NFIU, govs at daggers drawn over councils’ funds
There are indications that key stakeholders will battle state governors to ensure full implementation of financial autonomy for local government councils in Nigeria. Recently, the Nigerian Financial Intelligence Unit (NFIU) barred banks from allowing transactions from State Joint Local Government Accounts (SJLGAs) without monies first reaching a particular local government account. A statement signed by […]
There are indications that key stakeholders will battle state governors to ensure full implementation of financial autonomy for local government councils in Nigeria.
Recently, the Nigerian Financial Intelligence Unit (NFIU) barred banks from allowing transactions from State Joint Local Government Accounts (SJLGAs) without monies first reaching a particular local government account.
A statement signed by the Acting Chief Media Analyst of the NFIU, Mr. Ahmed Dikko, said from June 1, 2019, any bank that flouts the directive would be sanctioned 100 per cent locally and internationally.
The NFIU had released a new set of guidelines to Central Bank of Nigeria (CBN) Economic and Financial Crimes Commission (EFCC) Independent Corrupt Practices Commission (ICPC) and Chief Executive Officers of all banks and financial institutions to reduce crime vulnerability created by cash withdrawals from local government funds throughout Nigeria.
The Unit said the joint account system was meant “as a collection account,” meaning that “the amount standing to the credit of the local government councils of a state shall be distributed among the local government councils of that state” and not for other purposes.
“Cash withdrawal and transactions from State Joint Local Government Accounts poses biggest corruption, money laundering and security threats at the grassroots levels,” the statement stated.
The Unit also placed a cap on the cumulative cash withdrawal of N500, 000 per day on local government accounts effective 1st June 2019. All other transactions must be electronic.
The NFIU said the latest move was to uphold the full provisions of section 162 (6) (8) of the 1999 Nigerian Constitution as amended.
“As far as the NFIU is concerned, the responsibility of the account as a collection account is fully reinstated,” the Unit said.
However, the development was not welcomed by state governors, who receive local government allocations and, in most cases, divert the funds for other purposes.
The Nigeria Governors’ Forum (NGF) quickly petitioned President Muhammadu Buhari, for the NFIU to stay action on the new guidelines meant to grant financial autonomy to local governments.
The out-going Chairman of NGF, who is also the Governor of Zamfara State, Abdulaziz Yari, signed the letter dated May 15.
In the letter, the state governors accused the NFIU of attempting to dabble into a matter that was beyond its mandate.
The governors told the president that the NFIU was “stoking mischief and also deliberately seeking to cause disaffection, chaos and overheat the polity.”
The governors contended that Section 7 (6) (a) and (b) of the Constitution conferred on the National Assembly (NASS) and the State Houses of Assembly, the powers to make provisions for statutory allocation of public revenue to local councils in the Federation and within the State, respectively.
They stated also that Section 162 (6) of the Constitution expressly provides for the creation of the State Joint Local Government Account (SJLGA) into which shall be paid all allocations to the Local Government Councils of the State from the Federation Account and from the Government of the State.
They also argued that “Section 162 (7) of the Constitution goes on to place on the NASS the power to prescribe the terms and manners in which funds from the SJLGA may be disbursed and in Subsection (8), the Constitution empowers the State House of Assembly to prescribe the manner in which the amount standing to the credit of the local councils in the State shall be distributed.”
The governor said that nothing in the NFIU Act 2018 gave the unit the powers that it sought to exercise in the recently released guidelines.
Sequel to the governors’ petition to the president, the NFIU released another statement reiterating that its position that the 1st of June, 2019, is the effective date of the guidelines to all financial institutions and public officials on the local government funds stands.
The second statement, also signed by Dikko, stated that the Unit understood the position of the 1999 constitution that no debit is allowed on any local government funds unless and until the funds are credited to and reach the bank accounts of a local government in any state of the federation.
“We observed isolated comments to the contrary in the past few days which in our assessment only amounted to wilful misinterpretation of the 1999 constitution and therefore, of no consequences to the operations of the entire financial system.
“The provision of the guidelines to the financial institutions was also on account of legitimate powers provided by the NFIU Act 2018 and any violations of the said guidelines will be sanctioned appropriately,” the statement stated.
In a swift reaction in support of the NFIU’s new policy, the National Union of Local Government Employees (NULGE) petitioned the president and asked him to disregard the objections of state governors and support full implementation.
The letter dated May 22, 2019, and signed by the President of NULGE, Comrade Khaleel Ibrahim, stated that local government funds sent to the joint state-local government account have been subjected to “the most unimaginable abuse by state governors across the federation.”
The local government employees told the president that the governors almost without exception have since 2003 turned this account into a source of ‘slush fund’, from which they routinely withdraw funds without any form of accountability or restraint.
“The guideline from the NFIU is a bold step in the right direction to end the unconscionable financial recklessness by governors feasting on funds meant for the 774 local government councils in the country,” they said.
Meanwhile, Civil Society Organisations (CSO) and Non-Governmental Organisations (NGOs) have also backed the new guidelines.
The Chief Executive and Founder of Connected Development (CODE), an anti-corruption Civil Society Organisation, Hamzat Lawal, said that the guidelines of NFIU would end diversion of local government funds by state governors.
Lawal said the policy would cater for the welfare of the people at the grassroots level who are marginalised because funds meant for the development of their communities were diverted.
The anti-graft crusader said for years, Federal and State Governments have maintained great influence and control over local governments, leaving room for embezzlement, mismanagement and financial leakages, denying Local Governments the chance to make significant development impact and bring governance closer to the people at the grassroots.
He said LGAs are entitled to a statutory allocation of national revenue for carrying out specific functions in response to local needs, but the Nigerian constitution gives the state governments power to handle issues hampering on governance at the local level.
Lawal said the NFIU policy gives the 9th National Assembly an opportunity to make a historic mark in Nigeria’s democracy by passing the law that enhances Local Government autonomy.
CODE’s boss further added that any person or government against Local Government autonomy is an enemy of democracy and is ultimately against the economic development of Nigeria as the NFIU guideline will break the cycle of diverted funds to promote terrorist activities in fragile communities and people can better hold LGA chiefs accountable for local government development projects.
Meanwhile, the Senate also recently threw its weight behind the NFIU over the financial guidelines to secure local government funds from state governors.
Senator Sabi Abdullahi (Niger-APC) presented a motion on it, urging other senators to support the new guidelines, which was prompted by threats by international financial watchdogs to sanction Nigeria because of financial abuse.
Senator Abdullahi observed that the NFIU guidelines would reinforce the existence of local governments as independent governments established by the Constitution at the grassroots level with sovereign and elected officials
“The Senate further agrees that the NFlU guidelines do not serve any purpose other than freeing the Financial System from being flooded with cash which criminals use to escape transparency, accountability, and criminal investigation,” he said.