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European Journal of Social Sciences - Volume 2, Number 1 (2006) sharing the rest among the tiers of government and special funds at the rates already state above. Others sources of fiscal stress These can be classified into socio-political and structural sources. By socio-political sources, references are being made to issues like pervasive corruption and imposition of some (extra-budgetary) ad-hoc functions on local governments by both state and federal governments. On the other hand, the state government’s freedom to interfere and make automatic and numerous extra-budgetary deductions from the statutory allocation of the local governments as occasioned by the nature of intergovernmental fiscal relations is of immense. Examples of such imposed ad-hoc functions as well as extra-budgetary deductions are as already listed elsewhere in this work. Of importance to this part of the work is the aforementioned structural arrangement with respect to fiscal transfers. Specifically, this bothers on the supervising state’s right to establish and maintain a State Joint Local Government Account into which are paid all allocations to the local government councils of the state from the federation account and from the internally generated revenue (10%) of the supervising state (section 162 (8) of the 1999 Constitution). Apart from the fact that this arrangement allows the state to impose deductions on the local governments at will, it is often used as political instrument to settle scores with local government chairmen either with different political party affiliation or when not at peace with the state on one ground or the other. Implications of fiscal stress From the foregoing, the existing fiscal stress at the local government level in Nigeria is traceable to three main sources: inadequate tax-raising power, inadequate revenuesharing power as well as socio-political and structural problems with respect to intergovernmental fiscal relationship existing among the three tiers of government. There are two major effects of these inadequacies. First, the capacity of the local governments to play their roles as agents of development is limited, especially finding it difficult to meet the increasing scope, scale and standard of services needed in the community today (Iniodu, 1999:293). More concretely, it negatively affects the economic viability of the third tier of government and in effect not able to perform their constitutionally assigned responsibilities. Second, the inability of local governments to raise substantial portions of their recurrent revenue requirements from internal sources undermines the autonomy that is implicit in the idea of a third tier of government (Adamolekun, 1984). This is evident in the current revenue structure of local governments as the federal government is relied upon for more than 90 percent of their revenue. At macro level, it negates the relevance of local government creation to citizens since such a fiscal relationship will not allow for self-determination. Above all, with the relationship said to be lacking ‘ethos of justice’ (Adesina, 1998), the struggle for the control of federal power and influence among the regional blocs has increased. In addition, it has over time led to the emergence of domineering and autocratic federal government. Apart from the fact that it influences changes to the revenue allocation system, it determines what is actually paid into the federation account, deducts (at source) outstanding loans of any unit or such other payments as it deems fit, and more often than not delays disbursement to other two levels of government for political or any other reason(s). It even withholds funds meant for other levels at will as it was experienced when it (federal) withheld 13 percent derivation fund in the early periods of the fourth republic and more recently the allocation for local governments in the states where additional ones were created. The federal government uses this as a weapon 56
European Journal of Social Sciences - Volume 2, Number 1 (2006) having realised the fact that no other tier can exist without the monthly statutory allocation. Recommendations The fact remains that, so far local governments are known worldwide to be critical to the national development and in recognising this fact the Nigerian constitution guarantees its existence, it has become an inevitable and indispensable tier of government within the Nigeria’s federal structure. If this level of government must achieve and sustain its functional but relative autonomy (Bello-Imam and Uga, op.cit: 465), a number of steps must be taken. First, the federal government must evolve both the vertical and horizontal revenue sharing formula that takes into account the relative constitutional functions of local governments as one of the vexed questions is that there has to be correspondence between constitutionally alloted functions and fiscal allocation (CASS, 2003:74). The federal government must recognise the importance of local government as the grassroots development unit that must do everything possible within their jurisdiction to promote the welfare of the citizens. Second, since the internally generated revenue of local governments comes from minor sources, their revenue must continue to be supplemented from federal allocations enhance discharge of functions. This does not stop local governments from working towards a situation whereby they will be alert to their internally generated revenue responsibility to reduce the extent of their dependence on federal government (Iniodu, 1999:311). This can be done by mobilising available local resources to broaden the revenue base of the local government. In the alternative, the federal government can liberalise tax issues either by reassigning tax powers or by granting resource control rights. Third, the maintenance of State Joint Local Government Account (SJLGA) by the state must be discontinued and constitution be amended accordingly. The unhindered access of state government to the accounts of local governments under its jurisdiction has its aforementioned attendant problems. After abolishing the SJLGA, monthly statutory allocation to local governments can be done through the Central Bank nearest to them (Bello-Imam and Uga, op.cit). This arrangement will guarantee the local governments the deserved autonomy. The state government will be brought in to assume its supervisory role only to ensure fiscal prudence. Particularly, the auditing procedure may be strengthened and the office of Auditor-General for local governments be constitutionally guaranteed. An independent body can even be instituted to complement the roles of Auditor-General for local governments to monitor and evaluate the expenditure vis-à-vis revenue of local governments and report accordingly. Institutions such as Economic and Development Planning Commission, Economic Advisory Council, Economic Intelligence Committee, etc that are already in place must be empowered, encouraged and protected and more importantly made relevant in this respect (Iniodu, ibid). In addition, the government may need to re-orientate the thinking of the citizens towards disciplined and responsible behaviour and conduct, which will in a way reduce corruption at the local government level. Fourth, the State House of Assembly must monitor and enforce the distribution of 10% of the supervising state’s internally generated revenue to local governments in the state. Records have shown that many states in the federation have not been complying with this constitutional provision. It is also hereby suggested that the National Task Force on local government revenue mobilization be created. This is necessary if only to be self-reliant, as one of the 57
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