LOCAL GOVERNMENT ADMINISTRATION FINANCIAL SUSTAINABILITY AND PUBLIC-PRIVATE PARTNERSHIP FOR GRASSROOTS DEVELOPMENT.

A paper submitted on “Oyo State Pacesetter Development Summit-2008”

1.0 INTRODUCTION

Local Government was described by the United Nation as “A political subdivision of a nation or State which is constituted by law and has sub-national control of local affairs including the power to impose taxes or to extract labour forces for prescribed purposes. The governing of such an identity is elected or otherwise locally selected.”

Various local government reforms in Nigeria since 1901, when the first Native Authority Ordinance was enacted up till 1976, were aimed at enhancing the management capabilities of Local Governments through adequate financial resources, harmonization and professionalization of personnel and career security of administrative and career security of administrative staff.

There is, therefore, the needed to design effective institutional framework for policy reforms that will promote good governance through greater devolution of power and responsibilities to local authority. This will require better mobilization and management of financial resources and building of partnership with private and community sectors.

Local Government remains the level of government where essential public services are delivered to individual and business community and where the people feel the policy. Municipality bears the basic responsibilities of government at its lowest level for allocating resources and promoting social equity within the constraints set by higher levels of government (which assign function and fiscal authority), and for ensuring the provision of local public goods and services, through partnership with the private sector and civil society.

Local governments therefore, refer to specific institutions or entities created by the national constitution or ordinary legislation or by the executive order to deliver a range of specified services to a relatively small geographically delineated area. On the other hand, local governance is a broader concept and s defined as the formulation and execution of collective action at the local level.

However, jurisdictional fragmentation of urban local governments has promoted revenue boundary dispute within the same Metropolis, Planning activities became uncoordinated while refuse collection has become ineffective as the Local Governments lack the skill and capacity to handle services of that magnitude which forced the State Government to set up Ibadan Waste Disposal Management Authority assisted by the World Bank in 1996.

A well structured local government should therefore, be motivated to improve towns and villages along a wide range of dimensions. Village Community infrastructure should be constructed and upgraded. These include: roads, water system, bridges small-scale irrigation, electrification and income-generating projects. Community and domestic hygiene should be improved through various measures including building health centers, refuse disposal and better cattle housing and improved water management.

2.0 Legal Status of Local Governments

Local government has been defined as the authority arising form a people or political unit, geographically identifiable, largely homogeneous, sharing common culture and corporate goals. The greatest advantage of the local government is the proximity to the people; hence it is described as grassroots-governance.

The functions of the local government are germane to the people at the grassroots. The functions are central, providing them some basic infrastructures which the other tiers of governments could not provide them possibly due to non-proximity unlike local government.

A local government refers to specific institutions or entities created by National constitution (as we have in Brazil, Denmark, France, India, Italy, Japan and Sweden,) by State constitution (e.g. Australia, the United States), by ordinary legislation of a higher level of central government (e.g. New Zealand, the United Kingdom), by provincial or State legislation (e.g. Canada, Pakistan), or by executive order (China) to deliver a range of specific services to relatively small geographically delineated area.

The fiscal federalism treats local government as a subordinate tier in a multi-tier system and outlines principles for defining the roles and responsibilities of orders of government:

1. In most federation, as in Canada and the United States, local governments are

extension of States (i.e. dual federalism)

2. In a few isolated instances, as in Brazil, local governments are equal partners with higher-level governments which is referred to as cooperative federalism

3. In exceptional case like Switzerland, the local governments are the main sources of sovereignty and have greater constitutional significance than the federal government.

Local administration in Nigeria can be traced to the colonial period following the Native Council Ordinance of 1901 initiated by Governor (Sir) William MacGregor. The Native Council Ordinance of 1901 provided for provincial, district, town and village councils. The objective of this new Ordinance was to make the Native Councils become more effective instruments of local government administration.

In 1996, a centralized budget system was introduced. Following the creation of Northern, Western and Eastern Regions in 1946, a decentralized public revenue structure began to emerge while three regions introduced some reforms in their local administrations in the 1950s which aimed at enhancing performance after the McPherson construction of 1948.

Thus, depending on the constitutional and legal status of local governments, state governments in federal countries assume varying degrees of oversight of the provision of local public services.

The Local Government Reforms of 1976 created for the first time, a single-tier structure local government and specified a list of functions for local governments in Nigeria. The 1979 Constitution further made it mandatory for the states to make financial grants to Local Government Authority which is about Ten (10) per cent of the internally general revenue of the state in addition to funds allocated from the Federation Account monthly.

However, with good intentions of the 1976 reform, the politicians of the second Republic (1979-1983) badly implemented the provisions of the constitution bequeathed by the Muritala/Obasanjo Military Administration. They exploited, compounded and dramatized the shortcomings and loop-holes in the local government system. The fever to create new local governments gripped the state governments with such intensity that the number of local governments was multiplied with reckless abandon (see table 1)

The 1989 Constitution further made the creation of Local Governments the responsibility of the National Assembly. This was done to prevent a repeat of performance of the events of the second republic when partisan political actors, in their bid to retain and consolidate political power at all cost, engaged in unbridled proliferation of local government.

In the 1989 local government reform, there were 483 local governments created in the country. Each of the local governments was allowed by law to operate single tier multipurpose structure, and set Area Development Committees of between 5-7 members. This was a departure from the Two –tier structure that created outer councils within the Local Government Area under the 1976 and 1986 Local Government Reforms (Habibu A. Sani, 1992).

Table 1: Distribution of Local Government in the Old Western Region (1955-1996) Now South-West of Nigeria

Source: National Population Commission and Habibu A. Sani (1992)
Note: Colony did not include Lagos Township in 1963 while both became Lagos State in 1967

Section 7 (1) of the 1999 Constitution of Nigeria provides ‘the System of Local Government by democratically elected Local Government Councils. And this constitution guaranteed, and accordingly, the government of every state shall, subject to Section 8 of the Constitution ensure their existence under a Law which provides for the establishment, structure, composition, finance and function of such Council. In addition, the functions are stipulated in the fourth schedule of this Constitution.”

According to studies carried out by the World Bank experts, all Federal Systems confer the same institution powers on the Municipalities. For example, in Argentina, the national constitution provides that the provincial Government shall provides for the establishment of the Municipal Government structure and finances as we have in the 1999 Constitution of Nigeria.

2.1 The Population Size of Local Governments

There is considerable diversity in the number and size of local governments in different countries even though, the broad objectives of local governments are similar, that is, stimulating resource participation and ensuring efficient and effective delivery of goods and services. This means there is no sacrosanct formula to determine the number and size of local governments as long as it meets the desire of the people.

In the United States of America (USA), the structure of local governments consists of many overlapping layers namely: cities, countries, school districts, and towns. According to James Halbrum (1974), there were not less than 81,245 local governments units in the United States in 1967 and only 18,048 of these were municipalities.

In a book on ‘Local Governance in Developing Countries’ published by the World Bank and edited by Anwar Shah (2006), Uganda has only 70 municipal governments, whereas, China has 43,965, South Africa has 282, Poland has 2,478 and Brazil has 5, 560. as the average population per local authority in sampled countries.

The Russian Federation, which is a unitary state, has 89 regional units and 2,000 local governments. A case study of some other countries in the central and Eastern Europe in addition to those in Latin America countries showed some varying sizes as indicated in the table 2 below:

Table 2: Distribution of Municipal Governments in Developing Countries

Source: World Bank Publications, 2006

From the foregoing analysis, the number and size of Local Governments has implication for revenue generating capacity and personnel wages of various local governments. Nigeria with a population of 114.6 million in 1996 had 774 Local Governments and an Average population per local government of 148,062 people comparable with South Africa and Uganda as at 1996. Unlike other countries such as Uganda, Kenya, South Africa, Brazil, and United Kingdom that have multiple tiers of local governments, Nigeria has a single tier system of local governments with uniform expenditure responsibilities and common revenue sources.

Local governments in Uganda is a multi-tier system with the district, city council, and municipalities are units under which are lower local governments structures and administrative units while South Africa had three-tier local government systems for metropolitan area, semi-urban areas and districts.

The number of municipalities in Brazil is 5,564 and the population distribution is very heterogeneous. In 2005, the population was estimated at 184.2 million. The city with the biggest population is Sao Daulo, with 10.9 million inhabitants and the smallest is Bora with more than 500,000 people, or 28.6 per cent of the national population. At the other extreme, 2,672 cities have fewer than 10,000 inhabitants, equivalent to 7.6 per cent of the national population. Distribution of population per local governments in all the 36 States of Nigeria and Abuja is shown in the table 3 with 2006 Population figures:

Table 3: Nigerian States, Capitals, Population and Local Government Areas

Source: National Population Commission 2002

As at 2006, the Average Population per local government in Nigeria is 180,883 an increase of 22.17% over that of 1996. This has a serious implication for sustainable economic growth and physical development of major urban centres, as revenue allocation continues to dwindle, thus creating vertical imbalance between the Federal, State and Local Governments and this will increase the fiscal gap in local government finances.

2.2 Political and Administrative Structure of Local Governments in Nigeria

Various local government reforms in Nigeria since 1901, when the first Native Authority Ordinance was enacted up till 1976, were aimed at enhancing the management capabilities of Local Governments through adequate financial resources, harmonization and professionalization of personnel and career security of administrative and career security of administrative staff.

There is, therefore, the needed to design effective institutional framework for policy reforms that will promote good governance through greater devolution of power and responsibilities to local authority. The will require better mobilization and management of financial resources and building of partnership with e private and community sectors.

With the recognition of Local Governments, each Council is now having Executive Chairman, Vice Chairman, Supervisory Councilors and Councilors who must be democratically elected under the electoral law in force.

Decree No. 28 of 1989 provides that the Chairman of Council shall assign necessary duties to Vice-Chairman, Supervisory Councilors and the Secretary who are statutory appointees of the Executive Chairman. The Vice-Chairman in the absence of the latter, whilst the Secretary will step into their shoes in the absence of the Chairman and the Vice-Chairman.

Each local government by law has six departments headed by a Director supported by divisional and unit heads. The Director of Personnel Management is the administrative Clerk of the council legislature and head of career officers. The local government management structure therefore, consist of Personnel Management, Finance and Supply, Education, Works, Housing and Survey, Health and Environment and Agriculture. Officers on Grade Level 7 and above are employed, disciplined and promoted by the Local Government Service Commission under the Unified Civil Service System. This is the structure of all the 774 local governments in Nigeria running a single-tier system of Local Governments.

In Nigeria, there are three types of local governments although; there is no provision for such multiple tiers of local government in the constitution as we have in America, Britain, Uganda and Kenya. However in 1991, President Ibarahim Badamasi Babaginda used military fiat, to create multiple local governments within same municipal Government Areas and President Sanni Abacha did a similar thing in 1996. Consequently, urban governments of Kano, Ibadan, Ogbomoso, Oyo, Abeokuta, Lagos and Enugu all have more than one or two local governments within the jurisdiction of the former Municipal Government Areas.

This geographic or jurisdictional fragmentation most often is just a natural consequence of urbanization, that is, the expansion of a metropolis beyond old core of the cities into surrounding minor cities or villages which are formerly rural area without changes in jurisdictional boundaries.

Other type of local governments are semi-urban local governments that are contiguous to metropolitan local government benefiting from the spill-over of the urbanization of the core metropolitan local government without changing the exiting boundaries that separate them e.g. Oluyole, Ona-Ara, Ido, Lagelu, Akinyele and Egbeda local government areas that are contiguous to the old Ibadan Municipal Government that was split into five in 1991. Afijio local government with satellite towns of Aawe, Ilora and Akinmorin benefiting from rapid urbanization of Oyo city.

3.0 The Federal Fiscal System and Local Government Finance

Fiscal federalism literature provides guidance on financing choices for local governments. According to Anwar Shah (7006), there are four general principles that require consideration in assigning taxing powers to various governments, these are economic efficiency fairness, revenue performance and how administrative criteria for the success of local governments tax administration.

The particular level of government to which a service is assigned determines the public or private production of the service in accordance with considerations of efficiency, and equity. Large metropolitan areas with population in excess of 1 million could be considered for subdivision into a first tier of municipal government of smaller size responsible for neighbourhood type services and a second tier of metropolitan-wide government providing area-wide services.

In many countries, special-purpose agencies or bodies deliver a wide range of metropolitan and regional public service, including education, health, planning, recreation and environmental protection. Such bodies include, Road Maintenance Agency, Waste Management Authorities, Library Board, Police Commission and Utility Boards providing.

3.1 Revenue Structure of Local Governments

The first step in analyzing the financing patterns of local governments is to distinguish between local and external sources of revenues. The three categories of local revenue considered or assigned by the federal constitution are:

1. Locally collected taxes (Poll tax and Tenement rate).

2. User charges and benefit charges; and

3. Other locally raised revenues such as Business Licenses, fees, penalties and other local taxes on goods and services.

Typically, Local revenue sources are limited and heavily regulated by federal governments. Local governments need more financial autonomy to perform the responsibilities they have been assigned. The principal local revenue sources assigned to local governments in Nigeria and common to local governments all over the world are described below;

3.1.1 Property Taxes

Large or urban local governments are better able to levy taxes than smaller or rural local governments. Hence, metropolitan and urban local governments rely on property tax revenues as they have a larger per capita tax base due to their high population density and high concentration of commercial, industrial and residential property that command high property values.

3.1.2 User Charges

User charges are especially appropriate for services such as water, public transit, solid waste or refuse collection and disposal; the benefits are confined largely to users. The private contractors are taking advantages of this source of revenue in Nigeria while the local governments have not been constitutionally empowered to do so.

3.1.3 Licenses, Fees and Fines

License, permits, fees and fines are also sources of local revenue although in many cases, the primary purpose of these sources of revenues is regulatory or punitive. Licenses are usually required as a means of controlling and regulating occupations and businesses for stipulated intervals. Permits such as building, vending and social activities may be required as a means of regulating specific activities usually over a limited period of time. Fees, such as those related to filing applications of various sorts, are usually a means of recouping the costs of processing.

Fines and penalties, ranging from library fines and traffic fines to penalties for late payment of taxes, are clearly punitive and designed to encourage compliance or conformance with the law.

3.1.4 Income Generating Enterprises

Local governments generally embark on some commercial undertakings such as providing land and services for development of small scale business, low cost houses, markets, shopping complexes and agricultural investments. When theses are directly owned by the local governments, they provide stable sources of revenue.

3.1.5 Inter-Governmental Transfer

There is often a mismatch between local governments’ responsibility for public service provision, on the one hand, and their revenue raising authority, on the other hand. The gap is filled with some form of intergovernmental transfer, a grant, a shared tax, or a subsidy. Certainly, there is justification for intergovernmental transfer as part of the local government structure.

The Nigerian constitution specifies some of the principles to be taken into account in determining the formula to include population, equality an internal revenue efforts, landmass, terrain, social development factors and derivation. However, a study of transfers in Tanzania indicates that urban local governments’ areas with major expenditures responsibilities receive larger grants, even though they have greater fiscal capacity than rural areas. The small or rural local governments also require matching grants for capital projects of national importance due to lack of sufficient fiscal resources like the larger urban local governments and may not be financially strong enough to access private capital markets.

However, local governments will lose a considerable degree of fiscal autonomy when they continue to rely heavily on intergovernmental transfers and fail to develop the ability to adjust the size of their budgets and the distribution of grogramme costs among the population. That is, local government should provide a structure for restraining expenditures to the revenue available and ensure that expenditure and revenue plans are executed as budget.

3.2 The Problem of Vertical Imbalance in Urban Financing

Vertical aspect of the metropolitan and local government fiscal problem is the result of a mismatch between functions and revenue rising powers at the local level. It is also referred to as ‘fiscal gap.’

Urban governments in developing countries and most industrial countries alike, complain about the lack of resources to provide sufficient services to their population. This is evident in the poor state of urban infrastructure and poverty level in the cities. The gap between the perceived need for services and the financial resources to provide them can be attributed in many cases to the following factors:

3.2.1 Changing Taste and Social Values

Demand for unrealistically high standard of services which are beyond the financing capacity of an urban government. Efforts by urban governments to provide services at levels which are not affordable usually result in an inefficient and inequitable allocation of public resources. For example, providing high standard housing units, health care, and education ultimately limit areas of such public services to few wealthy segments of the urban population and leave the majority with inadequate service or none at all.

3.2.2 Effects of Rapid Urbanization

The vertical fiscal problem may have its origin in the misallocation of functions and revenues to urban governments by higher level authorities. The rapid growth of urban areas has led to concomitant increases in the demand for a minimum level of public services for each of the new urban dwellers, which necessitates expenditure by urban authorities. In a highly urbanized society, it becomes necessary for government to provide some services such as sewerage disposal, water supply, and recreational facilities that in a rural area or village society the individual often provides for himself.

3.2.3 Rising Income in Urban Areas

Rising incomes in urban areas have also increased the demand for public services. As living conditions improved, however, people chose to spend an increasing proportion of their income on the whole range of local government services, most of which were complementary to private sector sending. However, this has not improved the revenue of local governments due to constraints on their revenue generating capacity.

The primary explanation for the situations that urban governments are often restricted in their revenue-raising to income-inelastic sources such as property taxes, fees and fines, and transfers from higher level governments (federal and states) is that, it creates fiscal gap in local government financing. The allocation of expenditure responsibility and revenue-raising authority to urban governments is, therefore, an issue of utmost importance.

3.2.4 Finding of Primary Schools and Other Mandatory Expenditures

An important spending assignment to local governments is the funding of primary schools education including the payment of primary schools. Payment of salaries to primary school teachers constitutes the single most important items of expenditure for local government councils and is deducted at source from Local Governments’ Share of the Federation Account. At the end of the day, many local councils were left practically nothing to meet other expenditure, giving rise to the phenomenon known as ‘Zero-allocation.’ This scenario informed the state governments to legislate on Joint Allocation Committee which adjusted the horizontal distribution formula. In Oyo State, after deducting Teachers Salaries, the balance is allocated using the following indices: Population 30 percent, Equality 50 percent and Land Mass 20 percent to ameliorate the suffering of rural local governments with less revenue generating capacity.

Other mandatory expenditures are 5 percent of gross allocation for Traditional Rulers maintenance, and other deductions for higher level government initiatives.

3.2.5 Horizontal Fiscal Imbalance among Local Governments

Significant disparity in fiscal resources means that the residents of some local governments will have better governmental options available to them than will other areas. Local governments that gave high fiscal endowments may offer more governmental services at a standard tax rate, standard governmental services at a lower tax rate, or various combinations between those limits. This puts their citizens at an advantage in comparison with citizens of less well-endowed jurisdictions.

For instance, tax bases are not evenly dispersed because there is an unequal geographic distribution of natural resources (e.g. oil, water, and fertile soil); hubs of commerce; and people within countries. A pattern of fiscal imbalance will emerge with almost an local tax source, especially, property tax, than for others and where the geographic scope of the localities is smaller.

May central or federal governments establish intergovernmental transfer schemes to mitigate horizontal imbalances, so that the public services provided by local governments lose a considerable degree of fiscal autonomy when they lose the ability to the distribution of programme costs among the population.

4.0 Why Urban Developments are not Sustainable?

Generally, the model of development adopted at the local level has been the top-bottom approach. This model is predicated upon the assumption that the government (decision maker) knows the problems of the people in the areas to be developed and also that it has the wherewithal to do what needs to be done. Therefore, the beneficiaries are recipients who are expected to do little or nothing to bring development. Consequently, government tries to identify the needs of the people, do the planning and execute the programme. On the other hand, the beneficiaries are expected to receive the projects, use them and take care of them in order to elongate their life.

In may instance, markets were established outside the town/village settlements requiring some transport to use them. After the completion of the markets, the intended beneficiaries refused to use them. Even in the cities, market traders were forced by governments to occupy newly built markets like streets traders at Oritamerin were moved to Bodija Market, traders at Old Dugbe market to Alesinloye market and Trailer drivers at Ojoo-end of Lagos-Ibadan express Road to Akinyele Trailer Parks including the resettlement of Old Gbagi traders at the multi-million Bola Ige International market after the 1980 Ogunpa Flood Disaster.

For development projects established in a local area to be sustainable, they must be considered by the beneficiaries as their own. They must not be regarded as alien or external community. “Sustainable development, in this case, means development, that meets the needs of the present without compromising the ability of the future generations to meet their own needs.” Therefore, the beneficiaries/users, of the projects must be involved right from the initial stage of the projects, that is from project conception, identification, planning to implementation.

Local governments are however; typically lack many of the skills and expertise which are increasingly required for effective environmental management and urban development planning. For example, there are shortages of personnel and capabilities in economics, policy analysis, statistics, real estate management, financial management project appraisals, public relations and information. In many cases, the low salaries and poor career prospects of local governments make it difficult to attract or keep the appropriately qualified staff.

4.1 Hostile Environment for Industrial Growth

Industrial local incentives (both fiscal and non-fiscal) offered in the context of growth-pole strategies are often not enough to attract industries away from big to smaller cities. Business wishing to operate in both the cities and the rural areas face many constraints, including poor infrastructure, particularly road networks and electricity supply, inadequate physical security, corruption, weak enforcement of contracts and the high cost of finance. These factors have deterred foreign entrepreneurs from investing in Nigeria and induced many Nigerians to take their money and skills abroad.

Governments themselves are often unwilling to take a lead in decentralizing their activities to secondary towns outside the major urban areas. This becomes even more significant when it is recalled that in many Sub-Saharan countries the public sector accounts for the larger proportion of the total number of people employed in the formal sector.

Most large private-sector manufacturers are more interested in the distribution or marketing of their products in smaller towns rather than setting up manufacturing enterprises in such towns. Apart from decentralization of manufacturing industry to smaller towns, this preference of large firms also poses stiff competition to small-scale and informal industries based in the smaller towns, the goods of which cannot (in term of quality) compete with those market from large towns.

4.2 Inefficient Service Delivery System

Because of the poor state of infrastructure, individuals and communities in many cities and towns, including secondary cities, have had to adopt a range of survival strategies. Most of these strategies have been devised in the context of what Goran Hyden has termed the “economy of affection” (Hyden 1983). The more significant of these strategies have included the following:

(a) Because of the inability of urban local authorities to provide sufficient affordable housing, and because of the inappropriate infrastructure and building standards, the majority of urban low-income residents in sub-Saharan Africa have had to provide their own housing within unplanned or squatter settlements.

(b) As a result of both the increasing inaccessibility and unreliability of existing piped-water-supply and waterborne-sewerage systems, communities and individuals in many urban areas have been forced to develop and fund their own infrastructure added as high as 15 times higher than that of piped water system.

(c) Failure in the coverage and quality of service reflect, in part, aggregate resource constraints. The ability of an economy to provide convenient, and reliable urban service is constrained by the demands of other fundamental needs such as food, clothing, basic shelter and security in extremely poor countries. According to Dillinger (1993), in the absence of conventional service delivery system, households commonly resort to more expensive alternative sources.

4.3 Deficient Land Information Systems

The theory and application of Geographic Information Systems (GIS) and Land Information System (LIS) should be integrated into the development and management of our cities. This will afford the managers and policy makers the opportunities to identify areas of priority in infrastructure needs. GIS is a veritable tool in the Management of infrastructure in urban areas and in efficient Land Administration. The commendable pioneering example of the Federal Capital Development Territory in this respect has been emulated by states such as Enugu, Abia and Lagos while the Federal Ministry of Environment, Housing and Urban Development has advanced with it’s comparable FELIS project.

5.0 Strategies for Achieving Sustainable development

During the 1970s and 1980s and even in recent time, the World Bank’s urban development projects in different parts of the world and Nigeria in particular, shows that living conditions for urban residents, including the poor, could be improved significantly and cost-effectively. While all these efforts brought benefits, however, they have suffered a failure to recognize that sustainable urban development requires an approach that is even more integrated across the physical environment, infrastructure networks, finance, institutions and social activities.

If local governments are to promote the welfare of their residents and contribute to the national development, they must be sustainable and functional in the following sectors:

5.1 Adoption of Strategic Planning Approach

The local government’s commitment to improving the living condition of the citizenry should be aimed at ensuring a healthy and dignified living standard for the poor that permits them to share the resources of the society. This goal requires participatory, gender-sensitive planning for meeting priority needs of the local communities.

The Local Agenda (LGD) called “Strategic Action” describes the city development strategy for improving the living condition of the citizenry as a document containing the plan for reducing urban and rural poverty, Agenda inequality, creating a healthy urban environment, enhancing personal security (i.e. minimizing the risk of crime, violence, traffic accidents, and natural disasters) and making cultural and recreational amenities available to all.

Without some form of strategic planning vision and mechanism, it is extremely difficult for local governments to deal with their grassroots development and environmental problems, many of which are structural and long-term in nature. Equally, it is difficult to efficiently utilize capital investments (especially in the public sector) unless there is an over-all strategic framework into which they can be organized.

In pursuance of this local government Agenda, Egbeda local government should direct its efforts towards delivery of services critical to the poor by providing: micro-credits; access to affordable housing, basic infrastructure (such as health care, good road network, drinkable water and rural electricity), public transport; community centres; and programme for youths street children and the homeless.

5.2 Sustainable Local Government Financial Base

The local budget process is the core of the system of fiscal administration because that is where the broad financial policies and programmes of the local government are developed and the size of government is established, with other functions contribution to its operation.The budget process is a recurring cycle in which:

(a) the Chief Executive Chairman of the local government with the operating agencies, develops a service plan to respond to the conditions anticipated in the upcoming year;

(b) the appropriate legislative body reviews the plan and adopts a programme response based on the plan;

(c) the administration puts the adopted programme into effect; and

(d) an external review body audits and evaluates the executed programmes and reports its findings to the legislative body, or the Executive Governor of the state and the citizenry.

Local governments therefore must observe the fundamentals of sound local government finance which include rational intergovernmental assignment of functions as well as:

• Prudent expenditure management, that is, capital and Recurrent budgeting and

investment selection practices including management of assets of the local government such as real estates.

• Revenue mobilization and cost recovery: through the use of suitable licenses,

fees and charges, property and other local taxations.

• Equitable intergovernmental transfers: that are predictable and consistent with

“hard budget” incentives and promotes appropriate incentives.

• Sound financial administration: including generally accepted accounting,

auditing, disclosure of asset and liquidity management, procurement and payment procedures. Transparent and efficient management of expenditures, revenue, and municipal asset, publicly disclosed and audited.

• Access to credit: based on a legal and regulatory framework that allows flexible

collateralization for Bank loans, local enterprises micro financing scheme and access to capital markets by the local government for viable projects.

Changes in national economic systems and the unpredictable intergovernmental transfers are fundamentally altering the ways in which local governments investments and services are financed. Complicating these changes is a continuing lack of clarity and inadequacies about sources of local government finance, usually due to inadequate decentralization of financial powers and taxation authority.

5.3 Local Economic Empowerment and Development Strategy (LEEDS)

The continued growth of urban and metropolitan areas and the surrounding serves as the national and regional growth centre of economic, technological and cultural creativity and human development. Transportation and communication systems permit individuals from the surrounding local government areas and rural communities to enjoy the benefits of the metropolitan areas without actually having to live in urban centre except by choice.

Although, many affluent sub-urban residents have abandoned urban areas, urban population continue to grow due largely to the influx of many poor, unskilled and uneducated individuals who still view cities as a base upon which to build their lives.

The series of urban development activities contribute to economic growth of the metropolitan area by allowing increasing returns to land, labour and capital. This savings, investments and wealth accumulation (through real estate, productive and infrastructure assets etc.) become concentrated in the urban areas of Ibadan.

Urban workers are more productive in large urban areas (the metropolis). Because there are more opportunities to match skills to jobs and to use additional capital inputs, however, bad management can impede labour mobility.

Therefore, it is important to stress that synergy between the rural and urban economics is a particularly important channel through which growing urban areas contribute to national and regional development. Urban and rural areas are interdependent markets linked by exchanges of people, goods, services, capital, social transactions and information technology that benefit residents in both locations. For example, ensuring the food security of urban population may require deliberate policy attention, since urban consumers depend more heavily on a marketed food surplus than do rural residents Policy.

Local Economic Empowerment and Development Strategy (LEEDS) will therefore, provide the opportunity for local governments, the private sector, not-for-profit sectors, the local community economy. The aim of this strategy is to enhance competitiveness and thus encourage sustainable growth that is inclusive.

Ideally, the development of LEEDS strategy should be integral part of the broader strategic planning process for the state and local governments. Sound Local Economic Development strategic planning ensures that priority issues are well targeted.

The economic empowerment of people is one of the foundations on which sustainable human development must be built. Together with political and social empowerment, it is the current and only means of not only alleviating poverty in the short run and eradicating it in the long-run.

Furthermore, the people have to be economically empowered in order to change their values, their attitudes to work and their savings and investment habits. Empowering the people economically will enhance their sense of human dignity and their perception of citizenship and self-reliance. Economic empowerment requires the satisfaction of three conditions, that is, access, availability and equality of opportunity.

The citizenry must have equal access to available productive resources such as land, capital and technology as well as consumable goods and services, to ensure accessibility to the resources, there is the need to provide income generating opportunities to the poor.

In order to achieve sustainable economic empowerment of the people, there must be establishment of community development institutions (CDI), especially, Indigenous NGOs and civil society institutions promoting self-help programmes. This will enable the use of direct community labour on a voluntary basis for the provision and fostering of greater mass participation in decision making, policy formulation, execution and monitoring of community projects.

5.4 Good Governance and Management

Improving the living condition of the residents of the local government in the urban or rural areas places big demands on good governance and management of the local government. Good governance implies inclusion and representation of all groups in urban society and entails accountability, integrity and transparency of local governments. Local Government institutions should be sensitive to the needs of the poor and disadvantaged residents of the local government area and to gender differences in service requirement.

Good governance entails broad participation of all groups in urban governance through both formal and informal channels and institutions. It is the sum of the many ways in which individuals and institutions, both public and private, participate in the planning and management of the common affairs of the city of local government area.

Therefore, local government should provide incentives to all groups in urban governance for effecting urban development. This means local government should develop a strong capacity to ensure the delivery of services through a variety of mechanism and there should be public access to information about local government decision making and actions.

Good Urban Governance is not just about providing a range of local services but also about preserving the life and liberty of residents, creating space for democratic participation and civic dialogue, supporting market-led and environmentally sustainable local development and facilitating outcomes that enrich the quality of life of residents

A framework for good urban governance must embody three principles of good governance. It must be responsive, responsible and accountable.

(a) Responsive Governance

This principle expects the government to do right things, that is, to deliver services, consistent with citizen preference;

(b) Responsible Governance

The government should also do it right, that is manage its fiscal resources prudently. It should earn the trust of residents by working better and costing less and by managing fiscal and social risks for the community. Egbeda Local Government should strive to improve the quality and quantity of and access to public services. To do so, it needs to be benchmarking its performing with the best performing local governments.

(c) Accountable Governance

A local government should be accountable to its electorate. It should adhere to appropriate safeguards to ensure that it serves the public interest with integrity. Legal and institutional reforms may be needed to enable local governments to deal with accountability between elections, reforms such as a citizen’s charter and a provision for recall of public officers. I am aware of the proposed procurement and Fiscal Responsibility Bill before the Oyo State House of Assembly. This is a very good initiative from the State Government

Lack of accountability is linked to the problems of transparency in which there is a large degree of participation of identified stakeholders. Transparency and accountability can be fostered through regularly organized open consultations of citizens on financial matters and other important issues and through creating public feedback mechanism such as City Consultative forum, village or Town Hall Forum, hotlines, establishing complaint offices, Radio programmes etc.

At the level of the officials, both elected and appointed, there is need to promote an ethic of public service, establish codes of conduct and provide for regular disclosure of assets. All this will, of course, be facilitated where administrative and procedural incentives for corruption have been removed, local taxation system simplified and administrative discretion in the processing of permits and licenses is reduced.

5.5 Public-Private Partnership

The decline in local government service delivery is evidenced by inadequate resource allocation, low revenue collection, low service coverage, mismanagement, corruption and lack of transparency and accountability. The option to address these problems is for the local government to form partnership with the private sectors.

The public-private partnership (PPP) in public service delivery cannot be overemphasized. It is an arrangement whereby, the private sector harnesses its financial and managerial resources to provide social amenities and infrastructure on behalf of the local government.

Public – Private Partnership can take many forms such as:

(a) The private contractor or service provider operates the facility for a fee while the local government retains responsibility for capital costs;

(b) The private sector leases or purchases the facility from the local government, operates the facility and charges user fees;

(c) The private sector builds or develops a new facility, or enlarges or renovates an existing facility (e.g. Market, Shopping Complex, Fishpond or Housing Units) and then operates for a number of years.

(d) The private sector under (B.O.T.) agreement build the needed infrastructure, operates the facility for some specified period of time and then transfer to the local government,

(e) The private sector under (B.O) contract build and operate the facility and is responsible for capital financing while local government regulates and controls the operation.

(f) The private sector builds the infrastructure and then transfers ownership to the public sector. Public – Private Partnerships provide some advantages. In addition to providing a source of capital, they enable the public sector to draw on private sector expertise. Private sector involvement tends to lead to more innovative and efficient operations than if public sector provides the services on its own.

5.6 Combating Corruption at Local Government Level

The fight against corruption in Nigeria is not going to be easy if only because of its magnitude and the fact that many Nigerians are not yet ready for the fight. The fight against corruption cannot be won until the general public traits corrupt officials in public and private sectors as lepers. So long as we give chieftaincy titles and other honours to well known corrupt people, so long will the fight against corruption be elusive. Already, cynics are saying that President Obasanjo is alone in this fight against corruption in Nigeria but it is a fight that we must all join in. future generations will not forgive us if we fail.

Corruption in urban governance can be reduced considerable if the people, the stakeholders, are allowed to participate in all planning and budgetary processes. There must be openness and the people should have full access to information about incomes and expenditures. There must be transparent tendering and procurement procedures and monitoring mechanisms must be put in place. Over the last two decades or so, the heavy reliance of Local Governments on allocations from the Federation Account has promoted corruption to high heavens. The LGs can now realize much of what they want from the Federation Account and so do not bother to collect rates and taxes. The citizens themselves do not pay taxes and so do not bother about what the LGs do. They do not know how much is received from the Federation Account or how it is spent. As for the LG officials, the type of fear which officials elsewhere in the world have with mis-spending “tax payers’ money” does not exist since; in any case, there is no tax payers’ money. All these create irresponsibility on the parts of the officials and the citizens and create an atmosphere where corruption and cynicism flourish.

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