CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Internally Generated Money (IGR) refers to the revenue generated by state governments inside their jurisdiction. Taxes, fines and fees, licenses, profits and sales, rent on government property, interests and dividends are only a few of the internal income streams accessible to state governments. The ability of a state government to produce income domestically is an important factor to consider while forming one. According to Babalola (2009), providing public schools, public health, and public infrastructure, particularly in these contemporary times, necessitates significant government investment. In addition, the state government spends money to provide proper security, as well as to carry out its commercial and administrative tasks. Given the government's spending profile aimed at decreasing poverty, creating jobs, stimulating development, and producing wealth, the requirement for enough income at all levels of government has become critical. State governments are now facing more difficulties in their efforts to become less reliant on the federal government for financial resources. Despite the fact that the income distribution mechanism requires a portion of the Federation Account to be distributed to state governments, these amounts are insufficient to fulfill spending needs. This is due to the fact that the account's size is based on oil income, which fluctuates, and the state government's expenditures greatly exceed available resources. The issue of fiscal transparency continues to exist as a consequence of misuse of finances, corruption, weak internal control, and a skepticism toward government work and property. The issue that comes to me is what would happen to state governments if the statutory allocation was not available due to the de-emphasis of oil in the economy. How would they manage their finances? 2011 (Olusola). Despite the different sources of income available to the various levels of government as stipulated in the Nigerian Constitution of 1999, petroleum still accounts for over 80% of the yearly revenue of the three tiers of government and has done so since the 1970s. The sharp drop in the price of oil in recent years, however, has resulted in a reduction in the revenues available for distribution to the states. According to Kiabel and Nwokah (2009), state governments' requirement to earn appropriate money from domestic sources has become a subject of extraordinary urgency and significance. This requirement highlights state governments' determination to find new sources of income or to become more aggressive and imaginative in collecting money from current ones. The rising expense of administering government, combined with declining income, has prompted several Nigerian state governments to devise revenue-generating techniques. Of addition, the impact of the global financial crisis in 2007-2009 in Nigeria produced considerable financial hardship for all levels of government. The state governments have been affected the hardest, with all of them seeing an unexpected fall in their share of money from the Federation Account.

1.2 Statement of the problem

Oil bench price is used as the primary budget restricting element in national budgets. The United States, which has been a major supplier of Nigerian oil, has begun to sell oil from own reserves to other countries (Ebelo,2013). Other African countries are now part of the oil-producing club. What happens to Nigerian oil if these nations become self-sufficient and no longer need Nigerian oil? There are states that get more than 85 percent of their income from federally allotted sources without making any attempt to diversify their revenue sources (Douglas,2010). What do these nations that have vast resources do with this funds? Are other states doing better than these oil-producing states in terms of infrastructure development? The necessity for nations to find new methods to earn cash from inside their borders has created a significant problem. As a result, difficulties and the promise of locally produced income in Bayelsa state must be investigated.. Hence the need to look into problems and prospect of internally generated revenue in Bayelsa state.

1.3 Objective of the study

The primary objective of the study is as follows

1.        To examine the challenges of generating revenue in Bayelsa state.

2.        To evaluate the benefit of internally generated revenue in Bayelsa state.

3.        To find out method used in generating revenue in Bayelsa state.

4.        To find out strategies that can be used to improve the revenue generation in Bayelsa state.

1.4 Research Questions

The following questions have been prepared for this study

1)        What are the challenges of generating revenue in Bayelsa state?

2)        What are the benefit of internally generated revenue in Bayelsa state?

3)        What are the method used in generating revenue in Bayelsa state?

4)        What are the strategies that can be used to improve the revenue generation in Bayelsa state?

1.5 Significance of the study

This study will examine problems and prospect of internally generated revenue in Bayelsa state. Hence this study will be significant to the government as it will expose the loop holes surrounding the internal generation of revenue and also provide strategies that can be used.

This study is significant to the academic community as it will contribute to the existing literature.

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