States control LG funds Nigeria as N1.46tn flows through FAAC despite Supreme Court ruling on local government autonomy

State governments retained control over N1.46tn allocated to local government councils in the first quarter of 2026, despite a landmark ruling by the Supreme Court of Nigeria granting financial autonomy to the third tier of government.

Also read: Nigeria Hits N6 Trillion FAAC Record in Q3 2025

Data compiled from the Federation Account Allocation Committee, the Office of the Accountant-General of the Federation, and the National Bureau of Statistics show that the funds, derived from revenues earned between January and March 2026, were distributed through the existing FAAC structure rather than paid directly to councils.

The states control LG funds Nigeria trend persists nearly two years after the July 11, 2024 judgment, in which the apex court ruled that state governments lack constitutional authority to retain or manage funds meant for local government councils.

Despite the ruling, implementation of direct payments to Nigeria’s 774 local government areas has remained stalled, with states continuing to play a dominant role in managing council finances.

The figures show that councils received N537.88bn from January 2026 revenue shared in February, followed by N456.47bn from February revenue shared in March, and N468.83bn from March revenue shared in April.

On a year-on-year basis, the allocations represent a 19.05 per cent increase from the N1.23tn received during the same period in 2025, signalling improved inflows despite structural concerns.

However, month-on-month data reveals volatility, with allocations dropping sharply between February and March before recording a modest rebound in April, reflecting fluctuations in federation revenues, particularly from statutory sources and Value Added Tax.

Across all tiers, total distributable revenue stood at N6.97tn in the first quarter of 2026, down from N7.40tn in the corresponding period of 2025.

Despite the overall decline, the Federal Government of Nigeria received N2.04tn, while state governments took N2.10tn, both recording significant increases compared with the previous year.

In contrast, oil-producing states saw derivation revenue fall to N321.90bn, down by 18.29 per cent from N393.93bn in 2025.

Local governments accounted for about 20.99 per cent of the total allocation, but analysts warn that increased funding may not translate into improved grassroots development without full financial autonomy.

Under the existing system, allocations are paid into State Joint Local Government Accounts, a structure long criticised for enabling state control over council funds.

The Supreme Court ruling was expected to dismantle this arrangement, but delays have raised concerns that local governments may continue to receive allocations in principle while lacking real spending authority.

The implications are significant, as councils are responsible for critical services including primary healthcare, rural roads, sanitation, and local infrastructure.

The Citizens Centre for Integrated Development and Social Rights has called for stronger accountability in implementing financial autonomy, warning that without reform, corruption risks and service delivery gaps could persist.

Executive Director of the Centre, Emeka Ononamadu, said improved autonomy would strengthen local economies, reduce insecurity, and enhance governance outcomes.

Also read: FAAC Allocates N2.094 Trillion for October 2025 to All Tiers of Government

The states control LG funds Nigeria issue remains a critical test of institutional reform, as stakeholders continue to push for full enforcement of the court’s decision and genuine decentralisation of fiscal power.