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GENERATION
(A CASE STUDY OF ADO LOCAL GOVERNMENT)
BY
DEPARTMENT OF ACCOUNTANCY
SCHOOL OF BUSINESS STUDIES
THE FEDERAL POLYTECHNIC ADO – EKITI
EKITI STATE NIGERIA
FEBRUARY,2022
THE PROBLEMS AND PROSPECTS OF REVENUE
GENERATION
(A CASE STUDY OF ADO LOCAL GOVERNMENT)
BY
DEPARTMENT OF ACCOUNTANCY
SCHOOL OF BUSINESS STUDIES
THE FEDERAL POLYTECHNIC ADO – EKITI
EKITI STATE NIGERIA
FEBRUARY, 2022
I
CERTIFICATION
This is to certify that this project work on problems and prospects of revenue
Generation was prepared by ONI TAIWO OYIDAMOLA under close supervision as
directed by the head of Department of Accountancy for the award of the National
Diploma (ND) in Accountancy of the Federal Polytechnic Ado Ekiti.
………………………………. ..……...……………
(Supervisor)
………………………………. …………………….
(Coordinator)
……………………………… …………………….
(Head of Department)
II
DEDICATION
This project is consciously dedicated to the Almighty God our creator and who will
continue to be the supreme ruler of the whole universe, the kings of kings, who in His mercies
has spared my life to see my dreams comes true.
I equally dedicate the project work to my mother, Mrs Eunice Kehinde who bored the entire
burden of seeing me through my career up to this level.
III
ACKNOWLEDGEMENT
In the accomplishment of this project successfully, many people have bestowed upon me their
blessings and the heart pledge support, I am utilizing this time to thank all the people who have
been concerned in this project.
Primarily, I would thank God for being able to complete this project with success.
I would like to thank my project supervisor Mr. I.D. Durodoore who made the approval of this
topic and diligently examined this project work, May the peace and love of God continue to be
with him in Jesus name (amen).
My sincere gratitude goes to my Mother, Mrs. Eunice Kehinde who has spent her time, money
just to make me a successful person in life, she has been my backbone, I pray that almighty God
will spare her life to eat the fruit of her labor.
I express my gratitude to Mr. and Mrs. Amoo, Mr. and Mrs Akinyemi for their ultimate support,
care, advice and encouragement throughout the program.
Finally, I will like to thank my sister, Oni Kehinde Oyinkansola for her love and support, and to
my colleagues in whom we did this training together. I salute you all and thank you all, I am
grateful.
IV
TABLE OF CONTENT
Title Page i
Certificate ii
Dedication iii
Acknowledgement iv
Table of Content v
CHAPTER ONE
1.0 Introduction 1
V
2.5 Financial Control over Local Authority in Nigeria 7
CHAPTER THREE
CHAPTER FOUR
CHAPTER FIVE
5.1 Summary 26
5.2 conclusion 26
5.3 Recommendation 26
REFERENCE 29
APPENDIX 30
QUESTIONNAIRE 32
VI
CHAPTER ONE
1.0 INTRODUCTION
The importance of local government cannot be over emphasized, be it the federal, State
or local government. It serves as a life wire of every business which helps the organization to
attain its goals. Revenue is of great importance to national development.
Local government which the project emphasizes can be described as the government at
the local level, exercised through representative council, established by law to exercise specific
power within definite areas. Local government which is the third tier of government is a creation
of the constitution of the federal republic of Nigeria. The essence of this division of government
is to enable the government exercise her administrative power easily and effectively.
It is through this activity that local government raises adequate funds to pursue development
projects, therefore, to a large extent determining the quality and quantity of service provided to
the generality of people within their domain. These reasons, alongside the fact that local
governments are tools to ensure growth and development, make it highly essential for the
existent of revenue generation strategies. This emphasizes the need for internally generated
funds, which are more flexible, assess able and are in total control of the local government
themselves.
Presently, local government in Ado Ekiti is assigned with numerous responsibilities like
water resources, arable land for farming, variety of food and cash crops, mineral deposits, solid
minerals etc. Also available are commercial ventures like markets, petrol stations, sawmills,
trading outfits to mention but a few.
1
1.2 THE OBJECTIVE OF STUDY
i. The main objective is to examine the various ways of generating revenue by local
government.
ii. To evaluate the performance of the local government council.
iii. To identify the problem encountered in process of generating the revenue and to
recommend possible ways to improve on the generation of revenue for effective rural
development.
There are many problems that have been advanced for the inability of local government
in Nigeria as a whole to render effective social services to the people. These include:
What are the problems encountered by revenue collectors during the course of revenue
generation?
2
What are the things to be done in order to avoid tax evasion?
The significant of the study is to review the present system of revenue generation of local
government with particular reference to Ado Ekiti Local Government. It is also to find out
possible loopholes on weaknesses in financial controls and management, identify problems
facing the local government and recommend how the system can be improved upon.
This study will be of paramount importance to the society and will become tools for most
local government areas to a speedily apply some strategies which will enable them to generate
their revenue easily and as well as executing their projects effectively.
This will also give potential market men and women as well as other residents the opportunity to
pay their taxes, rates, charges easily.
Finally, it will enable the researcher to have an in-depth knowledge of the study. Therefore, the
significance of this study is by no virtue, in-exhaustive.
1. Grant:This refers to money made available by the government at a higher level to one a
lower level. A typical example is the Federal Government giving special funds to State or
local government for specific purposes.
3
3. Municipal: Is a district that has its own local government.
4. Tariff: Is the amount of tax or income that is received on goods coming into the country
and amount paid on the goods out of the country.
5. Taxation: This is one of the ways local government generate revenue. It is a compulsory
levy imposed by the local government on most of the entire members of the taxable
adults within its jurisdiction
6. Personal income: This is a form of direct tax, which is levied on wages, salaries and
other earnings of individuals.
In assessing this kind of tax, certain allowances are deducted; the balance is then taxed.
7. Loan: Loan can be described as a financial assistance repayable with interests at a date.
8. Rent and Royalty: These are payments made on local government properties, such as
land, building etc.
9. Charges, Fine and Fees: These are among the means of generating revenue by the local
government. They are payments made to local governments by those who indulge
in one commercial activity or the other. Such fees are: motor license fees, Road/bridge
tolls, market fees etc.
4
CHAPTER TWO
INTRODUCTION
1. MAIN FUNCTIONS
(d) Provision and maintenance of public convenience, sewage and refuse disposal.
(f) Assessment of privately owned houses or tenants for the purpose of levying such
rates as may be prescribed by the House of Assembly of a State.
5
(b) The development of agriculture and natural resources, other than the exploitation
of materials
With the above multiplicity of functions as dictated by the constitution, local government
councils need a lot of revenue to carry our these constitutional responsibilities..
The main type of revenue could be divided into the following classes
1. Community tax
4. Receipts derived from the letting and leasing of building or belonging to the local
government
5. Statutory allocation
6
7. Contribution from other local government
8. Capital revenue
9. General
The general heading include miscellaneous source like services, rent etc. The tax
component of the local government revenue is not determined by the volume of services, but to
effectiveness of the collection procedure put in place at the local government level.
- To help in financing a function or services newly developed in the state and local
government
- Effective implementation of policies and even distribution of amenities between the state
and local government
- To facilities the financing of its constitutional roles
- Approvals of annual estimate, to also help to maintain the minimum standard in the
provision of services, provided and basic amenities to the people.
Revenue generation has become an inevitable tools in the hand of the local government,
the reason is that both the federal and state allocation to local government are insufficient to meet
the needs and also in terms of the execution of its functions projects etc with respect
in carrying out the ease with which the states have affected them show that any talk about
inherent powers for the local authorities is of purely academic interest but of very doubtful
7
practical value. The states have clearly showed that they have the last say in what system of local
government there should be, their structures, aims and financial status.
i. The need and desire of national government to open and control socio economic
development in their areas
ii. The fact of the recent attainment of state hood by these countries and their anxiety to
assert authorities over their region, local authorities and possible areas of resistance.
iii. The fact that local authority have relatively weak constitutional positions and in
nearly all cases are Creations of the central authority from which they therefore
derive their powers; and
iv. In the circumstance of Nigeria, the fact those local authorities have invariably,
competence and responsibility in handling their own affairs to justify lesser central
controls.
The state have the constitutional responsibility for good governance and
socioeconomic development of their areas, they should be interested not only in ensuring that
local authorities do not pursue divergent goals and aspiration in fields requiring consistent
government action, but also to direct and control local authorities to the overall benefits of the
public they serve.
In order to be able to direct the action of these authorities the various former regional local
government laws which have now passed onto the states and have being amended provide for
several forms of control over local government bodies. Such controls include those over their
internal constitution and organization of their legislative and executive powers, source of
revenue and object of expenditure, as well as controls over personnel establishment and
discipline.
8
As far back as 1946, there have been various commissions that were set up to look and
found an acceptable sharing formula (i.e. revenue) for the country such as; Phillipson’s
Commission 1950, Reesman’s Commission 1958, Asogede’s Commission 1978, Okigbo’s
Commission 1979, on 1st June 1980, Okigbo’s Commission submitted their report to the federal
government that the revenue from the federation account should be shared among the three tiers
of government formerly are listed below:
The current way by which the revenue from the federation account is been shared among
the three tiers of government are listed below:
9
CHAPTER THREE
The study area of my research work is Ado-Local Government, Ekiti State in order to get
the necessary information on the problems and prospects of revenue generation.
The population used for this research is Ado – Local Government Secretariat, Ado –
Ekiti, Ekiti State. Population defines the limit within which the research findings are applicable
(i.e) the element under study from which the sample may be picked in this research population is
finite because Ado-Local Government Secretariat is visited to collect information through
questionnaire.
The instrument for data collection used in this write up is structured questionnaire, where
respondent is restricted to some ready made question; it is adopted in order to obtain adequate
report about the problems and prospects of revenue generation in an economy.
The procedure for data collection will be carried out statistically by the application of
CHI-SQUARE formula, which can be derived as;
E(O−E)²
x ²C=
E
10
WhereX²C= Chi Square calculated
O= Set of observed frequencies
E= Set of expected frequencies
For the purpose of this research work, I assume 5% level of significance
11
CHAPTER FOUR
This chapter deals with the analysis of data collection at the end of the survey. The
conclusion reached in this chapter is based on the sample information gathered from the
questionnaire as administered during the course of the study.
It summarized the result, sowing the respondent covered in this research work and their
response to the question in such a way that will and testing of hypothesis.
TABLE 1
No of Returned 60 75%
No of Given 80 100
The returned shows that out of 80 questionnaire distributed, 60 were returned and 20 were not
returned. The percentage returned is 75% and the percentage of not returned is 25% so the
analysis will be based on the questionnaire returned. The questionnaires were given to senior
officers, middle officers and junior officer.
TABLE: SEX
12
VARIABLE RESPONSES PERCENTAGE (%)
Male 20 33.33
Female 40 66.67
Total 60 100
From the table above sixty questionnaire answered by the workers, twenty of the respondents are
male while forty is females. This shows that there are more female workers in the local
government secretariat in Ado-Ekiti than male.
MARITAL STATUS
Married 45 75
Unmarried 15 25
Total 60 100
From the above 75% of the worker are married, this prove them matured and responsible
20 – 30 12 20
31 – 40 30 50
41 – 50 13 21.67
13
Total 60 100
From distribution table shows that 100% of the respondents are adult, suggesting that they know
what they are saying.
EDUCATIONAL QUALIFICATION
Secondary School 15 25
Grade 2 15 25
NCE/OND 20 33.33
HND/BSc 10 1667
Primary - -
Total 60 100
The above analysis shows that 100% of the respondents have past secondary academic
qualification, suggesting that they were all well informed. Hence, the researcher can assume that
the data is reliable.
DEPARTMENT
POSITION
PART B
Question 1 whether revenue generated in the local government is dependent on the employment
of qualified staff?
14
RESPONSE RESPONSES PERCENTAGE (%)
Agreed 15 25
Disagreed 10 16.67
Total 60 60
The above analysis means that 25% agreed that revenue generated in the local government is
dependent on the employment of qualified staff while 58.33% strongly agreed and 16. 67%
disagreed.
TESTING OF HYPOTHESIS
Chi square method of statistical presentation was use in testing the hypothesis by applying the
following formula;
(OF −EF)²
X=
EF
OF = observe
EF = expected
Ho = null hypothesis
Hi = alternate hypothesis
To test whether the revenue generation in the local government is dependent on the employment
of qualified staff or not.
15
H1 = Revenue generation is independent on the employment of qualified staff.C11 = 33 x 35
= 19.25
60
C12 = 33 x 15 = 8.25
C13 = 33 x 10 = 5.50
60
C21 = 17 x 35 = 9.92
60
C22 = 17 x 15 = 4.25
60
C23 = 17 x 10 = 2.83
60
C31 = 10 x 35 = 5.83
10
C32 = 10 x 15 = 2.50
60
C33 = 10 x 10 = 1.67
60
16
OF EF OF – EF (EF _ EF)² (OF – EF)²
EF
Reject Ho or null hypothesis X² cal greater than X² table is greater X² cal the researcher will
accept Ho
Strongly Agreed 30 50
Agreed 15 25
17
Disagreed 15 25
TOTAL 60 100
The above analysis shows that 25% of the respondent agreed that adequate finding is imperative
in generating revenue while 50%strongly agreed and 25% disagreed.
H1: The adequate funding is imperative for effective service in generating revenue
Ho: The adequate funding is not imperative for effective service in generating
revenue.
Test whether adequate funding is imperative for effective services in generating revenue or not
.C11 = 30 x 30 = 15
60
C12 = 30 x 15 = 7.5
60
C13 = 30 x 10 = 7.5
60
C21 = 20 x 35 = 10
60
C22 = 15 x 15 = 5
60
C23 = 20 x 10 = 5
18
60
C31 = 10 x 35 = 5
C32 = 10 x 15 = 2.5
60
C33 = 10 x 10 = 2.5
60
EF
15 15 0 0 0
10 10 0 0 0
5 5 0 0 0
5 5 0 0 0
5 5 0 0 0
19
DECISION RULE
Reject Ho or null hypothesis X² cal greater than X² table otherwise accept Ho. Since X² table is
greater than X² cal the researcher will accept Ho hypothesis.
Question 3: Whether education of the general public on the importance of the payment of the
tax is necessary for effective generating?
Agreed 8 13.33
Disagreed 12 20
TOTAL 60 100
The table shows that 13.33% agreed, while 66.67% strongly agreed and 20% disagreed that
education of the public on the importance of payment of taxes is necessary for effective revenue
generating.
Test whether education of the general public on impotence of the payment of tax is necessary for
effective revenue generation or not.
Ho: The education of the general public on importance of the payment of tax is necessary
for effective revenue generation.
H1: The education of the general public on importance of the payment of tax is not necessary
for effective revenue generation.
20
EF
5 7 -2 4 0.057143
Reject Ho or null hypothesis if X² cal greater than X² table otherwise accept Ho. Since X² table is
greater than X² cal the researcher will accept Ho hypothesis.
Question 4: whether a good welfare package will reduce local government official inclination
to fraud?
C11 = 35 x 40 = 23.33
60
C12 = 35 x 8 = 4.67
60
C13 = 35 x 12 = 7
21
60
C21 = 11 x 40 = 7.33
60
C22 = 11 x 8 = 1.47
60
C23 = 11 x 12 = 2.2
60
C31 = 14 x 40 = 1.87
10
C32 = 14 x 8 = 1.87
60
C33 = 14 x 12 = 2.8
60
Agreed 10 16.67
Disagreed 7 11.67
TOTAL 60 100
DECISION RULE
22
The above analysis shows that 16.67% of the respondents agreed, while 71.66 strongly agreed
and 11.67 disagreed that good welfare package will reduce local government official inclination
to fraud.
TESTING OF HYPOTHESIS
Test whether a good welfare package will reduce local government official inclination to fraud or
not.
Ho: A good welfare package will reduce the local government official inclination to fraud.
H1: A good welfare package will not reduce the local government official inclination to fraud.
C11 = 33 x 45 = 23.65
60
C12 = 33 x 10 = 5.5
60
C13 = 33 x 7 = 3.85
60
C21 = 17 x 44 = 12.18
60
C22 = 11 x 8 = 1.47
60
C23 = 11 x 12 = 2.2
60
C31 = 14 x 40 = 1.87
10
23
C32 = 14 x 8 = 1.87
60
C33 = 14 x 12 = 2.8
60
EF
24
Reject Ho or null hypothesis if X² cal greater than X² table otherwise accept Ho. Since X² table is
greater than X² cal the researcher will accept Ho hypothesis.
The study revealed that, the local government does not have tax, policy. This has adversely
affected the tax administration, revenue base, its yield and its security of fund, lack of
administrative framework of organized of progressive scale and periodic base.
The collection of the above mentioned sources of revenue and lack of business, directory of
organization within the local government affected, the local government affected the local
government adversely.
Despite the fact that, potential revenue bases of the local government are very many, but
few of the revenue have so far been exploited for instance, it was found that, local government
has not realized the duality of local government I the tournament rate of collection. The property
development in local government is very high. Ironically, property evaluation has not been
properly realized. Also, necessary follow-up was lacking and fraud be revenue collectors have
also immensely contributed to the decline development of the local government.
25
CHAPTER FIVE
5.1 SUMMARY
Based on the research work, the following are major findings of the research work. The
local government depends heavily on external sources of revenue that is statutory allocation,
which accounted for highest revenue for various years.
It was also discovered that most of the council official were performing their duties
accordingly. Another problem that is facing the local government is that of assessment. What one
fins out is that a great majority of the payers escapes full liability.
It was also discovered through this research work that, the majority of the people in the
area does not know the importance of birth, death and marriage registration and lastly one
discovered that the major problem of this local government is low level of internally generated
revenue.
5.2 CONCLUSION
This study has provided an interesting insight into the problem and prospect of revenue
generation of local government in Ekiti State, using Ado-Ekiti local government in particular as
a case study.
5.3 RECOMMENDATION
26
The payment of statutory allocation by the federal government should be made directly to
the local government as opposed to the present system of channeling it through te state
government.
Where the state government are inevitably involved as in the case of sharing pay-as-you-
earn, strict adherence to the principle guiding this type of disbursement should be followed.
The 20% of the revenue generated from payee are meant for local government as it is stated in
the law, which created local government, should be strictly maintained. It is local authority, since
it is observed that the excessive control by the state government under the progress of the local
government in the area of revenue generation.
Since it was observe that evasion and avoidance of deceitful farmers, petty traders and
self employed business men was responsible for low level of income tax collected and to solve
this social problem, the following recommendations are relevant.
i. People should be educated on the importance of taxation and its uses. Proper taxation
should be encouraged. There is the potential for higher revenue to be raised from this
sources, if the present system of assessment and allocation could be reviewed.
ii. It is essential that the local government guides against delay in payment and non-
payment of worker’s salaries and entitlement. This could be done through state
government participation in form of back up loan to specific amount. The graves
effect of non-regularity of salaries among other includes lowering of officer morale
and effectiveness which consequently expose officers to corrupt practices.
iii. The local government should embark on profitable business ventures from which a
regular stream of income can be earned. Initial capital for these enterprises can be
gotten from the surplus from local purpose or loans provide by financial houses. This
could be in form of equity participation between the local government and private
institution, agriculture and aggro-allied industries (especially food processing
industries). There are some straight forward actions
iv. which local government may engage in as contained in part A of guidelines for local
government reforms. This includes shopping centers, tourists resorts, cinema houses,
entertainment center, filling stations, small scale enterprises, which will make use of
27
local materials and perhaps refuse collection can also be put in same box. It will not
be grossly wrong to change on a commercial basis for all these services.
v. Apart from providing the local government with a stream of revenue or income, the
enterprises will transform the local government area through provision of
employment opportunity.
vi. Finally, there is need for research and planning unit in the council, this will provide
relevant information on decision making as regards revenue generation.
28
REFERENCES
Adebayo A & Riwland L (11972): Local Government Finance in Nigeria Problem & Prospect
Adeniyi A.E (2006): Corporate Finance for Professionals, Bestway Production, Ado-Ekiti, Vol
VII
Aliyu A.Y.A (1979/1999): The Nature & Implication of Administration Vol VIII
Mills J.S (1958): Consolidation of Representative Government (World Classic Edition) Oxford
University Press.
Olaniyi A.R (2004): Management Information System, Ola-Olu Printers, Ado-Ekiti Vol IV
Prest A. R and Barn (1979): Public Finance in Theory and Practice 6th Edition ELBS, Weldon
Felt and Nicolson
29
APPENDIX
INTRODUCTION
30
SECTION B
31
QUESTIONNAIRE
32