PwC – Nigeria’s Local Government System: Challenges and Opportunities Abound

To most Nigerians, June 12, 1993 — Democracy Day — is a date that brings bitter-sweet memories.

It is remembered as the date when, after 14 years of military rule, Nigerians participated in what are, to date, regarded as the most free and fair presidential elections ever conducted in the country.

Unfortunately, the results of that election were annulled, and the country was plunged back into another six years of military rule.

This year’s Democracy Day was marked by pockets of peaceful demonstrations across the states of the Federation. Citizens’ frus-trations stem from rising insecurity, food inflation, pervasive corruption in the public sector, a recent ban on micro-blogging site Twitter and poor governance across all the levels of government. Most citizens believe all three levels of government — federal, state and local — have performed below par. In recent times, there has been more focus on the role local govern-ments can play as the closest government to the people.

Origins and Current Legal Framework

Ironically, the idea of the local government system is to bring the government close to the people. Nigeria’s local government system can be traced to the Native Authority Ordinance of 1916, which was passed by the British colonial government to lever-age the existing traditional administrative systems in different areas now known as Nigeria.

Though resisted by the Eastern and Western regions for being undemocratic as it did not fit well with the traditional adminis-trative system in those regions, the Ordinance remained in force until the 1946 Richard Constitution, which introduced new regional assemblies.

“There is also a grave concern relating to the calibre of people elected as chairmen and officers of local government councils.”

In 1950, the Local Government Ordinance was passed. This introduced democratic values. It also marked the beginning of fed-eral and regional dominance over local government administration, which was evident throughout colonial rule and has en-dured through the post-colonial era to contemporary Nigeria.

The current local government system can be traced to the 1976 and 1988 reforms. Currently, there are 768 Local Government Areas (LGA) and six Area Councils in Nigeria making a total of 774 LGAs across the states in the federation. Though local gov-ernments are a creation of state legislation (which define the structure, finance and composition of the areas), the National Assembly must make consequential provisions to the Constitution before any new local government is recognised.

Funding, Functions and Powers

Nigeria operates a revenue-sharing system where the federal government allocates funds from the Federation Account to the three tiers of government. Section 162 (5) provides that amounts standing to the credit of the local government shall be allo-cated to the States for the benefit of the local governments. Sub-section (6) provides that each state shall maintain a “State Joint Local Government Account” into which shall be paid all allocations from the Federation Account as well as all funds from the state governments.

Local governments do not determine what amounts are allocated to them. The House of Assembly of each state has responsibil-ity for determining the statutory allocation of public revenue to the local government councils within the states.

The implication is that the local governments do not have direct access to funds accruing to them from the Federation Account since the funds are held in trust by the state governments who determine how much, and when, the funds will be disbursed to the local governments.

The functions of local governments are set out in the Fourth Schedule to the Constitution. The functions are straightforward and generally devoid of complexities. The functions include consideration and making recommendations on economic devel-opment of states, construction and maintenance of roads, streets, street lightings, drains and other public highways, provision and maintenance of primary, adult and vocational education, development of agriculture and natural resources (except exploi-tation of minerals), and the provision and maintenance of health services.

In addition, local governments have powers to make-over bylaws and impose tax on all areas within their remit (television and radio licenses, cemeteries, burial grounds, outdoor advertising, sewage and refusal disposals).

Criticism

Many Nigerians feel detached from the government. If the idea of the local government system is to bring the government close to the people then the system is not working fulfilling its primary objective. Hardly do local governments construct roads in Nigeria. At best, local governments apply coal tar or gravel to make the surface of roads motorable. The same applies to streetlights; over 90 percent of roads are poorly lit. In the few instances where the streetlights can be found, the materials used are usually sub-standard.

In the few instances that local governments have completed projects such as public libraries, slaughterhouses, places of voca-tional learning and so on, these initiatives are usually always run-down due to a poor maintenance culture.

With respect to the local governments’ revenue-generating powers, most residents claim to be overburdened by multiple taxes and levies imposed by various local government agents and officers.

According to the Lagos State Inland Revenue Service’s (LIRS) — the tax authority of Nigeria’s economic hub) — website, local governments are authorised to collect 21 taxes and levies including shops, kiosks, markets, signboard, advertisement, vehicle radio, television and radio licences and rates.

Similarly, according to a recent study conducted by PwC on the average cost of compliance for micro, small and medium Scale Enterprises (MSMEs) doing business in Nigeria, 51 percent of respondents in Abuja and Lagos claim that they pay (28 percent) or sometimes (23 percent) pay unofficial levies or fees to the local governments. These unofficial fees are estimated to be some-times as high as 10 times the official rates.

There are also concerns of a lack of transparency by the local governments on how funds collected are applied. According to one respondent, “Local government does not have published information on fee expectations, they knock on door and bring outrageous fees”.

In the same survey, 31 percent and 29 percent of respondents in Lagos and Abuja respectively claim that they do not know what the fees are for. In many instances the local government officers do not issue receipts. There is no central database where local governments publish their annual budgets.

There is also a grave concern relating to the calibre of people elected as chairmen and officers of local government councils. The criteria for qualification into local government council offices is set rather low. To be eligible to contest as a chairman, a person need only be educated up to at least secondary school level. It is interesting to note that the criteria do not require the person to pass or successfully conclude the school certificate examinations. Because of this, many of the aspirants are unen-lightened and are in some cases political thugs used by politicians during elections. The character of some of those elected or appointed as local government council chairs is questionable.

Challenges

Most of the challenges faced by local governments stem from lack of autonomy. Ideally, each tier of government ought to be independent and should be allowed to carry out their constitutional functions free from any form of restriction.

On their part, local governments argue that, by virtue of their set-up, they are not autonomous in areas of finance and opera-tions. Many local government councils claim that funds which should, by the constitution, accrue to them are withheld by their respective state governments. As a result, local governments are hampered from carrying out their constitutional roles.

Interference by State Governments

In many instances, state governments have refused to conduct local government elections into the local government councils. Instead, state governments, as political favours, appoint acquaintances and party loyalists as caretakers. This has eroded whatev-er semblance of a merit-based system a democratic process would have provided.

Some states have even gone as far as dissolving local government councils because the councillors were elected on the plat-form of a different political party. In one state, the governor, without adhering to due process, dissolved the local government councils of 148 local governments. Though the Supreme Court deprecated this action, it is often the case where state gover-nors use the local government system to further their personal gains.

As a result, the local governments operate at the whims and caprices of the state governors who use them as an extension of their rule in a state.

No Political Autonomy

The constitution does not adequately provide for the structure of local government system. Rather, state governments are vested with power to determine things such as tenure, elections, composition of the local government councils. This subjects the local government system to the control of the state governments and does not encourage uniform development across the federation.

Recommendations

To restore the trust of citizens in the local government system, the existing laws — for example, the constitution — must be amended to give financial autonomy to local governments. Centrally allocated funds should go directly to the local govern-ments instead of through the states. The existing anti-graft agencies can investigate and prosecute officers for any misappropria-tion of such funds.

The minimum qualification to run for office into the local government must be reviewed. The bar must be raised. Setting a minimum standard of having a university degree does not guarantee success, but it helps to weed-out political thugs and mis-creants.

State governments should play supervisory roles and must not usurp or dictate the day-to-day operations of their local govern-ments. State governors can also cause to be prosecuted any officer indicted for misappropriation of state funds given to the local governments.

State governors should be barred from interfering in local governments, especially where the officers are elected on the plat-form of a political party that differs from the governor’s party. Where possible, such interference must be penalised by law following a verdict of a competent court.

With respect to elections, residents of local government areas must be given powers to remove elected officers by way of a referendum on specific grounds set out by law.

Local governments must not only be mandated by law to publish revenue and expenditure. Failure to do so should come with penalties. There must be more transparency in relation to the levies imposed.