LG Autonomy: Court dismisses state govts’ suit, affirms NFIU guidelines

The Federal High Court in Abuja, on Monday, dismissed a suit filed by Attorneys-General of the 36 states against the Nigerian Financial Intelligence Unit (NFIU) from implementing its guidelines on the administration of local government funds.

The guidelines limited the cumulative amount that can be withdrawn from a local government account to not more than N500,000 daily.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 enshrined in the Nigerian constitution.

Inyang Ekwo, the judge, held that the case lacked merit.

In the suit, the Attorney-General of the Federation (AGF), the NFIU and the Nigeria Union of Local Government Employees are defendants.

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

Delivering his judgement, Mr Ekwo held that the essence of the NFIU guidelines is to entrench financial transparency in government transactions at the local level.

Mr Ekwo agreed with the AGF that going by Section 23 (2) (a), Section 28 (2) and Section 31 of the NFIU Act, the “unit has the power to make the guidelines.”

The guidelines are aimed at reducing “crime vulnerabilities created by cash withdrawal from local government funds throughout Nigeria effective from June 1, 2019.”

Suit’s hearing

During the legal fireworks on March 2, the lawyer to the state governments, Omonsoya Popoola, said the state governments are not subject to the control of the NFIU.

Mr Popoola told the court that going by the operation of the State Joint Local Government Account, the states are regulated by legislation passed by the State Houses of Assembly, not the NFIU.

He urged the court to declare that the NFIU lacks the statutory powers to make guidelines for the regulation, monitoring and operation of the State Joint Local Government Accounts.

But the AGF represented by Tijjani Gazali, a Senior Advocate of Nigeria, said the NFIU has not encroached on the powers of the states or local governments.

“There is nothing wrong or unconstitutional about the NFIU guidelines as they do not usurp the powers of the plaintiffs,” Mr Gazali, acting Director, Civil Appeals at the Federal Ministry of Justice, Abuja, told the court.

Mr Gazali contended that “it is clear from the provisions of the NFIU Act, especially Section 23 (2) (a) and Section 28 (2) and Section 31 of the NFIU Act, that the unit has the power to make the guidelines.”

Similarly, counsel to the NFIU, Arthur Okafor, also a SAN, said the agency acted within its statutory powers to prevent abuse of office and other forms of financial crimes that might arise at the local government level.

Background

PREMIUM TIMES reported that in 2019, the Nigerian Governors Forum (NGF) approached another Federal High Court judge, John Tsoho, who is the current Chief Judge of the court, to stop the NFIU’s guidelines from being implemented, but Mr Tsoho declined the request.

Due to complaints by the governors, another federal judge in Uyo, Akwa Ibom State, 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 the local governments.

Financial institutions were directed to ensure the full implementation of the guidelines with effect from June 1, 2019.

In March this year, the National Assembly passed a bill abolishing the state joint local government account and providing for a special account where all allocations due to the local government councils, from the federation account and state government, shall be paid.

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

The legislation also mandates 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.

But for the bill to become a law, it has to receive the approval of at least 24 state Houses of Assembly.