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NFIU’s controversial orderon LG funds

NEWLY-independent Nigerian Financial Intelligence Unit, NFIU, has swung into action to stop the mismanagement and laundering of funds belonging to the local government councils, LGCs, by directing that effective from June 1, 2019, all funds from the Federation Account belonging to them be credited directly into their accounts.

NFIU also instructed that no cash withdrawal of more than N500, 000 per day should be authorised by financial institutions except when done through valid cheques and electronic transfers.

This directive, which is an affirmation of the Federal Government’s support for financial autonomy for the LGAs, is justified by the NFIU as a means of curbing corruption, money laundering, terrorism financing, proliferation of weapons, among others, as demanded of the country by the international financial watchdogs, obviously the Egmont Group. Nigeria and her financial institutions risk serious sanctions unless we comply with these regulatory demands.

However, this order is coming directly into conflict with Section 162 (8) of the Constitution (1999) which directs: “The amount standing to the credit of the Local Government Councils (in the Federation Account) shall be distributed among the Local Government Councils on such terms and in such manner as may be prescribed by the State House of Assembly”. This Section (6) also directs the establishment of a special account to be called “State Joint Local Government Account” into which is paid monies from the Federation Account belonging to the States and their LGCs.

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The state governors had since capitalised on this constitutionally-created Joint Account to spend the LGC funds just as they like in cahoots with the State Houses of Assembly which are invariably their rubber stamps. This provision effectively killed local government autonomy. Many state governors use local funds to pay contractors, while in states like Lagos, local council development areas were created from the constitutionally-recognised LGAs, and LGC funds shared among them monthly.

This directive from the NFIU will throw chaos into the financial affairs of the States and LGCs. It will make life difficult for the banks who now have two contending masters – the Governors and the NFIU – to serve at the same time. Should they obey the one backed by the Constitution, or the one seeking to implement international regulation to make our financial system compliant?

We have no doubt that the NFIU means well in its concern for local government financial autonomy and the need to arrest corruption and the laundering of LG funds. However, its directive cannot overpower extant constitutional provisions. It requires Constitution amendment to bypass the powers of the State Houses of Assembly over LGC finances. It would have been much better if this issue were first sorted out with all stakeholders through consultations, due process and consensus. It can still be done. Otherwise, there are bound to be protracted conflicts.


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