Revenue Mobilization, Institutional Quality and Financial Accountability among Local Government Councils in Southwest Nigeria

Abstract

Public sector financial accountability is vital for effective governance since it is known to promote economic growth and development, facilitate efficient service delivery and enhance long-term financial and economic stability and sustainability. Achieving it, however, poses a serious concern particularly within the framework of local governance systems. Despite the availability of many revenue sources due to constitutional provisions and monthly allocations from the federation, local governments in Nigeria still face significant challenges in mobilizing and managing revenue effectively. It is in this regard that the study explores how revenue mobilization practices affect financial accountability in Southwest Nigeria local governments while considering the role of institutional quality. Mixed method research was adopted. A sample size of 320 respondents was derived from a population of 1, 896, made up of directors in the local governments and officers on grade level 10 and above in the Office of the Auditor General for Local Governments using stratified sampling technique. Descriptive analysis of data (mean scores; standard deviations) were displayed in tables while further analysis was done with the Partial Least Squire Structural Equation Modeling (PLS-SEM). Qualitative data were analyzed thematically. The study found that regulatory compliance and efficient revenue collection significantly improve financial accountability (β = 0.201, t = 5.29, p < 0.001; β = 0.312, t = 6.93, p < 0.001). However, increased government allocations alone do not (β = -0.098, t = -2.97, p = 0.003). Institutional quality equally enhances the positive impact of compliance with revenue rules and efficient collection strategy on financial accountability but does not resolve issues related to increased government allocations. However, qualitative findings highlight major obstacles such as fragmented tax systems, low public trust, corruption, political interference and poor digitalization of revenue collection. The study concludes that revenue mobilization generally affects financial accountability and also that strengthening oversight institutions, enforcing revenue generation mechanisms and ensuring regulatory compliance are key drivers of financial accountability. It recommends building public trust through transparent reporting, automating revenue collections and curbing corruption as measures to boost revenue and enhance financial accountability and grassroots development.