Signed, sealed, but not delivered
Nigeria's federal allocations committee has been unable to implement direct allocations to local governments due to a lack of bank accounts.
The Federation Accounts Allocation Committee (FAAC) cannot implement the Supreme Court’s ruling on direct allocation to local governments as most have not provided bank accounts. Only Delta State’s 25 local governments have met the requirements. The Supreme Court ruled on 11 July 2024 that local governments should receive allocations directly to ensure autonomy. However, many have not opened accounts with the Central Bank or designated payment preferences. As a result, FAAC continues paying state and local government shares into joint accounts, disbursing ₦1.703 trillion ($1.13 billion) for January 2025. There are suggestions that some local government chairmen fear state governors' backlash for seeking direct funding.
Nigeria’s ongoing struggle for local government autonomy reflects deep-rooted structural and political challenges within the country’s federal system. Despite the Supreme Court’s landmark ruling on 11 July 2024, affirming local governments as an independent tier entitled to direct funding, implementation remains stalled. Only Delta State’s 25 local governments have complied with the directive to open designated accounts. As a result, the Federation Accounts Allocation Committee (FAAC) has continued the long-standing practice of paying state and local government allocations into joint state accounts—further entrenching governors’ financial control over local administrations.
At the core of this impasse is the reluctance of local government chairmen to assert their independence, largely due to political pressure. Historically, state governors have used joint accounts to dictate local spending, making financial autonomy more of a theoretical ideal than a practical reality. Many local government officials are wary of political repercussions. Hence, they have refrained from opening accounts with the Central Bank of Nigeria or designating federal pay offices for direct disbursement. Given the high turnover of local government leadership—often handpicked by state governments—their inaction appears to be a calculated effort to avoid political alienation or outright removal.
This situation raises serious concerns about Nigeria’s decentralisation efforts. Local governments, meant to be the closest tier of governance to the people, remain financially handicapped, limiting their ability to deliver essential services and fueling public distrust. Without direct funding, they remain weak institutions, unable to implement independent policies or drive meaningful development. The issue of local government independence is further complicated by broader governance and economic realities. Many states in Nigeria struggle with financial viability, yet political elites continue to push for the creation of more states. Yet, the public often feels little to no impact from local governments, with many Nigerians unclear about their roles and responsibilities.
The lack of financial autonomy has been a key argument for their inefficacy, compounded by cases of state governors unilaterally dissolving local councils or refusing to conduct elections. While the Supreme Court ruling provides a legal foundation for reform, local governments still operate under the heavy influence of state governors. The road to autonomy will likely be slow and gradual, and while some progress may be made, significant improvements in local government performance remain uncertain. For real change to occur, the federal government and civil society must push for full enforcement of the ruling, ensuring local governments receive and manage their allocations independently, free from political interference. Without this, the promise of fiscal federalism will remain elusive, and governance at the grassroots will continue to suffer.