Administrative lapses have disrupted the long-awaited direct payment of allocations to Nigeria’s local government councils, stalling the transfer of over N361.75 billion from the Federation Account. The Federation Account Allocation Committee (FAAC) meeting in Abuja last week revealed that a lack of necessary bank account details from the councils has led to the delay, throwing a wrench into plans to streamline revenue distribution.
Local government councils across Nigeria were expected to directly receive their share of the federal revenue from the Federation Account for January 2025, a total of N1.424 trillion to be divided among the three tiers of government. However, an important requirement—bank account information—has not been submitted by the councils, halting the process. A source familiar with the situation confirmed that this oversight has created a significant bottleneck.
“The structures are yet to be erected,” the source said, referring to the absence of accounts specifically opened with the Central Bank of Nigeria (CBN) for the purpose of receiving direct payments.
This failure has been attributed to a lack of coordination between state governments and local authorities, as well as potential political interference. “Some councils that opened accounts with the CBN failed to submit the required account details to FAAC. This is causing delays,” the source explained.
With the Federation’s approval for direct allocations in 2025, the move was hailed as a step toward ensuring that local governments have full financial autonomy, following a pivotal Supreme Court ruling in July 2024. However, the current impasse underscores the challenges of transitioning from a system of indirect funding through state governments to one of direct transfers.
FAAC officials have set a deadline for the end of the month to resolve the administrative bottlenecks. Bawa Mokwa, FAAC’s Director of Press and Public Relations, assured that if local governments submit the correct documentation, the delayed payments will be processed without further hindrance.
Background to the Delay
In an attempt to decentralize revenue distribution and empower local governments, the Federal Government issued a directive in line with the Supreme Court’s ruling granting financial autonomy to Local Government Areas (LGAs). This ruling was expected to enhance transparency, reduce political interference, and provide local governments with the financial independence needed to implement policies and initiatives directly impacting their communities.
The total share for local governments from the N1.424 trillion of distributable revenue is N361.754 billion. Out of this, a combination of statutory revenue, VAT, Electronic Money Transfer Levy (EMTL), and exchange difference revenue was expected to be transferred to councils directly. This revenue was crucial for the smooth functioning of local government activities, from infrastructural development to the payment of salaries.
However, delays in conducting local government elections in some states have complicated matters further. Many councils are not fully functional due to the absence of legally recognized officials. Political analysts suggest that this delay in elections may have further compounded the problem, as certain state governments appear reluctant to relinquish control over local revenue distribution.
“It’s a combination of structural challenges and political maneuvers. Until the elections are completed, some states may be reluctant to hand over full control of the allocations to local government councils,” noted an insider familiar with the ongoing issue.
Despite these challenges, local governments are not entirely without funds. In a twist, FAAC revealed that the distributable revenue for the month of December 2024 included N1.424 trillion shared among the three levels of government. Of this amount, the Federal Government received N451.193 billion, state governments got N498.498 billion, and local governments were slated to receive N361.754 billion.
Revenue Breakdown
While the local governments await their direct allocations, the Federation Account for January also included significant figures. The statutory revenue came to N386.124 billion, with VAT contributing N604.872 billion. The remaining figures included N31.211 billion from the Electronic Money Transfer Levy (EMTL) and N402.714 billion from exchange difference revenue. However, the key concern for local governments remains the delay in disbursement due to the unresolved banking issue.
For local governments to receive their share, the missing bank account details need to be submitted to FAAC as soon as possible. Mokwa expressed optimism that the situation would be resolved before the month’s end, allowing the councils to finally receive their much-needed allocations.
Government’s Response
The Federal Government has continued to emphasize its commitment to ensuring transparency and fairness in the revenue-sharing process. In an official communiqué, the government reiterated its efforts to foster equitable distribution of resources across all levels of government, particularly in light of the new arrangements for direct payments to local governments. The aim is to boost local governance and reduce dependence on state governments.
“The direct allocation system is crucial for strengthening local government finances, ensuring that resources reach the grassroots where they are most needed,” said a government official.
Despite these assurances, some experts warn that delays in the implementation of such reforms could hinder the broader goal of improving local governance. Dr. Amina Abubakar, an expert in public administration, argued that the lack of coordination and delayed elections in some regions had the potential to erode the intended impact of the financial autonomy granted to local governments. “The reform’s success hinges on the effective and timely implementation of the banking system for direct allocations, without which the desired autonomy will remain out of reach,” she said.
As local governments scramble to resolve the issue before the end of the month, FAAC officials continue to push for swift action. The situation highlights the complexity of managing the financial independence of the country’s 774 local governments. Many are now looking to the coming weeks to see if the administrative hurdles can be cleared and the direct payments will finally be made.
