In a landmark ruling aimed at promoting transparency and accountability in the administration of public funds, the Supreme Court of Nigeria has ordered the federal government to pay allocations directly to local government councils (LGAs) from the federation account.

This decision is intended to bypass state governments, which have been accused of retaining and misusing funds meant for local government areas.

Delivering the judgment on Thursday, a seven-member panel of justices, led by Justice Emmanuel Agim, held that state governments have consistently abused their powers by retaining and using funds allocated to LGAs. The court held that states are mandated to ensure that their local government councils are democratically elected and that governors cannot use their powers to dissolve these councils arbitrarily.

“The amount standing to the credit of local government councils must be paid by the federation to the local government councils and not by any other person or body,” Justice Agim stated. “The said amount must be paid to local government councils that are democratically elected.”

The apex court also ruled that allocations to LGAs governed by unelected officials appointed by governors should be withheld.

Furthermore, the court issued an injunction restraining state governments from collecting funds belonging to local government councils in the absence of democratically elected councils.

The Judgment’s Backstory

The federal government initiated the suit against governors of the 36 states in May, seeking full autonomy for the country’s 774 local governments.

The suit, marked SC/CV/343/2024, was filed by Lateef Fagbemi, Attorney-General of the Federation (AGF) and Minister of Justice, on 27 grounds. The federal government argued that the constitution recognizes federal, state, and local governments as three tiers of government, each entitled to funds from the federation account.

The federal government contended that efforts to compel governors to comply with the 1999 Constitution’s requirement for democratically elected local government systems had failed. Continuing to disburse funds to governors for non-existing democratically elected local governments was seen as undermining the constitution’s sanctity.

Reactions

Oluseun Onigbinde, Director of the civic organization BudgIT, praised the Supreme Court judgment, describing it as a significant step towards constitutional democracy and accountability.

“I urge the federal government to clarify the state of State Independent Electoral Commissions (SIECs) to build trust in the electoral system. A comprehensive tax policy that makes LGAs more viable is also needed. Most LGAs need help to bear the nationwide burden of primary health and education standards in their current fiscal state,” Onigbinde said.

However, not everyone agreed with the judgment. Former Delta State governor, James Ibori, criticized the ruling as a setback for the principle of federalism as defined by section 162(3) of the 1999 Constitution (as amended). He argued that the constitution explicitly provides for the distribution of funds among the federal, state, and local governments through state joint local government accounts.

“The Apex Court’s ruling on the matter is an assault on true federalism. The federal government has no right to interfere with the administration of local governments under any guise whatsoever. There are only two tiers of government in a federal system of government,” Ibori stated.

Ibori outlined several implications of the ruling, highlighting its potential to shift the balance of power and erode state autonomy. He outlined them as follows:

1. Constitutional Interpretation: The ruling appears to contradict the explicit provisions of Section 162 of the 1999 Constitution, raising questions about judicial interpretation.
2. Balance of Power: Allowing federal intervention in local government finances centralizes more power at the federal level, contrary to federalism principles.
3. State Autonomy: This decision could erode state autonomy, as states are meant to control their internal affairs, including local government administration.
4. Financial Independence: The ruling may impact the financial independence of states and local governments, potentially allowing the federal government to use financial intervention as a political tool.
5. Precedent Setting: The decision could set a precedent for further federal interventions in state governance, leading to a more centralized government system over time.

“In the coming days, we will begin to fully understand the implications of the Supreme Court decision. An assault on the constitution is not the answer to fiddling with the Joint LG Acount,” Ibori said.

“If the ruling is saying Governors cannot temper, touch, fiddle with the Joint Accounts, that’s fine because they shouldn’t be doing that in the first place. But asking the Federal Government to pay Local Governments allocations to the account of the Local Government directly will lead to utter chaos and avoidable friction in governance,” he added.

Concerns over Potential Mismanagement

While the ruling aims to ensure democratic governance at the grassroots level, there are concerns that it could inadvertently empower local government chairmen to mismanage or embezzle public funds. Critics argue that without proper oversight and accountability mechanisms, direct allocations to LGAs could lead to widespread corruption and theft of scarce resources.

Despite these concerns, supporters of the ruling believe it will promote greater transparency and efficiency in the use of public funds. They argue that direct allocation to LGAs will ensure that funds are used for their intended purposes, such as improving local infrastructure, education, and healthcare services.