Nigerian state governors are resisting the federal government’s proposal to give local government areas (LGAs) direct funding through the Central Bank of Nigeria (CBN), even though the Supreme Court has ruled that LGAs should have financial autonomy. Fearing that federal control would continue, some governors argued against directing monies through the CBN during a meeting with President Bola Tinubu. They favoured using commercial banks for disbursement instead. The Supreme Court’s decision from July 2024 required that federal funds be sent to LGAs directly, avoiding state governments.
This decision further stated that funding could only be disbursed to democratically elected LGA leaderships, hence excluding governor-appointed interim administrators. Nevertheless, there has been opposition to the application of this decision. Due to political and administrative barriers, the CBN’s requirement that LGAs submit two-year account audits prior to opening accounts for direct payments has been sluggish. A lack of clear information surrounding account openings has been highlighted by the Association of Local Governments of Nigeria (ALGON), while the National Union of Local Government Employees has accused the CBN of helping governors impede financial autonomy.
ALGON has called for more extensive engagement with important parties.
Although there are obstacles in recognising LGAs with democratically elected leaders, the Federal Government has held talks on executing the Supreme Court’s ruling. Due to multibillion-dollar debts purportedly incurred by LGAs, state governors are apparently delaying the implementation of the direct payment system. There are worries that in order to pay off these debts, governors would try to take money from the LGA. In the absence of appropriate protections, ALGON has cautioned that court rulings against the CBN pertaining to financial settlements with consultants could result in the mismanagement or loss of LGA monies.
President Tinubu has called for cooperation to guarantee grassroots development but denied having disagreements with state governors over the matter. To avoid financial mismanagement and guarantee a seamless transition to financial autonomy, ALGON has called for more extensive engagement with important parties. The group has also taken issue with the CBN’s ambiguous instructions on how LGAs are to interact with the new financial system. LGA officials, financial specialists, and Civil Society organisations have all expressed differing opinions in the current discussion around the financial autonomy of Nigeria’s 774 LGAs.
FG’s dedication to enforcing court decisions is questioned.
Concerns regarding the successful execution of the Supreme Court’s July 2024 decision, which required direct federal funding distribution to LGAs without going via state governments, are at the heart of this discussion. Civil society organisations have praised the Supreme Court’s decision as a major step towards fiscal federalism, including the Centre for Fiscal Transparency and Public Integrity (CeFTPI). They do, however, have concerns about the accountability and openness of the local government system as it stands now. Only seven out of 774 LGAs have operational websites, according to CeFTPI’s evaluation, highlighting a serious lack of the Infrastructure required to guarantee openness and public accountability.
The Federation Accounts Allocation Committee (FAAC) distributed over ₦2.08 trillion meant for LGAs between July and December 2024. However, in defiance of the Supreme Court’s order, these money were deposited into state government accounts. The federal government’s dedication to enforcing court decisions and encouraging local governance change is seriously called into question by this behaviour. State governments held more than ₦23 trillion in LGA assets during a longer time frame, from 2007 to 2023. This huge sum highlights the state governments’ long-standing financial hegemony over local councils, which exacerbates development deficiencies at the local level.
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A number of actions have been suggested to solve these issues. The federal government must enforce adherence to the Supreme Court’s ruling in order to show that it is committed to reform. To guarantee that LGAs receive funding directly and are able to operate as an autonomous level of government, a strong position against state-level meddling is required. Adopting transparency measures, such creating useful websites to reveal financial data, budget allocations, and project updates, is vital for LGAs. By encouraging citizen responsibility and engagement, this action would guarantee that monies are used efficiently for local development.