– Ishaq Obashola Apalando, Esq
On 11 July 2024, the Supreme Court of Nigeria gave a landmark decision in a suit between the Federal Government (FG) and the 36 State Governments. The suit, AGF v AG Abia & 35 Ors (No. SC/CV/343/2024, reported (2024) LPELR-62576(SC)), bordered on the method of paying the country’s 768 local governments (LGs) their allocations (LG allocations) from the Federation Account, and the Supreme Court had ordered direct payment by the FG, bypassing the SGs.
Prior to 11 July 2024, the payment had been indirect, through the State Joint Local Government Account (SJLGA) of each state. However, because the SGs controlled the SJLGAs, they habitually abused the LG allocations paid therein through under-distribution or diversion. They also abused the governance of the LGs by habitually supplanting the democratically elected local government councils (LGCs) of their LGs with handpicked cronies of the Governor under such names as caretaker, interim or administrative committees among others.
The foregoing situation thus prompted the FG to file the lawsuit against the thirty-six SGs under the original jurisdiction of the Supreme Court for the correct interpretation of Section 162 of the Constitution of the Federal Republic of Nigeria, 1999 (CFRN, as amended). In a majority of 6 to 1, the Supreme Court granted almost all the reliefs sought by the FG by permitting it to directly pay LG allocations to LGs by bypassing the SJLGAs; permitting it to withhold payment to any LG whose LGC has been supplanted by its SG; and restraining the SGs from ever receiving or tampering with the LG allocations by any means from the FG.
While many have praised the decision for its significance is ensuring the LGs are funded and independent, others have decried it as an assault to federalism, arguing that it amends the relevant provisions of the CFRN in the guise of interpretation. This piece therefore seeks to humbly take a closer look at the judgement to see if there could have been a win-win scenario for the FG, the SGs and the LGs as opposed to the absolute victory handed to the FG.
The reasoning in the judgement
The majority accepted the abuse of local governments’ governance and financing as a matter of common knowledge. This meant the plaintiff-FG did not need to prove this alleged abuse by evidence. They also hold that the CFRN no doubt guarantees governance of the LGs by democratically elected LGCs as has been affirmed in various judgements of the Supreme Court and of the Court of Appeal, and that the CFRN also guarantees the LGs their own share from the Federation Account (LG allocations). The core dispute therefore turned on how the LG allocations are to be paid pursuant to Section 162(6) of the CFRN. That section is reproduced below.
(6) Each State shall maintain a special account to be called “the State Joint Local Government Account” into which shall be paid all allocations to the local government councils of the State from the Federation Account and from the Government of the State. (underlining mine)
The majority, per His Lordship, E. A. Agim JSC, conceded that a literal interpretation of Section 162(6) will indeed require the FG to pay LG allocations into the SJLGA of a state from which the SG of that state will distribute the allocation to its respective LGs. However, because of the accepted wanton abuse of this indirect payment method by the SGs, His Lordship held that the literal interpretation of “shall” could not have been the intention of the framers of the CFRN.
Thus, after noting that a “…purposive or teleological approach requires the Court not to remain fixated on the literal and narrow meaning of the words used in the Constitution…”, His Lordship concluded that if construing the word “shall” in Section 162(2) “…as permissive or discretionary would meet the intention of the statute [CFRN], it would be read as permissive.”
Aptly capturing this approach, His Lordship clarified that reading the “shall” as permissive “… is an application that would not exclude any other mode of paying allocation from the Federation Account to the Local Government Councils and giving discretion to the Federation to pay the allocations directly to the Local Government Councils or through States.” Consequently, the Supreme Court restrains the SGs from ever receiving the LG allocations of the states from the FG and thereafter orders the FG to henceforth directly pay only democratically elected LGCs their LG allocations while withholding those of supplanted LGCs.
The problems with the judgement
Four problems are identified in the judgement, though there may be others not apparent to the author. The first problem with the judgement is an apparent contradiction between the core reasoning and the reliefs. If, indeed, construing the “shall” in Section 162(6) as permissive allows the FG “to pay the allocations directly to the Local Government Councils or through States” as clarified by the apex court, the relief should have been ordering the FG to pay the LG allocations to the LGs by any of the two payment methods which the FG considers most favourable to the LGs. However, the Supreme Court took away the discretion dictated by its own reasoning of a permissive “shall”.
By ordering the FG to henceforth directly pay the LG allocations to the LGs and at the same time restraining the SGs from ever receiving the LG allocations, the Supreme Court has given the FG no discretion in the method of payment and has given no room for the existence of an SJLGA “into which shall be paid” the LG allocations from the Federation Account. Simply, Their Lordships, with utmost deference, have simply maintained the “shall” as mandatory but only in favour of direct payment.
The second problem is the failure of the apex court to consider the effect of the same “shall” vis-à-vis the duty of the SGs as stated in the same Section 162(6). It is clear from the subsection that apart from LG allocations from the Federation Account, all LG allocations from a state’s internally generated revenue are also to be paid into the same SJLGA from which the totality is distributed to the LGs of that state based on state Law. The “shall” in the subsection is the modal verb for the payment of both types of LG allocations.
If that “shall” has now been interpreted to compel the FG to bypass the SJLGAs, can the same “shall” be interpreted to compel the SGs to go through the same SJLGAs? If what is sauce for the FG-goose is sauce for the SG-gander, then the logical implication of the reliefs granted to the FG is that the SGs must now also bypass the SJLGAs in paying LG allocations from the state’s internally generated revenue, and any state law mandating going through the SJLGA would be null and void.
The third problem with the judgement is that the Supreme Court totally ignored its own 2002 decision on the question of direct payment to LGs while the majority ignored a 2006 decision of the same court on the question of FG’s intrusion into LG expenditures. The parties are therefore left to figure out whether this 2024 judgement has overruled the two previous decisions by implication.
The first, which is completely ignored, is AG Ogun State & Ors v. AG Federation (2002) LPELR-621(SC) which was in relation to the Allocation of Revenue (Federation Account) Act of 1982 as it governed revenue allocation between January to December 1998. Lagos State, as co-plaintiff, had sought a declaration that a direct payment of LG allocations by the FG to the LGs under the Act would violate Section 162(5), (6) and (8) of the Constitution, and the Supreme Court agreed and so declared, against the contention of the FG that such would not.
The second is AG Abia State & 2 Ors vs. AG Federation & Ors (2006) 16 NWLR (Pt 1005) 265 which was in relation to the Monitoring of Revenue Allocation to Local Governments Act of 2005 (MRALGA). The states had sought the nullification of various provisions of the MRALGA on the grounds that it purported to regulated distribution of the allocations contrary to Section 162(8), as opposed to the allocation of the LG allocations under Section 162(5). The Supreme Court agreed and nullified sections of the MRALGA relating to states while preserving those relating to the FCT (using the blue-pencil rule). This is because the six area councils in the FCT Abuja are under the legislative control of the National Assembly.
Only His Lordship, H. A. Abiru JSC, noted the relevance of the 2006 decision in his sole dissenting judgement by holding that despite the FG’s allegation that the 2006 “…decision has aggravated the already existing ugly situation in the various Local Government Areas/Councils”, he had not furnished sufficient evidence to prove the abuse of Section 162(6) of the Constitution to warrant a departure from the said 2006 decision. Since this 2006 decision is predicated on the SGs first receiving the LG allocations before permitting the SGs to exclusively regulate their distribution, it may well be deemed overruled.
The fourth problem is the possibility of the FG abusing the “purposive interpretation” of Section 162(6) just as have the SGs. A precedent for this abuse was the subject of A.G Lagos State v. A.G Federation (2004) LPELR-10(SC), when the Supreme Court declared as unlawful the withholding of the LG allocations of Lagos State by the FG on the grounds that Lagos State created additional local governments contrary to the twenty which the CFRN has given it. Contrary to popular belief, the Court also declared the newly created LGs inoperative and permitted the FG not to pay them any allocation.
When the FG abuses the power of direct payment, an affected LG will have to start from the Federal High Court through the Court of Appeal to the Supreme Court – a longer process compared with invoking the original jurisdiction of the Supreme Court in disputes between the FG and SG(s) or between SGs. This is because SGs may no longer have the standing to sue the FG under the original jurisdiction of the Supreme Court in respect of the matter, since they have been taken out of the payment process by the reliefs granted.
The possible alternative reliefs
Considering the foregoing analyses, it is instructive to consider what any reliefs flowing from the core reasoning of the judgement should look like. If indeed the “shall” in Section 162(6) is permissive and not mandatory, the FG should be given the discretion to choose the best method between direct payment and payment through SJLGAs as earlier explained. Further, the discretion could have been guided as proposed below.
The possible alternative reliefs are one, declaring and ordering payment through the SJLGA where the FG is satisfied that the governance and financing of an LG has not been abused by its SG; declaring and ordering direct payment to an LG only where an SG has abused the LG’s financing but not its governance (such as where an LG has a related judgement against its SG); declaring and ordering withholding of payment by any means to any LG where an SG has abused both the governance and financing of that LG; consequentially declaring that an SG may similarly choose between direct payment of allocated internally generated revenue to its LGs or payment through the SJLGA; and declaring that the SG has the right to approve, by a state Law, the lawful and beneficial expenditure of any monies received by an LG from any sources.
As there are no perfect systems, it must be admitted that these reliefs still leave room for abuse by the FG. However, this method preserves the power of an SG not only to lawfully regulate its LGs pursuant to the 2006 decision, but also to challenge the FG’s abuse of the discretion in deserving circumstances. The implication of this is that where an SG files an action alleging abuse of the discretion by the FG, the permissive interpretation of “shall” can be maintained for consistency in constitutional interpretation and the system of precedent, while the factual basis of the abuse can be litigated in order to obtain state-specific reliefs.
Conclusion
With utmost deference to Their Lordships, in no way is this piece intended to ridicule the judgement. The judgement is indeed a praiseworthy decision, but it comes with its own challenges as humbly argued in this piece. The proposition in this piece has therefore been offered as nothing more than my own minute contribution to nation building, which any counsel or party privileged to relitigate the issue in the future may propose to the apex court for consideration and possible adoption. I rest my case here.
Ishaq Obashola Apalando is a Senior Counsel at Charles Anthony Lawyers, Lagos Island, Lagos. He can be contacted via his verified account on LinkedIn, ishaq@charlesanthonylaw.com or @Shola4Short on Twitter (X), Instagram and Threads.