Federal Government, Governors Strike Temporary Deal on Local Government Funds, Delaying Autonomy

By Omowumi Omotosho

The Federal Government and state governors have reportedly reached an understanding to delay the implementation of Local Government autonomy for three months. This temporary suspension is due to concerns over how the autonomy might affect the payment of salaries and the overall functionality of the local governments, sources revealed to News Men on Monday.

As a result of this development, the enforcement of the new law, which mandates direct payment into the bank accounts of Local Governments, might not begin until October.

On July 11, 2024, the Supreme Court delivered a groundbreaking verdict that established the financial independence of Nigeria’s 774 Local Government Areas (LGAs). The ruling prevents state governors from controlling the funds allocated to these councils.

The Supreme Court further directed that the Accountant-General of the Federation should ensure Local Governments receive their funds directly, declaring any state-level interference with these allocations as unconstitutional.

This move aligns with a regulation put forth during the administration of former President Muhammadu Buhari. Back in June 2019, the Nigerian Financial Intelligence Unit (NFIU) introduced a regulation that barred financial transactions from occurring through the State and Local Governments Joint Accounts. Instead, funds were to be disbursed directly to the Local Governments. The regulation also imposed a daily cash withdrawal limit of N500,000 for Local Government accounts, with penalties for non-compliant banks. Despite opposition from the Nigerian Governors’ Forum, the NFIU eventually relented under pressure.

The status quo persisted until May 2024 when the Attorney-General of the Federation, Lateef Fagbemi (SAN), filed a suit (marked SC/CV/343/2024) at the Supreme Court. The suit aimed to reinforce the autonomy of Local Government Areas as outlined in the constitution. It also sought to prevent state governors from dissolving democratically elected Local Government councils and replacing them with caretaker committees, actions that contravene constitutional provisions. The AGF’s argument emphasized that the constitution mandates a democratically elected local government system, leaving no room for alternative governance structures.

Moreover, the lawsuit requested that funds from the Federation Account be transferred directly to Local Governments, bypassing the controversial joint accounts managed by state governors. The Federal Government also sought an injunction to prevent governors and their agents from receiving or utilizing Local Government funds without a democratically elected local government system in place. The government argued that the governors’ failure to establish such a system amounted to a deliberate subversion of the 1999 Constitution. The Supreme Court heard the arguments on June 13, with state governments, represented by their attorneys-general, opposing the suit.

This led to the Supreme Court’s ruling on July 11, 2024, which affirmed the financial independence of Nigeria’s Local Governments. In its unanimous decision, the seven-member panel upheld the federal government’s case, reinforcing the autonomy of Local Governments nationwide.

Justice Emmanuel Agim, delivering the lead judgment, stated that all Local Governments should henceforth receive their allocations directly from the Accountant-General of the Federation. He declared it unlawful and unconstitutional for state governors to control or withhold funds meant for Local Governments.

The judgment has been widely celebrated across Nigeria, with many, including Local Government chairmen, praising it as a crucial step towards restructuring the nation.

Despite some concerns raised by certain governors, the Nigeria Governors’ Forum, represented by its chairman and Kwara State Governor, AbdulRahman AbdulRazaq, expressed relief over the ruling, particularly regarding the financial responsibilities of the states.

Speaking to journalists after a meeting with President Bola Tinubu on July 12, just a day after the ruling, AbdulRazaq 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.”