ABSTRACT

Revenue generation is the foundation on which development at every level of government is built. This study therefore assessed the effect of revenue generation on rural development in Nigeria, using Ihiala Local Government Area of Anambra State as a case study. The local government is the third tier of government and the one closest to the people, particularly those in rural areas, so it needs adequate revenue to supply basic social amenities. Unfortunately, local government management has not lived up to expectations in providing these amenities to rural dwellers. The objective of the research was to analyse the extent to which poor revenue generation has affected development in the area. Data were gathered from primary and secondary sources. The responses obtained through a questionnaire were presented in tables and analysed with simple percentages. The findings included poor rural development in the area, a lack of basic social amenities for rural people, and insufficient revenue to maintain the infrastructure that already exists. The study therefore recommended that the local government provide basic amenities of good quality. Doing so would earn the people’s confidence and encourage them to give the council their full support, which in turn would advance development.

Keywords: revenue generation, local government, rural development, social amenities, Ihiala

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Development is a necessary condition for any society that wishes to enjoy the benefits of modern life. In the effort to bring development to every community, the local government, as the tier of government closest to the people, carries the direct responsibility of improving the living conditions of citizens at the grassroots. The Constitution of the Federal Republic of Nigeria (1999, as amended) recognises the local government system and assigns it functions in the areas of local services, markets, roads, primary education and primary health care, among others (Constitution of the Federal Republic of Nigeria, 1999, s. 7 and Fourth Schedule). Okereke and Olewe (2023) similarly note that the local government was created to promote rural development and to complement the work of the state and federal governments.

Development, however, is closely tied to money. Large amounts of revenue are needed to plan, build and maintain infrastructure and public facilities at the local level. Projects such as accessible roads, public schools, health centres and bridges are financed from taxes, rates, royalties, fines and fees collected locally, together with grants and allocations from the state, federal and, in some cases, international sources. Internally generated revenue (IGR) is especially important because it is the part of council income that the local government can influence through its own effort. Okereke and Olewe (2023) found that IGR had a significant effect on the provision of road and educational infrastructure by local governments in Enugu State, although its effect on water infrastructure was not significant. They accordingly recommended that councils keep widening their internal revenue base.

Without adequate revenue, a local government cannot start, complete or maintain these projects, nor can it meet its other responsibilities. This is a major reason why development remains thin in many local government councils in Nigeria. Bello and Ekhator (2023) observe that governments in Nigeria face real difficulty in sourcing enough revenue and that these difficulties disrupt the smooth running of government. The evidence from different parts of the country points the same way. Idowu (2022) studied selected local government areas in Oyo State between 2010 and 2019 and found that local taxes contributed very little to infrastructural development, and he recommended expanding the internal revenue base, raising awareness of local taxes among rural dwellers and ending corruption and the mismanagement of funds. Adedapo and Albert (2023), writing on Ilesha West Local Government Area in Osun State, recommended that councils diversify and strengthen their revenue base through taxes, levies, rates and other charges, and that IGR should not be used for political patronage. Sani (2026), who examined rural councils in Kano State, stressed that transparency and accountability are essential if local revenue is to translate into effective service delivery and grassroots development.

The national policy context has also shifted. In its judgment of 11 July 2024, the Supreme Court of Nigeria ordered that allocations from the Federation Account be paid directly to the country’s 774 local government councils, and it held that state governments cannot lawfully retain or manage those funds through the joint account arrangement (Nairametrics, 2024). Implementation has nonetheless been uneven across the states, with many state governments yet to comply fully (The Guardian Nigeria, 2026). The ruling underlines how central funding is to the capacity of councils to serve their communities, and it makes the internal revenue effort of each council all the more important.

The problem of revenue generation is not peculiar to any one area, and local government councils in Anambra State are no exception. Ihiala Local Government Area, whose headquarters is Ihiala in the Anambra South Senatorial District and which has an estimated population of about 430,800, has also faced it (Ihiala Local Government Area, n.d.). The council itself acknowledges that some rural roads in the area need rehabilitation and maintenance to improve connectivity (Ihiala Local Government Area, n.d.). Weak revenue generation has a clearly negative influence on development in local government councils, and this research examines how far revenue generation affects rural development, with particular reference to Ihiala Local Government Area.

1.2 Statement of the Problem

The local government council looks after the grassroots population, most of whom live in rural areas. These people frequently lack facilities that characterise modern living. Many have no pipe-borne water, no electricity and no motorable roads, and their schools and other educational facilities are poor, to name only a few of their deprivations.

These conditions are among the principal causes of rural–urban migration. As people move out of the villages, cities become overcrowded and criminal activity increases. In view of these facts, the effect of revenue generation on rural development is clearly a serious problem, and it may be traced to poor revenue generation by the councils. If Nigeria is to achieve the development objectives she has set for herself, including the Sustainable Development Goals (SDGs) of the 2030 Agenda, the issue of revenue generation must be confronted directly. The Supreme Court’s 2024 judgment on direct allocations to councils has not removed the need for this; instead, it has drawn fresh attention to how local governments raise, manage and account for the money available to them (Nairametrics, 2024; The Guardian Nigeria, 2026).

The researcher was therefore motivated to find out how poor revenue generation affects the lives of rural people and how it has affected development in general, especially in Ihiala Local Government Area.

1.3 Purpose and Objectives of the Study

The broad objective of the research is to evaluate the effect of revenue generation on the rural development of Ihiala Local Government Area in Anambra State.

The other objectives of the study are:

i. to determine the level of modern social amenities available in Ihiala Local Government Area;

ii. to find out the level of poverty among rural people as a result of poor development;

iii. to find out the degree of rural–urban migration; and

iv. to make useful suggestions for solving the problem of poor revenue generation, since development depends on the revenue that is generated.

1.4 Research Questions

i. What are the effects of poor revenue generation on the development of Ihiala Local Government Area?

ii. Are there adequate modern social amenities in Ihiala Local Government Area?

iii. Is the poverty level of rural people high as a result of poor development?

iv. Has poor revenue generation in Ihiala Local Government Area contributed to rural–urban migration?

v. How can revenue generation in Ihiala Local Government Area be improved?

1.5 Significance of the Study

The value of any scholarly undertaking is measured by its relevance to the solution of human problems. The findings of this study will help Ihiala Local Government Area to identify the problems associated with revenue generation and their consequences for development.

The study will also be useful to local government officials and revenue collectors, who can use its findings to improve the way revenue is identified, collected and accounted for. State and federal policy makers will find in it evidence on the importance of adequate funding for councils, which is relevant to the implementation of the 2024 Supreme Court judgment on local government financial autonomy. Residents of rural communities will benefit indirectly if better revenue performance leads to improved roads, water, schools and health facilities. Finally, students and researchers will find the study a useful addition to the literature on local government finance and rural development in south-eastern Nigeria.

1.6 Scope and Delimitation of the Study

The study focuses on the effect of poor revenue generation on the development of local government areas. It involves an analysis of the problems associated with revenue generation and their impact on the development of Ihiala Local Government Area, Anambra State.

1.7 Limitations of the Study

The researcher was constrained by time, because the period allowed for submission was too short for a more expansive study.

The researcher also faced financial limitations, since no corporate body sponsored the work and the researcher’s modest resources could not cover a wider area.

Another major difficulty was the reluctance of many local government staff to supply the data that were needed.

1.8 Definition of Terms

Some concepts require explanation so that the theme of the study can be properly understood. The terms are therefore explained below in the sense in which they are used in this research.

Local government: The tier of government below the state, established by law, which exercises substantial control over local affairs within a defined territory. Its powers include the authority to levy taxes and rates for prescribed purposes. In Nigeria, the 1999 Constitution recognises it as the third tier of government and lists its functions (Constitution of the Federal Republic of Nigeria, 1999, s. 7 and Fourth Schedule). It is a non-sovereign territorial community with the legal right and the organisation needed to manage its own affairs within the framework of the federation.

Revenue: The funds that government collects to finance its activities. In other words, it is the total income received by a government (federal, state or local) to meet its expenditure in a fiscal year. It also refers to the total money received from the sources from which expenses are met. Revenue may be internal or external. Internally generated revenue is the revenue that a government mobilises within its own jurisdiction, apart from allocations, subventions and grants (Bello & Ekhator, 2023).

Generation: The process of sourcing revenue for the local government so that it can carry out its aims and objectives.

Expenditure: The spending that a government incurs to maintain itself, to serve the interest of society and the economy, and to support other countries where necessary.

Tax: A compulsory levy imposed by government on goods, services, income and wealth. It provides a dependable source of revenue for government spending. It is the means by which government obtains money from the income of individuals and companies. Taxes may be direct or indirect. A tax is a payment made by taxpayers and used by government for the benefit of all citizens, and tax laws are an important source of internally generated revenue (Bello & Ekhator, 2023).

Tax evasion: The illegal reduction of one’s tax liability, by paying less than the amount due or by not paying at all.

Tax avoidance: The arrangement of one’s financial affairs within the law so as to minimise tax liability.

Development: The process through which people create and recreate themselves and their living conditions to reach higher levels of well-being, in line with their own choices and values. It is also a form of social change in which new ideas are introduced into a society to raise per capita income and standards of living through more modern production methods and improved social organisation.

References

Adedapo, A. A., & Albert, M. O. (2023). The influence of internally generated revenue on revenue profile of Osun State: A study of Ilesha West Local Government Area. Lead City Journal of the Social Sciences, 8(1), 48–61.

Bello, I. A., & Ekhator, A. J. (2023). Evolution and legal implications of revenue generation in Nigeria. Benue State University Law Journal, 12(1).

Constitution of the Federal Republic of Nigeria. (1999, as amended).

Idowu, O. A. (2022). Internally generated revenue and infrastructural development in selected local government areas in Oyo State, Nigeria. African Renaissance, 19(Special Issue 1), 133–153.

Ihiala Local Government Area. (n.d.). About Ihiala LGA. https://ihiala.an.gov.ng

Nairametrics. (2024, July 11). Supreme Court grants full financial autonomy to 774 local government areas. https://nairametrics.com/2024/07/11/supreme-court-grants-full-financial-autonomy-to-774-local-government-areas

Okereke, N. C., & Olewe, B. N. (2023). Effect of internally generated revenue on rural development of local government areas in Enugu State. Nigerian Journal of Social Development, 11(1), 25–36. https://ajol.info/index.php/ngjsd/article/view/260072

Sani, Y. (2026). Internally generated revenue efficiency in rural local governments: Evidence from Gwarzo and Kabo LGAs, Kano State, Nigeria. FUJAFR, 4(1), 276–289. https://doi.org/10.33003/fujafr-2026.v4i1.321.276-289

The Guardian Nigeria. (2026). Supreme Court verdict: 19 months after, govs explore gaps in constitution, resist LG autonomy. https://guardian.ng/?p=2760751