Sources Of Revenue and Expenditure Pattern of Local Government in Enugu State

The Sources Of Revenue and Expenditure Pattern of Local Government in Enugu State


The extent that is generated internally has continued to dwindle as observed by L. Rowland that “in the Late 5o and 60” The accumulate recurrent funds of some by no means all local authorities, were sufficient to enable them to finance a considerable volume of capital development. This position has long given way to one in which they have barely sufficient funds to meet normally recurrent cost in respect of minimum standards of services, let alone to finance capital expenditure.


The external sources of funds available to local government area are: –

  1. Statutory Allocation
  2. Grants in – Aid
  • Loans

Statutory Allocation: This is area where a local government source of revenue has attracted public comments. To justifying the importance of this statutory provision, L. Rowland argued thus “Local authorities are the creatures of the state governments who provide them with or allocate to their revenue resources to carry out a prescribe range of functions. It is therefore the responsibility of state governments to lay down minimum acceptable standards of local services and to ensure that local authorizes has the necessary financial resources at their disposal to enable them to attain to prescribed standards.

By guaranteeing this critical financial support, the federal government ensures the establishments and continuity of the local government and prepares the group for a viable strong and in dependent third level of government capable of carrying out its assigned responsibilities. The amount due to local government from the federal account has been constantly reviewed upwards in response to its increased responsibilities.  By the provisions of decree No36 of 1985, the percentages of the federation account due to local government was reviewed upwards from 10% to 20%

Federal        Government 50%

State Government 25%

Local           Government 20%

Contingency                    5%


From 1st June, 1992 this formula was changed as follows:-

Federal        Government         48%

State Government         24%

Local           Government         20%

Special Fund                           7.5%


In addition to what the Local Government acts from the Federal Account, the Local Government in each state are entitled to 10% of internally generated revenue of their respective states. Whereas the Federal and State government’s share have continued to decrease, that of Local Government have been on the increase. This could be attributed to the shift on emphasis for grass root development. Hitherto, the councils where expected to operate autonomously and been tied to the apron strings of state governments by whose administrative and interfering intimidation funds released by the federal government through states, to local government never get to the councils.         To overcome this administrative bottle neck and to ensure that funds allocated to local authorities get to them in time, the Federal government has directed that their share of the federal account and indeed funds from the federal government solely for local government to paid directly to the local government through the ministry of finance.

Grants- in –Aid:  Another external source of funds to Local Government is grant- in- aid. Grants have always been the traditional external sources of funds to Local Governments. Unfortunately, according to Orewa and Adewumin the system of grant, an evolution of the British system has not obviated the problem of local finance, and thus local authorities should explore area for more internal bases for fund generation.

Orewa and Adewumis views of grants-in-aid are true because inmost cases government grants are not suitable or promises made may not be redeemed of if redeemed may not be on time. This often results in local government embarking on a project only to be stopped permanently or temporally by lack of funds. Therefore grants have seized to be a major source of external funds of local government as they are given only external cases.

Loans: The problem of financing some projects especially capital oriented ones through loans as done in developed economics also highlighted by some authors. Wrath observed that councils which aspire to more ambitions scheme such as large scale market development, drainage or town hall would normally go far loans, the interest and capital of which should be spread over years.

Emphasizing on the need for credit financing, Rowland observed that apart from the internal sources, loans, from a well established and funded municipal bank for the development and expansions of projects should be sought for. To add weight and further support to these calls, the first national conferences on Local government conclude and gave the following recommendation.

There is an urgent need to establish authority to provide capital finance for local government projects. Such an institution would be most appropriately set up on a national basic to provide capital funds for local development projects in all the states. Although local governments there seems to be a strong case for participation by the federal government; in helping to provide adequate capital funds for local governments through such a national institution. The responsibilities of the proposed national loans authority would be limited solely to the provision of capital funds for development purposes. It went on to recommend that the national loans authority should be given independent states and be financed by

  1. Loans and grants from the Federal Government
  2. Loans and grants from state government
  • External borrowing subject to many limitations which may be imposed


Local authorities are responsible for establishments, construction and management of Public motor parks and markets. They collect fees from vehicle owners and trades using these facilities daily, monthly or annually. Motor parks and markets are expected to generate enough revenue to liquidate the capital cost of establishing them as well as cover the cost of maintenance.

However, Clerk-test carried out between 1960 and 1973 at various motor pars and markets by Government Administrative officers indicated a 50% to 75% under collection of revenue from the source. This cannot be divorced from the fact that clerical Assistants, messengers and daily paid workers were given this crucial responsibility. This lack of adequate personnel to enforce vehicle parking and hawking bye-laws, illegal parking and street trading in an authorized placed rob the local authorities of enormous revenue from the sources.


Local authorities have derived revenues from the operation of commercial undertakings such as printing press pottery works, bus services, purchase and disposal of metal scraps of and of grains. Revenue accruing from these has declined sharply. This is due to financial and management problems, competition from private sector, overstaffing and irresponsible budgeting. Not withstanding the decline in revenue from the source, Fayemi observed that it could yet be turned into a dynamic revenue based when he stated among other things that local government should examine the area of merchandise and propose the establishment of shopping centres, petrol stations, Lotteries, and Cinema houses, establishment of some viable small-scale industries.



The other side of the coin which is patterns of utilization of revenue generated has also been talked about by some authors.

Rowland observed that the success or failure and effectiveness or otherwise of local governments must depend on the financial resources are utilized. What they said is true because the patterns of expenditure of local government funds go along way to affects the achievement or otherwise of the objectives of the local authorities. To buttress fact,

Dr. Ekezie at a workshop observed that the expenditure of local governments tend to increase with increase in revenue. He therefore suggested that for the expenditure to achieve meaningful objectives it must have the following: –

  1. Waste containment measures such as avoidance of ghost projects and other fraudulent practices.
  2. cost effectiveness measure such as the ability to identify the assess the quality or services before payment
  3. More money implying high expenditure syndrome should be avoided.

What he was saying in effects is that there should be a mix of expenditure where by revenue – yielding projects could be balanced with non-revenue yielding social and administrative expenditure and that returns therefore could be utilized in financial recurrent expenditure.

The increase expenditure in administrative to the determine of their other sectors has been as a result of rising trend in salaries vehicle and other allowance as well as the expansion of administrative staff to cope with increasing responsibilities of local authority.

What is disturbing about the present trend is that there is no evidence that local authorities in Nigeria have ever themselves felt it necessary to take stock of their expenditure with a view to carrying out internal re-organizations to affect savings or to curb the upward trend in expenditure.

Based on the review of these related literatures, it could be discovered that there is great room for improvement on the known sources of fund for local authorities and the patterns of expenditure.

The review is by no means exhaustive as other aspects will be highlighted in the course of the report.

—-This article is not complete———–This article is not complete————

This article was extracted from a Project Research Work Topic:



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