Can Local Governments Generate Revenue With Impunity?

Can Local Governments Generate Revenue With Impunity?


The lowest level of government – the Local Government – has traditionally been the weakest and poorest. Politically, they have historically been beholden to State Governments – notwithstanding their notional autonomy under Section 7(1) of the 1999 Constitution which declares that “the system of local government by democratically elected local government councils is, under this Constitution guaranteed, and accordingly, the Government of every State shall, ensure their existence under a law which provides for the establishment, structure, composition, finance and functions of such councils”.

Given their sheer ubiquity (they are 774, in all, under the Constitution – compared to 36 State Governments and the one Federal Government), it is obvious that local governments are, on paper, at least, the closest to the people – the man on the street. Such is their potential. Unfortunately, the reality has often belied their promise, with countless tales of local governments being emasculated (especially in financial terms) and at the beck and call of overbearing State Governments. This has prompted calls for the strengthening of their autonomy, through administrative and quasi-legislative intervention. An instance of the latter was the NFIU Enforcement and Guidelines to reduce Crime Vulnerabilities Caused by Cash Withdrawal from Local Government Funds throughout Nigeria, issued by the Nigeria Financial Intelligence Unit in 2019.

All the 36 States (through their Attorneys-General) challenged this move at the Federal High Court, in Suit no FHC/ABJ/CS/563/2019, coram: Inyang Ekwo, J). In a ruling delivered on the 23rd of May, 2022, the court dismissed the suit, holding that the NFIU Guidelines were not inconsistent with the constitutional requirement that the allocation of the funds earmarked for a local government from the Federation Account, should be paid into the State Joint Local Government Account from which it would be distributed among the local government councils in the manner prescribed by the State House of Assembly. 

The Court further held that the Guidelines were consistent with 4th Schedule to the Constitution, which lays down the functions of a local government. I believe this particular feature of a Local Government’s powers is often overlooked, and the full scope and shape of its outlines and contours are yet to be fully grasped and understood. To the extent that the Constitution authorises the State House of Assembly to empower local governments in terms of the subject-matter of the 4th Schedule thereto, are those provisions self-executing or not? Given the prevailing practice of local governments of demanding various kinds of levies, taxes and rates from hapless Nigerians (and non-Nigerians, too) supposedly on the strength of the provisions of the 4th Schedule to the Constitution, is that practice legitimate in respect of every single subject-matter spelt out therein, or should it be limited to such activities in respect of which that power is specifically donated? Does the Taxes and Levies (Approved List for Collection) Act, 1998 (specifically, Part III of its Schedule which spells out the list of taxes to be collected by Local Governments) make any difference, in terms of the legitimacy or validity of such practices? I believe these questions are pertinent and ought to be addressed, in order to clear the fog which I believe, presently beclouds the powers of local governments vis-a-vis their said on-going practice. 

What are the Taxing Powers of Local Governments?

This question is at the heart of the issue, which I am addressing in this piece. In order to get a full picture of its context, it is imperative to set out the entire provisions of Item 1 of the 4th Schedule of the Constitution, vis:

“The main functions of a local government council are as follows:

1. (a) the consideration and the making of recommendations to State commission on economic planning or any similar body on – 

(i) the economic development of the State, particularly in so far as the areas of authority of the council and of the State are affected, and 

(ii) proposals made by the said commission or body;

 (b) collection of rates, radio and television licences; 

(c) establishment and maintenance of cemeteries, burial grounds and homes for the destitute or infirm; 

(d) licensing of bicycles, trucks (other than mechanically propelled trucks), canoes, wheel barrows and carts; 

(e) establishment, maintenance and regulation of slaughter houses, slaughter slabs, markets, motor parks and public conveniences; 

(f) construction and maintenance of roads, streets, street lightings, drains and other public highways, parks, gardens, open spaces, or such public facilities as may be prescribed from time to time by the House of Assembly of a State;

 (g) naming of roads and streets and numbering of houses; 

(h) provision and maintenance of public conveniences, sewage and refuse disposal; 

(i) registration of all births, deaths and marriages; 

(j) assessment of privately owned houses or tenements for the purpose of levying such rates as may be prescribed by the House of Assembly of a State; and 

(k) control and regulation of – (i) out-door advertising and hoarding, 

(ii) movement and keeping of pets of all description, 

(iii) shops and kiosks, 

(iv) restaurants, bakeries and other places for sale of food to the public, 

(v) laundries, and 

(vi) licensing, regulation and control of the sale of liquor. 

A cursory look at the above provisions will show that sub-items 1(b) and (j) specifically empower local governments to “collect rates, (in respect of) radio and televisions” and to “assess privately-owned houses and tenements for the purposes of levying such rates as may be prescribed by the House of Assembly of a State”. No such power is conferred in respect of the other sub-items of Item 1 (or even Item 2) of the Schedule. It is trite law that the express mention of one thing in a statute, implies the exclusion of all other things which might otherwise be included: expressio unius est exclusio alterius. I believe this means that, contrary to the prevailing practice in virtually all the Local Governments across the country, none of them is competent or constitutionally-authorised or demand the payment of fees or taxes and levies for such things as out-door advertising, shops and kiosks, public convenience, sewage/refuse disposal, restaurants, bakeries, laundries, etc.

I believe that such a construction is demanded by the contra proferentum rule of statutory interpretation which is applicable to statutes (or constitutional provisions) which encroach on a citizen’s rights, whether in relation to his/her person or property. I believe the provisions of the 4th Schedule to the Constitution, are classic examples of such statutes. As a rule, such provisions should be strictly interpreted in favour of the citizen (or subject), and against the interest of the law-maker. This means that the statute should be interpreted so as to respect such rights and, if there is any ambiguity (which I humbly submit is the case with respect to the revenue-generating powers of local governments vis-à-vis the subject- matter of Item 1 of the 4th Schedule to the Constitution), the construction which favours the freedom of the individual (or subject) should be adopted. See EZE v GOVERNOR OF ABIA STATE (2010) 15 NWLR Pt. 1216 pg.323; OKOTIE-EBOH v MANAGER (2004) 18 NWLR Pt. 905 pg. 242; and AFOLABI v GOVERNOR OF OYO STATE (1985) 2 NWLR Pt. 9 pg.734 at 753H, per Aniagolu, JSC


Apart from collection of rates for radio and television licences and assessment of privately-owned houses and tenements for the purpose of levying such rates as may be prescribed by the House of Assembly of a State, I humbly submit that no local government can validly demand any fee, tax or levy in respect of any other matter specified in the 4th Schedule to the Constitution. Such a demand would be ultra vires, null and void – even if it was purportedly made pursuant to Part III of the Schedule to the Taxes and Levies (Approved List for Collection) Act (formerly Decree) of 1998. That provision is ultra vires the National Assembly because, by virtue of Section 7(5) (read along with Item 9 of the Concurrent Legislative List) of the Constitution, only State Houses of Assembly can validly empower local governments to collect taxes; the National Assembly can only empower State Governments (“or other authority of a State”, such as State Internal Revenue Boards) to collect taxes or duty on capital gains, incomes or profits on persons other than companies or documents/transactions by way of stamp duties (see Item 7 of the Concurrent Legislative List of the Constitution).

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