Financing is the life wire of any organization. The success or failure and effectiveness or ineffectiveness of local government depends on the financial resources available with individual local authorities and the way these resources are utilized. The problem of inadequacy of funding continues to remain quite high among factors most frequently identified as militating against the ability of local governments to effectively perform their statuary functions. There was no financial backing for local government to take off when the 1976 reforms came on board. What the federal government did was a deliberate effort to fund the body and as such, there was frustration in the allocation of fund in the wake of the reforms.
Internal source of revenue generation comprises several miscellaneous item aggregated together to provide the required fund to finance the enormous functions ascribed to local government. It means rates, tax, fines and fees. But this seem not to be enough, hence, local governments are highly dependent on the allocation grants from the Federation Account for survival. It may be stated here that 20% allocation from the Federation Account and 10% from the internally generated revenue of the State go to the local government.
The prevailing allocation formula from the Federation Account of the country is:
Federal Government – 48.5%
State Government – 24.0%
Local Government – 20.0%
Special Fund – 7.5%
From the above breakdown it simply shows how much allocation goes to local governments for grassroots development which in most cases are unaccounted for by different administration. The fault must not be completely laid on the feet of local government administrators without mentioning the visible or invisible hands of the State governors controlling things at the third-tire level.
Many problems have bedeviled the local government administration in Nigeria as such they have not been able to meet their statuary obligations of bringing the gains of democracy closer to the people at the grassroots. The one that ranks above the others is corruption and mismanagement.
In fact a mere mention of the local government exudes corruption. The popular myth propagated by the council officials is that the councils are always short of funds. No doubt, the heavy funding that runs into billions of Naira as seen from the tables may not be enough because of the high level government councils do not accord adequate regard to the budget process. The fall out of this situation is the indiscriminate and unplanned execution of projects.
The state governments which would have served as a check are not free from this cankerworm. Evidently, there are contract scams in all local government councils in Nigeria. These contracts are inflated and worse still, the projects are not executed and thereby defeating the essence of budgets.