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Enugu State

Economic Impact Of Local Government Autonomy And Fund Management

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The research focused on theImpact of Local Government Autonomy and Fund Management. The objective of the study is to find out whether local government areas are adequately funded in the present dispensation to tackle their statutory functions and responsibilities to the rural people and to determine the effect of the autonomy in the local government financial bases. In particular, fiscal decentralization, the devolution of revenue mobilization and spending power to lower level of government has become a main theme of urban governance in recent years. Local government system as the third-tier of government deserves adequate finance to enable it cope with numerous developmental activities within its jurisdiction. The study empirically tested the relationship between local government revenue and expenditure in Nigeria a low income developing country. A regression test was conducted using data from 1990-2015. Secondary data was used, which include textbooks, CBN bulleting, Journals and Internet material and analysis using parametric statistical tools regression co-efficient, Y was used as dependent variable and X as independent variables in this research work with a brief explanation.




TITLE PAGE       -        -        -        -        -        -        -        -        -        i

CERTIFICATION                   -        -        -        -        -        -        -        -        ii

APPROVAL PAGE       -        -        -        -        -        -        -        -        iii

DEDICATION     -        -        -        -        -        -        -        -        -        iv

ACKNOWLEDGEMENT       -        -        -        -        -        -        -        v

ABSTRACT -      -        -        -        -        -        -        -        -        -        vi

TABLE OF CONTENTS        -        -        -        -        -        -        -        vii


1.0 INTRODUCTION  -        -        -        -        -        -        -        -        1       

1.1 Background to the study   -        -        -        -        -        -        -        1

1.2 Statement of the problem  -        -        -        -        -        -        -        4

1.3 Objectives of the study      -        -        -        -        -        -        -        6

1.4 Research Question   -        -        -        -        -        -        -        -        7

1.5 Research Hypothesis         -        -        -        -        -        -        -        -        7

1.6 Significance of the study   -        -        -        -        -        -        -        8

1.7 Scope and Limitations of the study      -        -        -        -        -        9

1.8 Operational Definition of terms  -        -        -        -        -        -        10

Reference    -        -        -        -        -        -        -        -        -        -        20


2.0 LITERATURE REVIEW         -        -        -        -        -        -        -        21     

2.1 Conceptual framework      -        -        -        -        -        -        -        21     

2.1.2 The concept of autonomy        -        -        -        -        -        -        -        25

2.1.3 Objectives of local government autonomy  -        -        -        -        27

2.1.4 Functions of local government-        -        -        -        -        -        28

2.1.5 Financial Management   -        -        -        -        -        -        -        29

2.1.6 Techniques and Tools for achieving efficient management of local government finance-          -        -        -        -        -        -        -        31     

2.1.7 Economic impact of local government autonomy-        -        -        34

2.2 Theoretical framework      -        -        -        -        -        -        -        36

2.2.1 Democratic participatory school       -        -        -        -        -        -        36

2.2.2 System Theory     -        -        -        -        -        -        -        -        38

2.2.3 Integration Theory         -        -        -        -        -        -        -        -        40

2.2.4 Functional Approach     -        -        -        -        -        -        -        41

2.3 Empirical       -        -        -        -        -        -        -        -        -        42

Reference    -        -        -        -        -        -        -        -        -        -        44


3.0 RESEARCH DESIGN AND       -        -        -        -        -        -        45

3.1 Research Design      -        -        -        -        -        -        -        -        45

3.2 Research Methodology      -                  -        -        -        -        -        46

3.3 Methods of Data Analysis-        -        -        -        -        -        -        46

3.4 Model Specification-        -        -                  -        -        -        -        48

3.5 Description of Variables   -        -        -        -        -        -        -        48

      Reference        -        -        -        -        -        -        -        -        -        50


4.0 DATA PRESENTATION AND ANALYSIS-        -        -        -        51

4.1 Data Presentation    -        -        -        -        -        -        -        -        51

4.2 Test of Research Hypothesis      -        -        -        -        -        -        54



5.1 Summary of Findings        -        -        -        -        -        -        -        -        61

5.2 Recommendations   -                  -        -        -        -        -        -        62

5.3 Conclusion     -        -        -        -        -        -        -        -        -        63


5.4 Contribution to Knowledge        -        -        -        -        -        -        -        65

BIBLIOGRAPHY        -        -        -        -        -        -        -        -        67     






Sharnna and Sadana (2008) defined local government as a statutory authority in a specified local area, having the power to raise revenue through taxes for the performance of local services such as sanitation, education, water supply and electricity. Precisely they see local government as authority constituted by the elected representatives of local people, which enjoys autonomy from state or central control sufficient to enable it to perform its services adequately. However, Oluwa (1996), contributed that local government autonomy is the ability of local government to take some political, economic and social decisions without recourse to any of the two superstructures – state and federal governments. Nwatu and Okafor (2008), demonstrated that local government reform of 1976 brought about the creation of local government the third tier of government.

          Okafor (1994) argues that the structure of governance in Nigeria has over the years remained constant despite the several military incursions. Nwatu and Okafor (2008), also claim that reform of 1976 untied the local government system all over the country. Under the 1976 local government reform, Nigeria operates a single tier multipurpose local government system. However, Olasapo (2001), contributed that the guides for the local government reform provided that the population for all local government in Nigeria should range between a minimum of 159,600 and a maximum of 800,000, thus the two characteristics of the structure of local governments in Nigeria are uniformity and largeness of local governments area. Under the local government reform, a total of 301 local governments were created in Nigeria (Okafor, 2008).

          Okafor (2008), argues that these areas were entrenched into the 1979 constitution of Nigeria, the local area were so large that they lose touch of the people. However, Ojo (1994), claims that the federal governments increased the number of the local government in the federation to seven hundred and seventy – four (774) and democratized the appointment of their chairmen and enhance the autonomy of these local governments. In the word of Ogboazi (1998) argued that the issue of rural development like Enugu North has been creating a lot of concern in most third world countries. There has been growing recognition of the importance of rural development as an instrument in the overall development of the contemporary development world; this is because of glaring gap between the rural and urban areas in terms of infrastructure, resources distribution, human resources development and employment which has made rural development imperative. Husband and Dockery (1977), demonstrated that local government administration in Nigeria have been characterized by bazaar mentality, poor accounting systems, unavailability of reliable data required for planning, inadequate finance and poor revenue collection. The statutory allocations from the federation account because of poor management are said to be inadequate to cover financial obligations of local government councils on terms of staff salaries, social services and serving of debt but the autonomy had made the administration favorable to all Okoli and Nwabuto, (1990). Local government derives its existence power and autonomy from the fundamental law,the constitution of the land not at the whims and caprices of the federal or state governments. It has its legislation areas allocated by the constitution, it can be sue or sued to court and that makes inartificial personality corporation Nwatu and Okafor (2008).



The local government system from the early colonial days has undergone a lot of changes, most of thesechanges have occurred to correct certain deflections that emanated from the colonial masters. It is assumed that the national cake is not getting down to them while the wealth of the nation is being flatted away by some other lends of government.

The problems are:

·       Is fund made available to local government inadequately?

·       Is the local government system been able to effectively cater for the local stratum of Nigeria society through internally and externally revenue resources?

·       Is the autonomy granted to them making affective fund management a force or reality?

·       Is the staffing arrangement by the council to handle fund efficient and adequate?


·To determine if Nigeria federal statutory allocations revenue to local government is sufficient to effectively and efficiently achieve the local councils statutory functions and responsibilities to the rural people.

·To find out whether local government area are adequately funded in the present dispensation to tackle their statutory function and responsibilities to the rural people.

·       To determine the effect of the autonomy on the local government financial base.

·       To critically examine if the funds generated internally and externally are prudently managed to the benefit of their duties and obligations to the general public.

·       To evaluate the adequacy of staffing out arrangement by the council to handle fund efficiently.

·       To determine whether the internal or external resources of funding constitute the major sources of funding.


Some research questions have been formulated to help this study.

1.    What is the economic impact of local government autonomy on its financial base?

2.    What ways do local government manages their funds?

3.    What is the major source of fund to local government?



H:The autonomy does not have economic impact on thelocalGovernment financial base.

H:The autonomy of local government has economic impact on the local government financial base.

H:      Local governments do not manage their fund through       internal and external control.

H: Local government manages their fund through internal control and external control.

H:       The major source of fund for local government is not Internal and external revenue.

H:      The major source of fund for local government is internal and external revenue.




       Due to increasing attention being focused on the third tier of the government as a great instrument of the national development, this study becomes important. It is good to evaluate the journal so far knowing fully well that 70% of the Nigerian populace isin the rural areas where the local government administration ought to bring about grassroots developments. Good example of government efforts to carry along the grassroots people can be found in the establishment of sensitize people and createawareness which at the same time putting infrastructural like water,roadsand electricity. These efforts are meant to increase food production, marketing and encourage governance participation.

This study focuses on its importance as the management or the rural and local areas, checking rural urban migration effects, farming and social line of the rural dwellers. The study is relevant in the sense that how efficiently fund is used in the local government will become a reference material for a host of people, student, institution, government and nongovernmental agencies.


The scope of this study is restricted to Nigerian government and mobilizing local government tax revenue to adequate service delivery in Nigeria from the period of 1970 to 2007.


AUTONOMY: It is the right of self-government the ability of one to be independent.

ALLOCATION: it is the amount authorized to incur expenses or obligation up to a specific purpose and within a specific period (odoli, 2004).

CONSTITUTION: A set of principles, fundamental and practices of government written and unwritten, which establishes the major organs of government, allocates to them or as power which defines the rights of the citizens and the relations between them and the state. Nwatu and Okafor, (2008).

COLONIAL: Connected with or belonging to a country that controls another country. Nwatu, (2008).

ECONOMIC DEVELOPMENT: The gradual growth of an economy, so that it becomes more advanced, stronger in the development of its wealth. Sharma,(2009).

FINANCIAL MANAGEMENT: This is the management activity that is concerned with the planning and controlling of the firm financial resources. Orjih, (2009).

FUND: It is a resource inform of money, the sum of money available for a purpose. Olasupo, (2001).

GRASSROOTS: It is the devolution of powers to the local government whereby the effective principle is encouraged. Okafor,(2008).

INTERNALLY GENERATED REVENUE: Fund generated within the local government council which include capitation rate,fee,and licenses. Okafor,(1994).

APPENDAGE: Something added to an entity of greater importance or size, an adjunct Nzelibe, (2000).

APPARATUS: A group of combination of instruments, machinery, tools material etc having a particular function or intended for a specific use.

BUDGETARY: It is an estimate, often itemized of expected income and expenses for a given period in the futureOlasupo (2001).

CAPITAL EXPENDATURE: These are expenditure of capital nature e.g.Building of houses and secretariat Olasupo (2001).

CENTRALIZATION: It means that legal authority has not been decentralized subordinate units and it is also used to describe a situation where the powers within an administrative hierarchy are concentrated at the apex Okafor and Nwatu, (2008).

CONCURRENT: It refers having equal authority or Jurisdiction Ojo, (2001).

CONFLICT: It is a situation in which people, groups or countries are involved in a serious disagreement or argument Nwatu and Okafor (2008).

CONCEPTUAL: Something having to do with the mind, or with mental concepts or philosophical or imaginary ideas Ogbazi (1998).

CONSTRADINTS: It refers to things that limits or restricts something or your freedom to do something.

CONDRADICTION: To assent the contrary or opposite deny directly and categorically Chaparan (1999).

DECECIATION: It is the assignment of responsibility or authority to another person to carryout activities Agba (2013).

DECONCENCIATION OF POWER: It is the transfer of power to subordinate authorities whether office individual or field unit. Okafor and Nwatu,(2008).

DEMOCRACY: A system of government in which all adult citizens shall through their elected representatives. Adijolola(2009).

DEVELOPMENT: The gradual growth of something so that it becomes more advanced, stronger etc Sharma (2009).

DEVOLUTION: It refers to the transfer of power to special bodies or agencies, which are subjected to central control. Nwatu and Okafor (2008).

ELECTROAL REALITIES: It refers to the fact that direct election by popular votes gives locally elected officials, substantial degree of influence and at times significant control over their supposed supervisor at the staff and national levels. Coner (2001).

EXOGENOUS: A variable is exogenous to a model, it is not determined by other parameters and variable in the model but is set externally and changes to it come from external forces. Nzelibe (2000).

EXTERNALLY GENERATED REVENUE: Funds generated outside the local government includes statutory allocations grants in aids and loans. Okafor, (1994).

FEDERATION:A league or association formed by federating, especially a government or political body established through federal union. Ogboazi,(1998).

FINANCIAL OBLIGATION: An obligation to pay money to another party. The obligation may rise from borrowing funds or from a legal action. Nwabueze,(1999).

FRAMEWORK: A set of beliefs, ideas or rules that is used as the basis for making judgments, decision etcOlasupo,(1998).

Kilometers between the local government headquarters and the neighboring towns and villages that constitute the local government, Olasupo,(2001).

INDEPENDENCE: The process of not been influenced or controlled by others in matters of opinion, conduct etc, thinking or acting for oneself. Nzelibe,(1991).

INHABITANTS: A person or arrival that is a permanent resident of a particular place or region. Collins English Dictionary, (2003).

INTERNALLY GENERATED REVENUE: Fund generated within the local government council which include, capitation rate, fees, and licenses. Okafor,(1994).

JURISDICTIONS: This is an area with a set of laws under the control of a system of court or government entity which are difference from neighbouring areas. Okafor, (2008).

LEGISLATURE: This is the law making of the government; it comprises the representatives of the people elected through the party or parties or through

LEGITIMACY: This is the popular acceptance of an authority, usually a governing law or regime. Ojo, (2003).

MACHANISM: It is a natural or established process by which something takes place or is brought about. Coner, (2001).

METROPOLITIAN: It is a leading provider of integrated housing services, care and support and community regeneration. Adijolola, (2009).

MISCELLANEOUS SOURCES: This include very minor and irregular source of revenue like interest on bank investment deposit sales of agricultural products. Agba, (2013).

LOCAL ADMINISTRATION: A system of delivery service to the local communities and for collecting taxes rates and fees from them, as well as generating their support, for the planning and implementation of development programs. Okafor and Nwatu, (2008).

LOCAL AUTHORITIES: These are field officers, who perform only those functions assigned to them by the higher authorities. Nwatu and Okafor, (2008).

LOCAL GOVERNMENT AUTONOMY: This is the ability of local government to take some political economic and social decisions without recourse to any of the two superstructures, state and federal government. Olasupo, (2001).

LOCAL GOVERNMENT: This is a government that is closest to the people, the grassroots. Nwatu, (2004).

NATIONAL: It describes something that belongs to or is typical of a particular country or nation. Okafor,(2008).

OBJECTIVES: A specific result that a person or system aims to audience within a time frame and with available resources. Chiedozie,(2004).

REGIME: A mode or system of rule or government. Okafor, (2008).

REVENUE:This amount of money that a company actually receives during a specific period, including discounts and deductions for returned merchandize, it is also the “top line” or “gross income” figure from which cost are subtracted to determine net income. Odo, (2004).

STAFFING ARRANGEMENT: Putting in order the group of assistant working together under a manager or head. Oluwa,(1996).

STATRUM: A level of society composed of people with similar social, cultural or economic statue. Okafor, (2000).


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