CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Internally Generated Revenue (IGR) is the revenue that state governments generate within the areas of their jurisdiction. The various sources of internal revenue available to state governments includes taxes, fines and fees, licenses, earnings & sales, rent on government property, interests and dividends, among others. The capacity of a state government to generate revenue internally is a crucial consideration for the creation of a state government. According to Babalola (2009), the provision of public schools, public health and public infrastructure require huge government spending, especially in these modern times. Also, state government incurs expenditure for the provision of adequate security, fulfills its commercial functions and administration. Therefore, the need for adequacy of revenue at all levels of government has become imperative, given the expenditure profile of government aimed at reducing poverty, generating employment, boosting growth and creating wealth. State governments now face more challenges in terms of struggling to be less dependent on the Federal government for financial resources (Anyanwu, 1999). Though, the revenue allocation system mandates that a certain fraction of the Federation Account be allocated to state governments, these funds are not enough to meet expenditure requirements. This is because the size of the account is related to revenue from oil which is subject to fluctuations and the expenditures of state government far exceed available resources. The problem of lack of fiscal transparency as a result of mismanagement of funds, corruption, poor internal control and lackadaisical attitude to government work and property still abounds.

Despite the numerous sources of revenue available to the various tiers of government as specified in the 1999 Constitution of Nigeria, over 80% of the annual revenue of the three tiers of government still comes from petroleum and has been so since the 1970s. However, the serious decline in the price of oil in recent years has led to a decrease in the funds available for distribution to the states. Kiabel and Nwokah (2009) submitted that the need for state governments to generate adequate revenue from internal sources has therefore become a matter of extreme urgency and importance. This need underscores the eagerness on the part of state governments to look for new sources of revenue or to become aggressive and innovative in the mode of collecting revenue from existing sources. The increasing cost of running government coupled with dwindling revenue has led various state governments in Nigeria to formulate strategies to improve their revenue base. Moreso, the 2007-2009 Global financial crises effects in Nigeria further created serious financial stress for all tiers of government. Hardest hit are the state governments, all of whom have experienced unusual reduction in their share of the revenue from the Federation Account.

One of the striking features of the 36 states in Nigeria is that they differ in terms of economic, demographic, geographical, socio-cultural and fiscal characteristics. While some of the states are classified as urban states because of their level of economic, agricultural, infrastructural, industrial and technological development, others are classified as rural states because of the preponderance of absolute poverty, economic, agricultural, infrastructural, industrial and technological backwardness. Examples of urban states in Nigeria include Kano, Rivers, Oyo, Enugu, Anambra, Kaduna, Kano, etc, while Ekiti, Ebonyi, Nasarawa, Zamfara, Yobe, etc, fall under the rural sates. It is important to know that the level of economic development of a state in Nigeria has a significant impact on her fiscal capacity and viability. For instance, the capacity of a state to generate revenue from internal sources is determined by the level of economic, commercial, industrial, infrastructural and agricultural development of such a state. It follows therefore from assumption that urban states generate more revenue from internal sources and by extension incur more expenditure than rural states. This shows that fiscal capacity and viability differ between urban and rural states in Nigeria. However Kano State which is the focus of this study generates the highest amount of internal revenue in the country. Though the needs of the state populace is many due to overpopulation but the level of economic development is not laudable.

1.2 STATEMENT OF THE PROBLEM

Interestingly, a lot has been written about the need for improved allocation to states and local governments from the federation Account, as well as how to boost IGR of state governments in Nigeria, not much attention has been paid to the relationship between the internally generated revenue and the economic growth of the states. Though, the ability of states to generate revenue from internal sources depends on whether the state belong to urban or rural groups of states. That is, the fiscal capacity and viability of a state is a function of her commercial, industrial, economic, agricultural, infrastructural, and technological advancement and progress. Kano State being an urban state has all these above characteristics. However the researcher is examining the internally generated revenue and economic growth of Kano State between 1999 and 2014.

1.3 OBJECTIVES OF THE STUDY

The following are the objectives of this study:

To ascertain the level of internally generated revenue in Kano State between 1999 and 2014.

To examine the level of economic growth and development of Kano State between 1999 and 2014.

To examine the relationship between internally generated revenue and economic growth of Kano State between 1999 and 2014.

1.4 RESEARCH QUESTIONS

What is the level of internally generated revenue in Kano State between 1999 and 2014?

What is the level of economic growth and development of Kano State between 1999 and 2014?

What is the relationship between internally generated revenue and economic growth of Kano State between 1999 and 2014?

1.5 HYPOTHESIS

HO: There is no significant relationship between internally generated revenue and economic growth of Kano State between 1999 and 2014.

HA: There is significant relationship between internally generated revenue and economic growth of Kano State between 1999 and 2014.

1.6 SIGNIFICANCE OF THE STUDY

The following are the significance of this study:

Findings from this study will educate on the level income generated internally in Kano State, the level of economic growth and the relationship between internally generated revenue and economic growth in Kano State between 1999 and 2014.

This research will be a contribution to the body of literature in the area of the effect of personality trait on student’s academic performance, thereby constituting the empirical literature for future research in the subject area.

1.7 SCOPE/LIMITATIONS OF THE STUDY

This study will cover the relationship between internally generated revenue and economic growth of Kano State between 1999 and 2014.

LIMITATION 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.

REFERENCES

Anyanwu, J.C. (1999), Fiscal Relations Among the various tiers of Governments in Nigeria. NES Conference Paper. Ibadan

Babalola, R. (2009),Boosting Government Revenue through Non-Oil Taxes

Kiabel, B.D and Nwokah, N.G. (2009), Boosting Revenue Generation by state governments in Nigeria: The Tax Consultants Option Revisited: European Journal of Social Sciences, 8(4)