The Federal Government and state governors may have agreed to a three-month moratorium on Local Government autonomy, over concerns arising from its impact on salary payments and operational viability.
The Supreme Court, on July 11, 2024, gave a landmark judgment affirming the financial autonomy of the 774 LGs in the country and ruled that governors could no longer control funds meant for the councils.
The apex court also directed the Accountant-General of the Federation to pay LG allocations directly to their accounts, as it declared the non-remittance of funds by the 36 states unconstitutional.
Under former President Muhammadu Buhari, the Nigerian Financial Intelligence Unit issued a regulation, effective from June 1, 2019, which banned transactions on State and Local Governments Joint Accounts. Funds were sent directly to the accounts of the local governments. It also limited cash withdrawals from local governments accounts to a maximum amount of N500,000 per day with penalties for banks that failed to comply. The Nigerian governors under the aegis of the Nigerian Governors’ Forum kicked against this regulation and the NFIU eventually capitulated.
The status quo was maintained until May 2024 when the Attorney-General of the Federation, Lateef Fagbemi (SAN), filed suit marked SC/CV/343/2024 at the Supreme Court to strengthen the autonomy of the local government areas as guaranteed by the constitution. It sought to prevent state governors from unilaterally dissolving democratically elected local government councils and establishing caretaker committees, actions that violate constitutional provisions. The AGF argued that the constitution mandates a democratically elected local government system and does not allow alternative governance structures.
The suit also prayed that the funds from the Federation Account be channelled directly to local governments, bypassing the allegedly unlawful joint accounts managed by state governors. The Federal Government also sought an injunction to stop governors and their agents from receiving or spending local government funds without a democratically elected local government system in place. It contended that the governors’ failure to establish such a system constitutes a deliberate subversion of the 1999 Constitution. The Supreme Court heard parties to the case on June 13, with the state governments, through their respective attorneys-general, opposing the suit.
That was the prelude to the Supreme Court judgment of last Thursday, July 11, 2024, which has now affirmed the financial autonomy of Nigeria’s 774 local governments. In the unanimous judgment of its seven-member panel, the Supreme Court upheld the suit brought by the federal government to strengthen the independence of local governments in the country.
A member of the panel, Emmanuel Agim, who delivered the court’s lead judgment, held that the local governments across the country should henceforth receive their allocations directly from the Accountant-General of the Federation. He ruled that it is illegal and unconstitutional for governors to receive and withhold funds allocated to local government areas in their states.
Many Nigerians, including the LG chairmen, hailed the judgment of the Supreme Court, describing it as a step in the right direction to restructure the country.
Although some governors voiced their concerns, the Nigeria Governors’ Forum, speaking through the chairman and Kwara State Governor, AbdulRahman AbdulRazaq, said the judgment was a relief from the financial burden to state governments.
AbdulRazaq, speaking to journalists after meeting President Bola Tinubu on July 12, a day after the judgment, said, “The governors are happy with the devolution of power regarding local government autonomy. The public really doesn’t know how much states spend on bailing out local governments.”
However, it was observed that more than a month after the judgment, the order of the apex court had not been complied with.
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In July 2024, total disbursements by the Federation Allocation Account Committee increased to N1.354tn, with LGs receiving N337.019bn.
At the July meeting of FAAC, chaired by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, of the total amount shared to the three tiers of government, the Federal Government received N459.776bn, the states received N461.979bn, the LGs got N337.019bn, while the oil-producing states received N95.598bn as derivation (13 per cent of mineral revenue).
The Association of Local Governments of Nigeria, however, waited in vain to get the money paid directly into the LG accounts.
The Incorporated Trustees of ALGON accused the state commissioners of finance of conspiring with governors to obstruct the direct payment of allocations from the federation account to the 774 LGs’ accounts.
In a letter addressed to the Chairman of the Forum of State Commissioners of Finance in Nigeria, dated July 30, 2024, and signed by its counsel, Mike Ozekhome (SAN), ALGON threatened to initiate contempt proceedings against the commissioners if they failed to comply with the Supreme Court order.
Ozekhome stated in the letter that his clients’ enthusiasm over the apex court decision had been thwarted by the finance commissioners committee.
Though another faction of ALGON, led by Aminu Maifata, denied issuing a legal threat against the commissioners’ committee, Ozekhome insisted that he was briefed by the ALGON Board of Trustees in a letter signed by the Secretary-General of the board, Mohammed Abubakar.
On July 25 that the Federal Government confirmed that it had not yet commenced direct payment of the monthly allocations to the 774 Local Government Areas.
Edun attributed the delay to the proceedings of the Supreme Court, which had not been communicated to the Attorney General of the Federation for proper study and implementation.
He said the process was still in its early stages, adding that further steps would be taken once the full details were available.
The minister said the Federal Government was yet to commence direct payment to the respective LGs due to some “practical impediments” and added that a committee had been set up by the FG to look at the practicability of the judgment.
It was gathered on Monday that the “practical impediments” were creating challenges for the implementation of the Supreme Court judgment on LG autonomy.
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The Federal Government, it was learnt, faced challenges implementing the ruling on local government financial autonomy, with concerns over its impact on salary payments and operational viability.
The Oyo State Governor, Seyi Makinde, who raised concerns over the judgment, called for a homegrown solution to ensure the people did not suffer.
“The law is the law and when there is a conflict, yes, we should go to the court. But it behoves us to look for our own homegrown solutions that can ensure that we have transparency and that our people do not suffer. This is because when two elephants are fighting, it is the grass that will suffer,” Makinde was quoted to have said.
Also, the National President of ALGON, Aminu Mu’azu-Maifata, called for an increase in the monthly allocation to the 774 LGAs to enable them pay the new minimum wage.
Speaking at a press briefing in Lafia, Nasarawa State, recently, Mu’azu-Maifata said, “Once the new minimum wage is enacted by the National Assembly and becomes a law, every council chairman must obey.
“But how to obey such a law is what we will look into. By sourcing funds to pay salaries, we are also going to find ways to attract and harmonise resources so that we will not default.”
Multiple sources close to the NGF and the Federal Government, on Monday, said the Federal Government was in a fix on how to proceed with the implementation of the judgment on the financial autonomy for Local Government Areas.
“From what I know from the Nigeria Governors’ Forum, the Federal Government and the states are looking for a political solution to manage the fallout of the Supreme Court judgment.
“The first step is the three-month moratorium on the judgment. For the next three months, the LG allocation will still be paid into the joint account with the respective states, while a permanent solution that will serve the objectives of financial autonomy as envisaged by the Supreme Court judgment is worked out,” one of the sources said.
He added, “The governors are happy that the judgment came eventually, as it would relieve them of the burden of having to augment monthly FAAC allocation of the LGs to be able to pay local government staff, primary school teachers, and primary health workers, among others.
“However, they are apprehensive that we may go back to the early 1990 era when primary school teachers and other local government members of staff were owed salaries for an average of 12 to 24 months.”
The source expressed the concerns of the governors that only a few local government areas in the country could actually survive and pay bills conveniently from FAAC allocation and internally generated revenue.
“The issue of financial autonomy per the Supreme Court judgment is not as rosy as it looks. Only a few local governments in Lagos, Rivers, Kano, and the Federal Capital Territory can comfortably cover their expenses using only monthly FAAC allocations and their IGR.
“For other states, governors augment their allocation with state funds to be able to pay salaries. That is why the salary of primary school teachers and primary health workers, which are the responsibilities of LGs, is taken as first line charge through the joint account with the state.
“It is clear to both the Federal Government and the governors that there will be a problem with the Supreme Court judgment and the local governments will be rocked by industrial action by workers,”
