The Overview of Local Government Finance in the New Millenium

The Overview of Local Government Finance in the New Millenium

The Overview of Local Government Finance in the New Millenium


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Chapter One of The Overview of Local Government Finance in the New Millenium


Finance has been a problem facing the government.  The government of Nigeria is made up of the federal, state and local government which is preferably called the three tiers of government.  But however, this work is only limited to the local government.

          Local government forms the third tier of government in Nigeria.  The aim of creating local government is to decentralize government so that local government which is nearest to the people will enable the people to participate in development process of their area. Local government is also referred to as government at this grassroots level.

          To carry out its function, the local government must have readily available finances.  This is because the need for finance is very important in any establishment.

          In defining what finance is various perspectives from different aspects are recognized?

1.                 The layman understands finance as the volume of money held as cash and cash balances at bank.

2.                 The investor sees finance as the possession of funds when it is needed for investments.

3.                 The academics sees finance as the discipline that studies the science of funds management, which includes the institutions that are involved in sourcing funds such as the money market institutions, insurance market institutions and mortgage market institutions etc.

These guidelines help in generating funds and funds management.


One of the problems facing the local government is that they have limited source of revenue.  Apart from revenue accruing from the federation accounts all other source of revenue do not yield much fund.  This federation accounts services as the federal government budget estimates.

          In 1996 the vertical sharing from the federation accounts placed the local government on 20.0%. The federating government of Nigeria is empowered with the responsibility of generating and distributing revenue accruing from oil and non-oil revenue.


The objective of the work is to explore into the hindrance against effective measures undertaken to curtail the low rate of finance in local government.

          It will help in ensuring that adequate controls exist over the receipt custody and disbursement of funds, that all its transactions are promptly and properly accounted for and all documents and records relating to the financial transaction are accurate and complete.


This study helps in policy making and investment.  It also serves as a guide to authorities on how to control finance.

          After identifying the problems, it would also help in allocating fund to local government by checking its expenditures.  This, in effect will also help the local government in funds management.

          The people at the grassroots will also benefit from the study in solving their needs, thereby increasing the standard of living.


The study will ascertain the source of funds of local government administration.

          It would also look into the concepts of financial administration of the local government and its expenditure relating to inadequate funds.


1.                 Joseph Iloh 2004

Business Finance

Rockhill Associaties P 1 and 2

2.                 Odoh Nick N. 2004

Introduction to Public Finance

J.T.C. Publisher P 53


Chapter Two of The Overview of Local Government Finance in the New Millenium


Local government is essential because through them grassroots development and participation is achieved in any country.

          The following are some of the needs for local government.

i.                   There are amenities and services which can be best provided on a local basis and local government are the organ to do this.

ii.                 The state and federal government are rather for removed from grassroots and very often are unable to appreciate the problems of the people in the deferent localities.

iii.              Local government is better suited preserve the divergent culture of the localities.

iv.              People from one locality are more committed in getting their problems solved if they are allowed to fine solution to such problems.

v.                 The formulation of economic planning and development schemes for the local government areas.

vi.              Establishment and maintenance of cemeteries, burial ground, and homes of the destitute or the deform.

vii.            Constructions and maintenance of roads, streets, streets lighting, drains, parks, gardens, open spaces, or such public facilities as may be prescribed from time to time by the legislature.

viii.         Provision and maintenance of public conveniences, selvage and refuse disposal.

The above are indeed the essential function which state and federal government are too far removed to cater for.

Also the constitution makes it the function of the local government to provide and maintain primary adult and vocational education, to develop agriculture and natural resources, but it precludes the local government from the exploitation of minerals.  It is also the duty of local government to maintain and provide health services.


Adequate provision of fund is necessary for efficient and effective administration of local government and the sources of revenue can be internal or external.

          In an urban or mixed local government, the most important sources of internally generated revenue are property rates and markets.

          Property rate are taxes imposed on property owners of their property within tenant areas or area designated as property rating areas.

          Properly covers buildings, domestic, commercial or industrial mines, quarries, fixed and machinery.

          Other revenue bases for a local government are the capitalization or development rates: bicycles, licenses, carts, trucks, and wheel barrows, registration of births and deaths and marriages.

          The external sources of revenue to the local government are the local government’s share or the federal revenue account and the 10% share of the state internally generated revenue.  It is necessary to point out that many of the states in the country have for a long time defaulted from meeting their 10% obligation to the local government.




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