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The Definition Of Financing State And Local Government In Nigeria

Complete project materials on The Definition Of Financing State And Local Government In Nigeria from chapter not to five with abstract and references. Download now

Different author’s and scholars have given various definition to the term “Local government” if it is viewed from a legalistic point of view, it may be referred as “Body corporate” having perpetual succession with power to save and be saved” Administratively, it is referred to as a body that has three essential characteristics these are:

  1. Local election or selection.
  2. Operating in a restricted geographical area within a nation or state.
  3. The enjoyment of a measure of autonomy

From the above definitions, it is possible to define functions that are purely local character and which therefore should concern only those living in the locality. Thus the very objective of having local representation is to ensure that those do not share with the general body of their country, men may manage that joint by themselves.

Local government therefore, bring government nearer to the people at the grassroots level with a view to bringing the unnecessary gap-normally created by a centralized system of administration and allows them to participate in the running government affairs. Perhaps, it will not be out of place to mention that local government is established primarily to provide social service such as good roads, dispensaries, clinics, primary schools and so on.


If the local government is to be other than a locally based arm of the state executive, it must not only be governed with wide discursion in those fields, it devolves upon them. It must also be given a considerable degree of financial freedom, this does not mean that all local government finances should be raised locally but rather that local authorities should have freedom with broadly determined financial resources to spend money as they see fit and that resources should be sufficiently to allow the local government authorities to perform effectively.

Local government has two types of expenditure namely: 

Capital and revenue expenditure. 
Capital Expenditure:
 Results in some project of benefit to more than one year. 

Revenue Expenditure: Are those expenditure which benefit only within one year.
The provision of health center in an area would be a capital expenditure, whereas the cost of the medical and paramedical personal would be revenue expenditure. Revenue expenditure is also known as recurrent expenditure which means expenditure recurs within each year of operation.

Local government expenditure especially capital expenditure is being monitored by the state government through the ministry of local government. The local government must fit into the overall economic policy of the state government.

No matter how desirable a project might be to the local government, the state government will not sanction it, if the overall economic policy of the state will be affected adversely. In other words if the government (state) feels that there is a need for a cut back in expenditure it requests the local government to spend less.

Local government authority in Nigeria generates funds from two sources, Internal and External sources.


This as the name implies constitute all amount aching to a local authority from within its personal activities and some of these are:

  1. Development Tax:This is the oldest source of income it is traceable back to the traditional nature authorities during the colonial period. It is usually a fixed sum to be paid all male adults and who are indigenes or are residing in a particular local government area. It is an annual payment for development.
  2.  Tenement Rate: This is a type of tax paid on properties by residents to the government; it is mostly paid on building.
  3. Cattle Tax: Cattle rearers within a particular local government area pay this type of tax. It is levied on the number of cattle owned, it is collected mostly during the rainy season of every year.
  4. Payee (pay as you earn):This type of tax is the one being deducted from the monthly salaries of civil servants. Only 21/2 of such deducted is normally retained by local government, while the rest goes to the state government purse.

e.Local license fees: Certain trades cannot just be carried out in a particular locality, unless with licenses, e.g. selling gold blacksmithing, bakery, bicycle repairing etc payment for obtaining such licenses go to the local government.

  1.  Miscellaneous sources: In addition to the above mentioned, there are still some other sources through which local government authority generate funds (internally but which are difficult to classify under heads.

These types of revenue fall under miscellaneous sources. A typical example of this is interest paid on loan advances to individual workers of a local government.


These are financial sources to the local government; out for which local government doesn’t have full control of how inflow of the funds will be, how much it could be and sometimes cannot be cure of when it will come.

These sources are inclusive of
(a) statutory allocation (b) loans (c) investment.

  1. Statutory allocation: Major external generated revenue for Nigeria local government is the federal government statutory allocation which has been in existence since the inception of local government reforms of 1976. This is to ensure an easy take off of the reform.
  2. Loans: this is being resulted to by local government authority, for execution of project while the statutory allocation is still audited. Banks and other financial institutions gives facilities to local government authority, such money can be borrowed usually within the limit of the amount of revenue local government can generate internally.
  3. Grants: This is another important external sources of revenue for local government authority. Among these is grant-in-aid which can be federal or state. The federal grants-in-aid is that which comes directly from the federal, while the state grants-in-aid come from the state government account to the local government. While the statutory allocation, grant-in-aid goes to the local government at regular internals and in most cases, are meant for specific project, such as sinking of bore-holes, motor parks etc.
  4. Investment: This is a way of helping the state government in its industrialization programme. Some of these investments are either directed by the state government or made by the local government itself. Investment in such project as market stores, tractors, etc brings money into local government account.


The objective of this research is to investigate the impact of local government activities in Ilorin west local government area. In the course of this study efforts are made to;

  1. Identify and explain the factors that will influence the local government financing activities of Ilorin.
  2. Investigate the extent to which the local government financing activities have contributed to the finance department.

iii. Examine the problems facing local government activities.

4. Make conclusions and provide adequate recommendations.

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