From the month of August, the federal government will stop paying allocation belonging to local governments to state governments’ joint accounts, THE WHISTLER can report. The move is in line with the Supreme Court judgment directing that allocation from the federation account should be paid directly to the local governments’ account......See Full Story>>.....See Full Story>>
The Supreme Court had affirmed the financial autonomy of Nigeria’s 774 local governments.
In the unanimous judgment of its seven-member panel, the Supreme Court unanimously upheld the suit brought by the federal government to strengthen the independence of local governments in the country.
A member of the panel, Emmanuel Agim, who delivered the court’s lead judgement, had held that the local governments across the country should, from July 11 receive their allocations directly from the Accountant-General of the Federation.
But findings by THE WHISTLER showed that the payment made last week by FAAC was done to the state and local governments’ joint account controlled by the governors.
The Minister of Finance and Coordinating Minister for the Economy, Wale Edun on Thursday said during a chat with journalists that the money was released as a result of the inability of the Minister of Justice and Attorney General of the Federation, Lateef Fagbemi (SAN)to get the certified true copy of the Supreme Court judgment.
He said that as soon as the Supreme Court judgment gets to the AGF, the payment of allocation from the federation account would be made directly to the local governments in line with the rule of law.
Edun said, “As far as the Supreme Court ruled on local governments, Mr. President, as a democrat believes in federalism, he believes in fiscal federalism, and he fought for it as a state governor. And so, what has come to pass now is a new regime, a new fiscal regime where through the state joint local government account funding will go directly to local governments.
“There is a committee composed by the federal honorable Attorney General as well as representatives of the local governments, the states, and of course, the federal government within the context of the Federation Account Allocation Committee. That is the practicality of moving to what the Supreme Court has said.
“There are impediments, practical impediments to immediate implementation, such as the fact that and the governments or governors have moved immediately to hold local government elections because the funds have to go to elected governments, but it’s also in practical terms.
“There was a Federation Account Allocation Committee meeting just last week, but it could not get implemented because the judgment, the actual proceedings had not been handed down. They were not in the hands of the Attorney General for him to start implementing. So, what’s going to happen is on the presidency that believes in the rule of law, the supreme court judgment on local governments will be faithfully implemented.”
The FAAC committee is made up of commissioners of finance from the 36 states of the federation; the Accountant-General of the Federation, representatives of the Nigerian National Petroleum Company Ltd, the Revenue Mobilization Allocation and Fiscal Commission, CBN and Customs
.
The federation account is currently being managed through a legal framework that allows funds to be shared under three major components – statutory allocation, Value Added Tax distribution; and allocation made under the derivation principle.
A total of N1.35tn was shared last week to the federal government, states, and local government councils in the country.
From the N1.35tn total distributable revenue, the federal government received the sum of N459.77bn, the state governments received N461.97bn, and the local government councils received total sum of N337.19bn
A total of N95.598bn (13 per cent of mineral revenue) was shared to the benefiting States as derivation revenue.
But findings by THE WHISTLER revealed that the AGF Supreme Court judgment came after FAAC had held its meeting to consider and share allocation for the month of June.
A senior official in the Ministry of Justice told THE WHISTLER that as soon as a the certified true copy of the Supreme Court judgment was received, the AGF wrote to all the parties that would enforce the judgement.
According to the source,copies of the Supreme Court judgment were also attached to the letter.
The official said the implication of this is that from next month, FAAC allocation would be paid directly to local government accounts.
The official said, “As of the time when the FAAC meeting held, we have not received the judgment, but as I speak to you now, we have received the judgment.
“In a bid to enforce the Supreme Court judgment, all the parties concerned in carrying out that judgment have been written to, and a copy of the judgment has been attached to the letter. The implication of this is that from the next allocation committee meeting, payments will be made directly to the local government account.”
Meanwhile, the Attorney General of the Federation and Minister of Justice, Lateef Fagbemi (SAN), has threatened to prosecute local government chairmen and councillors who failed to use their Federation Account Allocation Committee (FAAC) allocations judiciously.
Fagbemi, who was speaking on Thursday at the 17th-Anniversary Annual Lecture of the Human Rights Writers Association of Nigeria (HURIWA) in Abuja, noted that the funds allocated to the local government must be used for development and governance.
He explained that going to court was the last resort for the federal government as some of the local government secretariats have been overrun with weeds.
“The money meant for the local government was not given to the local government, and if we had gone via amendment of the Constitution, whoever that Speaker was, who attempted to allow an amendment of the Constitution to give serious autonomy to the local government if he survived that term, he is not coming back. That one is sure.
“We now thought, this money is still coming from the federation, and in a way, the money is meant for the local government; the federation now says, states be our agents, hold this money for onward transmission to the local government.
“There are two issues: the states were the agents of the federation; when the money got to the states, they became trustees of the local government so either way, they are to do their utmost to ensure that the funds were not tampered with.
“But what do we have? If you go to some local government today, some have grown with weeds.
“At that stage, we felt it is no longer possible to persuade the states to follow the Constitution unless there is an order,” he said.
He noted that while the governors have immunity, the local government council chairmen or councillors have no immunity adding that they have to choose between dealing with the funds of the local government as they like and risking going to jail.
“Well, we have a situation on our hands, I know that it is still there; the conduct of elections is to be undertaken by the states.
“But the distinction is this: don’t forget, the governors have immunity, the local government council chairmen or councillors, they have no immunity, so they have to choose between dealing with the funds of the local government as they like and risking going to jail. The choice is theirs.
“If they want to tamper with these funds and end up in jail, it is their choice. Or if they want to write their names in letters of gold, activities like construction or upgrading of roads must return to the local government. They don’t all have to come to Abuja.
“If they stay at the local government, we will be able to reduce the level of insecurity that we have in Nigeria today. What obtains offshore is that the security agents are able to perform optimally because of information that comes to them from members of the public, and usually it is from the grassroots,” he said.
On the economic reforms being implemented by the federal government, the minister of finance also said they are yielding positive results for the economy.
His assertions are coming barely six days to the planned protest by Nigerians over the economic hardships facing the country.
Nigeria is battling inflation, which is at 33.25 per cent in June, while food inflation rose to an all-time-high of 40.8 per cent in June.
Inflation moved up following economic reforms by Tinubu’s government, leading to partial removal of petrol subsidies and managed float of the naira.
Since the introduction of the ‘Willing buyer, willing seller’ FX model last year, the currency has depreciated by more than 100 per cent.
Speaking on the impact of the reforms, the minister said that Nigeria now stands at a strong position globally to attract massive investments as a result of the efforts of the government.
He said currently that the country now has a stable exchange rate, low budget deficit, positive trade balance, increase in investment inflow, and rise in government revenues.
Edun said, “I think we already can see macroeconomic stability. We have a stable exchange rate. The budget deficits, as I will show, are reducing. The trade balance that measures how we are doing internationally is positive, and the investment flows are positive. There has been a root and branch reconfiguration of the finances of the federal government to achieve increased revenue across the board, as well as to achieve greater expenditure control.”
On the country’s debt, the finance minister said the federal government has recorded significant strides in its fiscal management, with a dramatic decline in debt service and a surge in non-oil revenue.
The minister said the debt service to revenue ratio has plunged from a staggering 97 per cent in June 2023 to a more manageable level of 68 per cent in 2024.
According to him, the substantial reduction in debt servicing costs frees up significant resources for critical sectors such as infrastructure, education, healthcare, and social services, adding that it also enhances the government’s credibility with investors and international financial institutions.
Edun said Nigeria’s overall debt, a combination of domestic and foreign obligations, has decreased, stressing that the dollar debt has also decreased.
He attributed this achievement to prompt payment of contractors and the government’s exit from the Ways and Means financing scheme.
The minister emphasized the importance of diversifying revenue sources away from oil, highlighting the government’s commitment to tax reforms.
The target, he noted, is to nearly double government revenue as a percentage of GDP from around 14 per cent to 15 per cent to approximately 25 per cent.