Funds in limbo

Justice Joyce Abdulmalik of the Federal High Court, Abuja, ordered a halt to federal monthly allocations to Rivers State, citing…

Justice Joyce Abdulmalik of the Federal High Court, Abuja, ordered a halt to federal monthly allocations to Rivers State, citing constitutional violations in the state’s budgetary process. The judge stated that the 2024 budget was not passed by a legitimate arm of the Rivers State House of Assembly, questioning the governor’s compliance with legal procedures in the budget submission. The ruling emphasised that a prior Federal High Court judgment nullified the state budget, a decision recently upheld by the Court of Appeal in Abuja, reinforcing the invalidation and prompting the suspension of federal funds to the state.

This case highlights significant political implications for Nigerian fiscal federalism, especially regarding constitutional compliance in state governance and its effect on the distribution of federal resources. Section 91 of the 1999 Constitution mandates that each State House of Assembly comprises 24 to 40 members, and Section 96 requires a one-third quorum for conducting legislative business. According to these provisions, only a properly constituted House can pass appropriation bills under Section 121. However, in Rivers State, four out of a 31-member assembly approved the budget — far below the required quorum of 10 members, creating a constitutional infraction. This renders the appropriation bill, passed by the faction loyal to Governor Fubara, legally invalid. This issue ties into the fiscal federalism debate, as it parallels past disputes, such as AG Lagos v. AG Federation (2004), where the federal government withheld Lagos State’s funds over the creation of new Local Government Areas (LGAs) which have yet to be constitutionally recognised till this day. Here, the Supreme Court ruled that the President had no power to withhold the statutory allocation due and payable to the state as it would be unfair to the recognised LGAs. Unlike Lagos, Rivers State has violated constitutional requirements in the legislative process, not territorial boundaries, making the Federal High Court’s decision distinct. In Rivers’ case, the suspension of withdrawal of funds by a court order demonstrates how judicial interventions can directly impact the flow of resources within Nigeria’s federal structure. The political challenge is compounded by the need for Governor Fubara’s and the Wike-aligned factions to find common ground. This case underscores the growing importance of adherence to legislative procedures in securing federal allocations and illustrates the risks that constitutional infractions pose to states’ financial stability. This case may thus propel forward the fiscal federalism discourse, as it emphasises the balance of power between state and federal authorities and underscores the judiciary’s role in enforcing that balance. To restore order, Rivers will likely need to reintroduce an appropriation bill passed by a validly constituted House of Assembly, emphasising that cooperation between political factions is essential for fiscal stability and governance within the federal system. The political standoff between federal figures like an ex-governor turned federal minister and a sitting state governor — exemplified here by the conflict between the Fubara and Wike factions in Rivers State — reflects broader issues within Nigerian governance. This kind of political tit-for-tat, where factions leverage legal and constitutional tools for political advantage, can weaken the integrity of governance and create significant barriers to the rule of law. When personal or political rivalries sway state affairs and legislative procedures, it risks creating a perception of arbitrariness in governance. Such instability in political processes can discourage investment, as potential investors view erratic legislative practices and state-level conflicts as significant risks. This unpredictability disrupts the ease of doing business and weakens the rule of law, as businesses may fear sudden policy reversals, financial withholding, or politically motivated legal action. The resulting instability also undermines the reliability of state institutions, driving up the cost of compliance, security, and operation, ultimately deterring domestic and foreign investment. For Nigeria’s federal system, this politicisation complicates intergovernmental relations and sets a troubling precedent where political clashes may regularly override constitutional mandates and governance priorities, adversely affecting economic growth and development.