Revenue Generation and Financial Sustainability of Local Government Area Councils of Rivers State, Nigeria

Abstract

This paper examined the nexus between government revenue generation and financial sustainability, of local government area councils of Rivers State, Nigeria. It specifically investigated the extent to which statutory allocations from the federation account (FAAC); VAT; share of state IGR; and Local government council IGR; influenced financial sustainability (proxied by total expenditure). The study adopted the ex post facto research design. Data were sourced from the Auditor-General (Local Government) on the Consolidated Accounts for the period of 2017 to 2023 and analyzed using descriptive statistics, correlation and the pooled panel regression technique. From the results, it was found that all the independent variables had positive and significant effect on financial sustainability except IGR of the LGA councils; which showed negative and insignificant effect on total expenditure. It was therefore concluded that VAT, SSIGR and FAAC supported financial sustainability of local governments in Rivers State; except their IGR. The following recommendations: (i) Local governments councils should intensify revenue diversification to reduce dependence on statutory allocations; (ii) VAT administration should be strengthened and widened to consolidate a stable, predictable revenue stream; (iii) State governments improve on tax collection and transparency (SSIGR), since that improved the revenue accruing to Local government councils enhance the flow of such revenues and their effect on the financial sustainability of local governments; and (iv) Local governments should carry out fiscal reforms to boost IGR, close leakages, and enforce compliance.

Keywords

• Revenue Generation
• Financial Sustainability
• Value Added Tax
• State Internally Generated Revenue
• Federal Allocation

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