On May 7, the Nigerian Financial Intelligence Unit, NFIU, released a guideline to reduce vulnerabilities created by cash withdrawals from local government funds throughout the country. The guideline amongst other things, seek to systematically restore LGA’s financial autonomy.

Since its release, the guideline has generated controversy among lawyers and other stakeholders over its constitutionality. In this edition, Vanguard Law and Human Rights sought the opinion of lawyers on the issue. Those who spoke are Dr Olisa Agbakoba, SAN, Mr Mike Ozekhome, SAN, Mrs Titilola Akinlanwo, SAN, Abiodun Owonikoko, SAN, Dr. Simeon Igbinedion, Mr Gbenga Ojo, Monday Ubani, Malachy Ugwummadu and Wale Ogunade.

By Innocent Anaba & Henry Ojelu

Dr Olisa Agbakoba, SAN

NFIU has technically no power to monitor and supervise local government funds but it is possible to stretch their mandate and say the interest is to keep an eye for money laundering and related financial misconduct. Whatever is the nature of power possessed by NFIU, local government funds are in the hands of unelected and often unaccountable people who have received trillions of Naira with absolutely nothing to show for it.

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I was compelled to file a suit at the Federal High Court to stop funding to local governments on grounds that they are not elected contrary to Section 7 of the Constitution. Unfortunately, I lost the case to make local governments accountable by first compelling state governments to organise elections at that level.

I see the work of NFIU as an extension of my case, and I am prepared to give the widest possible interpretation to NFIU work so they can monitor the huge fraud occurring at local governments who have failed to hold elections, in some cases up to 10 years ago.

Mr. Mike Ozekhome, SAN

By creating a “State Joint Local Government Account,” the Constitution completely puts the LGAs at the mercy of greedy and rampaging states. To underscore state’s  sovereignty over LGAs’ finances, section 162(7) sounds the death knell by providing that “each state shall pay to the Local Government Councils in its area of jurisdiction such proportion of its total revenue on such terms and in such manner as may be prescribed by the National Assembly.

Even when the amount finally grudgingly and tortuously wangles its way into the state, the House of Assembly of that state again ambushes the miserly remnants of funds as section 162(8) of the same Constitution laconically admonishes that ‘the amount standing to the credit of Local Government Councils of a State shall be distributed among the Local Government Councils of that state on such terms and in such manner as may be prescribed by the House of Assembly of the State.”

Such is the sorry state of affairs that one may be tempted to swallow the attractive bait of the NFIU to monitor Local Government Councils’ allocations. No matter how laudable such a policy directive may be, the truth is that it is patently illegal and unconstitutional. Section 1(1) and 1(3) jointly make such a step null and void and of no effect whatsoever, since it is a direct affront to the above clear provisions of the Constitution.

The answer is an immediate amendment of section 162 of the Constitution to grant the States the much needed autonomy of having direct access to federal allocations on first line charge like the Judiciary, so as to break their asphixiating umbilical cord from the apron strings of strangulating states. For now, the SFIU will be acting illegally and unconstitutionally to tamper with the mode and manner money is allocated to states and how the states distribute them. We operate a constitutional democracy where every step taken by government must enjoy constitutional imprimatur.

Mrs Titilola Akinlawon, SAN

The Nigerian Financial Intelligence Unit, by its 2019 guideline on local government funds purports to bar state governments from directly accessing funds in the State Joint Local Government Account. The paramount consideration is whether it has powers to do so. The Constitution of the Federal Republic of Nigeria 1999 (as amended) makes clear provisions for the financing of local government councils particularly in Sections 7(1), (6) and 162(3)-(8).

Section 162(6) provides for a State Joint Local Government Account into which all allocations to the Local Government Councils of the state from the Federation account and from the Government of the state are to be paid. Section 162(5) provides that the allocation of the amount standing to the credit of Local Government Councils is to be done on such terms and in such manner as may be prescribed by the National Assembly while Section 162(8) provides that the distribution of the amount standing to the credit of each local government of a state is to be done on such terms and in such manner as may be prescribed by the House of Assembly of the State.

What the NFIU now seeks to do by its guideline to wit, barring the State Governments from accessing funds which the Constitution grants them power not only to access but to distribute, is unconstitutional, their guidelines are Void to the extent of such inconsistency with the constitution.  More so, the law is trite that a body cannot act beyond the Act establishing it.  Sections 3 and 4 of The NFIU Act clearly outlines the powers and functions of NFIU which are restricted largely to collection, analysis and distribution of financial intelligence, advising agencies on prevention of money laundering, financing of terrorism and proliferation of weapons of mass destruction as well as monitoring suspicious accounts.

As seen from the provisions above, no powers are given to it to regulate the distribution of funds at any level of government. It is simply an intelligence gathering agency.  In conclusion, the NFIU guidelines are unconstitutional and ultra vires. Their powers as granted by their enabling Act.

Abiodun Owonikoko, SAN

What appears to have come out of the recent NFIU guideline is the seeming overreach by the NFIU. Effectively, an agency of the Federal Government like NFIU created by an Act of National Assembly is not competent to use regulatory power for enacting subsidiary legislation that derogates from constitutional powers vested in both State Government and its shared overriding oversight powers on operation of Local Government Councils.  The power of NFIU cannot extend to interfering with allocation of revenue or appropriation of same.  On the other hand, disbursements of appropriated funds which are forms of financial transactions are legitimate subject of interest and intervention by NFIU in the discharge of its statutory functions.  To the extent that the new NFIU guidelines dictates to State and Local Government how funds allocated to them can be warehoused before appropriation as prescribed by the State Houses of Assembly, it is tendentious towards an overreach. The prospect will appear high that the Court if invited to review it, will strike down such offensive provisions.

The blue pencil rule is there to cut down an ultra vires legislative instrument, be it substantive  or subsidiary.  I venture to predict that under the doctrine of covering the field, a federal agency cannot exercise delegated legislative power to override legislation or executive action of the State Government or even Local Government, in that order,  where the matter does not fall under exclusive or concurrent list .

While the intendment of the guideline is understandable, the means adopted is rather draconian and may not survive judicial challenge. We cannot criminalise legitimate exercise of state governance powers on account of abuse of the powers by resort to federal paternalism. Functionaries of State Government who actually process and release funds from government accounts do not enjoy immunity.  They can be proactively checkmated and prosecuted for breach of financial guidelines operational in handling revenue of State and Local Government. The Kuforiji v. FRN case of the Supreme Court settles the point that money laundering by even a speaker of State House of Assembly by handing cash above lawful limit, is a strict liability offence. Furthermore, the banking institutions which warehouse the FAAC allocations are smarter targets which can also be restrained to frustrate abuses without breaching the constitution. They are totally subject to NFIU and CBN regulators in handling public funds deposited with them .

Dr. Simeon Igbinedion

My modest understanding of NFIU guidelines is to the effect that they are apparently harmonious with the current battle against corruption especially as they relate to frustrating the capacity of local government officials to loot allocations or state governors to divert local government funds. On this score, the end appears noble and ought to be supported. But it is patently unacceptable for the NFIU to adopt the Machiavellian ethos of the end justifying the means through its usurpation of the constitutional duties of states and local governments. S. 7 (6)(a) (b) and S. 162 (5) & (6) of the 1999 Constitution, amongst other sections, support my contention.

Truly, a situation where public assets are easily plundered by local government officials or governors is a mischief against which the 1999 Constitution has not provided. However, NFIU’s guidelines aimed at plugging this loophole are brazenly unconstitutional and indicative of executive contempt for democratic governance and rule of law. I am not too surprised though because if President Buhari does not mind sacrificing the rule of law on the altar of nebulous national security, the NFIU would be too willing to undermine our constitutional order under the pretext that it is seeking to undo the plunder of our national patrimony.

The NFIU has lost track and it ought to be reminded that its remit is to source for financial information and intelligence and, where it finds evidence of money laundering or terrorist financing, to recommend culpable persons or authorities for necessary action. The legal implication of such executive lawlessness is that NFIU would unnecessarily regulate and hinder performing local governments from doing their lawful and constitutional duties. This could ultimately gravitate towards constitutional crisis and more trouble for rule of law.

Gbenga Ojo

This matter arose in AG, Lagos and AGF, when the Federal Government then withheld local government funds because the state government created additional local governments. Supreme Court held that the Federal Government has the right to allocate while state government has the right to distribute the funds to various local governments. Federal Government then passed a law through the National Assembly to pay directly to the local government. Supreme Court set aside the law. Allocation of fund to local government is a constitutional matter. That was the law.

I am not aware that the Constitution has been altered or amended to give the Federal Government right to pay directly to the local government. I think that the State Governors are right and NFIU is wrong. The Constitution is the Supreme law of the land.

Mr Monday Ubani

The guidelines are clearly backed by the NFIU Act 2018. A look at Section 3 of the Act specifically made elaborate provisions concerning their responsibilities towards financial intelligence network over several government institutions. They have a responsibility amongst other things, to ensure that the financial system of the country is free from money laundering, corruptive activities, terrorist activities and co-operate with other security authorities in information sharing of these issues.

Section 162 of the 1999 Constitution especially subsection 6, created the State Joint Account. The reason (the spirit and letters of that law) for that Account is to ensure that the money meant for the Local Government is properly accounted for and spent in a transparent manner. Furthermore, subsection 7 of that Section made it compulsory for the State Government to contribute their own share of revenue to that Account for the sake of the Local Government  administration.

The State Government has failed in contributing their own part.

The NFIU has every reason both moral and legal right to insist on the local government using their allocation for their own needs and not to be left for the State Governments to misappropriate. The President is advised to ignore the disagreement of the Governors over the directives of the NFIU and insist on full compliance.

Wale Ogunade

A look at Section 7 of the 1999 Constitution places local government system under state government control. It states: “The Government of every State shall subject to Section 8 of this Constitution, ensure their existence under a law which provides for the establishment, structure, composition, finance and functions of such councils.”

And legally, Section 162 (5 and 6) stipulates that each state shall operate a “State Joint Local Government Account.” Herein lies the minefield: the state governments prescribe “the establishment, structure, composition, finance, functions” of councils and control their accounts.

Through this lacuna, most of the governors have been manipulating it to suit their own whims. Although every month, funds are allocated, the LGAs can only access what a governor releases to them, because the local government authority is installed by the governor, who controls the local government fund, the result is the lack of development in the rural areas. Thus, this Regulation from the NFIU, is salutary and it should put its feet down to ensure the total implementation of this Regulation, so as to enhance Rural development, which is the essence of creating the Local Government.

Malachy Ugwummadu

Such identified collision course was bound to occur in view of the clear overlap of statutory functions between the Nigerian Financial Intelligence Unit, NFIU, specifically under S. 3(1)(r)&(s) that allows NFIU to “direct the monitoring of accounts, transfer & any other means of payment or transfer of funds and Ss. 7(1) of the Constitution of FRN 1999 that constitutes and guarantees a democratically elected local government authority largely conceived to be autonomous with clear powers and functions under the 4th Schedule of the Constitution of 1999.

However, from the practical political perspective, the reason for the collision cannot be far fetched as the States have managed to hijack and manipulate the opèrationalisation of S162(5)(6)(7)&(8) that vests the States with overriding powers to determine the sharing and allocation of funds standing to the credit of local government councils in the federation account with minimal supervisory roles by both the National Assembly and respective State Houses of Assembly.