CHAPTER ONE

INTRODUCTION

1.1       Background of the Study

Federation implies the existence of more than one level of government in one country each with different expenditure responsibilities and taxing powers. Nigeria is a federation consisting of states and federal capital territory, federal government, 36 states and 774 local governments. Among the different levels of government, fiscal arrangement ought to be worked out properly to ensure fiscal balance in the context of macro-economic development and stability. The fiscal arrangement among the different tiers of government in a federal structure contends (Osisioma and Chukwuemeka, 2007) is often referred to as fiscal federalism; in other types of political structure it is known as inter-tier or intergovernmental fiscal relations.

The capacity of the federal, provincial and territorial governments to assume their responsibilities hinges on the balance between decentralization of revenues and decentralization of government spending. This decentralization refers to the portion of total revenue collected and expenditures allocated to both state and local governments. The degree of decentralization argues Okoro (2006) is the extent of independent decision making by the various arms of the government in the provision of social and economic services. It connotes the degree of autonomy of state and local governments in carrying out various economic tasks.

Vincent (2002) enumerated the existence of the following fiscal arrangements before the military took over power in 1966.

–  The regions were assigned the proceeds from export and excise taxes while the Federal Government received the share attributable to Lagos area.

–  Marketing boards were regionalized and their respective regions retained their operational surpluses.

–  Regions were empowered to fix produce prices and also impose tax on the produce of the marketing boards.

–  Regions were assigned the full retention of mining rents and royalties with a federal tax of 30% payable to the distributable pool account (DPA) and were later adjusted to 35% in 1957.

–  Regions were allowed to administer and retain income tax on incomes not above $700 per annum.

–  The federal government collected import duties and corporate income taxes.

–  The regional governments determined the relationship between the regions and the provinces.

The implications of these measures were an increase in regional revenue from 17.7% in 1945/49 to 41.6% in 1966/67 while the share of the federal government declined from 82.3% to 58.4% in the same period (Obasi, 2006). The military intervention in 1966 brought new changes as the federal constitution of 1963 was suspended. The Federal Government took over state and local government functions. Consequently, new tax measures were introduced as follows:

*  The transfer of legislation and administration of mining rent and royalties to the Federal Government.

*  Centralization of the marketing boards while all taxes, surpluses and fixing of produce prices were administered by the Federal Government.

*  Right to revenue emanating from company income tax, import, export, petroleum profits tax (PPT), excise tax and mining royalties and rents were vested in the center.

*  Introduction of uniform rates in personal income and sales taxes while the state was to administer the taxes.

Replacement of sales tax with value added tax (VAT) in 1994 and subsequently transferred to Federal Government for the purposes of regulation and administration while the proceeds are paid into the VAT account for distribution among the tiers of government. Subsequently, the revenue potentials of the states were eroded, and internally generated revenue between 1993 and 1999 stood at 74% of total revenue while that of the local councils between 1996 and 1999 averaged 67% of total expenditure (Ezeabasili, 2006).

The 1999 Nigeria constitution stipulates the functions and powers of the levels of government in such a way that no one level of government can single handedly perform the functions of service delivery to the people. Therefore, cooperation has become an important prerequisite for governance (Fatile and Adejuwon, 2009:10). Nigerian federalism, like other federal systems of government, is characterized with diverse ethnic groups, languages, culture, political affiliation as well as struggle for political power. The need to cater for these diverse elements and ensure service delivery at the grassroot level necessitated the creation of local government (Fadeyi, 2009).

Local government was therefore made to be the third tier of administration with its autonomy. This autonomous nature of local government still allows for interaction with the central and state governments. The characteristics of the federal government are inter alia the separateness and independence of each level of government, mutual non-interference in the distribution of power, the existence of a supreme court and a court of law to act as an arbiter in intergovernmental dispute (Fatile and Adejuwon, 2009).

Intergovernmental relations (IGR) provide a platform for series of legal, political and administrative relationships between levels of government with varying degrees of autonomy. It is generally referred to as the transaction between levels of government of either national or regional or among federal, state and local governments (Ajulor and Okewale, 2011). Commenting on the tension and conflict among the three levels of government, Jinadu (1998:8) pointed out that:

The dynamics of federal-state relations within the federalist constitutional framework is one of a see-saw between interdependence and cooperation on one hand and conflict on the other hand, between the centre and the units and between the units themselves. The fourth republic witnessed unhealthy relationships between the states and local governments. During this period, about ten local government Chairmen were either removed and suspended from office. It was this that infuriated the Local Government Chairmen which made them to sue the thirty-six governors and their state assemblies (Fadeyi, 2001). Also, the stoppage of the monthly revenue allocations to the states that conducted elections into newly created local governments made the federal and state governments to be at loggerhead.

Under the distribution of powers in the 1999 constitution, Nigeria is a centralized federation with strong unitary elements. Currently, there are complaints about the overconcentration of power in the federal government (the product of long period of military rule), This school of thought has argued that, if Nigeria wants to practice ―true federalism, then it should go back to its 1963 constitution. Yet there are centrists who continue to support a very strong federal government in order to counter Nigeria‘s history of political instability (Adamolekun, 1983, Olopade, 1984).

This unhealthy rivalry and cold war between local government and other levels of government arises as a result of undue interference of the state government, unconstitutional removal of the local government Chairmen by some state governments, for instant, in 2014 Ekiti State governor Fayose dissolved the elected local government council and replaced them with his own appointees (Osakede and Ijimakinwa, 2014), shortening the Local Government Chairmen‘s tenure of office, joint state-local government account and what the states perceived to be an attempt by the federal government to relate directly to local governments. These need to be addressed if we are to sustain federalism that has been put in place. This paper therefore seeks to address the nature of intergovernmental relations between local government and other tiers of government and how improvement can be made to allow for true federalism in the country.

1.2       Statement of the Problem

The issue of having an acceptable formula for sharing resources among the three levels of government in Nigeria has remained problematic. A cursory look at the issue shows that the issue has resulted to tension and fight among different federating units.  Different Commissions and Committees had come out with different formula but that has not solved the problem. Conflict has become very common among federating units in the course of fighting for fund.  For instance, the conflict is usually whether the principle of derivation, need, natural interest or landmass should be used as a basis for the purpose. There is the problem of tax jurisdiction, which refers to the problem of which aspect of government should collect what revenue over a particular area.  These have been serious problems between the Federal, State and Local Governments.  Their share of tax revenue seriously affects local governments.  They are the lowest level of government.  Likewise, they collect the least amount of tax revenue, which makes them still stagnant. Also, there has been an occasional drop in amount and delays in remittances of federal allocations which left some strains in the financial capacity of the local government to prosecute some policies and vital programmes. The practice of federalism without recourse to true fiscal federalism amounts to sheer hypocrisy. The fact that the basic issues in Nigeria’s fiscal federalism are still hazy has equally encumbered her progressive move towards a true nation state. During the pre-independence period, a number of commissions were set up to look into the problems of Nigeria’s fiscal federalism. These include: Philipson Commission (1946), Hicks-Philipson Commission (1950), Lenis-chick Commission (1954), Raisman – Tress Commission (1958).

However, notwithstanding the fact that each tried to resolve the controversy surrounding true fiscal federalism in Nigeria, the issue persisted. This culminated in the series of other post-independence commissions that were equally set up to provide the needed panacea on fiscal federalism arrangement for the country. These included: Bins Commission (1964), Interim Revenue Allocation Review Committee (1969), Obigh Commission (1979), Danjuma Commission (1988) etc. Given the scenario, when the country reverted to the democratic rule in 1999, the 1989 constitution was made operational with several attempts to address the plethora of problems associated with the country’s fiscal federalism. However, during this period, there existed quite a lot of controversies surrounding the nation’s fiscal practice that led to some states in the Niger Delta region taking the Federal Government to court (Olugbemi (2000). This study therefore, seeks to address the nature of intergovernmental relations between the local government and other levels of government and how these relationships can be improved for the attainment of true federalism in the country.

1.3       Objectives of the Study

The broad objective of this study is to critically evaluate intergovernmental relations and performance of Surulere Local Government Council. The specific objectives therefore are to:

i.  evaluate the relationship between the federal, state and local government in the area of Performance of the local government.

ii.  evaluate the agitations/complaints by the lower tiers of government vis-à-vis the principles of true federalism.

iii.  examine the constitutional provisions of revenue allocation and analyze its implications on the lower tiers of government.

1.4       Research Questions

i.  Is there a relationship between the federal, state and local government in the area of Performance of the local government?

ii.  What are the agitations/complaints by the lower tiers of government vis-à-vis the principles of true federalism?

iii.  What are the implications on the lower tiers of government on constitutional provisions of revenue allocation?

1.5       Research Hypotheses

Ho1:  There is a relationship between the problem of revenue allocation in Nigeria and the performance of the local government councils.

Ho2:  Imperfection in the 1999 constitution of Nigeria has hampered good intergovernmental relations.

1.6       Significance of the Study

This study will be of immense benefit to other researchers who intend to know more on this topic and can also be used by non-researchers to build more on their work. This study contributes to knowledge and could serve as a bench mark or guide for other work or study.

1.7       Scope/Limitations of the Study

This study is on intergovernmental relations and the performance of local governments in Nigeria will be conducted in Surulere Local Government Council of Lagos State.

Limitations of study

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8       Definition of Terms

Inter-governmental Relation: Intergovernmental Relations are defined as an interacting network of institutions at national, provincial and local levels, created and refined to enable the various parts of government to cohere in a manner more or less appropriate to our institutional arrangements.

Local Government: A local government is a form of public administration which, in a majority of contexts, exists as the lowest tier of administration within a given state.

Performance: Performance is completion of a task with application of knowledge, skills and abilities.

Federal Government: The federal government is composed of three distinct branches: legislative, executive, and judicial, whose powers are vested by the Constitution in the National Assembly, the President, and the federal courts, including the Supreme Court, respectively.

State Government:  A state government is the government of a country subdivision in a federal form of government, which shares political power with the federal or national government. A state government may have some level of political autonomy, or be subject to the direct control of the federal government.