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This paper examines the issues of revenue generation and utilisation in the Nigerian local government system, specifically in the Udi Local Government Area of Enugu State. The local government’s revenue sources were investigated. This study examined how they made revenue.

Data for the study was gathered through interviews and questionnaires. The percentage of time spent answering research queries. However, the researchers discovered some information on how the revenue was generated. These include allocations from the federal government, grants from state governments, and revenue earned domestically.



Background Of The Study

Local government in Nigeria arose as a result of the indirect rule system established by colonial masters during the colonial era. Since that time, the local government system has undergone a number of reforms, including national conferences, workshops, and seminars on local government administration in various sections of the country.

The goal of these seminars and conferences was to guarantee that Nigeria’s local government system was successful and vibrant.

Despite a series of seminars and conferences on local government in Nigeria, there was persistent inefficiency and misuse of resources, particularly in terms of revenue production and utilisation in Nigerian local government districts.

As a result, we were driven by the desire to discover why financial inefficiency persists in local government despite a series of steps implemented to ensure effective administration in the local government system.

Despite the fact that the 1976 local government reform in Nigeria stated the roles of local government, it helped significantly to letting people feel the presence of a strong and active government.

Local government, as the third tier of government, is a process by which social economic activities are carried out in various localities, allowing for even growth. Local governments aid in the provision of government at the grassroots level.

The involvement of local governments around the country is a method of making government meaningful to them and so turning government into a tool for development.

However, the local government has been unable to meet the majority of these commitments due to a lack of financial resources, which has been a key issue leading to ineffective administration in various parts of local government in Nigeria.

With the implementation of the 1976 reform, there was an improvement in local government as a consequence of grants received from the federal and state governments, but they are still reliant on grants as the majority of their funding affects the effectiveness of their services.

Local governments also receive revenue from internal sources such as licence fees, taxes, and rates, but these funds are not always effectively collected and utilised as a result of embezzlement by L.G.A. staff members who are responsible for collecting the revenue as well as those who manage the revenue.

Despite the 1976 agreement for local government reform, the question of revenue production and utilisation remains a severe one.In such a context, we decided to undertake a study on revenue production and utilisation of the Nigerian local government system, utilising Udi Local Government of Enugu State as a case study.

We trust that the solution proposed to the problem would assure the effective and efficient realisation of our goal and objective for Nigeria’s future growth.

Statement of the Issue The researchers concentrated on the widespread issues that contributed to the revenue and utilisation issues in Nigerian local government.

This issue impedes the efficient generation and effective use of local government revenue in Udi Local Government. These were the issues: –

1. Inadequate revenue sources or limited revenue resources.

2. Inadequate handling of revenue generated.

3. Inadequate revenue generating.

4. Local governments’ inability to carry out the obligations delegated to them by the federal government.

5. Poor attitude of citizens in carrying out their responsibilities, such as tax payment.

 Goal of the Research

Local government, as the third tier of government, has many financial commitments and responsibilities to fulfil, and the goal of this research is to guarantee that these requirements are met successfully. This work attempted to;

1. To ascertain how revenue is generated in local government.

2. To investigate the internal and external revenue sources of the local government system in Udi, Enugu State.

3. To research the revenue and utilisation problem in Nigerian local government in order to learn how government officials manage the fund.

4. Determine the source of the problem.

5. To propose a feasible solution to the revenue generation and utilisation challenge.

Management by objective is required for every purpose to be realised.

Management by objective, according to Ikechuku (1995), is a system in which an organisation collaboratively identifies its common goals, defines each individual work, and uses this measure as a guide line for operating the unit and assessing the contribution of each of its members.

The implementation of this theory in the context of this research assures that we (as input) collaborate as a unit to produce an effective and efficient outcome (output or objective).

Ejiofor (1987) defined management by objectives as a technique in which an organisation agrees on broad goals, then converts these goals into a chain of precise short-term goals that define each particular key area of accomplishment.

This theory’s use in this situation ensures that each individual becomes optimally dedicated, accomplishment motivated, and outcome orientated.

Similarly, in any local government system, there must be demand and support from citizens (as input) into the local government, which then converts this support as (output). There are instances when the demand outweighs the output of local government due to a lack of community support.

This citizen support can take the form of obeying the law, paying taxes and rates, and having an understanding and sense of belonging. This will assist to reduce the burden on local government. As a result, successful local government organisation and management can be realised through mutual cooperation of the local government as a system.

The structure, as a system, is made up of a political unit, an administrative unit, and the overall models. When these structures function together as an input, the outcome is an effective and efficient result (output).

 Significance of the Research

People have been protesting about the low development state of local government in executing their obligations since the colonial time. We trust that this research will undoubtedly inform local government workers and management. It will result in a greater visible contribution and improvement in local government administration.

This study will be used to address the majority of the revenue production and utilisation issues, and the findings will be useful to other local governments in Nigeria, as well as students conducting comparable research on the same topic.

Research Questions

1. What are the internal and external sources of funding for local governments?

2. To what extent is local government funding being used?

3. What are the issues causing inefficiency and mishandling of revenue in Udi Local Government?

4. What are the underlying causes of the problem?

5. How can we reduce the identified revenue management issues?

Scope Of The Study

The research was carried out at Enugu State’s Udi Local Government. The study covers all aspects of revenue administration and disbursement in local government.

Limitations of the Research

This research would have been expanded, but there were various factors that limited the research’s ability to do so. These elements are as follows: –

Time: The limitation imposed on the researchers in this area cannot be overstated. The time allotted for data collection, study completion, and project submission was insufficient to do more detailed research for study.

Finance: The researchers were stressed by the large financial involvement such as material costs, travel expenditures, and so on. Second, revenue utilisation can be effective in policy development on local government funding due to their growing statutory functions.

Third, revenue utilisation is important in regulating the expenditure of the local government in light of their internal and external sources of money via budget (revenue budget).

Terminology and Abbreviations

Some crucial terms in this study effort could be explained to improve understanding of the goal.

This important notion includes the following: –

i. Municipal Government

ii. Earnings

iii. Application

Generation IV

v. Loan

vi. Permission

vii. Taxation

viii. Distribution

ix. Award

x. Financial Administration

Municipal Government

“Local Government” is defined in this work as “the third tier of government or political organisation established by law to carry out the responsibility of government at the grassroots level.” They can levy taxes due to the statutory authority they have over local affairs.


Revenue is defined as money earned by the government through taxes or product sales. It is all of the revenue or funds generated by local government from both internal and external sources.


This is a method of successfully utilising available resources to attain a desired goal.


This is a method of collecting revenue for the local government from either internal or external sources.


This is the amount of money borrowed by the local government to expand their project, such as the supply of social facilities.


This is the money paid for registration, property, and local government services.


This is a mandatory payment imposed by local government on individuals, businesses, and economic units, despite the fact that they have statutory authority over our local affairs.


This is the amount of money received by the local government from the state or federal government.

Allocation can be statutory or non-statutory. Statutory allocation is money from the state government, whereas non-statutory allocation is money from the local government.

Financial Administration

This is the ability to use available resources such as men, material, and money to achieve a common goal.

It is also the ability to maximise output from a given input. Its importance in local government administration cannot be overstated because it helps to ensure that local government policies and plans are successfully implemented.

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