On July 11, 2024, Nigeria’s apex court—the Supreme Court—delivered a landmark judgement affirming the financial autonomy of the 774 Local Government Areas (LGAs) recognised under the Constitution of the Federal Republic of Nigeria. This judgement implies that, effective immediately, all LGAs’ allocations from the federation account will be paid directly to the affected LGAs, replacing the previous system where funds were routed through the states. This ruling, attributed to Hon. Justice Emmanuel Agim on Thursday, July 11, 2024, marks a significant shift in local governance.
For those in governance studies, Nigeria operates as a federation with three distinct tiers: the federal government at the top, state governments in the middle, and local government at the grassroots level. Section 162(6) of the 1999 Constitution of the Federal Republic of Nigeria created a joint state/local government account, yet this provision has failed to deliver the anticipated benefits, leading to the call for change. Hon. Justice Agim’s ruling mandates that remittances from the federation account be sent directly to the local governments, bypassing state control.
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Before this landmark judgement, states and LGAs operated a joint account, where the states spent funds on behalf of LGAs, awarded contracts without LGA input, and handled payments. Unfortunately, this arrangement often led to inefficiencies, with delayed salaries for local government staff and neglected essential services, such as healthcare, roads, electricity, potable water, security, and education. These issues have significantly undermined the pursuit of good governance and best practices, which must be urgently addressed.
I commend His Excellency, President Bola Ahmed Tinubu, GCFR, for his unwavering support for the rule of law and for providing the enabling environment that allowed the judiciary to make this landmark decision. In my view, the desire to address these rising challenges at the grassroots level may have prompted the push to strengthen and uphold the independence and financial autonomy of the third tier of government.
With this ruling, it is now unconstitutional for any state to receive, withhold, or spend funds meant for LGAs. The esteemed jurist affirmed this, further guaranteeing the independence of local government administration in Nigeria. Henceforth, LGAs will receive their allocations from the federation account directly, ensuring financial autonomy.
Understanding financial autonomy
Financial autonomy means managing one’s financial affairs independently without external control. It involves the freedom to receive and disburse funds to achieve financial objectives and meet responsibilities. Many Nigerians are eager to understand the potential benefits of this recent ruling on LGAs’ financial autonomy. The answer, in my view, is a resounding “yes,” with the following implications:
Responsive and inclusive governance: Financial autonomy, if closely monitored, will foster a governance structure that promotes good governance and national development.
Transparency and accountability: This autonomy encourages transparency and accountability in meeting grassroots needs, upholding democratic principles, and building public trust.
Civic engagement: It creates space for participatory governance, promoting civic engagement and involvement.
Efficient resource allocation: Autonomy supports effective resource allocation, minimising wasteful spending through closer oversight. Local councils’ financial independence will prioritise local activities.
Self-sufficiency: It will promote self-sufficiency and financial autonomy at the grassroots level.
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No nation can develop meaningfully without good governance practices that incorporate financial autonomy and fiscal management across federal, state, and local governments. When leaders embrace good governance principles, it generates positive impacts on national development. It is our collective responsibility to demand good governance from those in authority.
Financial autonomy and good governance are inseparable twins. This is a call to all state governors to grant LGAs full financial autonomy, as it will enhance governance across all levels, uphold democratic values, and promote long-term national development.
Written by Kingsley Ndubueze Ayozie, FCTI, FCA – Public Affairs Analyst, Advocate of Good Governance, and Chartered Accountant.
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