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REVENUE ALLOCATION FORMULAR AND NATIONAL DEVELOPMENT IN NIGERIA (A STUDY OF ORLU LOCAL GOVERNEMNT ARE, IMO STATE)

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Abstract

This study focus on Revenue allocation formulation and National Development in Nigeria. Specifically, the study looks at how the various revenue allocations to the three tiers of government affects real gross domestic product (RGDP) in Nigeria using time series data period 1993 to 2012. The population size of 400 was used which received to a sample size of 200 using yaro yameni sampling technique. Simple percentage method was used in the analysis and interpretation of data. The study’s findings show that revenue allocations have significant causal relationship with economic development in Nigeria, with only revenue allocation to states having significant negative relationship. Unidirectional causality runs from revenue allocations to real GDP in Nigeria. All variables of the study are cointegrated and have a long-run relationship that 87.62% of the short-run disequilibrium is corrected yearly. The study recommends among others that more financial control and value for money audit shou

1.1 BACKGROUND OF THE STUDY

Every government pursues economic development by trying to achieve macroeconomic objectives in a particular system of government. Various systems of government include federation, unitary, and confederation. The Nigeria’s system favors federation. The federation of Nigeria achieves her macroeconomic objectives by performing the functions of resource allocation, income distribution/redistribution, and economic stabilization within the central government, that is, federal government and its units (states and local governments). This system of performing government functions in different tiers of government is called fiscal federalism (Buhari, 2001; Likita, 1999).

Fiscal federalism is a system of taxation and public expenditure in which revenue-raising powers and control over expenditure are vested in various levels of government within a nation, ranging from the national government to the smallest unit of local government (Anyafo, 1996). Basically, fiscal federalism emphasizes on how revenues are raised and allocated to different levels of government for development. A large body of literature exists on Nigeria’s fiscal federalism particularly with reference to revenue allocation. Despite the profound and lengthy discussions that have taken place on the subject for about four and half decades, consensus has not been reached concerning the optimal formula to adopt to achieve desired economic development (Aboyade, 1985; Buhari, 2001). Thus, the issue of revenue allocation has been a recurring theme in Nigeria’s fiscal federalism.

There is the problem of how to allocate revenue to different tiers of government in relation to the constitutionally assigned functions. The discordance between fiscal capacity of various levels of government and their expenditure responsibilities, the noncorrespondence problem, is a striking feature of the Nigerian federal finance (Mbanefoh & Egwaikhide, 2000). There is also the problem of how revenue should be shared among the states and local councils. Several studies mainly exploratory (such as Aluko, 2000; Ekpo, 2004; Khemani, 2001; Mbanefoh & Egwaikhide,

2000; Suberu, 2006; Uche & Uche, 2004) were carried out on how revenue is shared within the federal government, state governments, and local governments and the basis of sharing the revenue to these federating components. But these studies could not empirically study the impact of the revenue allocation on  development of Nigeria. Other studies, such as Aigbokhan (1999), Jimoh (2003), Emengini and Anere (2010), Akeem (2011), and Usman (2011) carried out empirical studies on the effects of the level of decentralization of government activities including revenue allocation on Nigeria’s economic development using

econometric analysis. None of these studies to the best of my literature review utilized causality econometric test to ascertain the direction of causal relationship between the variables. However, this study intends to examine empirically how different revenue allocations over the years impacted on economic development of Nigeria and the causal relationship between the variables.

 

1.2     STATEMENT OF THE PROBLEM

The issue at back of government mind while establishing the pension scheme is to provide the employee with a means of securing on retirement a standard of living reasonably consistent with that which years later, we can see that reverse has been the case, the worker decides to create retirement, just like death in developed countries the worker looks forward to retirement.

The management of pension scheme has made things so hard for the worker that a retiree has to travel long distance to get his pension paid in Nation development in Nigeria has been observed that those who are retired.

This is why this research is intended to suggest solution to the problem of mismanagement of allocation formular and National development in Nigeria a study of Orlu local government Area Imo State.

 

1.3     RESEARCH QUESTION

1. What are the effects of revenue allocation formular on National Development?
2. What are the challenges of revenue allocation formular in Nigeria?
3. What are the solutions for positive change?

 

 

 

 

1.4 PURPOSE OF THE STUDY

          The purpose of the study is;

1. To examine the effects of revenue allocation formular on national development.
2. To investigate the challenges of revenue allocation formular on national development.
3. To provide/proffer solutions for positive change.

 

1.5     SIGNIFICANT OF THE STUDY

This study is carried out basically to look into the problems of revenue allocation to local government with particular reference to Orlu local government Area Imo State. Also it will be directed to or focused on the unrealistic transfer of funds to the account of the local government by the state government.

It will create awareness with the problems encountered by revenue allocation to the local government. And it will also fund the possible solution to the problems.

This study after been completed will be very advantageous to local governments to know how the allocation of revenue is been distributed by the federal govern governments.

 

1.6     SCOPE OF THE STUDY

This study seeks to undertake on revenue allocation formular and national development in Nigeria. But study is to covers federal polytechnic nekedde as a case study, which is one of the many institutions in Nigeria.

However, the necessary reference would be made to other institutions and comparism to assess the performance of this level base on allocation output.

 

1.7     Limitations of the Study

In the course of writing and carrying out this project work, the research encountered many difficulties; some errors in the results of the research and from external sources of data collection. These are factors  standing as constraints thereby limiting the effect of the research result.

Among these are, time finance , scope and use of wrong statistics in data analysis, due to time limit, the research work is a time consuming one. A lot of time is taken to observe the subjects.

Most  times the behaviour of the staff changes even when they are aware that they are being observed by the researcher, this is by taking their behavior. The researcher also observed that these senior staff some time give true and false information in order to cover their branches.

At sometime the research work lasted over two months due to large scope of area of the study.

 

1.8     DEFINITION OF TERMS

Terms are words with specific meanings. The terms to be used for this study as the topic suggest are problems, revenue, allocation, local government, policy, administration, administer, subvention, overview, and encounter.

1. PROBLEMS: Simply means question or solutions involving difficulties.
2. REVENUE:Ganiya O. G. (1998) this refers to the money that a government receives form taxes or that an organization receives form it business. It also refers to the amount of money collected by the government form their usually regular sources of revenue.
3. ALLOCATION:Simply means to distribute share out or to give each his share.
4. POLICY:Is the plan of action agreed or chosen by a political party, or a company.
5. ADMINISTRATION:Simply means the activities that are done in order to plan, or organize and run a business, school or other institution.
6. ADMINSTER:Simply means to manage and organize the affairs of a company, an organization or a country.
7. SUBVENTION:Refers to the amount of money that is given by a government to help an organization.
8. NATIONAL DEVELOPMENT: This is the expansion and growth of people in an area of government.
9. ECONOMY: The relationship between production trade and supply of money in a particular country or region.

1.9 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows. Chapter one is concern with the introduction, which consist of the (background of the study), statement of the problem, purpose of the study, research questions, significance of the study, scope of the study etc. Chapter two being the review of the related literature presents the theoretical framework, conceptual framework and other areas concerning the subject matter.     Chapter three is a research methodology covers deals on the research design and methods adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the stud