Council Funds: Beyond the Supreme Court Judgement 

Happy 65th Birthday to ‘the Duke’

I congratulate my dearest trailblazing, intelligent and audacious Chairman, ‘the Duke’, Prince Nduka Obaigbena, CON, on his 65th birthday. Happy birthday to you, from all of us at ThisDay Lawyer. People have commented to me that “You mean Publisher is just 65?” It is because he has packed in a lot and achieved so much in the Media Space beyond his years, that some think he should be 80 or 90 years old, and not just the ‘tender age’ of 65 that he is! Congratulations Publisher. I wish you many, many more years, in good health, joy, peace and prosperity. Amen. Editor-in-Chief, I thank you for identifying those qualities in me, that I didn’t realise I had. Your Friend, IKEPS 

Introduction 

I  must admit that I have not yet had the benefit of reading the Supreme Court judgement in Suit No. SC/CV/343/2024 AGF v AG Abia & 35 Ors which was handed down last Thursday; we have only seen the highlights in the media. Nevertheless, the decision was welcomed by majority of Nigerians, with almost as much delight as what may have been felt when slavery was abolished in 1865. In the words of the Attorney-General of the Federation, Prince Lateef Fagbemi, SAN (AGF), he said: “I call it Local Government Emancipation Judgement, because it has really emancipated the Local Government from the shackles of the past”. 

The essence of the third tier of Government, that is, the Local Government (LG) is to bring governance and development to the people at the local level. In 1976, Nigeria had 301 LGs, and by 1996, between the Ibrahim Babangida and Sani Abacha regimes, they created over 450 additional LGs. Today, we have 774 LGs. 

Local Governments Were Once Autonomous 

Historically, it appears that under the Military, LGs were once fully autonomous, receiving their allocations directly from the Federation Account and handling their own funds. However, it may have been during the Babangida or Abacha regime, that it was discovered that LGs had somewhat mismanaged their funds – some were heavily indebted, owing their staff salaries for years, owing their Pensioners, with not too much to show in terms of development. 

Was it as a check and balance on the activities of LGs, or simply out of convenience, or because in the concept of Federalism, it is the State Government that appears to grant powers to the LG, that Section 162(5)-(8) of the 1999 Constitution of the Federal Republic of Nigeria (as amended in 2023)(the Constitution) was included in the Constitution, channeling State and Local Government funds into a joint account to be maintained by the State Government, thereby making the State Governments instead of the LGs, the direct receivers of the LG funds? Any amount standing to the credit of the LG in the Federation Account, was from then on to be allocated to the State for the benefit of the LG, and such funds along with those from the State Governments, to be paid into the State Joint Local Government Account for mandatory onward distribution to the LG Councils. 

However, Section 162(8) of the Constitution has been purportedly consistently abused by the Governors, who instead, are alleged to mostly handle these LG funds as they please, including withholding such funds from the LGs, spending them as they please, and using them as a tool of oppression to exert maximum control on this tier of government, thereby reducing them to a mere appendage, branch or stooge of the State Government instead. 

The Supreme Court Judgement 

The Supreme Court judgement, which has been hailed as a landmark decision by many, is said to have decided at least three major issues: 1) that all funds standing to the credit of the LGs in the Federation Account shall be paid directly to them, and not through the State; 2) that Governors do not have the right to dissolve democratically elected LG Councils, and replace them with Caretaker Committees (this has already been decided in a plethora of authorities like APC & Ors v Enugu State Independent Electoral Commission & Ors (2021) LPELR-55337(SC) per John Inyang Okoro, JSC); and 3) that no funds will be released to LG Councils run by Caretaker Committees, because they are not democratically elected. See Section 7 of the Constitution.

Some of the Issues for Determination in the AGF’s Originating Summons Concerning Payment of LG Funds

In his Originating Summons, the AGF had raised 15 issues for determination, the 11th -15th concerning the payment of funds standing to the credit of LGs in the Federation Account. The 11th question was whether States had the unrestricted and unbridled discretion to operate the State Joint Local Government Account ‘whimsically’, and to the disadvantage of democratically elected LG Councils, rather than for their benefit. Clearly, the answer to that question is No. 

Issue 12: A Bone of Contention 

The question in the 12th issue, was whether the amount standing to the credit of the LG Council in the Federation Account should be distributed to it, and if so, whether it could be distributed directly. The answer to the first part of the question is a definite Yes, as Section 162(5) & (8) of the Constitution provide that the LG funds should be distributed to them. 

The answer to the second half of the 12th question, however, has generated some controversy. The Naysayers argue that, the answer to this question is No, LGs cannot be paid directly from the Federation Account, as, for starters, this appears to promote more of a Unitary system of government as opposed to Federalism. Akin to the dissenting opinion in the case, on direct payment, they also believe that the concept of Federalism institutionalised in the Constitution subordinates the Local Government Councils to the States, and doesn’t provide for and/or accommodate a direct dealing/payment between the Federal Government and the Local Government Councils. Additionally, they are also of the view that Section 162(6) of the Constitution is unequivocal that such funds must be paid into the State Joint Local Government Account maintained by the State Government, for onward transmission to the LG Councils (Section 162(8) of the Constitution) and that an amendment of Section 162(6) of the Constitution is required to implement any other payment procedure to the LG Councils directly. See the case of  AG of Lagos v AGF (2004) LPELR-10 (SC).

The majority of the Supreme Court Panel however, didn’t see it the way the Naysayers do, and answered this question in the affirmative, appearing to be of the view that the way and manner the State Governments had abused Section 162(6) & (8) of the Constitution to the detriment of the LGs and the people, so much so that the LGs were starved of funds to function and bring development to the grassroots, the LGs could/should be paid directly. Though there may a strong argument in support of this point of view because of the interest of Nigerians, those not in support of the decision argue that because there has been an abuse of the provision by the State Governments, doesn’t mean that the Apex Court  should have come to this decision to resolve the issue.   

Undoubtedly, there may have been abuse of Section 162(8) of the Constitution by many State Governors, over the past 25 years of democratic rule. Secondly, the Supreme Court is not just a final court of appeal, it is first and foremost, a Policy Court that must take public policy and interest into consideration, in making interpretations of the law or handing down decisions. It can strike down repugnant provisions or Government actions. For example, in the 2022 case of AG Kaduna & 2 Ors v AGF Naira Redesign Case, it was decided in the interest of Nigerians who had suffered untold hardship from the Buhari administration’s hurried and irrational currency redesign policy. Also see the case of Awolowo v Shagari & Ors (1979) LPELR-653(SC) per Andrew’s Otutu Obaseki, JSC on the use of the literal, mischief and golden rules of interpretation, where the Supreme Court held inter alia that: “The 3rd rule, the golden rule, allows for a departure from the literal rule when the application of the statutory words in the ordinary sense would be repugnant….”. 

It was indeed, a departure from the literal interpretation of the unambiguous Section 162(6) of the Constitution, to decide that the LGs could/should be paid directly; but, it is obvious that the literal interpretation of that provision had been rendered repugnant by the improper implementation in Section 162(8), not because the provision itself is repugnant, but as a result of its abuse by State Governments; and the golden rule may have been applied in order to deliver justice to the people. Another argument for another day, may be whether the fact that there is abuse in the implementation of a law meets the threshold that may necessitate the departure from the literal rule for repugnancy of a law. See also Section 15(5) of the Constitution, on one of the Political Objectives of the State being to abolish abuse of power. The actions of the State Governments misusing or misappropriating LG funds (though vehemently denied by them), at the least, constitutes a gross abuse of power.

We are all aware that by virtue of Section 4(2) of the Constitution, the function of the National Assembly is to make laws for the peace, order and good government of Nigeria, and it appears that Section 162(6) & (8) of the Constitution may not have met this threshold on account of their improper implementation by State Governments. Could this have also informed the Apex Court’s majority position? Additionally, Section 16(1)(b) of the Constitution provides that the State should control the economy in a such manner, inter alia, as to secure the maximum welfare of the people, a goal that may not have been  achieved by channeling LG funds through the joint account controlled by the State Government, necessitating the institution of this LG case. 

Issues 14 & 15

The question in the 14th issue, was if the said funds are to be paid to the LG without delay. The answer is Yes. In AG of Lagos v AGF (Supra) per Sunday Akinola Akintan, JSC, the Supreme Court held that “It is clear from the above provisions of Section 162(6), that States are not to keep the allocation received on behalf of their local government councils as its own money….Any such breach would, in my view, be actionable in a court of law….”.

The final question in the 15th issue, was whether a LG Council isn’t entitled to direct payment from the Federation Account of the amount standing to its credit therein, where the State has persistently refused to pay same received by it to the LG. The Supreme Court majority must have answered Yes to this question, possibly for some the reasons I discussed above. We however, look forward to reading the judgement.

Going Forward

Now that the LGs have ostensibly gained their freedom from the State Governments, the debate as to what type of system Nigeria is practising – whether Unitary or Federalism, has been sparked off again. Be that as it may, Nigerians hope that LGs will use their new found financial autonomy wisely. Some sceptics do not believe that the Apex Court’s decision will bring much change, as they believe that the Governors are still firmly in control of the LGs. 

Again, of what benefit would it be, if the LG Councils are paid directly, and they then turn around to misuse their funds, instead of ploughing the monies into developmental programmes in their areas for the benefit of the people? After all, the LG is a microcosm of our society. 

There has been a call for the anti-corruption agencies like the EFCC and ICPC, to establish departments that monitor the expenditure of the LGs. Luckily, unlike the President, Vice President, Governors and their Deputies, LG Chairmen are not covered by the Constitution’s Section 308 Immunity from suit and legal process clause, which means that if they are caught dipping their fingers into the cookie jar, criminal proceedings can immediately be instituted against them.

Some are nevertheless, optimistic that this newfound independence will attract a better crop of qualified people to seek positions in the LG Councils, not just those whose only credentials are that they are appointees of the Governors. But, is there any assurance that this judgement will truly free the LGs from the clutches of the State Governors? Can LG elections be free, fair and transparent when they are conducted by State Electoral Bodies that are said to be mostly controlled by the Governors? Nevertheless, reservations or not, this judgement has been hailed as a step in the right direction. Only time will tell.