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Financial autonomy for local governments

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Financial autonomy for local governments

There is no disputing the fact that the recent directive by the Nigeria Financial Intelligence Unit (NFIU) barring state governments from tampering with local governments’ allocations is a welcome development given that the third tier of government is almost heading to extinction.
The Federal Government, through the newly inaugurated NFIU, which was excised from the Economic and Financial Crimes Commission (EFCC), set June 1 as the take-off date of the new order, making it compulsory for all local governments’ allocations to go straight to their respective bank accounts.

The guidelines will make the joint account system currently in use to only exist for the receipt of allocations from the Federation Account, but not for disbursement. Consequently, NFIU warned banks to immediately comply with the directive, saying that any lender that flouts the order would be sanctioned.

The agency, in releasing the guidelines, said: “To be precise, with effect from June 1, any bank that allows any transaction from any local government account without monies first reaching a particular local government account will be sanctioned. In addition, a provision is also made to the effect that there shall be no cash withdrawal from any local government for a cumulative amount exceeding N500,000 per day. Any other transaction must be done through valid cheques or electronic funds transfer.”

No doubt, this is a breath of fresh air for the councils. But most Nigerians have over time craved for change in the local government system as presently constituted in order to bring it to conform with present day realities as well as to make the councils live up to the expectations of the people, who have continued to yearn for development at the grassroots.

The need for this change was premised on the failure of the nation’s local government areas, which as the closest tier of government to the people, are supposed to make positive impact in the lives of a majority of the country’s population, who live in rural areas.

While most analysts blamed Nigeria’s faulty federal structure for the failure of the councils, the States/Local Governments’ Joint Accounts run by the respective 36 state governments and their local governments was seen by many as the major reason for the failure of past and present administrations at the councils to meet the two primary objectives spelt out in the Local Governments’ Reform of 1976, which are: To promote participatory democracy, and ensure rapid socio-economic development at the local level.

The Nigerian Constitution, in Section 7(1), guarantees a system of local government by democratically elected government councils, but the second component of the section makes the establishment, structure, composition, finance and functions of the local governments dependent on state laws. This inadvertently makes it possible for state governments to cripple the local governments financially by routing funds standing to their credit in the Federation Account through the States/Local Governments Joint Accounts rather than directly to them.

Whereas it was argued then that the operation of the joint accounts was meant to bring even development to all parts of the country as well as to curb corruption, the arrangement has overtime adversely affected the financial viability of the councils as some state governments have continued to make inexplicable deductions from the accounts.

Section 162 (8) of the Constitution, which explains how the amount standing in the Joint Account should be distributed to the local governments in each state, states: “The amount standing to the credit of local government councils of a state shall be distributed among the local government councils of that state on such terms and in such manner as may be prescribed by the House of Assembly of the state.”

This constitutional provision, rather than ensure fiscal responsibility, has provided a window for state governments to hold them hostage and make them their appendages. In practice, the operation of the joint accounts has denied local governments of their financial autonomy.

While we join other concerned stakeholders to commend the Federal Government on its bid to free the local governments from the grip of states, we however insist on an amendment to the provisions of Sections 7 (1) of the 1999 Constitution (as amended), which states that “The system of local government by democratically elected local government councils is under this Constitution guaranteed; and accordingly, the Government of every State shall, subject to Section 8 of this Constitution, ensure their existence under a Law, which provides for the establishment, structure, composition, finance and functions of such councils,” in order to eliminate any possible legal impediment to the implementation of the directive on financial autonomy for the councils.

It is on this note that we implore the two chambers of the National Assembly, especially the Senate, which resolved last week to throw its weight behind financial guidelines introduced by the NFIU, to go further by amending the relevant sections of the law to give constitutional backing to the directive.

The National Assembly should see the perilous state of the councils as a matter of urgent national concern, and accord priority to amendment of the local government extant law given the fact that the local governments will continue to fail in its mandate of delivering dividends of democracy to the people at the grassroots until they are freed from grip of state governors.

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