Beyond The Legals Tussle: Empowering Local Governments for Infrastructure Development in Nigeria

INTRODUCTION

In the recently-decided case of Attorney General of the Federation v. Attorney General of Abia State & 35 others., the Supreme Court of Nigeria affirmed the entitlement of Local Governments Councils (LGCs) to receive funds directly from the Federation Account, marking a significant development in Nigeria’s fiscal federalism.

The judgement emanated from the originating summons filed by the Attorney General of the Federation (AGF) on behalf of the Federal Government of Nigeria (FGN). The AGF prevailed on the highest court to interpret Section 162(6) of the Nigerian Constitution regarding “Whether Local Governments are entitled to direct payments from the Federation Account given the persistent failure of State Governments to disburse these funds.

A majority of the Court’s justices ruled in favour of direct payments to LGCs, while Justice Abiru’s (JSC) dissenting opinion hinged on the literal rule of interpretation of the Constitution. Specifically, Section 162(6) of the Constitution stipulates that ‘each State shall maintain a special account to be called “State Joint Local Government Account”, into which shall be paid all allocations to the local government councils of the State from the Federation Account and from the Government of the State.

HISTORICAL CONTEXT

The contention over direct allocation of funds to LGCs in Nigeria has a protracted and complex history, dating back to the country’s transition to democracy in the 1970s. In 1976, the government introduced the Local Government Reforms, which aimed to decentralize power and resources to the local level. ¹These reforms along with the 1979 Constitution identified adequate revenue sources for the LGCs. This was followed by the 1988 Local Government and Civil Service Reforms, which further emphasized theurgency for decentralization and local autonomy. However, the 1988 reforms were not fully implemented, and the issue of direct allocation continued to hang in the balance. The Supreme Court’s judgment has now settled the matter, but not without presenting a compelling case study on statutory interpretation. In resolving the apparent ambiguity in S.162(6) of the Constitution, the apex Court, favoured a “purposive approach”, which involved discerning the meaning of the words used in the section, rather than applying their literal meaning.

THE DEBATE ON THE DIRECT ALLOCATION OF FUNDS TO LGCs: A DELICATE BALANCE

Justice Abiru’s (JSC) dissenting opinion highlights the crux of the debate: whether the literal interpretation of Section 162 (5) & (6) of the Constitution supports the decision for the FGN to bypass state governments to allocate funds directly to LGCs. Proponents of the literal interpretation argue that there is no ambiguity in the relevant section and hence the courts should not deviate from the plain meaning of the statutory provision. They cite cases such as Dongtoe v. Civil Commission² and Orakul Resources Limited v. Nigerian Communications Commission³ to emphasize that deviating from a clear statutory provision sets a dangerous precedent. However, this philosophy ignores the practical pitfalls associated with channeling LGC funds through state governments. On the other hand, advocates of direct allocation argue that LGCs are better positioned to manage their own resources and deliver basic services directly to local communites. A significant body of research – including works by Suberu⁴, Olowu,⁵ and Okeke⁶ – suggests that the conventional approach of channeling LGC funds through states often results in the “delay, diversion, and deduction” of the funds by state governments, thereby impeding local development. This view is supported by numerous reports from Transparency International, the World Bank, Nigerian Extractive Industries Transparency Initiative (NEITI) and other organizations which highlight pervasive corruption and a lack of financial transparency at the state level in Nigeria. The Supreme Court’s decision aligns with this view.

A NEW DAWN FOR LGCs

The Supreme Court’s judgement creates nuanced opportunities for LGCs. Indeed, direct funding to LGC accounts could play a pivotal role in enhancing public infrastructure delivery at the local level, where the needs are more pronounced. Additionally, direct funding can empower LGCs to identify and develop commercially-viable projects, potentially attracting private sector investment and catalyzing local economic development. However, LGCs must be equipped with the necessary capacity and resources to leverage these transformative opportunities.

A CASE STUDY: DIRECT FUNDING TO LGCs

Ghana, initially a loosely formed federation at independence, now operates as a unitary republic with sovereignty residing in the Ghanaian people. The country implements a direct funding model for its LGCs known as the District Assemblies Common Fund (DACF), established in 1993 to provide financial autonomy to the Metropolitan, Municipal and District Assemblies (MMDAs). The DACF has since become instrumental in promoting fiscal decentralization, contributing significantly to increased local autonomy, improved infrastructure, economic growth, as well as greater transparency and accountability.

However, the successes of the DACF are not without challenges, such as inadequate capacity and resources at the local level, and the absence of an optimal monitoring and evaluation system. Nonetheless, the DACF in Ghana clearly demonstrates the importance of direct funding to LGCs and offers valuable lessons for Nigeria.

CONCLUSION

The Supreme Court’s decision on direct funding to LGCs has the potential to accelerate local development through enhanced infrastructure service delivery and improved human capital, especially when implemented within a framework of good governance. The focus therefore, should be on the establishment of appropriate frameworks for public investment management, public financial management and public-private partnerships, to ensure auditable, inclusive and sustainable economic development at the local levels. To this end, LGCs should seek technical support, including from development partners, to maximize the inherent transformative opportunities derivable from the Supreme Court’s judgement.

Reference

¹The reform recommended that LGCs be empowered to collect and manage their own funds; however, the implementation of this reform was hampered by the military coup of 1983.

²(2001) 4 S.C. (Pt. II) P.43; (2001) 9 NWLR Part 717, P.132.

³(2022) 1 S.C. (Pt. I) P.1; (2022) 6 NWLR (Pt. 1827) P.539.

⁴Suberu, R.T. (2005) States and Local Government in Nigeria. Nigeria Today, 51(4), 23-45.

⁵[Olowu, D. (2001) The Crisis of Governance and the Challenges of Fiscal Decentralization in Nigeria—In Decentralization
and Poverty Reduction in Developing Countries (pp. 171-194) Springer, Dordrecht.

⁶Okeke, E.A. (2010) Local Government Finance in Nigeria: A Case for Fiscal Autonomy. Journal of Social Sciences, 22(3),
163-170.

Oseloka Brown
Senior Associate
o.brown@ivycrestsolicitors.com

Abubakar Ishaq
Associate
a.ishaq@ivycrestsolicitors.com