JUST IN: FG EXPLAINS WHY LG FINANCIAL AUTONOMY WON'T TAKE EFFECT IMMEDIATELY
The Federal Government and state governors have agreed to a three-month moratorium on Local Government autonomy due to concerns over its impact on salary payments and operational viability.
This development means Local Governments may not see the implementation of direct payments to their accounts until October.
On July 11, 2024, the Supreme Court delivered a landmark judgment affirming the financial autonomy of the 774 LGs in Nigeria, ruling that governors no longer have control over funds meant for the councils. The court ordered the Accountant-General of the Federation to pay LG allocations directly to their accounts, declaring the non-remittance of funds by the 36 states unconstitutional.
Under former President Muhammadu Buhari, the Nigerian Financial Intelligence Unit (NFIU) issued a regulation effective June 1, 2019, banning transactions on State and Local Government Joint Accounts and requiring direct payments to local government accounts. It also limited cash withdrawals to N500,000 per day, imposing penalties on banks for non-compliance. Nigerian governors opposed this regulation, ultimately leading the NFIU to relent.
The status quo remained until May 2024, when the Attorney-General of the Federation, Lateef Fagbemi (SAN), filed suit SC/CV/343/2024 in the Supreme Court to bolster local government autonomy as guaranteed by the constitution. The suit aimed to prevent governors from unilaterally dissolving elected councils and establishing caretaker committees, which violate constitutional provisions. The AGF argued the constitution mandates a democratically elected local government system and disallows alternative governance structures.
The suit also sought to redirect funds from the Federation Account directly to local governments, bypassing the disputed joint accounts managed by state governors, and requested an injunction against governors receiving or spending local government funds without an elected system in place, citing violations of the 1999 Constitution. The Supreme Court heard the case on June 13, with state governments opposing the suit.
This led to the Supreme Court’s ruling on July 11, 2024, affirming the financial autonomy of Nigeria’s 774 local governments. In a unanimous decision by its seven-member panel, the court upheld the federal government’s suit to enhance local government independence.
Justice Emmanuel Agim, delivering the lead judgment, ruled that local governments should receive their allocations directly from the Accountant-General of the Federation and deemed it illegal and unconstitutional for governors to withhold these funds.
Many, including LG chairmen, hailed the Supreme Court’s judgment as a significant step toward restructuring the country. While some governors expressed concerns, the Nigeria Governors’ Forum, represented by its chairman, Kwara State Governor AbdulRahman AbdulRazaq, stated that the judgment alleviates financial burdens on 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.”
More than a month after the judgment, the order of the apex court had not been complied with.
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.
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 that the “practical impediments” were creating challenges for the implementation of the Supreme Court judgment on LG autonomy.
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.
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