement, outdated revenue collection methods are slowing down the efficiency of revenue mobilization. Many local governments, including Asa Local Government, are still using manual methods for tax collection, which is leading to revenue losses, fraud, and administrative delays (Okoli & Akindele, 2018). The lack of modern technology in revenue collection is making it difficult to track payments, enforce tax laws, and optimize revenue streams. Without adopting digital payment systems and automated financial management processes, the local government is struggling to enhance its financial performance.

Furthermore, there are cases where funds generated at the local level do not translate into meaningful development due to leakages, embezzlement, and lack of accountability (Adeyemi et al., 2021). Poor financial oversight is allowing inefficiencies in revenue management to persist, making it difficult for the local government to improve infrastructure, healthcare, and education services. It is against the backdrop that this study seeks to address these problems by exploring the problems and prospect of generation and management of revenue in Nigeria local government.

1.3 Aim and Objectives of Study

The aim of this study is to examine the challenges and prospects of revenue generation and management in Asa Local Government, Ilorin. To achieve this aim, the study seeks to fulfill the following objectives:

1. To analyze the current sources of revenue available to Asa Local Government and assess their contribution to local governance.
2. To examine the challenges affecting revenue generation and management in Asa Local Government.
3. To evaluate the impact of poor revenue management on the delivery of essential public services within the local government.
4. To assess the role of corruption, political interference, and financial mismanagement in hindering revenue generation at the local government level.
5. To explore innovative strategies, including digital revenue collection systems and policy reforms, that is improving revenue generation and financial accountability.
6. To recommend practical solutions for enhancing revenue mobilization and ensuring efficient financial management in Asa Local Government.

1.4 Research Questions

Based on the stated objectives, this study seeks to answer the following research questions:

• What are the current sources of revenue available to Asa Local Government, and how do they contribute to local governance?
• What are the major challenges affecting revenue generation and management in Asa Local Government?
• How does poor revenue management impact the delivery of essential public services within the local government?
• In what ways do corruption, political interference, and financial mismanagement hinder revenue generation at the local government level?
• What innovative strategies, such as digital revenue collection systems and policy reforms, is improving revenue generation and financial accountability?
• What practical solutions is enhancing revenue mobilization and ensuring efficient financial management in Asa Local Government?

1.5 Research Hypothesis

Based on the stated objectives, the following hypotheses are formulated:

• H₀1: There is no significant relationship between revenue generation and the delivery of essential public services in Asa Local Government.
• H₀2: The current sources of revenue in Asa Local Government significantly contribute to local governance and development.
• H₀3: Poor revenue management significantly impacts the quality and efficiency of essential public services in the local government

1.6 Significance of Study

The outcome of the research findings will serve as a useful resource for local government officials by offering practical recommendations on how to enhance revenue mobilization and improve financial management. This research will also help in formulating policies that strengthen fiscal decentralization and improve financial autonomy for local governments in Nigeria.

Furthermore, the study will contribute to creating awareness among residents about the importance of paying taxes and levies, encouraging civic engagement in revenue generation. It will also benefit researchers and scholars by expanding existing knowledge on local government finance and governance in Nigeria.

Lastly, academics and researchers will benefit from this study as it will contribute to the existing body of knowledge on local government finance, governance, and public administration. It will serve as a reference for future research on fiscal policies, revenue mobilization, and financial management in local government systems.

1.7 Scope of the Study

The scope of this research is focused on the problems and prospects of revenue generation and management in Asa Local Government, Ilorin, Kwara State, Nigeria.

1.8 Limitations of the Study

During the course of this study, there were some problems encountered which stood as limitations to the research work. Some of the limitations include:

1. Delays from Respondents: Many cooperative members had busy schedules and were unable to respond promptly to surveys and interviews. Some respondents needed repeated follow-ups before providing their inputs, which extended the research timeline beyond the initial plan.
2. Financial Constraints: This limited the ability to expand the study to more cooperatives across different locations. The cost of transportation, printing of questionnaires, and other logistics affected the number of cooperatives that were studied, reducing the diversity of the sample.
3. Time Constraints: Conducting a broader study across multiple states or regions would have required more time for data collection and analysis. The limited timeframe influenced the scope of the study, making it necessary to focus only on selected primary cooperatives in Lagos State, Nigeria.

1.9 Definition of Terms

Revenue:

Revenue refers to the income generated by a government from various sources, including taxes, levies, grants, and other financial inflows, to fund public expenditures (Ola & Tonwe, 2020). In the context of this study, revenue refers to the funds collected by Asa Local Government for the provision of essential services and infrastructural development.

Local Government:

Local government is the third tier of government that operates at the grassroots level, responsible for governance, administration, and service delivery within a defined geographical area (Arowolo, 2018). Asa Local Government in Ilorin, Kwara State, serves as the case study for examining revenue generation and management practices.

Revenue Generation:

This refers to the process by which local governments mobilize financial resources through taxation, levies, fees, and other revenue streams (Bello & Danjuma, 2019). Effective revenue generation is crucial for sustaining local government operations and ensuring community development.

Revenue Management:

Revenue management involves the efficient collection, allocation, and utilization of financial resources to meet governmental responsibilities (Adeyemi & Ojo, 2021). In Asa Local Government, proper revenue management determines the effectiveness of public service delivery.