Revenue and Expenditure of Local Government Administration In Nigeria (Case Study Of Mbanabo North Local Government



Local government in Nigeria was legally recognized in 1976 through the local government reform of 1976, and subsequently, it was identified as the third tier of government, while its first appearance reflected in the 1979 constitution of the Federal Republic of Nigeria.

For some decades ago, some forms of reforms/ modification have been found in the local government administration for instance, in July 30, 1990, the federal military government set up a seven – man committee to review the financial memorandum for local government in the federation. The committee was headed by Professor J.B Adewumi.

The committee was mandated to take a close look at the implementation guidelines in the application of civil service reforms of local government especially as they relate to budget format, in Mbanabo north Local Government. The budgetary control, financial responsibilities of local government, the constitutional role of each local government for the application in the economic development of the state in which it is located etc. in the course of its deliberations, the committee covered all the major reforms in the local government administration. It will be worthy to note that in 1976, there were 301 local government and only 12 states in the federation.

Presently the local governments is about to undergo another reform or general overhaul. In a presidential speech by olusegun Obasanjo recently titled “Why we must restructure local government” Obasanjo highlighted three major reasons as follows.

1. The non performing or gross under performance of local governments

2. The high cost of governance and near prohibitive cost of electioneering campaigns to individual contestants in Nigeria.

3. Atomization and continual fragmentation of locals councils including division of towns and cities into unworkable min local governments.

Since 1976 (about 28 years ago,) local government administration has been commended as in the view of Ijewere (1997: 19) on his paper presentation titled “ Financial empowered and Accountability of local government” he said “local government have helped considerably to bring development closest to the rural areas where majority of Nigerian reside and beside it acts as an accelerated economic machine towards progress in the rural areas. It was established because it is the only avenue of bridging the information gap between the rural populace and the central leadership.

At independence in 1960, there were three regions, northern regime, western region and eastern region. And in 1963, a southern region, mid western was democratically created out of the Western region. As at 1963, according to Adeshina (2003:9) north had one regime, and 14 provinces while the eastern regime had twelve (12) provinces. However, when the government of General Yakubu Gowon (rtd) delved into the issue of state creation in 1967, the former northern region was divided into six states and the same number of states were carried out of the Western, mid western and east region combined.

Then between 1975 and 1996, the military multiplied the 41 divisions of the north to twenty (20) states and 419 local governments, and the 55 divisions of the south to 17 (seventeen) states and 355 councils. This has been given us 36 states including Abuja federal capital territory and a total of 774 local councils.

In June 2003, president Obasanjo inaugurated a 28 member technical committee to determine the tenor and texture of reform of the council to be headed by the ETSU of NUPE. Achaji Umaru Ndajoko. The president had leveled allegations of non performance financial irregularities and recklessness/inefficiency of the system. This development there suspended indefinitely the local poll which was scheduled to hold on Saturday, 21st June, 2003.



The role of local government as an agent of national development cannot be emphasized. Local government as follows:-

The reconciler of community opinion

Consumer of pressure group

Coordinator of services in the field

Agent for responding to rising demand.

There is no doubt that Local government facilitate democracy and provide a vehicles for formulating new polices and promising idea. According to ugwu (1998)-109) Local government plays obligation and discretionary functions. It will also be noted that local government (Basic constitutional and Transitional provision) decree 1989 gave specific function to Local government. It is the duty of Local government to formulate economic plans and development schemes in it respective areas of administration.

According to Adike Jinadu (2003) a political scientist with Lagos state University (LASU) on his paper a power and functions of Local government “ the primary purpose of Local government is to develop power to the local level in such a way as bring government and development to the people. He further argues that the third tier of government is to ensure participation of the local people in the administration of government at the grass root. Local government have been prominent in the areas of community education, health case services, coordination of community based development, promotion of economic activities at the rural area and cross fertilization of ideas amongst other tiers of government.


The impact of Local government have been felt in so many ways which are not limited to Urban/ rural transportation, liaising with local farmers in the procurement and finance of agricultural products, vertinary services, environmental services, town planning and the coordination of local chiefs. Local government is the only contact in which the masses in the area has with other tier of government because the state cannot cook into all the nooks and crannies of the country, this was the view of Dr. Derin Ologbenla (2003) of the political science Development of the University of Lagos (UNILAG) prince Ademola Adeniji – Adele (1993) on his paper titled “ the role of municipal authorities in infrastructure development” as stipulated by the constitution from the more complex process of plan formulation, levies, taxes, construction work to simple roles of street naming and numbering of houses. According to him (Adele 1993) Local government role is subdivided into two Via (i) Constitution and (ii) responsibility.



No organization will survive without fund. Therefore revenue/ income is one of the reasons in which the council can carry out her statutory functions to the populace. The constitution, sec 7 (3) made provisions for the council to venture into economic planning and development activities within her area. Sources of Local government revenue can be classified into three (3) groups; namely statutory, permissive and incidental sources of revenue.


a. Statutory collection of 2% from the federation Account paid directly to the council by the federal government FG = 48.5%, state government 24% and special fund 7.5% while Local government is 20%.

b. 10% of the state derived income from all sources paid to the Local government. This sources ought to be satisfactory, but some if the states are even demanding that the 10% share of Local government revenue generation be paid to them.

c. Fees and other changes imposed by the council under its instruments


II. Permissive sources

a. Radio and T.V licenses, special rates fees and fines.

b. Registration and license fees

c. Tenement rates T.C Project tax

d. Grants and aids.

iii. Incidental sources

a. Proceeds from economic projects within its areas e.g Community plantation.

b. Local direct contributions e.g. village levy on development project.

c. Grant from the federal and state governments.

d. Loans granted by state government or money borrowed from other sources.

e. Investment income such as interest and dividends.

f. Income generated from maintenance of market stalls, car park and public conveniences.

g. Income derived from maintenance of cemeteries and burial grounds.

h. Income derived from registration of Births, deaths and marriages.

i. Income derived from regulation and control of outdoor advertising.

j. Movement and keeping of pets, restaurants

k. Income derived from naming streets, roads.

l. Sale of sized goods, boarded vehicles, etc.

m. Collection of merriment tax e.g. use of streets for ceremonies.


According to Orewa (1968), the raison d’etre of local authority is to collect revenue efficiently and to use that revenue to provide as many social services as possible for its taxpayers while maintaining a reasonable amount of revenue. A commercial cannot therefore be idea from the financial point of view if it collects its revenue in a ship- shed manner and devotes a lange percentages of it to maintenance of a top heavy administrative set up with a relatively small proportion of the revenue left for the provision of social services which are of direct benefit to the local inhabitant.

The expenditure pattern of local government administration especially that Mbanabo North Local Government could be said to be subdivided into two major parts namely Capital expenditure and recurrent expenditure. However, the chairman is the chief according to officer of the area and is being supported by other executive member like the Deputy chairman, secretary treasurer, the respective head of department and the legislative organs amongs tother rank and file. There is always a routine and approval method of operation. Before any expenditure is uncured from the appropriate office of officer, then for the officer, an authority to incur expenditures (AIE) is expected to be in line with the budget for the years so as to be guided and be prudent in expenditure.


Capital expenditure undertaken by local government includes but not limited to the following

i. Construction of mini bridges within the area including calvets.

ii. Purchase of official vehicles, buses and machines for the council

iii. Engagement into market development building of abattoir.

iv. Construction class room, building of mini stadium

v. Building of amusement parks, secretariats and staff quarter.

vi. Building of health centers and vertinary

vii. Purchases of office equipment like computers, typewriters, air conditioners, refrigerators, etc.

Where these assignment tend to gulp so much by the council, such capital expenditure are usually undertaken in piece – meal or in phases to enable other obligations of the council to be carried out in line with the budget proposal. There is no doubt that some of these capital and commercial ventures project are expected to yield some forms of income to the council.

Recurrent expenditure includes all those expenditure apart from the capital expenditure. Some of them includes expenditures on salaries, wages, allowances, rents, and rates, maintenance of office machines, vehicles cost of securing the premises and local government assets and all other incidental costs incurred in the smooth running of the council. However, this is also not limited to the supply of office utilities like machine/ computer ribbon, typing sheets, pencils, pen, ruler, etc. the expenditure pattern is also expected to be in line with the current years budgetary allocation/ assumption. These expenditure are to be matched with the whole embodiment of the revenue and the positive balance should be in favour of the council.


Every organization, whether electronic, social or political, males plan for the future. An organization without plan is no longer an organization. It will be linked to an individual without coordination in his/ her activity, this was the view of Nwoze (2002:54). Plans may vary in degree and dimension, and as organization vary in size, so also their plans depend on the extent to which different organization plan their future. Their successes also depend on the amount of plans injected into the effort of the organization.

Common organizational goals include maximizing profit or achieving satisfactory goals/ levels of performance and profit satisfaction

According to Copeland and Descher (1979) achieving continual growth or ensuring the survival of the organization, avoiding risk in making investment and performing a social since desired by others is vary important (Copeland: 1979: 256) it is with this view to achieving their organizational goals that great emphasis is placed on budgeting. According to the chartered institute of Accountants, budget is a plan quantified in monetary terms, prepared and approved prior to a defined period of time, usually showing income to be incurred within that period and the capital to be employed to attain given objectives (Owler 1984: 482) Horngrean and Forster (1984:139) described a budget as a quantification expression of a plan of action and an aid to coordination and implementation, male and usry (1976: 4720 described budget as a plan expressed in a financial and other quantificative terms and stressed that the terms “Budgeting” and “profit planning” are synonymous.

However, it is very clear that budgeting is a vital instrument that aids the overall revenue and expenditure pattern of local government administration should not be weak so as to detect all necessary loopholes of financial irregularities like forgery. Embezzlement, mis appropriation of fund, reckless spending, etc. in the view of Aguolu(1998 –36), internal control is the whole system controls, financial or otherwise, established by management in order to secure as quick as possible, the accuracy and reliability of the records, run the business in an orderly manner and safeguard the company’s assets, its objective being the prevention or early detection of fraud and errors. It may include internal auditing.

Some financial control in local government could be subdivided into two.


a. Issuance of financial authorities e.g. warrants

b. Appointment of committee for different services

c. Centralization of all payments to and out of the council.

d. Preparation of standing orders and instructions on the signing of cheques issued.

e. Preparation of estimates of income and expenditure for the year.



a. Parliamentary control

b. State and federal government control

c. Control by the general public

d. External auditors control


This is also called federal government account. In accordance with section 24 of finance (control and management) act 1958, the accountant general shall sign and present to the Auditors General of the federation his account showing fully the financial position on the last day of each financial year. The consolidated revenue fund (DRF) account is subdivided mainly into two i.e inflows (credit ) and outflows or charges from CRF(Debits), this therefore implies that the inflows is credit accruing to the account while the outflow are debits i.e. payment e.g. for all recurrent expenditure heads, salaries and consolidated allowances of public officers.

Furthermore, no money shall be withdrawn from the consolidated revenue fun (CRF) of the state or any other public fund of the state except as prescribed by the house of assembly and except through the dues process or recommended by law.


Over the years, the local government had carried out insufficient fund to carry out her statutory obligation. Other associated problems include the following.

a. they have limited revenue sources

b. Absence of loan funds

c. Arising from above, the inability to proceed with essential capital development projects.

d. Poor revenue collection with the result that sometimes staff salaries cannot be paid promptly.

e. The non payment or delay in payment of federal/ state grants or share of tax revenue to the local authorities especially in Mbanabor North local government.

f. Non viability to certain local government authorities especially those in areas of small population.

g. Rising cost and increasing demand for improved services.

h. In- effective financial control and management.

i. Sometimes, the state government makes compulsory deduction from the local government fund e.g. when the federal government with drew some money from local government account to purchase Jeep (Vehicles) numbering 100 at a total cost of N5.56 billion for the Nigeria police. Also during the recent election 2003. some state government deducted as much as N10 million each from some local government fund to assist in political campaign.


local government administration in Nigeria from the year (2003-2004) is characterized with the transition to civil programme lending to the ushering in of the 5th democratic elected government of the federal republic of Nigeria which finally saw the emergence of chief olusegun Obasanjo as the re-elected (2nd tenure0 president of Nigeria.

However, within the period under review (2003-2004) the local government administration was left under the cusody of transition committee chairmen who were appointed. This implies that the elected local government chairman (1999-2003) were asked to relinquish power within year 2002 to adequately make adequate preparation for the smooth transition to new democratic government. Subsequently, a new caretaker committee chairman were appointed by state government in all local government areas of the federation which offers the elected chairman (1999-2004) to prepare for the next election. This implies that the power of incumbency did not arise for local government chairman and ward councilors.

revenue and expenditure pattern of local government in Nigeria measured some hitches, perhaps, some of the transition committee chairman were not seasoned administrator and were not democratically elected. Also some of the transition chairman used the short opportunity to misappropriate and indulge into reckless spending and embezzlement of fund. This therefore, brought some distortion in the various local government as regard their revenue and expenditure pattern. The local government election which was scheduled to hold in June 2003, was unconstitutionally suspended indefinitely.



One of the main reason for the establishment of local government council is to devolve power to the local level in such a way as to bring government and development closer to the people especially at the grass – root. The local government have been prominent in the Co-joint administratation of the nation because they play obligatory and discretionary function. In addition, it is the duty of local government to formulate economic plans and development schemes in their respective areas of jurisdiction.

However, in this critical analysis of revenue and expenditure pattern of local government, adequate effort must be paid in keeping relevant records or documents relating to local government activities. When approvals are received or secured, the recording clerk should compare the approvals with cheques issued and as well check the supporting documents with the approvals. For the interest of the nation, the government should always give the local authorities the attention in which it deserves.

In Nigeria today, the revenue and expenditure pattern of local government is nothing to write home about. Part of the reason include that the revenue base of some local government is too weak which will subsequently make little or no provision for the embarkment of capital projects. This implies that some local councils use the largest clunk of her financial resources in setting recurrent expenditures.

This is to say that some local government authorities hardly embark on capital projects due to lack of fund, what some local government does is to hide under the umbrella of the state and federal government. It will be worthy to note that government is all about development and beside it is also her duty to provide some essential amenities which will party from the basis of infrastructure amenities therefore, in the course of reconciling the revenue and expenditure pattern of local government, a lot a variations were noticed from the local government especially when their activities and operations were being compared.

Federal government should as a matter of necessity and urgency put place machineries towards conducting an election for the officers of chairman and ward councilors, and not by appointment. The appointment. The appointment of caretaker committee as local government chairman is undemocratic, unconstitutional, and a threat to democracy.

Unfortunately, the situation appeared to be worse during the military regime. No matter how bad the full democratic regime look like, it is far better the best military regime. The activities of fraudulent practices and other sharp corrupt local government staff should be checked. Convinces of staff with the public to defraud the local government should be well locked and corrupt officials should be instantly disciplined or even prosecuted without delay.