In a recent development, the Federal Government and state governors have reached a three-month agreement suspending the implementation of Local Government (LG) financial autonomy. This pause comes amidst concerns regarding the impact on salary payments and operational viability for local councils.
The Supreme Court of Nigeria had, on July 11, 2024, issued a landmark ruling affirming the financial autonomy of the country’s 774 local governments. The court mandated that the Accountant-General of the Federation directly pay LG allocations into their respective accounts, invalidating the current practice where governors control these funds. This decision was aimed at ending the unconstitutional withholding of LG funds by state governments and restoring financial independence to the local councils.
Previously, the Nigerian Financial Intelligence Unit (NFIU) had implemented regulations effective from June 1, 2019, which mandated direct transfers of LG funds and imposed restrictions on cash withdrawals. This regulation faced resistance from governors, leading to its eventual suspension. However, the recent Supreme Court ruling sought to reinstate and strengthen this autonomy, addressing issues such as unlawful dissolution of elected councils and the misuse of funds.
Despite the Supreme Court's ruling, the Federal Government has yet to comply with the order. Concerns about the practicality of the judgment, especially regarding its impact on local government salaries and financial operations, have led to a delay in implementation. The Federal Government has attributed the delay to ongoing evaluations of the judgment’s feasibility and challenges in updating the account details of LGs.
State governors have expressed mixed reactions. While some view the ruling as a necessary step towards reducing the financial burden on state governments, others worry about the potential operational difficulties and the possibility of a return to the financial instability experienced in the early 1990s. The Nigeria Governors’ Forum has advocated for a political solution to manage the transition smoothly.
The Association of Local Governments of Nigeria (ALGON) has criticized the delay, accusing state finance commissioners of obstructing the direct payment process. ALGON has threatened legal action against those not complying with the Supreme Court’s directive.
In contrast, some states, such as Adamawa, have already implemented measures granting financial autonomy to their local governments, reflecting a proactive approach to the Supreme Court's decision. In these states, local governments have reported direct receipt of their allocations, demonstrating a commitment to transparency and efficiency.
As the three-month moratorium progresses, stakeholders continue to call for a swift resolution to ensure the effective implementation of local government autonomy, aiming for a balance that supports both financial independence and operational sustainability.
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