MINIMIZING CONGESTION IN NIGERIA BANKS (A CASE STUDY OF FIN BANK PLC)

                CHAPTER ONE

                  INTRODUCTION 

1.1  BACKGROUND OF THE STUDY

Congestion in banks can be viewed as a generation problems, which is as old as banking in Nigeria itself. The Nigeria banking section which is over 108 years old has the year tried to maintain 9 certain degree of human and technical organization as regards bank transactions within bank premises and across the counter. Therefore bank congestion is one problem in the banking sector that has thrived despite new polices and ideas created by the authorities in curbing it. 

Going down memory lane, precisely in the 70’s and 80’s, the regular occurrence  of long queues was not new anymore as people were made to wait for hours before proceeding their bank transactions.

Msungu (2007) on his book emphasizes on congestion in banks says that considering banks at the time, a friend would quickly advise you not to open a bank account because it is a big bother when it comes to withdrawing your own money, it takes hours before you get it. Imagine you got into a bank that  keeps your money and you are delayed for more than two hours before collecting a little sum of money you have requested and of course no one gives you any explanation for undue delay in giving you the cash badly needed. It is annoying and absurd- it is also more annoying when “Tellers” start calling names out loudly, so that customers can come forward to collect their money. In strict African tradition, that is not entertained and so ways should be devised on how customers are to be called to collect money at counters.

Also, it was normal during the manual banking system that customers practically spent the entire day at the bank the expenses of their other activities as individuals. This manual trend’s in banking encouraged congestion the most. “Old generation banks’ such as Union bank Nigeria Plc, and First Bank Nigeria were the “architects” of bank congestion since they had a high degree of public confidence at the time. In this situation accounts were documented in files and it was rather tedious to go through the accounts as well as other book-keeping activities for hundreds of people who wish to transact business that same day. The resultant effect of these is “human congestion”, a situation whereby the bank hall is crowded and there are too many people to be attended to at the same time.

The Nigerian clearing house activities also compounded the problem of bank congestion. This is because credit instrument such as cheques and bankers drafts took many days before they got cleared. After one year of it inception, into full banking operations in July 1959, the CBN (Central Bank of Nigeria) initiated actions in establishing a national clearing system and thus Lagos clearing committee and a sub-committee came together to work out details to draft the operation of a national clearing house. Thus, the Lagos clearing house was subsequently opened in 1961 and has quiet a number of its branches nationwide.

Furthermore, a time came when the clearing system had to be automated so as to fall in line with international standards. In this view the magnetic ink character recognition (MICR) cheques were introduced to easily read cheques and were checked with the use of cheque scanners.

       More so, the problems known as bank congestion, has been in existence at a time when “arm-chair banking” was practiced. Here, customers queued up for hours on end before they can be attended to. This was due to the fact that there were too many book of account to process before cash deposits and withdrawals were made. However time count on and computerization started creeping into the banking system 9E-banking) so in due time, the “armchair banking” was gradually eradicated and has drastically reduced.

1.2  STATEMENT OF THE PROBLEM

Banking hall congestion is more less device that hampers the smooth running of a job well done in a bank of financial institutions. Bank congestion has been found to be both a human and technical problem and has been a booster of inefficiency among banks in Nigeria. Congestion is a menacing problem but the sad angle to this scourge is treat it permeates other departments of banking activities thus slowing down the system.

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THE EFFECT OF PROMOTION ON CONSUMERS’ PATRONAGE OF TELECOMMUNICATION SERVICES: A CASE STUDY OF MTN CALABAR

   CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND OF THE STUDY

Telecommunication is concerned with the roles of information technologies (IT) in the society that moves the economy forward, according to (Hobday 1981). In line with Hobday’s word (Hudson 1981) opined that as social and economic activities become more and more dependent on information technology (IT), telecomm are crucially  expanding technological trend to capture shares in the rapidly growing (IT) markets. They do this with the primary objective of stimulating consumers’ high demand for telephone services by offering low prices, preventing abuse of monopoly or (market) power by few telecomm operators and promoting technical efficiency in the telecommunication system.

According to international telecommunication union (Itu, 2004) opine that the development of telecommunication in the Nigeria economy encompasses many technology related business sectors operating in the telecom industry. And such telecommunication services include- MTN, Globacom, Etisalat etc.

Thus, in this article, focus will be made on MTN telecommunication service and her effective promotion used in enhancing consumers patronage, which equally serve as the topic of this research work.

Hence, the objective of this research work is to investigate how MTN can maintain consumer’s patronage using effective promotion to persuades, informed and reminding target customers about the company’s product and services.

This promotional objective coincides with the words of (Jerome and Perrault 1994) which stated that promotion can be attained when the objectives and markets mix is clearly define.

However, MTN is an emerging communication service in Africa, with Nigeria rated as one of the fastest growing market, where she owns outlets and branded stores to distribute products and services. Although, MTN is an organization which has other rivalries in communication services which compete with them in the area of marketing and sales promotion. Thus MTN has to adopt effective promotion to induce subscribers so as to create high volume of sales, maximize profit and making investment in advertising to gain consumers patronage.

1.2  STATEMENT OF THE PROBLEM

This study precisely states what problem the researcher seeks to investigate and how far this has been helping MTN in faulty decisions and takes corrective measures.

Thus, for MTN to remain in business and grow, it must know what marketing strategies should be used in order to achieve continuous sales maximization. Because, by so doing, it covers up cost and make reasonable profit through sales. Hence, an apparent problem confronting some of the telecomm services after few years of operations starts with low sales, low profit as a result of poor customer patronage caused by failure to adopt effective promotion. Thus, the researcher envisages that the following below contribute to the problem statement.

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IMPLICATIONS OF OIL AND GAS ACCOUNTING ON ECONOMY DEVELOPMENT OF NIGERIA (A STUDY OF NIGER DELTA)

CHAPTER ONE 

INTRODUCTION

1.1  Background to the study

The oil and gas industry in Nigeria is the largest industry and main generator of GNP in the West African nation which is also the continent most populous. Since the British discovered oil in the Niger Delta in the late 1950s, the oil and gas industry has been marred by political and economic strife largely due to a long instinct of corrupt military regimes and complicity of multinational corporations notably Royal Dutch Shell. Despite this, it has not until the early 1990s that the situation was given international attention, particularly following the murder of playwright and activist Ken Saro-Wiwa by the Nigerian provoking the immediate suspension of Nigeria from the Common Wealth of nations. Nigeria is identified by the international community and the firms in operation there as a major concern with regards to human rights and environmental degradation (Aina, 1991).

        Oil and gas production in Nigeria has been mixed by bag of fortune and misfortune of blessings and curses, depending on who is feeling that effect. For the country, it has been a large fortune. It is the source of her wealth, accounting for about 90% of her foreign exchange earnings; it is the source from which governments at the federal, state and local levels substantially fund their developmental programmes, a source of employment. Most desired transfer of technology was to extent been achieved especially in the areas of exploration and production, provision of internal energy requirement, increased income per capital (Ekpo, 2004). Nigerians membership of such important bodies as the World Petroleum Congress (WPC), Organisation of Petroleum Exporting Countries (OPEC) and African Petroleum Producers Association (APPA) has raised the country's profile internationally.

        In other words, that Nigeria is a force to reckon with in the country of nations is arguably attributable to her being an oil producing country (Adams, 1999). For the oil bearing communities in the Niger Delta, however, oil has been more of a curse than a blessing.

        In communities where oil exploration and production are carried out on shore, deforestation, erosion and destroyed farm lands are the main signposts for this gift of nature. The Nigerian Content Policy initiated by the Obasanjo’s administration to help develop local capacity building in the Nigeria oil and gas sector with a view to ensuring that Nigeria participate actively in the operations in the sector.   

        In the early 1990s where democratic government initiated a series of a market oriented policy reforms to integrate the economy towards globalization and economic growth. A remarkable progress in terms of growth, investment and employment has been achieved. It is in view of this that the researcher is writing on the “implication of oil and gas accounting on the economy development of Nigeria in Niger Delta”.

1.2  Statement of the problem       

Since the introduction of oil and gas exploration in Nigeria in the place of agricultural sector, the problem surrounding this sector has been on how the account of……

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THE ROLE OF MARKETING STRATEGIES IN THE DEVELOPMENT OF BANKING INDUSTRIES. (A STUDY OF SELECTED COMMERCIAL BANKS IN CALABAR)

CHAPTER ONE

INTRODUCTION

1.1        Background to the study

One of management's main concerns is with the outcome of strategic decision making in particular, how a specific strategic decisions such as the selection of a plan for competitive posting, affect the performance of firms within specific industries. These and related issues have previously been addressed by many studies in the literatures often times with conflicting results (Mcmalian, 2001; Miles and Snow 1978; Porter, 1980; Wilson and William, 2000).

      One aspect strategy is the selection method used t grow the firm, a priority of management, particularly due to growth’s impact on the firm, including the size of the firm, performance, focus of the firm, marketing emphasis and product mix to name a few (Stremersch and Tellis 2004; Wyner, 2005). As growth intensifies, marketing decision becomes more relevant since other operational specialization of firm add up for total success (Day, 2003).

      The bank is a financial institution which accepts deposits and lends money to its customers. As banks deal with their customer’s finances, banking is a high-involvement service. Therefore banks needs to win the trust of their customers based on the customer profiles, banks segment their market into retail banking, corporate banking, personal banking etc.

      Depending on customer needs for finance, the market can also be segmented into trade customer finance etc. For banker to de-maximum returns and enhance his market, the marketing mix has to be effectively made (Howell, 2004). The products offered by a bank may be in core or segmented form. The core products offered by a bank include a current saving bank account or a housing loan.

      The augmented product includes services like, ATMs 24-hour customer service, etc. these services offering from those of his competitors. In the pricing of banking services, determining the interest rates plays on important role these rates in turn determine the revenues and profits of the bank.

      The multiple sources of revenue for today’s bank include annual charges for core services and augmented and services penalties, commissions for cross selling and charges for payment of utility bills, apart from the differential, interests rate. The basic pricing strategy in banks is based on risk-return pay-offs. However, the competitor and customer reaction have to be taken into consideration while initiating a price change (Doyle et al., 1998).

      The place element of the marketing mix refers to making the service available and accessible to customers. Improvement in the availability and accessibility of services has changes the process of banking. Technological innovations have given rise to modern channels like the internet, which have helped banks increase business volumes and attract new customers.

      ATMs and credit and debit cards offer convenience to customers and have also improved the efficiency of banking operations. These changes have helped banks tackle the challenges of services marketing. The promotion of communication mix banking refers to varied strategies like personal selling, advertising, discounts, and publicity etc. used by present banks to promote their service offerings.

      According to Doyle et al (1998), people also play an important role, even though their role has been eclipsed by technology in the recent past. Process determines the efficiency of banking operations and thus the service quality in a bank’s physical evidence includes the infrastructure and building not only in branch offices, but also at the ATMs or other places of interaction, even the quality of physical evidence. The banking industries have changed drastically over the past decade.

      Howell (2004) confirmed that the banking reforms and the opening of the economy to foreign and private banks have improved the working of the public sector banks. This has resulted in improved service to the customs of the banking industry. Increased competition and technology have enhanced the quality of service offered to the customers and also improve the return for bankers.

      Banks are businesses like any other. They have service to sell and they need customers to buy them. Seeking the customer naira in the face of tough competition is the province of the marketing people and the marketing of banks is as varied as the number and type of banks out there. “Most banks focus comes from their strategies plan wherein they decide what they are going to be and who they are going to service” says Dominic Bernardi, President and Chief Executive Officer of the western state school of banking at the Anderson school of management, University of New Mexico. “Some banks take the all things to all people approach”, but if you look closely, they are focusing on certain things; a bank has to decide if it is to be a commercial or retail-oriented bank, then develop it image (Aridishivi et al., 1994).

      Supporting the marketing role in the banking industry, Howell (2004) asserted that, banks all offer a basic menu of services which serves as the “floor” of the marketing plan. The largest banks in Nigeria, such as First bank, UBA and Union bank, view their hug line of services as a selling point while community banks like Ekondo Microfinance bank, Calabar Microfinance bank, Bakassi Microfinance bank and Akwa Savings are pleased to market a shortest list of offering tailored to their small metropolis customers. In the days of electronic banking, most banks can, if they choose to offer their customers pretty much any service. The trick lies in taking a good look at the customers they like to serve.

      Moreover, how the banks attempts to differentiate themselves from others in the mart is often seen in their slogans or catch phrases in the case of large, merged banks the message is very similar as they promote both the convenience and sophistication of their size and their community presence. Similar banks stress their accessibility and individualized customer services and the rich banks focus tightly on the market they are chose to serve (Kotler, 1988).

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IMPACT OF INTEREST RATE ON BORROWING AND LENDING ACTIVITIES AMONG COMMERCIAL BANKS IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

Bank like other private enterprises establish polices aimed at achieving their primary objectives. Interest rate is the cost on borrowing and also the payment to a borrower of funds to the lenders of the use of money borrowed. The interest rate policy is one of the major tools employed by the monetary authorities to regulate the value, supply and cost of money in an economy. In other words, the economic activity in any economy to a large extent is influenced by interest rate.

Interest rate as a component of cost of fund, has contributed both positively and negatively on the economy, and has gained considerable attention from economist, lender and borrowers alike. It effect the demand for and allocation of available laonable funds, it also effect the level of consumption on one hand, and the level and patter of investment on the other hand, as higher interest rates discourage borrowing and encourage savings and will also tend to slow the economy. Lower interest rate encourage borrowing and economic growth i.e the lower the interest rate, he higher the profit expectation as business are expected to pay certain percentage of the money borrowed (little) as interest for fund borrowed. Conversely, the higher the rate of interest the less the profit expectations

There was a time when the charging of interest on loans was sinful. It was using one’s financial power for the save of extorting money after the banking debacle of 2007 to 2008; questions on the morality and usefulness of interest rate have arisen yet again. Until 1970’s the main line of argument was that because interest rate represent the cost capital, low interest rate will encourage people to borrow and promote economic growth. Thus, during the era, the policy of low interest rate was adopted by many countries including the developing countries of Africa (of which Nigeria is among). This position was, however challenged by what is now known as the orthodox approach to financial liberalization mckinnon kapur and the broader mckinnon- shaw hypothesis suggested that high positive real interest- rate will encourage saving. This will lead, in turn to move investment and economic growth, on the classical assumption that prior savings is necessary for investment.

However, high rate of interest to the borrowers on lending has contributed to the bank failure in higher-risk segments of the credit market. This involved elements of moral hazard on the part of both the banks and their borrower’s and the adverse selection of the borrower’s. it was in part motivated by the high cost of mobilizing funds. Because they wore perceived by depositors as being less safe than the established bands, as commercial banks has to offer depositors higher deposit rates. They also had difficulty in attracting non-interest bearing current account because they could offer few advantages to current account holders which could not also obtained from the established banks. Some of the commercial banks relied heavily on high-cost interbank borrowing from other banks and financial institutions on which real interest rates of over 20 percent where not uncommon.

The high cost of funds meant that the commercial bank had to generate high earnings from their assets, for example, by charging high lending rates with consequences for the quality of their loan portfolios. The commercial banks almost inevitably suffered from the adverse selection of their borrowers, many of who had been rejected by the foreign banks (or would have been, had they applied for a loan). Because they did not meet the strict creditworthiness criteria demanded of them. As they had to charge higher lending rates to compensate for local banks to compete with the foreign banks for the “prime” borrowers (ie the most creditworthy borrower). As a result, the credit markets were segmented, with many of the banks operating in the risky segment, saving borrowers prepared to pay high lending rates because they could access no alternative sources of credit. High risk borrowers include other banks and NBFIs which were short of liquidity and prepared to above market interest rate for inter-banks deposits and loans. In Nigeria some of the commercial banks were heavily exposed to finance houses which collapsed in large number in 1993, as well as to other local Banus (Augustto and Co., 1995, pg. 40). Consequently, bank distress had domino effects because of the extent to which commercial banks lent to each other. Arguably a change in interest rate for loans is not likely to effect decision to interest on long term equipment and other such assets but will affect total spending in the economy.

1.2   STATEMENT OF THE PROBLEM

the financial system of most developing nations of which Nigeria is among, have come under stress as a result of the economic shocks in recent time. Additionally, financial repression, which has largely manifested through discriminate distortions financial prices including interest rates, has tended to reduce the real rate of growth and the real size of the financial system relative to non-financial magnitudes.

Consequently, most countries both developed and developing have taken major steps to liberalize their interest rates as part o the reform of the entire financial system. Such liberalization represents a policy response, encompassing a package of measures to remove all undesirable state imposed constraints on the free working of the removal of interest rate ceiling and loosening of deposit and credit control (Killick and Marhn: 1990).

According to the Keynesians, interest rate increases investment while a rise in the rate of interest depends on investment. Anyawu (1993) reported that as soon as the central bank of Nigeria announced deregulation of interest rate in 1987, bank over reacted by purchasing interest rate tools high reaching 30-40 percent. Such rise helped in rendering borrowers insolvent.

Interest rate has contributed both positively and negatively on the economy (how people lend and borrow money as it effect the demand for and allocation of available loanable funds. Hence, the need for this research work, to determine if the interest rates have helped in increasing the level of investment or how people responds to lending and  borrowing when interest is high or low among banks in Nigeria.

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IMPACT OF NIGERIAN AGRICULTURAL, COOPERATIVE AND RURAL DEVELOPMENT BANK (NACRDB)

CHAPTER ONE

                                          

INTRODUCTION 

Background of the study

A bank is a financial institution that deals with money. Bank draw surplus or idle fund from customers and lend them to those who would invest them into productive business or investment. Therefore bank have been defined by different school of taught arising from the multifarious function and services, they perform in recent years in most cases either the term banker have been defined in negative sense or in a ways which lay itself to different interpretation for example, section 41 of the Nigerian banking Act of 1969 defined a bank as any institution, person, company who carries out banking business and which a commercial  bank, and the same section of the Act went further to define Banking business as the business of recurring moneys from outside sources as deposit irrespective of the payment of interest or the granting of money loans and acceptance of credit of the purchase of bills and cheques or the purchase and sale of securities. Section 61 of the Banks and other financial institutions decree No 25 of 1991 (BOHIO) deposits on current accounts savings account or other similar account paying or collecting cheques drawn by or paid in by customers, provision of finance or such other business as the governor may by order published in the Gazette, designate as banking business. Section 3 of the negotiable instrument Act 1881 states that the term banker includes a person or persons corporate or a company acting as a banker. This is mere cantology and has not succeeded in defining whoa banker is. In America the term banker is often used in a broad sense to include capitalist, the financers, the stockbrokers and even the high bank official.

         Banks have also been defined as nay institution that is dealing on shares and stock. The first successful definition of a bank was made by law maker (legislators) in the United State of America. They define banking as dealing in credits, according to them a bank include a firm, person or companies having a place of business where credit is operated through deposits and collection of money or currency subject to be paid or remitted on drafts, cheques or money in advance or loaned or stock bonds, billion bills of exchange or promissory notes are received for discount. In Japan, the Japanese Act of 1927 defines a bank as an institution which carries on the operation of giving as well as receiving credits. Inspite of the absence of an acceptable definition of the term, some writers have attempted to give a sound definition of banker. According to Hart H, G. (1991) a banker is one who in his ordinary course of his business honours cheques drawn upon him by person from and for whom he receive money as current account. Another was given by Sir John Paget. According to him no other person, body, corporate or others can be a banker who does not take deposits account take current account issue and pay cheques and collect crossed or uncrossed. This is a more compressive definition of banking business, but does not include most of the present day banking operation like agency and general utility business.

         Also banking in Nigeria has gone through very dramatic change within this decade, the industry has grown beyond optimistic expectation. Over the year and period, the number of bank expanded, the variety of bank increased. Banking operation were substantially deregulated, competition increased and bank were forced to be more innovative and services oriented.

From the above definition, the functions of commercial bank or development bank could be visualized. There function include

-      Receiving deposit

-      Advancing loan

RECEIVING DEPOSIT

This is an important business in banking operation because bank depend merely on these funds for it’s day to day operation. These are the three types of deposit:

-      Current demand deposits

-      Fixed and time deposits

-      Savings deposits

Current and Demand Deposit: These are deposit made by customers which are virtually interest free. Such deposit can be withdrawn in part of full at anytime by the customers through the use of cheques.

Fixed and time: These deposits attract higher interest rates and can only be withdrawn after a given period.

Saving Deposits: These are deposit that can be withdrawn subject to certain limitation, regarding frequency and amount to be withdrawn. This aspect of banking business requires the bank to keep enough fund or money available for transactionary and operation purpose so as to be able to meet withdrawals or demand by customers. According to IIjere (1986) the bank should keep enough cash sufficient to meet any demand made by customer.

ADVANCING LOANS

The bank makes profit by advancing loan to customers. Because banks deal with other people money as such while advancing, these loan, bank try to strike a balance between profitability, liquidity and security. This is done in order to meet the customer obligation and at the same time to ensure the liquidity and survival of the banks.

After the bank has satisfied itself that the purpose for which a loan is required is economically sound, the bank gives the customer right to draw cheques. The loan thus becomes a deposit through issuance and drawing of cheque such as loan than creates credit.

Advance constituted the most important asset of the bank. It is said to be income sterile until invested (Okoafor 1987). Amongst the major types of bank asset loan and advances are the most dependable and highest yielding sources of income Lot (1983)

Bank as a result of their nature don’t seek to maximize its profit simply by maximizing its advances according to Ijere (1986) certain prudent policies are followed by bank before granting loan and advances. These include

a.   The sources of Repayment: the probability that the business will generate enough funds to enable the entrepreneur to honour his business obligation as and when due to maintain himself and repay the bank advances.

b.   The personal character of the borrower: No banker would like to lend to a dishonest person who does not intend to pay back.

c.   The period of the advances: the bank would prefer this period to be as short as possible so that he doe not suffer risk for losing.

d.   The purpose of advances:- Banker request for clear and very well articulated purpose or use of loan before grating such request. They insist on this since very high risk ventures bothering on gambling and betting are usually not considered.   

e.   The personal worth of the borrower: banker are always weary of lending to men of straw who could not even raise the base minimum amount required for the advance.

f.    The security offered: Banker would like to lend only against security sot that if the borrower defaults in repayment he can exercise his right against the borrower asset.

AGRICULTURAL LENDING

Agricultural and agro-based industries fall within the high risk zone. The risk in agricultural business sin Nigeria is not only a function of the vagaries of the climate condition of a place on which farming depend, other factors such as the small and scattered nature of most agricultural holding which together with the relative lack of sophistication of the bulk of the small scales farmer make the bank cost of servicing them high. Because banks are risk aversive they are therefore reluctant to operate in rural areas or community where they are left with only the farmers and have no alternative other than to develop the rural environment. As a result of the role of agriculture as a major sources of the food for teaming populations and the need to diversify export based resources, the federal  government decided to emback on rural banking programmes and also established some specialized lending institution to take care of agricultural sector of the economy.

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THE ADMINISTRATION OF FISCAL POLICY AND ATTAINMENT OF LOCAL GOVERNMENT OBJECTIVES

CHAPTER ONE

INTRODUCTION

1.1 Background to the study  

       Primarily, federalism presupposes that the national and states/regional governments should stand to each other in a relation of meaningful autonomy resting upon a balance division of powers and resources. Each state or region must have power and resources sufficient to support the structure of a functioning government, able to stand and compete on its own against the other. It is in a sense, the system of transfer payments or grants by which a federal government shares its revenues with lower levels of power to enforce national rules and standards. In other types of political structure it is known as intergovernmental fiscal relations. Sometimes, both terms are used interchangeably.

       Conceptually, fiscal operations of any economy can be viewed from two extreme forms of public sector. On one hand, there exists a highly decentralized fiscal structure/system in which the government at the centre has no economic responsibilities. The other tiers of government perform virtually all economic functions. The other extreme is case of total centralization where the central government takes total responsibility for economic activities of the public sector and therefore no tiers of government participates in the economic life of the nation. In practice, there exist some degrees of decentralization in all economics. Decentralization here refers to the portion of total revenue collected and expenditures allocated to both state and local governments. The degree of decentralization is the extent of independent decision-making by the various arms of the government in the provision of social and economic services. It connotes the degree of autonomy of state and local government in carrying out various economic tasks.

       Nigeria has operated the three-tier structure of government for many years. The determination of appropriate fiscal jurisdiction and inter-tier distribution of the nation’s revenue within the existing structure has witnessed considerable controversy and conflict, which remains unresolved till date. Nigeria’s fiscal policy system is exceptional in its degree of centralization of power and access to the resources and wealth of the nation. As rightly observed by Philips (1997), the fiscal policy/system tends to be synonymous with that of a unitary government where inter-tier revenue allocation follows a unidirectional process from top to bottom. The system is beset with widespread imbalance both vertically and horizontally. In a federation, vertical fiscal imbalance refers to the mismatch between revenue means and expenditure need at various levels.

       Till date, fiscal operations in Nigeria have tended to undermine the autonomy of lower tiers of government and have adversely affected the attainment of their objective. For instance, in view of the erosion of fiscal autonomy at the state level, it has now become a herculean task for many state to pay their workers as and when due. And the much expected improvement in economic and physical developments remains elusive. Many states have abandoned their hope of financing the development projects to the Petroleum (Special) Trust Fund (PTF) and Federal Road maintenance Agency (FERMA), which in the last few years have assumed a central position in providing physical, social and institutional infrastructure as well as several other services in virtually all sectors of the Nigerian economy.

       At this level, the pertinent question to asker here is: why should state government go through this indirect way to seek fund which they ought to legitimately and directly obtain from the federation account? The proliferation of special funds is diversionary, political motivated and detracts from the capability of government to perform its responsibilities within existing administrative structure. Through this revenue allocation procedure, the federal government has widened the scope of its activities by getting involved in the provision of virtually everything. Despite this level of involvement, there seems to be a very low level of federal government presence even at the grassroots level. Lower tiers of government consider such involvement as a usurpation of power, and the people seem to have derived little direct benefit from it. There is a general feeling that resources are being distributed inequitably within the federation and the impact of fiscal federalism is far from being fully satisfactory (Antai, 1999).

      With the current situation there is risk that Nigeria may not continue as quasi-federal country, but as a complete federal state with the full autonomy for the regions. According to Wheare (1946) “Federal Government is an association of states, which has been formed for certain common purposes, but in which the member states retain a large measure of their original independence.” Under the current federal government in Nigeria, all power is centralized, and the states or regions do not have any control over their resources. This problem has been provoked by a number of factors, including ‘over dependence’ on statutory allocations from both the state and federal governments, deliberate tax evasion by the local citizenry, creation of non-viable local government areas, differences in the status of local government in terms of the rural-urban dimension, and inadequate revenue and restricted fiscal jurisdiction.

       Nigeria’s economic development, apolitical stability, security and peace depend on extending the freedom, benefits and choice of autonomy to each ethnic nationality within the country. For the financially healthy and function must be allocated in accordance with their taxing power and ability to generate funds internally. The constitutional provision that recognises local government’s power in this regard must give them full freedom to operate and this must be well guaranteed and adequately protected. These measure, coupled with a review of the revenue sharing formula, the granting of fiscal autonomy and fiscal discipline as well as making local governments free from the strengthened by the 1999 constitution. Stressing these points and the appropriate strategy to be adopted form the focus of this project.  

 

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