UNDERSTANDING LOCAL GOVERNMENT

FINANCIAL AUTONOMY: IMPLICATIONS AND

OPPORTUNITIES IN KADUNA STATE, NIGERIA

BY
MUHAMMAD TANKO
 INTRODUCTION

 I first Congratulate you on your recent election! As custodians of grassroots governance, you play
a critical role in driving development within your communities. A significant milestone has been
achieved with the recent constitutional amendments granting full autonomy to local governments
across Nigeria.
 OBJECTIVE
 This presentation aims to equip you with a deeper understanding of financial autonomy
and explore the implications of financial and administrative autonomy for local
governments in Kaduna State and provide actionable insights for effective governance.
THE KEY TOPICS IN THE PRESENTATION
 Laws on Local Government Autonomy in Nigeria

 Legal and fiscal principles of financial autonomy.

 Potential benefits and challenges of autonomous local government administration.

 Opportunities for growth, innovation, and resource management.

 COMPARISON OF THE NEW AND OLD LAWS ON LOCAL GOVERNMENT
AUTONOMY IN NIGERIA

• Legal Framework and Constitutional Basis

• Revenue Generation and Fiscal Control
• Political Autonomy and Governance
• Accountability and Oversight
• Challenges in Implementation
 LEGAL FRAMEWORK AND CONSTITUTIONAL BASIS

Old Law:
o Local governments were established under Section 7 of the 1999 Constitution as the third tier of government.
o The operation of the Joint State-Local Government Account (JAC), as specified in Section 162(6), allowed state
governments to control local government allocations, limiting direct access to funds.
o State governments often interfered with local government administration, leading to financial dependency and
inefficiencies.

New Law (Amendments in the Nigerian Constitution):

o Recent constitutional amendments (e.g., the 2018 Nigerian Financial Autonomy Law for local governments)
mandate direct disbursement of federal allocations to local governments, bypassing JAC.
o The new law strengthens local governments’ financial independence by ensuring that funds are directly credited to
their accounts, reducing state interference.

Key Difference: The old law allowed state governments significant control over local government finances, while the new
law guarantees direct access to funds, fostering autonomy.
 2. REVENUE GENERATION AND FISCAL CONTROL

 Old Law:
o Local governments relied heavily on statutory allocations from the federation account.

o Limited authority to raise internally generated revenue (IGR), constrained by state laws regulating tax collection and
other revenue streams.
o Inconsistent remittances and deductions by state governments hindered financial planning.

 New Law:
o Empowers local governments to collect and manage taxes and levies (e.g., property taxes, market fees) independently.

o Encourages diversification of revenue sources, including partnerships and grants.

o Establishes auditing systems to ensure accountability and transparency in IGR management.

• Key Difference:
The new law provides greater latitude for revenue generation and ensures local governments retain a significant portion of
their resources.
 3. POLITICAL AUTONOMY AND GOVERNANCE

 Old Law:
o State governors had significant control over local government operations, including the appointment of caretaker
committees instead of elected officials.
o Local governments lacked the capacity to independently execute policies, as state governments often influenced
decision-making processes.

 New Law:
o Promotes the election of local government chairpersons and councilors, reducing the practice of caretaker
appointments.
o Guarantees local governments’ constitutional role as independent administrative units, free from undue political
influence by state authorities.

• Key Difference:
The new law limits the appointment of caretaker committees and prioritizes elected officials, ensuring accountability to
constituents.
 4. ACCOUNTABILITY AND OVERSIGHT

 Old Law:
o Weak mechanisms for financial accountability at the local government level.

o Poor transparency in the management of federal allocations and IGR due to lack of oversight.

 New Law:
o Introduces robust auditing and reporting systems for local government expenditures.

o Empowers civil society organizations (CSOs) and local communities to participate in monitoring projects
and financial management.

• Key Difference:
The new law emphasizes financial accountability and community oversight, reducing the risk of
mismanagement.
5. CHALLENGES IN IMPLEMENTATION

 Old Law:

o Lack of clarity in the roles and responsibilities of state and local governments.

o Systemic corruption and political interference at multiple levels of government.

 New Law:

o Resistance from state governments that are reluctant to cede control over local government funds.

o Capacity gaps in financial management and resource utilization at the local level.

• Key Difference:
The new law faces challenges in enforcement due to pushback from states and inadequate preparedness of local governments.
 KEY CHANGES IN THE CONSTITUTION
1. Full Autonomy for Local Governments: Section 124 has been amended to establish local governments as a full-fledged third tier of government, free from undue
interference by state governments.

2. INEC to Conduct Local Government Elections:

o The amendment transfers the responsibility for conducting local government elections from the State Independent Electoral Commission (SIEC) to the
Independent National Electoral Commission (INEC).

o This ensures uniformity and credibility in council elections across the country.

3. Creation of Key Offices:

o Auditor General for Local Governments: Strengthens accountability and transparency in financial management.

o State Local Government Service Commission: Provides oversight for staffing and operational efficiency.

4. Independent Candidacy: Sections 65 and 106 now allow for independent candidates in elections, fostering inclusivity and citizen participation.

5. Retention of the Immunity Clause: The immunity clause for Presidents and Governors was retained, maintaining the Senate's version of the amendments.
 COMPARISON OF OLD AND NEW FRAMEWORKS

• Old Framework

 Reliance on Joint State-Local Government Account, which allowed state governments to control funds.

 Elections conducted by SIEC, often subject to political manipulation.

 Weak accountability mechanisms and limited independence in decision-making.

• New Framework
 Direct Allocation of Funds: Local governments now receive funds directly from the Federation Account.

 INEC Oversight: Conducting elections by INEC ensures standardization and fairness.

 Enhanced Transparency: Introduction of an Auditor General for Local Governments.

 Administrative Independence: Free from state government interference, allowing for innovation and
responsiveness.
 IMPLICATIONS FOR KADUNA STATE LOCAL GOVERNMENTS

 Increased financial independence and better resource allocation to meet local needs.

 Greater credibility and transparency in elections, ensuring that local governments are led by the
people's choice.

 Strengthened accountability mechanisms through the Office of the Auditor General for Local
Governments.

 Empowered leadership with improved administrative autonomy to implement impactful policies.

 UNDERSTANDING FINANCIAL AUTONOMY

Definition:

Financial autonomy refers to the ability of local governments to generate, allocate, and manage
their financial resources independently, within legal frameworks. Local government financial autonomy
is a critical component of effective governance. It empowers local governments to make independent decisions
about their financial affairs, leading to improved service delivery, economic development, and overall
community well-being. This paper delves into the key principles of financial autonomy, examining its potential
benefits and challenges, and exploring opportunities for growth, innovation, and resource management.

Importance: Why financial autonomy matters for local governance

 Promotes self-reliance and innovation.
 Reduces over-dependence on federal and state allocations.
 Strengthens grassroots development.
 LEGAL AND FISCAL FINANCIAL AUTONOMY

• Legal financial autonomy involves the statutory powers granted to local governments to generate
and manage their revenues. This includes the authority to levy taxes, fees, and charges, as well as
to borrow funds.
• Fiscal financial autonomy, on the other hand, pertains to the actual financial independence of local
governments, including their ability to make budgetary decisions and allocate resources effectively.
 LEGAL AND FISCAL FINANCIAL AUTONOMY

 Legal Autonomy:
o Statutory powers for revenue generation
o Authority to levy taxes, fees, and charges
o Borrowing powers

 Fiscal Autonomy:
o Financial independence in budgetary decisions
o Effective resource allocation
 KEY ASPECTS INCLUDE:

 Revenue Generation: Local governments must have the legal authority to generate their own
revenues through various means such as property taxes, business licenses, and service fees.

 Expenditure Control: Autonomy in deciding how to allocate and spend financial resources is
essential for addressing local priorities and needs.

 Borrowing Powers: The ability to borrow funds for capital projects can significantly enhance local
governments’ capacity to invest in infrastructure and development projects.
 BENEFITS OF FINANCIAL AUTONOMY

Improved Service Delivery: Empowered decision-making tailored to local

needs. Enhanced infrastructure development in health, education, and
agriculture.
Strengthened Accountability: Direct management of funds fosters
transparency. Easier monitoring of project outcomes by local stakeholders.
Economic Development: Opportunity to stimulate local economies
through resource optimization. Increased attractiveness for investment
and partnerships.
 OTHER BENEFITS

 Financial Opportunities: Expansion of Internally Generated Revenue (IGR): (Property taxes,

agricultural levies, and tourism promotion. & Digital platforms to streamline tax collection and
reduce revenue leakages. Increased access to grants and partnerships.
 Administrative Opportunities: Streamlined decision-making and priority-setting based on local
needs. Recruitment and training of competent personnel through the State Local Government
Service Commission.
 Political Opportunities: Credible elections, fostering greater trust and participation by citizens.
Emergence of independent candidates, providing alternative leadership choices.
 Innovation and Flexibility: Autonomous local governments are better positioned to innovate
and implement tailored solutions to local problems.
 CHALLENGES OF FINANCIAL AUTONOMY

 Political Interference:
 Resistance from higher tiers of government in releasing funds.
 Overlap of responsibilities leading to conflicts.

 Resource Inequalities:
 Economic disparity among local governments, affecting capacity.
 Unequal distribution of resources and opportunities.

 Capacity constraint and Governance:

 Limited technical know-how in financial management.
 Corruption and mismanagement of funds.
 OPPORTUNITIES FOR GROWTH, INNOVATION, AND RESOURCE MANAGEMENT

 Innovative Financing Mechanisms: Exploring innovative financing mechanisms, such as public-

private partnerships and impact investing, can help local governments secure additional resources.

 Public-Private Partnerships (PPPs):

 Infrastructure development in roads, markets, and housing.

 Collaborative waste management and renewable energy projects.

 Capacity Building:

 Establishment of local governance institutes for leadership and financial training.

 Partnering with international organizations for technical support.

 OPPORTUNITIES FOR RESOURCE MANAGEMENT

 Strengthening Revenue Generation: Local governments can enhance their revenue generation capacity by
improving tax collection systems, diversifying revenue sources, and promoting economic development.

 Expanding Revenue Sources:

 Property taxes, agricultural levies, and local tourism.

 Harnessing Kaduna's abundant agricultural and mineral resources.

 Embracing Technology:

 Digital platforms for revenue collection and budgeting.

 E-governance to foster transparency and citizen engagement.

 OPPORTUNITIES FOR RESOURCE MANAGEMENT

 Efficient Resource Management: Implementing effective financial management systems,

including budgeting, accounting, and procurement procedures, can optimize resource
utilization.

 Capacity Building: Investing in capacity building programs for local government officials
can improve their skills and knowledge in financial management, planning, and policy
development.

 Intergovernmental Cooperation: Fostering collaboration between different levels of

government can help address shared challenges and leverage resources more effectively.
 ACTION PLAN FOR NEWLY ELECTED CHAIRMEN

 Immediate Steps:
 Conduct an audit of existing local government finances (Evaluation and Straitening of the internal control processes).

 Identify key revenue opportunities in your jurisdiction.

 Mid-Term Goals:
 Develop a strategic financial plan with clear priorities.

 Strengthen collaboration with state agencies to address resource gaps.

 Long-Term Vision:
 Advocate for constitutional reforms that empower local governments.

 Foster a culture of accountability and inclusivity in governance.

•
 ACTION PLAN
1. Implement Financial Reforms: Develop a transparent budgeting and expenditure framework.
Strengthen IGR systems to reduce dependency on federal allocations.

2. Leverage Administrative Autonomy: Prioritize local development projects aligned with community
needs. Partner with local stakeholders and private organizations to drive innovation.

3. Promote Transparency and Accountability: Collaborate with the Office of the Auditor General for
Local Governments. Foster community involvement in budget tracking and project monitoring.

4. Prepare for Credible Elections: Engage with INEC to understand new electoral processes. Educate
constituents on their rights and responsibilities in a more transparent electoral system.
 CONCLUSION

• Financial autonomy is not just a concept but a pathway to transformative governance. As

local government chairmen, you have the opportunity to lead with innovation, integrity,
and vision. By harnessing the principles of financial autonomy, you can improve the
quality of life for your constituents and set a benchmark for effective governance in
Kaduna State.
 Q&A AND DISCUSSION

Let us engage in an open discussion about your unique challenges and how we can collectively
address them. Together, we can create actionable strategies for a financially autonomous and
prosperous Kaduna State.
COLLABORATION, LEADERSHIP, AND
GOVERNANCE IN A VIBRANT SETTING
VISUALIZES OF LOCAL GOVERNMENT
ACTIVITIES IN NIGERIA