The Federal High Court in Awka has blocked an attempt by the federal government to assist the local government areas (LGAs) in Anambra State in recovering over N16 billion that was diverted by the state government.
This amount represents the share of the Paris Club refund allocated to the local governments, which the Anambra State Government received from the federal government on their behalf but failed to hand over to them.
In a judgment delivered on 21 June, Judge Nnamdi Dimgba declared that the approach taken by the federal government, facilitated by the Minister of Finance, was unconstitutional in its efforts to recover the funds.
According to Mr. Dimgba, the federal government exceeded its legal authority by deducting the money from the state’s allocations and directly paying it into the joint account of the local government areas.
The court agreed that the state government’s failure to pay the local governments’ share of the money into the State Joint Local Government Account “is clearly a constitutional breach”.
But he said the solution is not in the minister “exercising unconstitutional powers of deducting at source monies due to the states, and in this case Anambra State, from the federation account.”
“Where a state has failed to make this payment, the state clearly has fallen foul of its constitutional obligation,” the judge said. “For a breach of the Constitution cannot be cured by another breach of the Constitution by another party, no matter how well motivated.”
Citing section 162(5) of the Nigerian constitution and the Allocation of Revenue (Federation Account Etc) Act, the judge said: “None of the relevant provisions empowers the 1st Defendant (finance minister) to make deductions from the statutory allocation due to a state from the Federation Account on the basis that the State has failed to transfer the LGCs share into the State Joint Local Government Account.”
He said the federal government would require a court order to help the local government areas recover their money.
Funds steeped in corruption
The fund in question is a fraction of what the federal government has released to all 36 states of the federation and their local government areas as Paris Club refunds over the years.
The refunds followed the discovery that money was over-deducted from allocations of states and local governments across the country between 1995 and 2002 to offset Nigeria’s indebtedness to the Paris Club and the London Club.
But the handling of the proceeds of the refunds has been steeped in corruption in various states.
Allegations concerning the misappropriation of funds disguised as payments to consultants for achieving the Paris Club refund are still unresolved and widespread.
Observers note that the refunds primarily benefited public officials and their associates, rather than the intended recipients, the people of the respective states.
Even after receiving the windfall from the Paris Club refund, many state governors neglected their obligation to pay outstanding salaries owed to workers.
Abdulaziz Yari, a former governor of Zamfara State and then-chair of the Nigeria Governors’ Forum (NGF), is currently under investigation by the Economic and Financial Crimes Commission (EFCC) regarding his handling of the funds allocated to his state.
This case also underscores the extent of control exercised by state governments over the local governments beneath them, thereby hindering the financial independence guaranteed to the third tier of government, which should be closest to the people.
Anambra’s share of Paris Club refund
Anambra State alone received N38.2 billion under an agreement that dates back to 2016 during the administration of the immediate-past governor of Anambra State, Willie Obiano.
Based on the prevailing revenue sharing formula, the state government took 57 per cent of the money, amounting to about 21.8 billion, while the rest, 43 per cent, amounting to about N16.4 billion, was meant for the local government areas in Anambra State.
But the 21 local government areas (LGAs), like many of their counterparts across the country, did not get their share of the funds from their state governments.
This prompted the Association of Local Governments of Nigeria (ALGON), a forum of all the 774 local governments across the country, to engage a prominent Senior Advocate of Nigeria (SAN), Femi Falana, to send a series of letters to the Federal Ministry of Finance over the issue.
Mr Falana’s law firm sent two such letters dated 1 July 2019 and 29 September 2019 to the finance ministry.
Acting on the prompting of ALGON, the Federal Ministry of Finance serially requested the state government to provide evidence of remitting LGA’s share of the funds to them.
When it got no answer, the ministry sent another letter dated 20 December 2022 intimating Governor Charles Soludo of the plan to start deducting the sum of N16, 422, 695, 111.20 from the state’s monthly allocations.
The ministry said it would make the deductions from the Anambra State’s share of Statutory Allocation from the Federation Account in 36 equal instalments of N456, 185, 975.31 from January 2023.
Anambra goes to court
Almost two months after receiving the ministry’s letter and after the first tranche of the deduction was suspected to have been made, the Anambra State government filed a legal action to stop it on 16 February 2023.
It sued the Minister of Finance and the Attorney-General of the Federation as co-defendants in the suit.
The Anambra State Government, through its lawyer, Patrick Ikwueto, a Senior Advocate of Nigeria (SAN), argued in the suit that the federal government overstepped the limits of its powers with its plan to deduct the funds from its allocations.
It cited Sections 2 (2) and 3 (1) of the Nigerian constitution and Sections 1 and 3 of the Allocation of Revenue (Federation Account, Etc) Act, 1982.
Both the Minister of Finance, represented by A. A. Shamaki and the Attorney-General of the Federation, defended by Ekene Elodimuo, vehemently opposed the suit.
‘No room for direct relationship between LGAs and FG’
But delivering his judgement, Mr Dimgba dismissed the preliminary objections and the substantive defence filed by the defendants in opposition to the suit.
Mr Dimgba held that the law does not provide room for a ”direct relationship” to disburse funds between the federal and local government areas.
He said the law “does not permit any bilateral interaction between the federal government represented by the 1st defendant and LGCs under a state”.
Section 162(5)(6)(7)(8) of the Nigerian constitution, the judge said, only stipulates that “any amount standing to the credit of LGCs must be allocated to the states who will in turn to remit it to the State Joint Local Government Account and distribute them in the terms and manner approved by the National Assembly and State Houses of Assembly”.
Weeping more than the bereaved?
Mr Dimgba also faulted the finance minister’s decision to deduct the local government funds from the state government’s allocations.
He said there was no reference or accusation in the letters written by Mr Falana’s law firm.
The judge said apart from the fact that the letters from ALGON and Falana & Falana Chambers made no reference or accusation anywhere that the Anambra State Government was running afoul of its obligations, there was also “no complaint from any LGCs in Anambra State to the 1st Defendant or any other body.”
“No petition emanated from Anambra State from any Non-Governmental Organisation (NGO), Civil Society Organisation (CSO) or any other concerned individual. So, where exactly did the 1st Defendant get its suspicions from?”
ALGON’s lawyer reacts
ALGON’s lawyer, Mr Falana, faulted the rationale behind the judgement, as he maintained that the court ought to have dismissed the Anambra State Government’s suit.
He criticised the judgement on the grounds, including a contention that the affected local government areas, which were necessary parties, were excluded.
“After all, the subject matter of the suit pertained to the London/Paris Club refund, which ought to have been paid to the State Joint Local Government Accounts but diverted by the State Governments,” Mr Falana said.
He added that contrary to the court’s decision, the case is not one of illegal deduction from state government’s allocations, “but a case of directing state governments to refund and return the fund illegally diverted from the State Joint Local Government Accounts.”
He noted that the court relied upon section 162 of the constitution “does not authorise state governments to divert funds from the State Joint Local Government Accounts by the Federal or State Governments.”
“Since it was abundantly clear that the State Governments had diverted the funds belonging to the local governments, the Federal Government has the power to deduct the fund and ensure that it is paid into the State Joint Local Government Accounts where it was illegally diverted,” the lawyer added.
Noting that the Supreme Court had ruled in different cases that the federal government is the custodian of the funds in the Federation Account, Mr Falana said, it implies that “the custodian has the power to prevent the diversion of the fund paid to the State Joint Local Government Accounts that state governments have illegally diverted.”
Overbearing control
The case is another reminder of state governors’ overbearing control over local governments across the country.
Many local governments in the strangling grip of the governors have little say over their statutory allocations, which the law provides must first be entrusted in the care of their state governments before it is remitted to them.
There were attempts by the immediate-past administration of President Muhammadu Buhari to deepen local governments’ financial independence through an executive order and constitution amendments, but the efforts did not sail through.
