By Damilola Agbalajobi, in-city politics lead
On 11 July 2024, Nigeria’s Supreme Court delivered a unanimous judgment affirming the financial autonomy of the country’s 774 Local Government Areas (LGAs). It ordered direct payment of statutory allocations from the Federal Government Account into the LGAs’ bank accounts, and barred state governors from seizing or withholding these funds. The court’s verdict also outlawed the unconstitutional dissolution of democratically elected officials of the LGAs and their replacement with caretaker committees appointed by the governors.
In Nigeria’s layered governance structure, the LGAs form the third tier of government and are the closest to the people. This structure is expected to provide services to the poor and vulnerable, prioritise service delivery, and promote accountability. However, the lack of autonomy over the years has impacted local service provisions across all LGAs in Nigeria, as they hardly take political, social or economic decisions without recourse to the federal or state government. Hence, they have not been able to satisfactorily provide core urban services, such as primary education, sanitation, waste management and primary healthcare.
Catching up with service delivery
Studies of service delivery challenges in Lagos – including those conducted by Dataphyte, the 2025 Lagos Economic Development Update (LEDU) and an advocacy brief on the Primary Healthcare Development Challenge – highlight that political interference, corruption, bureaucratic delays and a weak revenue-raising capacity have all conspired to starve LGAs of the means to function effectively. This is evident in the lack of some basic services and the fallout in community initiatives, such as waste management, due to inadequate financial support from these LGAs. Also, in the area of health supplies, many health centres have no medicines, with patients having to seek other alternatives.
Lagos Autonomy Law
Following the Supreme Court decision, Lagos State also passed the Autonomy Law, with the State House of Assembly granting 20 constitutionally recognised LGAs’ elected leadership and direct fund access. This resulted in the restructuring of the 37 Local Council Development Areas (LCDAs) to become “Area Administrative Councils”, to be headed by governor-nominated secretaries. This has the potential to weaken autonomy as there is no electoral legitimacy, plus it engenders centralisation of executive power.
Next steps for local government autonomy
Following this development, councils are expected to submit quarterly expenditure plans and follow state accounting manuals before drawing funds. Previously, funding releases were ad hoc as councils received allocations whenever the state treasury approved them, often unpredictably and without a fixed schedule.
However, on 12 July 2025, the state conducted elections in all the LGAs and the LCDAs, with the ruling party, All Progressives Congress (APC), winning all 57 chairmanship seats and 375 out of 376 councillorship positions. With the election conducted across the 37 LCDAs and the 20 LGAs, the new autonomy law may have simply become another puzzle – only time will tell.
Harnessing FAAC’s record disbursement for grassroots development
The August 2025 meeting of Nigeria’s Federation Account Allocation Committee (FAAC) produced an outcome that made history, with a whopping NGN 2.225 trillion shared among the three tiers of government and other statutory recipients. This is the highest single monthly disbursement since the revenue-sharing framework began. Local Government Councils altogether received NGN 267.652 billion in statutory revenue, NGN 235.516 billion from value-added tax (VAT), NGN 11.318 billion from the Electronic Money Transfer Levy (EMTL) and NGN 7.742 billion from exchange difference adjustments. In total, this represents over NGN 520 billion flowing directly to local councils nationwide, representing a fiscal magnitude hardly ever witnessed in Nigeria’s history of federalism.
For Lagos State, where the Supreme Court’s July 2024 judgment and the subsequent Lagos State Local Government Autonomy Law were intended to secure direct funding and reduce gubernatorial interference, this inflow is an important test case. If the 20 Local Government Areas (LGAs) recognised by the constitution, and the 37 recently restructured Local Council Development Areas, now known as Area Administrative Councils, receive and control these resources without bottlenecks from the state, it will be the first time they would have predictable and reasonable cash flows that they need to plan and execute basic service delivery.
The predictability of FAAC transfers is not just of administrative concern. Extant literature on fiscal federalism consistently shows a strong connection between stable intergovernmental transfers, and improvements in sub-national governance that trickles down even to households. That is, when councils know when and how much funding they get, it is easier for them to adopt medium-term expenditure frameworks and enter into competitive local procurement and participatory budgeting, rather than relying on ad hoc approvals from state treasuries. This stability also helps them change from spending in short-term patterns that respond to crises, to planned infrastructure maintenance and social investment.
For Lagos residents, the implications of these are tangible. Streetlighting projects, which are often stalled because of allocations being reprioritised at the state level, could be completed within predictable timeframes. Primary health centres could also be able to restock important medications and hire staff without prolonged cycles of state approval. Waste management contracts, which have often been underfunded, could be paid on schedule, thus reducing the recurrent breakdowns in urban sanitation.
Meanwhile, this huge benefit also shows the unresolved tension between autonomy and centralisation which the hybrid reform enacted by Lagos has caused. The Supreme Court has outlawed caretaker committees and affirmed elected local councils, but the state at the same time converted its 37 Local Council Development Areas into Area Administrative Councils, which are headed by secretaries appointed by the governor. This arrangement puts the state at the risk of bringing decision making back to the point of centralisation and weakening fiscal accountability. Without strong local oversight mechanisms, significant portions of these record FAAC revenue disbursed could still be diverted or reprioritised away from the immediate needs of these communities.
Putting local communities first
From a governance and policy perspective, several steps are important if this unprecedented revenue is to translate into development that can be seen, and which is also centred around citizens.
First, there needs to be a transparent cash-flow disclosure, whereby councils publish a simple monthly calendar that shows the inflows they get from the FAAC, as well as the dates when they have available funds. Also, the quarterly expenditure planning remains a perfect idea, with LGAs releasing budget outlines that can be accessed – on notice boards, local newspapers and digital portals, before they are disbursed.
Furthermore, there needs to be structured citizen engagement. Neighbourhood associations and civil society organisations should be invited to join hands in deciding which services to prioritise, and monitor the execution of these services. Local councils could also engage community-based contractors, small businesses and NGOs, in order to accelerate their micro-projects such as boreholes, health outreach and literacy centres.
Only by enforcing transparency, participatory governance and fiscal discipline into this new funding landscape can Lagos’ councils escape the cycle of financial dependence and underperformance for which they have long been criticised. The Supreme Court’s judgment opened a legal door, and the August 2025 FAAC benefit tests whether Lagos will walk through it – or continue to move in circles, as evidence hitherto suggested.
Header photo credit: peeterv / Getty Images (via Canva Pro). Traffic and street market in Ikorodu district, Lagos.
Note: This article presents the views of the authors featured and does not necessarily represent the views of the African Cities Research Consortium as a whole.
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