Fiscal Federalism and Local Government Finance in Nigeria: An Examination of Revenue Rights and Fiscal Jurisdiction

The most severe problem facing public institutions in Nigeria is the fiscal one, particularly in local government. This problem has been provoked by a number of factors, including ‘over dependence’ on statutory allocations from both the state and federal governments, deliberate tax evasion by the local citizenry, creation of nonviable local government areas, differences in the status of local governments in terms of the rural–urban dimension, and inadequate revenue and restricted fiscal jurisdiction. This article examines these factors and their attendant problems, implications and effects within the context of the fiscal federalism established by the 1999 constitution of the Federal Republic of Nigeria.

For financially healthy local governments to exist, responsibilities and functions must be allocated in accordance with their taxing power and ability to generate funds internally. The constitutional provision that recognizes local governments’ power in this regard must give them full freedom to operate and this must be well guaranteed and adequately protected. These measures, coupled with a review of the revenue-sharing formula, the granting of fiscal autonomy and fiscal discipline as well as making local government responsive, responsible and accountable to the people will set local governments free from the fiscal stress promoted and strengthened by the 1999 constitution.