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Sources of Revenue for Local Governments in Nigeria

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Intro: Sources of fund for Local Governments in Nigeria comes to mind as the debate and conflicts on minimum wage in Nigeria is still raging with the Labour Union threatening fire and brimstone  since May, 2024 to go on strike if the central government refuses to abide by their demand for a new national minimum wage to the tune of ₦250,000. This is because the Association of Local Governments of Nigeria (ALGON) has joined the matter saying that Local Governments won't be able to pay the proposed minimum wage due to their lean pockets.  So far in the negotiations, the Federal Government of Nigeria has offered ₦62,000  from the current ₦30,000 minimum wage. It appears however that the Labour Union is now shifting ground as President Tinubu hinted in his June 12, 2024 Democracy Day speech that an agreement has been reached on a new minimum wage. Yes, it must have to be so because the Federal Government has always insisted that the figure being demanded by the Labour Union is unsustainable. In one of such occasions, the Minister of Information and National Orientation, Mohammed Idris warned the Labour Union that the figure they are demanding for could lead tomassive retrenchment of workers in Nigeria as employers strive to meet up with the wage bills, thereby undermining the economy and jeopardising the welfare of the people of Nigeria. The Anambra State Governor, Prof. Chukwuma Soludo who is internationally respected in economic matters is also reported to have held the same opinion concerning the ₦62,000 being offered by the Federal Government, not to talk of a higher amount demanded by the Labour. Prof. Soludo was sure that many states in Nigeria would not be able to pay that figure especially as many are yet to implement the current minimum wage. Labour has denied any agreement so far nonetheless. 


ALGON Boss Argues that Local Governments in Nigeria Cannot Be Able to Pay Minimum Wage

Among the voices against the new minimum wage of ₦62,000 being offered by the Federal Government is the Association of Local Governments of Nigeria (ALGON) Boss, Aminu Muazu-Maifata. He argues that the figure will put serious strain of the meagre finances of the 774 Local Governments in Nigeria. Furthermore, he underscored his position with the fact that a great deal of the Local governments in Nigeria are still struggling with the payment of the current minimum wage in Nigeria approved since 2019. The National President of ALGON while speaking to Channels on Thursday, June 13, 2024 made it clear that 90% of what accrues to Local Governments from Federal Accounts Allocation Committee (FAAC) goes to salaries and pensions while he regretted that the functions of the Local Governments in Nigeria are not just payment of salaries and pensions. This is a way of saying that increment of the minimum wage without concomitant upward review of the allocation to the Local Governments is tantamount to leaving the Local Governments incapable of delivering on their responsibilities. He regretted that just a little above 18% of the FAAC allocation comes to the Local Governments in Nigeria to perform the multiplicity of their functions.  It is noteworthy here that 52.68%, 26.72% and 20.60% of the FAAC allocation goes to the Federal Government, State Governments and  Local Governments in Nigeria respectively, on monthly basis.  Meanwhile, as at 2023, the average FAAC allocations in Nigeria was ₦11.86 trillion (Punch Newspaper, December 8, 2023). This argument by the ALGON Boss brings to the front burner, the need to discuss the various means by which Local Governments in Nigeria get their revenue.


Sources of Revenue for Local Government in Nigeria

Local Government as the third tier of government in Nigeria after the Federal and the State governments as the first and second respectively has two sources of revenue namely: external and internal sources of revenue.

The external sources are: the statutory revenue allocation from the FAAC on monthly basis (20.60%); the statutory allocation from the State Government internally generated revenue (10%) on monthly basis; 30% of the Value Added Tax (VAT) from the VAT Pool; Foreign Aids, and Grants from the international donors, and top tiers of Government in Nigeria; Excess Crude Accruals; Loans from financial institutions; and Exchange Rate Gains, etc.

The internal sources are the host of taxes, rates and user charges from multiple sources. Some of them are as follows: property (tenement) rates, development levies, licenses, taxes on special services such as water and electricity; penalties, rents, control and maintenance fees, registrations including deaths and births, and interests and dividends on investments, etc.


Conclusion

Local governments in Nigeria has rich sources of revenue so that one wonders why they cry over nothing about payment of ₦62,000. It is noteworthy that the concerns about the dangers of unsustainable minimum wage is real but it is not about payment of the paltry sum of ₦62,000. It is high time these bunch of leaders in Nigeria should be aware that Nigerians are humans with feelings. The workers pass serious difficulties under the harsh economic conditions in Nigeria, and their plights should be attended to, maximally. Local Governments are notorious for being a cesspool of corruption where public funds are pilfered away into private coffers to the detriment of the working populace in Nigeria. The leaders at the grassroots should as a matter of urgency be sincere to their lives and the society and jettison all forms of corruption in the local government system, and free up funds to give workers a fair share of what they worked for. They should sanitize the payroll for instance and flush out the host of ghost workers depleting the enormous resources accruing to Local Governments. Unless this is done, the intentions for establishing Local Governments in Nigeria will remain unrealizable.


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