N15.5 trillion of LGA allocation ‘pocketed’ by State Governments in the last 12 years

In the last 12 years, 15.5 trillion were duly transferred to states on behalf of the 774 local governments, yet there is no public information on what portion of that 15.5 trillion, each local government received

A monthly average of N139,117,586 or an annual average of  1.67 billion naira (N1,669,411,036) has accrued to each local government in Nigeria.

Revenue Mobilisation Allocation and Fiscal Commission, RMAFC is mandated to determine sharing formula of Federal Allocation (FAAC) but the details are NOT in the public domain

Local governments are a fundamental part of Nigeria’s political landscape; they may understand citizens’ daily lives more intricately than politicians at the state and federal level and are sometimes better equipped to respond to localized issues. Yet, public data and information about how state governments manage and disperse federal money specified for redistribution to local governments are scarce. This data could play a critical role in ensuring local government autonomy, holding state governments accountable for mismanaging funds and providing clarity around why certain local governments receive more than others.

Based on analysis of the 12-year data sourced from the websites of the National Bureau of Statistics and the Office of Accountant-General of the Federation, about 15.5 trillion naira (N15,505,489,701,816) has been transferred to the 36 states and the FCT on behalf of the 774 local government councils of the country. Broadly speaking, an average of N20 billion naira accrued to local governments in Nigeria between 2007 to 2018 with the least Council having a total of 12.8 billion and the highest Council having 56.3 billion in the same period. It should be noted that these statistics are difficult to confirm, as local government chairpersons did not confirm the amount they received from the state government and constituents cannot attest to the exact value of the services they received from their local government.

The monthly LGA transfer is the statutory allocation distributed by the Federation Account Allocation Committee. While Abuja Municipal with the highest allocation has had a monthly average of 391.1 million naira (N391,103,922) or an annual average of 4.69 billion naira (N4,693,247,062), Ifedayo local government in Osun State, with the least allocation, has accrued a monthly average of 88.56 million naira (N88,560,331) or an annual average of 1.06 billion naira (1,062,723,969). The question that naturally should follow is how transparent, accountable and prudent have the state governments been with all these funds?

Local governments in Lagos State top earners list, with little information why other LGs with similar indices do not

Based on the analysis, the top twenty LGAs in the recipient list were Abuja Municipal – 56.32bn, Alimosho – 52.16bn, Kosofe – 49.96bn, Mushin – 49.31bn, Oshodi-Isolo – 48.85bn, Ojo – 47.49bn, Ikorodu – 46.43bn, Alkaleri – 45.46bn, Surulere – 45.16bn, Agege – 43.14bn, Ifako-Ijaye – 43.03bn, Shomolu – 42.02bn, Ajeromi-Ifelodun – 38.98bn, Ikeja – 38.96bn, Lagos Mainland – 38.74bn, Gwagwalada – 36.64bn, Lagos Island- 35.49bn, Kwali – 35.30bn, Kuje – 34.94bn,  and Nassarawa (Kano State) – 34.25bn.

While the bottom twenty on the list in descending order were  Igueben – 14.64bn, Isin – 14.62bn, Ogori/Magongo – 14.62bn, Bomadi – 14.50bn, Ogo Oluwa – 14.45bn, Ewekoro – 14.39bn, Ede South – 14.37bn, Nkwerre – 14.35bn, Ukwa East – 14.31bn, Udung Uko – 14.31bn, Patani – 14.30bn, Ila        – 14.18bn, Ondo East – 14.18bn, Kwaya Kusar – 14.15bn, Atakumosa West – 14.09bn, Ijebu North-East – 13.86bn, Ola-oluwa – 13.84bn, Remo North – 13.76bn, Ilejemeji – 13.03bn, and Ifedayo – 12.75bn.

As revealed in the chart above, 13 out of the 20 top receiving local governments are from Lagos state alone. A further drill down shows that not less than 15 of the 25 local governments that receive the most from the distribution in the last 12 years are from Lagos state. The obvious reason for this perhaps is the population preference given to the allocation of resource revenue. A prominent principle used in sharing FAAC is the population of the local and state governments in the country.

However, only eight of the thirteen local governments from Lagos state would qualify on a nominal basis because they are among the twenty most populated local governments. It is unclear the rationale that drove the inclusion of the other five. Some of the twenty most populated local governments like Nasarawa, Maiduguri, Ifo, Port-Harcourt, Ado-Odo/Ota, Surulere (Oyo State), Bauchi, Obia/Akpor, Jos North, Idemili North, Igabi did not make the list for other reasons only the RMAFC can explain as the commission mandated to determine the sharing formula.

The general notion about federal allocation is that aside from population factor, 13% derivation, a concession given to oil-producing states, determine how much more a state and its local government get compared to counterparts. An interesting insight from the analysis, however, reveals none of the local governments from the oil-producing states made the top twenty receivers list even where the local governments are among the twenty most populous. For instance, the 2006 population census puts Port-Harcourt (538,558) and Obia/Akpor (462,350) local government in the 11th and 16th most populated local governments in Nigeria respectively. Port-Harcourt, a local government from Rivers State only made the bottom of the top 25 while Obia/Akpor was down at 42nd top earners. So why did these local governments not make the top earners list?
The oil-producing states, especially those in the Niger Delta, have continued to describe the nature of federal allocation to their regions as unfair and inequitable given the fact the revenue mainstay, crude oil, comes from their regions. In a recent report, the Governor of Bayelsa, Dickson expressed the frustration that his state, as well as other Niger Delta states, are not given the control of their resources among other Federal controls such as oil licencing.

Though the national bureau of statistics (NBS) strives to provide data on federal allocation about two months after the disbursement, the data tend to assume every Nigerian understands how the allocation committee came about the values. NEITI’s Fiscal Allocation and Statutory Disbursement, FASD, on the other hand, tries to show the aggregate breakdown as seen in the image below. However, it can be assumed that the values of this criteria change, and citizens and policymakers— at least at the local government level—do not have a supporting document to help them understand the recurring breakdown.

The implication is that the 774 Nigerian local governments are forced to rely on assumptions from historical data when factoring federal revenue into their budget planning, as they lack supporting documents that explain the decision making process federal allocations.  As much as anyone can extrapolate based on the 40% equality share and 30% population quota, the data used to determine other criteria such as school enrollment, amount of rainfall, water supply spread, amount of internally generated revenue, on a rolling basis is not known to the public. Even the population figure is not a clear indicator of federal distribution as it is unclear whether FAAC is working with the 2006 Census figure or adjust this on an annual basis.

Nigeria’s 1999 constitution empowers the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) to allocate revenue to the three tiers of government. The challenge posed with assuming the rationale for sharing necessitates a proactive approach from RMFAC to publish the proportion and rationale for allocating FAAC and when it changes, should oblige itself to make the information available to the public. According to Adetunji Ogunyemi, lopsidedness in the constitutional division of legislative jurisdiction and the allocation of tax powers coupled with the failure to develop the best and accepted principles and criteria for the vertical and horizontal distribution of revenues remain the most contentious and intractable challenge in Nigeria’s post-independence.

State Governments and their impunity against their Joint Statutory Accounts

There has been controversy about the moral standing of state governments to receive and manage LGA allocations from FAAC. The FAAC makes transfers of the statutory allocation of local governments to their respective state governments. This is in accordance with the 1999 constitution of Nigeria which established the Federal Accounts Allocation Committee (FAAC) and the Joint Allocation and Accounts Committee (JAAC) for the pooling and distribution of Local Government Revenue among state and local governments.

However, federal allocations to local government, for the most part, are just additional revenue for the state government who then determines how to redistribute in terms of developmental projects across local governments. It is very clear, to the agitation of civil society, that the state governments are neither transparent nor accountable about the redistribution of FAAC to the municipal executives and legislators with statutory mandates. This is especially worrisome given that state governments always have a hand in local government allocations; only the governor of Bayelsa has claimed not to touch the local governments’ allocation for his state. The statement is yet to be verified.

Nearly all the 774 local governments’ executives never got the exact amount distributed to them and many times accuse their state governments of misappropriating the funds received on their behalf while also interfering in the running of the affairs at the grassroots level. This is contrary to Nigeria’s legal framework; the law makes it mandatory for the state governments to allocate 10 percent of its internally-generated revenue to the local councils.

An OECD report decried how state governments have taken over most local government functions in order to justify spending funds earmarked for councils in the Joint Revenue Account, and funds from the Federation Account do not reach the local level. This is largely because most resources are owned and managed by the federal government, and almost all states and local governments rely on allocations or shares from federal revenues. Two other positions Adetunji Ogunyemi noted consistently trouble the realisation of fiscal federalism are illegal custody and disbursement of federally collected revenue and the refusal to act upon audit reports by prosecuting indicted federal officers who deal corruptly with the federations’ treasury.

Section 162 (6), (7) and (8) of the 1999 Constitution offer some directions as to the legality of the state government to withhold or deduct from the local government share of the Federal allocation.

(6) Each State shall maintain a special account to be called “State Joint Local Government Account” into which shall be paid allocations to the local government councils of the state from the Federation Account and from the government of the state.

(7) Each State shall pay to local government councils in its area of jurisdiction such proportion of its total revenue on such terms and in such manner as may be prescribed by the National Assembly.

(8) “The amount standing to the credit of local government councils of a state shall be distributed among the local government councils of that state and in such manner as may be prescribed by the House of Assembly of the State.

A recent report indicated the Nigerian Financial Intelligence Unit, NFIU’s mouthed commitment to go after state and local government officials who misappropriate federal allocation meant for local governments. It was reported that the Acting Chief Media Analyst of NFIU noted with effect from June 1, 2019, any bank that allows any transaction from any local government account without monies first reaching a particular local government account will be sanctioned. On top of that, the spokesman went on to stress the quota set for cash withdrawals from the FAAC account saying “In addition, a provision is also made to the effect that there shall be no cash withdrawal from any local government account for a cumulative amount exceeding N500,000 per day and any other transaction must be done through valid cheques or electronic funds transfer.

Though this sounds like a step in the right direction, the dilemma lies with the legal rights for NFIU to dictate how governments exercise their constitutional mandates of resource distribution.

What are the ways forward

A key development in social accountability arena of Nigeria is the use of public data to demand accountability and unearth corruption in the Nigeria budgetary and procurement process. Civil society organizations including PTCIJ, PPDC, ICIR, Connected Development, BudgIT and Value for Money working with the media have used available data to expose corruption and equip citizens to demand service delivery in their various communities. It is pertinent therefore for the RMAFC working with state governments to provide accessible, accurate and descriptive details of monthly revenue distribution across the states and the 774 local governments of Nigeria.

The auditor general at the federal and state levels need to beam light into revenue disbursements and spending across the country and ensure to make the audit report available to the public and anti-corruption agencies

There is a need for deliberate and timely interventions to address issues of local government autonomy in the country. There is hardly any local government budgets in the public space, which may allude to the lack of any municipal level of budget planning and implementation. This hampers grassroots development and constitutes a usurping of the constitutional role of local governments by state and federal governments of Nigeria.

Closely related is the need for civil society advocacy and citizen education to drive grassroots demand for transparency and accountability in the disbursements and management of local government allocation. This would involve the publishing of statement of accounts showing receipts of transfers into local governments’ accounts and monitoring the implementation at the level of councillors and caretaker committees.