LG Funds: States Lose As Court Okays Federal Govt, NFIU’s Guidelines

Justice Inyang Ekwo of the Federal High Court sitting in Abuja has okayed the position of federal government and Nigerian Financial Intelligence Unit (NFIU) on local government joint accounts nationwide.

NFIU had in June 2019 issued guidelines aimed at curbing crime vulnerabilities created by cash withdrawals from local government accounts by various state governments.

The Nigerian Governor’ Forum (NGF) had dragged the federal government and NFIU to court for interfering with state governments’ powers to initiate transactions on local government joint accounts citing provisions of the 1999 constitution.

The NFIU issued guidelines on money laundering risk and vulnerabilities, advising all banks not to honour transactions from joint accounts. It directed that the States/Local Governments Joint Accounts should be used only for receiving funds and subsequently transferring them to local government accounts only.

The guidelines also reduced cash withdrawal from local government accounts to N500,000 daily.

In 2019, the NGF approached the Federal High Court headed by justice John Tsoho to stop the NFIU’s guidelines from being implemented, but the judge dismissed the request.

After another suit by the governors before the Federal High Court in Uyo, Akwa Ibom State, it refused to restrain the NFIU from pushing through with its guidelines.

The guideline mandates that state and local government joint accounts be operated solely as transit accounts from which funds will be distributed directly to the accounts of local governments. Under the guidelines, financial institutions were directed to ensure full implementation with effect from June 1, 2019.

However, the attorneys-general of the 36 states moved to prohibit the NFIU from enforcing its rules on local government accounts nationwide. In the suit, the attorney-general of the federation (AGF), the NFIU and the Nigeria Union of Local Government Employees were defendants.

Last March, the National Assembly passed a bill abolishing the state/local government joint account and replacing it with a special account where the councils’ allocations from the federation account and state government are to be paid.

In the bill, each council was to create and maintain its own special account to be called the Local Government Allocation Account into which all the allocations will be paid.

It also mandated each state to pay to local government councils in its area of jurisdiction such proportion of its internally generated revenue on such terms and in such manner as may be prescribed by the House of Assembly.

However, since the bill seeks to amend a constitutional provision, it has to receive the approval of at least 24 states’ Houses of Assembly.

The NFIU issued the guidelines in May 2019 to guard against the overbearing influence of state governments in the administration of local governments’ monthly allocations.

The guidelines also reduced cash withdrawal from local government accounts to N500,000 daily.

But the plaintiffs (state governments) had argued that the guidelines were in breach of the financial autonomy of the various states as enshrine+d in the Nigerian constitution.

In a reaction to the judgement, NFIU vowed to provide details of transactions involving local government funds to the anti-corruption agencies

The director/CEO of the NFIU, Modibbo Tukur, described the judge’s decision as excellent.

In a statement released by the NFIU’s chief media analyst, Ahmed Dikko, the agency’s boss declared that all transactions on local government monies would be made known to the anti-corruption agencies.

He said the federal government is always prepared to protect states and local governments by providing cash for their governance responsibilities. Tukur stated that local governments can now decide on funding that can be used to improve local security.

“All transactions on local government monies would be revealed to the ICPC and the EFCC 100 per cent and will be reported continually,” the NFIU chief said.


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