The debate over whether powerful State Governors should be allowed to tamper with the finances of local governments, has been raging for a while.
Pulse Explainer: Here's the latest on the battle between State Governors and NFIU over Local Government autonomy
Would local governments have access to their own monies from June 1, 2019 as declared by the NFIU? This article provides some useful answers.
Let’s take a look at what has been said and where we are at the moment.
First, a brief recap
Earlier this month, the Nigerian Financial Intelligence Unit (NFIU) asked state governors not to touch the revenues disbursed to the local governments every month from the federation account.
Nigeria’s revenue sharing formula is as follows: every month, the federal government takes the lion’s share of 52.68 per cent from the federation account. The 36 states take 26.72 per cent, while the balance of 20.60 per cent is handed to the 774 local governments in the country.
Sometimes, local governments don’t get to receive their 20.60 percent share. State governors seize this percentage and if local governments are lucky, they get a fraction as decided by the all-powerful state governors.
It is important to state here that the Nigerian constitution allows governors to receive monies from the center on behalf of the local governments and to decide what is disbursed to local governments thereafter.
But local governments have been complaining for years that state governors have been treating the third tier so badly.
There has also been so much noise about local governments being left to die because they have been starved of funds by the governors.
This noise led the NFIU to do what you are about to read next.
What did the NFIU do?
The NFIU declared that effective from June 1, 2019, it would be illegal for state governors to tamper with the allocations of local governments.
The NFIU banned banks, governors, financial institutions, public officers and other stakeholders from tampering with the statutory allocations of local governments beginning from next month.
Some parts of the NFIU statement reads as follows: “having realized through analysis that cash withdrawal and transactions of the State, Joint Local “Government Accounts (SJLGA), poses biggest corruption, money laundering and security threats at the grassroots levels and to the entire financial system and the country as a whole, the NFIU decided to uphold the full provisions of section 162 (6) (8)of the 1999 Nigerian Constitution as amended which designated state Joint Local Government Account into which shall be paid allocations to the local government councils of the state from the federation account and from the government of the state.
“The amount standing to the credit of local government councils of a state shall be distributed among the local government councils of that state and not for other purposes".
The NFIU also warned banks to adhere strictly to the directive or face sanction.
The NFIU adds that “in addition, a provision is also made to the effect that there shall be no cash withdrawal from any local government for a cumulative amount exceeding N500,000:00 per day. Any other transaction must be done through valid Cheques or electronic funds transfer”.
How did state governors take this directive?
Not very well, like everyone expected.
State governors have written a petition to President Muhammadu Buhari, asking the NFIU to mind its business and not to dabble in matters between states and local governments.
In a letter signed by Chairman of the Nigeria Governors’ Forum and Governor of Zamfara State, Abdulaziz Yari, the governors say they were left very dismayed by the NFIU’s directive.
The governors accuse the NFIU of “stoking mischief and also deliberately seeking to cause disaffection, chaos and overheat the polity”.
Accusing the NFIU of acting beyond its powers, the governors say the directive from the NFIU was not only illegal, but was also an attempt by the NFIU to show total disregard for the Constitution of the Federal Republic of Nigeria (1999) as amended.
They said 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 the local councils in the federation and within the states.
“Similarly, 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.
“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 governors' letter read.
The governors say that nothing in the NFIU Act 2018 gave the unit the powers to dabble into finances of states and local governments
The governors say: “The so-called Guidelines are in our view an exercise in mischief-stoking and one calculated to cause chaos and overheat the polity. The guidelines have nine (9) provisions including two (2) sections covering sanction, penalties. Powers that they clearly do not possess.
“The NFIU in proposing far reaching guidelines of this nature ought to have consulted widely and carried all stakeholders along.”
According to the governors, the NFIU is the “Nigerian arm of the global Financial Intelligence Units (FIUs) once domiciled within the EFCC but now for the purpose of institutional location domiciled in the Central Bank of Nigeria.
“This means the NFIU is only mandated to trace or track laundered money that finds its way into terrorism financing and report such to the nation’s security agencies.”
What happens now?
Some states like Lagos, say they have local governments and Local Council Development Authorities (LCDAs) which they fund from state coffers.
As it turns out, the monthly revenue sharing meetings in Abuja do not recognize LCDAs. Whatever money is shared in Abuja doesn't take the LCDAs into cognizance because LCDAs are creations of states.
These states with LCDAs have been asking: 'What money would we use to take care of LCDAs if monies go straight to accounts of only the local governments the federation and constitution recognizes?'
Like I said in an earlier explainer piece, this matter would end up in court. And it may take a while before it is resolved.
May the party with the best case win.
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