For the records: Towards True Fiscal Federalism: Restructuring Nigeria’s Federal Architecture for Sustainable Democracy and Development

Presentation by Professor Abigail Ogwezzy-Ndisika at as a panelist at 7th annual lecture of Penpushing Media with the theme: Reworking Nigeria’s Federalism, Perspectives to Restructuring: The Future on Fiscal Federalism” held at Olusegun Obasanjo Presidential Library, Abeokuta, Ogun State on Thursday, July 31, 2025

Preamble

Good morning distinguished Chairman, our keynote speaker, esteemed members of the high table, respected panelists, media professionals, esteemed guests, fellow Nigerians, ladies and gentlemen gathered here at the illustrious Olusegun Obasanjo Presidential Library.

It is both an honour and a responsibility to join you at the 7th Annual Penpushing Media Lecture under the timely and crucial theme: Reworking Nigeria’s Federalism, Perspectives to Restructuring: The Future of Fiscal Federalism.

Today, we dissect a fundamental question that continues to determine the fate of our Republic: What kind of federalism do we truly operate; and what kind must we now urgently restructure to guarantee justice, stability and prosperity for all Nigerians? Let me remind us that the very fabric of our nation, its progress and its stability hinge significantly on how we, as a collective, address the intricacies of our federal system. So, today’s discourse is not just another policy debate; it is a clarion call to recalibrate the very foundation of Nigeria’s federal system.

Introduction

For decades, the discourse on Nigeria’s federalism has been punctuated by calls for a return to what many term “true federalism.” This sentiment resonates deeply within the national consciousness, finding consistent voice in platforms like The Guardian Nigeria newspaper’s editorial series, aptly titled “True Federalism is the Answer.”

These editorials have consistently championed the notion that a truly federal system is not merely an administrative arrangement but a fundamental prerequisite for effective governance, equitable resource distribution and sustainable national development. Furthermore, as recent developments such as the landmark Supreme Court judgment on Local Government Autonomy crystallise the legal landscape, we stand at a major crossroad where intellectual rigour must meet political will and pragmatic reforms.

Given that, there are no magic bullet solutions to “…The Future of Fiscal Federalism” in Nigeria; my perspective, which I titled “Towards True Fiscal Federalism: Restructuring Nigeria’s Federal Architecture for Sustainable Democracy and Development” I make a few propositions as heuristics; and present some actionable ideas –

(1)A Call for Restructuring: Beyond Semantics to Substance because (a) restructuring is not a slogan. It is a clarion call to redesign the nation’s foundational systems which compels us to explore transformative restructuring options: (i) fiscal federalism reinvented; (ii) resource control and derivation principle; (iii) intergovernmental fiscal Transfer; and (iv) institutional capacity and accountability.

As such, we must: re-negotiate revenue sharing to reflect contributions and responsibilities … I believe the tax reform is somewhat in that direction, but it is just a drop in the ocean; (b) abolish federal overreach in education and agriculture because these are areas best managed locally; (c) reinvigorate local governments with constitutionally guaranteed elections and independent funding; (d) institutionalize fiscal transparency across all levels through enforceable audit regimes and citizen oversight.

(2) Policy Proposals: Pathways to Fiscal Justice – (a) Constitutional amendment to grant states powers over taxation and rail transport; (b) state fiscal responsibility laws should be harmonised with national targets to curb unsustainable borrowing; (c) resource control frameworks with environmental safeguards must be enacted for extractive regions; and (d) the zonal development commissions should stimulate regional economies by focusing on areas of comparative advantage.

(3) The Role of the Media and Civil Society – as watchdogs and nation-builders in agenda-setting for structural justice.

The State of Nigerian Federalism: Diagnosis and Historical Context

Nigeria, since independence, has remained shackled in a constitutional contradiction. While we claim to operate a federal structure, our actual practice is a centralised unitary system masquerading as federalism. Thus, Nigeria’s federal structure, since independence, has oscillated between centralisation and calls for decentralisation.

The post-colonial dream envisioned a federation balancing unity in diversity, yet decades of political maneuvering have led to a paradox of federalism characterized by centralized fiscal powers and attenuated local governance. This structural dysfunction has not only paralysed sub-national governance but rendered local governments, arguably the most critical for grassroots development, administratively impotent. The Guardian Nigeria’s editorial series “True Federalism is the Answer” captures this enduring tension by highlighting the disconnect between resource control, revenue allocation and local autonomy.

The Quest for True Federalism: A Guardian Perspective

The Guardian’s editorial series has passionately argued that true federalism is the panacea for many of Nigeria’s systemic challenges, particularly in areas like security and economic development. They posit that a federation is uniquely suited for managing Nigeria’s inherent diversity, guaranteeing justice, fairness and equity, while simultaneously strengthening democracy and fostering peace and development. The core of their advocacy lies in the imperative of restructuring, advocating for the reallocation of critical functions and resources from the overburdened center to more responsive and accountable federating units. This includes vital areas such as internal security, local government administration, primary and secondary education, electricity, railway and even the exploitation of mineral resources.

The Guardian’s position also highlights the historical deviation from a functional federal system, noting that the “pseudo federalism” foisted upon Nigeria since 1966 has stifled innovative responses to challenges and fostered an over-centralised system. They advocate for states to have the autonomy to determine their local government structures, rather than having them dictated by a national constitution. While this perspective emphasizes the need for significant devolution, it is also important to acknowledge counter-arguments that suggest Nigeria, by its very nature, already practices a form of fiscal federalism and that criticisms of “feeding bottle federalism” may not fully capture the intricacies of inter-governmental fiscal relations in a federal system.

Local Government Autonomy: A Landmark Judgment and its Implications

A major development in the ongoing quest for true federalism and fiscal autonomy came with the Supreme Court’s landmark judgment on July 11, 2024, which affirmed the financial and administrative independence of the 774 local government councils in Nigeria. This judgment, widely lauded as a significant milestone, grants local governments the freedom to manage their own funds, receive allocations directly from the Federation Account and operate without undue interference from state governments. This historic ruling reaffirmed the constitutional autonomy of local governments, outlawing the long-standing illegal practice of joint state-local government accounts.

The apex court’s ruling unequivocally condemned the unconstitutional practice of state governors dissolving democratically elected local councils and establishing illegal caretaker committees. It further declared it illegal and unconstitutional for governors to withhold funds allocated to local government areas in their states. This judgment represents a powerful judicial intervention aimed at decentralizing power and strengthening governance at the grassroots level, potentially leading to improved service delivery in essential sectors like healthcare, education and sanitation.

Therefore, the Supreme Court’s recent judgement affirming Local Government Autonomy is a watershed moment as it recognizes local governments not merely as administrative appendages but as constitutional entities entitled to independent fiscal and political powers. This decision mandates the release of funds directly to local governments, emancipating them from state control and promising enhanced accountability, service delivery and citizen participation; and presents a glimmer of hope. This ruling is a thunderclap across Nigeria’s federal terrain; and  it should, if faithfully implemented, return power and fiscal autonomy to the grassroots, rejuvenating development from the bottom up.

However, despite the clarity of the Supreme Court’s verdict, its full implementation has faced significant challenges. Reports indicate widespread confusion and resistance from state governors, leading to stalled enforcement and continued debates over constitutional amendments. The Independent Corrupt Practices and Other Related Offences Commission (ICPC) has, however, issued a stern warning, affirming its commitment to holding accountable any official who defies the Supreme Court’s ruling, signaling a determined effort to ensure compliance.

So, while the judgment is a crucial step, its transformation into tangible autonomy for local governments will require sustained political will and collaborative effort. As a result, autonomy must be matched by capacity building, transparency and robust oversight mechanisms. These are the imperatives of local government autonomy because without these, fiscal autonomy becomes fiscal irresponsibility or mismanagement; and government archives and policy briefs make it clear that fiscal decentralization without institutional capacity is a recipe for chaos rather than progress.

Perspectives on Restructuring: Towards a New Fiscal Architecture

“Reworking Nigeria’s Federalism” compels us to explore transformative restructuring options: (i) fiscal federalism reinvented; (ii) resource control and derivation principle; (iii) intergovernmental fiscal transfer; and (iv) institutional capacity and accountability.

Fiscal Federalism: Challenges and Pathways to Restructuring: The concept of fiscal federalism, which governs the division of public revenue and financial relations among different levels of government, remains a cornerstone of the restructuring debate. In Nigeria, this arrangement has been fraught with challenges, including significant fiscal imbalances, an over-dependence of sub-national entities on the center and persistent agitations for resource control. Many argue that, the central government dominates revenue collection and allocation, restraining subnational governments’ fiscal independence and operational efficiency; and that, the existing revenue allocation formula is inequitable and stifles the financial independence of states and local governments.

This has stunted grassroots development, feeding into the cycle of under development and national disunity. They submit that the division of taxing powers and expenditure responsibilities among federal, state and local governments, remains underdeveloped.  The Guardian aptly calls it “a masterstroke of contradiction,” where the federal government accumulates more than 50% of national resources, while the 36 states and 774 local governments scramble for the rest.

Indeed it is a contradiction because the 1963 Republican Constitution had a more balanced fiscal arrangement, where 50% of natural resource revenues were retained by regions. Today, resource-producing states suffer degradation while receiving meager derivation, an economic injustice that fans the flames of agitation.

As a result, I submit that fiscal federalism is the missing link in national development; and propose fiscal federalism, where subnational units control their resources, pay taxes to the centre and compete on service delivery as the cornerstone of every viable federal system. Nigeria’s oil-dependent rentier model is not only unsustainable but fundamentally unjust.

A situation where states contribute nothing yet receive allocations fosters indolence, corruption and fiscal irresponsibility. The Guardian editorial series on “True Federalism” rightly noted that federalism is not about equal distribution of poverty but empowering constituent parts to unlock their unique potentials.

Proponents of restructuring advocate for a radical shift in this paradigm, proposing that states should be empowered to manage their own economies, generate their revenue and contribute an agreed-upon tax or royalty to the federal government, rather than solely relying on monthly allocations.

This sentiment is strongly echoed by regional blocs, such as the South-South governors, who consistently insist on proper fiscal federalism and resource control, viewing it as a crucial step towards rectifying historical injustices and fostering equitable development. They believe that this approach would curb the current system’s tendency to breed corruption and create a culture of dependency and unproductivity among state governments.

A truly robust fiscal federalism, they argue, would promote competitive productivity among states, with a clear and transparent system for revenue sharing and allocation. This call for a reinvention of fiscal federalism; and I propose a federal fiscal framework where revenue generation and expenditure responsibilities are equitably shared among federal, states and local governments. This includes revising the revenue allocation formula to incentivize local economic development while ensuring national cohesion.

Resource Control and Derivation Principle: We must revisit the derivation principle, granting resource-producing states and their local governments a greater share of revenues. This realignment will empower communities directly affected by resource extraction to reclaim agency over their destinies.

Intergovernmental Fiscal Transfers: A transparent and predictable mechanism for fiscal transfers, regulated by an independent agency, will guarantee regular funding flows to subnational governments. This will minimize political interference and foster prudent fiscal management.

Institutional Capacity and Accountability: Enhancing the capacity of local governments through training, technology adoption, and participatory budgeting is imperative. Strengthened institutions reduce corruption and increase citizen trust in government.

The Role of the Media and Civil Society: Agenda-Setting for Structural Justice

This platform, Penpushing Media, reminds us that the media is not a bystander. It must boldly interrogate political narratives, expose fiscal irresponsibility and champion equity. As watchdogs and nation-builders, media must amplify voices calling for urgent fiscal restructuring while holding leaders to account. So, as stakeholders in democratic engagement, the media, represented today by Penpushing Media and civil society must persist as watchdogs, educators and advocates.

The press should also remain at the fore in its education functions by demystifying fiscal federalism concepts and strenthening the office of the citizen and empowering Nigerians to hold all tiers of government accountable for implementing restructuring policies.

Perspectives to Restructuring for National Development: The Future Outlook of Federalism That Works

Achieving true federalism is not an abstract ideal but a practical necessity for sustainable democracy, social justice and inclusive development. Also, the call for restructuring, underscored by the Supreme Court ruling on local government autonomy and robust advocacy for true fiscal federalism, is simultaneously an opportunity and a challenge.

Hence, the path forward demands that we critically re-evaluate the constitutional provisions governing fiscal relations, aiming for a system that fosters self-sufficiency, accountability and competitive development among federating units. This includes revisiting the revenue allocation formula to ensure a more equitable distribution that empowers states and local governments to meet their constitutional responsibilities and address the unique needs of their communities. In addition, political will is paramount; for without it, even the most profound judgments and well-articulated policies will remain mere aspirations; and the ongoing challenges in implementing the local government autonomy judgment serve as a stark reminder of this reality.

Ultimately, a truly reworked Nigerian federalism, particularly on the fiscal front, promises to unleash the hidden potential of its diverse states, foster robust grassroots development and enhance overall national progress. It is a win-win situation for all stakeholders, paving the way for a more just, equitable and prosperous nation.

So, as Nigeria approaches yet another political crossroad, the future depends not merely on elections or constitutional court victories, but on restructuring our federation into a system that is just, equitable and efficient (a total structural realignment of the federation into a just, empowering and functional system).

The 2024 Supreme Court ruling on local government autonomy offers a constitutional springboard and offers a glimmer of hope. However, judgments alone do not build nations; citizen vigilance, media pressure and political courage do. So, without implementation and structural rebalancing, the Supreme Court ruling becomes another forgotten page in our legal history. Hence, the need for advocacy, civic pressure and media engagement to engineer political will for the actualisation of true federalism.

Conclusion

Nigeria’s federalism is at a defining moment. The consistent advocacy from media outlets like The Guardian, coupled with judicial interventions such as the Supreme Court’s judgment on local government autonomy, underscores a national consensus on the need for change. Albeit, the future of Nigeria’s federalism, particularly its fiscal dimensions, lies in a concerted effort to implement genuine restructuring. This necessitates a move beyond rhetorical commitment to a practical and enforceable devolution of powers and resources.

Charge to us All

Now, that the hour has come, it is time to choose: the status quo of decay or a reimagined federalism that empowers states, respects diversity and prioritises justice. So, let us harness this moment to forge a federal structure where resources, responsibilities and powers are balanced within a framework that respects Nigeria’s diversity and unity. True fiscal federalism is not just the answer; it is the pathway to the Nigeria we aspire to become.

Therefore, this is not the time for half-measures. It is the time to restructure or rupture. As a result, let this conversation today move from rhetoric to resolve…Let the conversation move beyond hotel conference halls and expert panels! Let it ripple into media space, classrooms, town halls, marketplaces and ballot boxes.

Let us all in this forum today send a bold message to every seat of power across Nigeria, that (i) we demand a federation that works; where states are not beggars, where local governments are not hostages and where resources flow not from patronage, but from productivity, innovation and fairness. (ii) to policymakers that their hesitation is a betrayal of national potential and history will judge those who had the chance to reform and chose comfort (iii) to the media: you must be more than observers.

Be fearless voices, relentless watchdogs and custodians of the people’s truth (iv) to the people: democracy is not a spectator sport. So, demand reforms; mobilize voices and refuse to be ruled by a broken system. Let us, together, rise…Reclaim the federation…Restructure the future.

Thank you for being here today; and for being part of this momentous occasion as we take this monumental step forward. Together, we are not just making history; we are shaping the future.

Thank you for your time and attention.

Let the conversation begin!

Professor Abigail Ogwezzy-Ndisika, PhD, MNAL, FNIPR, arpa

Chevening, ADM Erasmus+ and SUSI Scholar. Director, Institute of Continuing Education (ICE) &

Former Head Department of Mass Communication University of Lagos, Akoka-Yaba Lagos, Nigeria. Founder, Media Action and Development Foundation (MADE-F)

Tel: +234-8033346304

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