LOCAL GOVERNMENT FINANCE AND THE CHALLE

Topics: Tax, Public finance, Local government Pages: 33 (7539 words) Published: November 17, 2014
LOCAL GOVERNMENT FINANCE AND THE
CHALLENGES OF GLOBAL ECONOMIC CRISIS

BY
TOMORI M. ADIJOLOLA
lolatomori@yahoo.com

BEING A PAPER PRESENTED AT:

THE WORKSHOP ON PROPERTY TAX SYSTEM AND LOCAL
GOVERNMENT FINANCING

ORGANISED BY:

MINISTRY OF LOCAL GOVERNMETN AND CHIEFTAINCY MATTERS IN
COLLABORATION WITH MESSRS WALE ADENIYI PARTNERSHIP

MARCH 2009

LOCAL GOVERNMENT FINANCE AND THE
CHALLENGES OF GLOBAL ECONOMIC CRISIS
1.0

INTRODUCTION
As the biggest economic recession in 70 years continues to undermine political

support for globalization and threaten the income of more families globally, its negative implications for Nigeria’s economy now appear to be incontestable. According to economic experts, right now, the economy appears stuck with various offshoots of the crisis; shrinking private inflows, weakening naira, nose-diving foreign reserves, and reduced revenues due to plummeting oil prices. If nothing is done urgently to improve the competitiveness of Nigerian industries and diversify the country’s revenue base, the ripple effect of the crisis may be difficult to tackle. Globalization is leading to major restructuring within countries, shifting trade and production away from traditional urban centres towards cities and towns that can demonstrate market advantage. The role of national governments is being refocused to facilitate markets, promote market economic and social stability, and ensure equity. But reforms will not do what is desired for national development until they are adopted and implemented appropriately at the local government level where services essential to individuals and corporate organizations are delivered.

In the present day of economic crisis, local governments have a great role to play in the management of the cities and they have to be equipped with financial, human and technical resources. Moreover, local government budgets should reflect citizens preference for public services.

2

2.0

OVERVIEW OF LOCAL GOVERNMENT FINANCE:
Urban Local Government finance includes almost all conceivable areas such as

revenue, expenditure, budgeting and financial control. Within the formal institutional context, Local Governments receive by virtue of the constitution and other legal mechanisms, funds for certain purposes known as transfer. Local Governments however can generate internal revenue locally through direct taxation, fees and user charges. Both sources of funding have different implications on the economy of Local Government. The ability to generate internal revenue implies autonomous fiscal measures and is indicative of the ability of the Local Governments to run its own affairs. However, inter-governmental transfers often have as an objective of distribution of resources amongst the Local Governments which, as a general rule, operate in different economic circumstances and have varying taxation possibilities.

Internally generated revenue (IGR), apart from being part of fiscal policy, also enable the Local Government Authority to formulate economic policy, to the extent that the revenues can be used for economic purposes and the Local Government authority can take a stand in that regard.

Local governments are generally assigned expenditure responsibilities for a wide range of services, including roads and transect, water and sewerage services, police and fire protection in some developed countries, solid waste collection and disposal, recreation and culture, land-use-planning, social services, public health and social housing. In many countries, the laws on local governments do not distinguish between large metropolitan areas medium size cities, and towns and villages. This accounts for the funding problems between the rural and urban local government in Nigeria. “A structure that fails to distinguish between major metropolitan areas and small village makes it difficult to clearly define the functional responsibility of local 3

government” (Burki, Perry, and...

Bibliography: Combating corruption and State and Local
Revenue Administration (2007) in Local
the Evolving Roles of Local Governments,
(2006) in Local Governance in Developing
Broadway and Anwar Shah, 2007 published
by IBRD/ the World Bank, Washintogton
D.C. 200433.
and Anwar Sharh, 2007 – IBRD/the World
31
Multigovernmental Framework
(2007) in
Roy W. Baw and Johannes F.Linn: Urban Public Finance in Developing
Countries (1998) Published by the World
(2002) A Paper delivered at the Training
Workshop organized by the Development
Oyo State Government:
Local Government Law Cap 78, 2000.
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