Strategies for Improved Revenue Generation in Local Governments

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Local governments operate at the grassroots and are expected to provide services to their stakeholders. In a federal system like Nigeria, local governments are close to the people and hence could effectively alter socioeconomic and political conditions within their jurisdictions. Apart from providing and maintaining basic infrastructures, local governments can complement the economic activities of other levels of government. This of course depends on the availability and proper utilization of funds.

Revenue generation is therefore an important issue for Local Government Councils. It is through this activity that the Councils source the finance for
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The establishment of a full government apparatus fully supported with the symbols and instruments of power and authority.
2. A government with distinct responsibility for managing its finances through internal generation of revenue and complemented with allocation from the Federation Account.
3. A government with the capability to initiate its own development projects in such areas as roads, agriculture, health, and others.

This paper is however more interested in the 1976 reform in relation to the restructuring of the financial system. The reforms instituted statutory allocations of revenues from the federation account with the intention of giving local governments fixed proportions of both the federation account and each state’s revenue. This mandatory allocation was entrenched in the recommendations of the Aboyade Revenue Commission of 1977. The 1979 constitution empowered the National Assembly to determine what proportion of the federation account and a state’s revenue should be allocated to local governments. In 1981, the National Assembly fixed these proportions at 10% of the federation account and 10% of the total revenue of the state. In 1985, the States’ proportion was reduced to 10% of internal revenue. Local government’s allocation from the federation account was later amended to 20% and a little above that subsequently (see Table 1).

TABLE 1: Brief Historical Outline of Revenue Allocation Formulas in Nigeria ITEM Date Federal
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