As Court Breathes New Life into LG Administration

A Federal High Court last Monday dismissed a suit by the 36 governors challenging the Nigerian Financial Intelligence Unit’s guidelines on the spending of the local governments’ funds. Alex Enumah writes that the next few months would decide if this judgment stop state governors from tampering with their statutory allocations of local governments from the Federation Account

A Federal High Court (FHC) in Abuja last Monday breathed life into local government administration in the country when it threw out a suit by the 36 governors challenging the Nigerian Financial Intelligence Unit (NFIU) guidelines on the spending of the local governments’ funds. The governors had in the suit marked: FHC/ABJ/CS/563/2019 asked the court to stop NFIU from implementing the guidelines.

In May 2019, NFIU issued some guidelines to guard against the overbearing influence of state governments in the administration of local governments’ monthly allocations. The agency also threatened to deal with individuals and companies abetting the diversion of local government funds with local and international sanctions. The guidelines also reduced cash withdrawal from local government accounts to N500,000 daily.

Dissatisfied with the development, the 36 state governors, through their Attorneys-General and Commissioner for Justice, argued among others that the NFIU guidelines, particularly provisions 1 to 6 and the penalties prescribed are ultra vires (outside or beyond) the power of the NFIU, under sections 3 (1) and 23(2) (a) of the Nigerian Financial Intelligent Unit Act, 2018 and therefore unconstitutional.

The Nigeria Union of Local Government Employees (NULGE) and the Attorney-General of the Federation are named as defendants in the case filed by state Attorney-Generals.

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. He 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 the acting Director, Civil Appeals at the Federal Ministry of Justice, Tijjani Gazali (SAN), said the NFIU has not encroached on the powers of the states or local governments.

He 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.”

“There is nothing wrong or unconstitutional about the NFIU guidelines as they do not usurp the powers of the plaintiffs,” Gazali told the court.

Similarly, counsel to the NFIU, Arthur Okafor (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.

After listening to the final addresses by parties to the matter, trial judge, Justice Inyang Ekwo, dismissed the case for lacking in merit. Before then, he had struck out the name of the Nigerian Governors’ Forum, the umbrella body of the 36 governors, as a co-plaintiff in the suit on the grounds that it lacked the locus standi to file the suit.

Justice Ekwo then went further to declare that  he could not  see where the  guidelines contradict  Sections 7(1), (6) (a) and (b) of the 1999 Constitution. He added that the guidelines also did not conflict with the provision of Section 162(6) of the Constitution, which creates the State Joint Local Government Account,  into which allocations to the local government councils from the Federation Account and state governments are paid.

According to him, the guidelines also did not contradict Section 162(8) of the Constitution, which prescribes that the amount standing to the credit of a council shall be distributed in such manner as may be prescribed by a House of Assembly..

The judge also said that the guidelines also did not contradict the provisions of the 4th Schedule of the Constitution, which prescribes the functions of a local government. He pointed out that the “duty of the court is limited to expounding the law and not expanding it.”

He added: “On the whole, I see the provisions of the guidelines of the 2nd defendant as seeking to direct the monitoring of accounts, transfers and any other means of payment or transfer of funds of local government councils as provided for in Section 3 (1) (r) of the Act of the NFIU.

“It only limits cash withdrawal made from any Local Government Account anywhere in the country to an amount not exceeding N500,000 per day. Any amount higher than that can be done using other methods of banking transaction save cash.

“Unless it can be shown that there is any provision of the 1999 Constitution (as amended) which these provisions of the 2nd defendant’s guidelines have contradicted or conflicted directly and practically, then the issue of unconstitutionality cannot be said to arise.

“I also find that the case of the plaintiffs has not been established and I so hold. I find, in the end, that the case of the plaintiffs lacks merit and ought to be dismissed and it is hereby dismissed.”

Local government is the third tier of government in Nigeria. It is the closest arm of government to the people. Its mandate is to take development to the local people. But since the enthronement of democracy in the country in1999, local government administration has been hijacked by state governments. Governors do not only choose their cronies to administer the local governments, they also dictate how their finances, especially allocations from the Federation Account should be spent. The practice cuts across political parties with a predominant number of state governments regarding the third tier of government as mere administrative appendages placed under commissioners for local government and chieftaincy matters.

This has made the third tier of government not only to lose its financial independence but operational autonomy, and rendering them redundant and incapable of rendering even the simplest of social services to the grassroots. The situation is said to be a major reason for under-development at the local government levels.

Many observers had wondered if the state governors would allow the policy to work considering their firm control of the councils and the huge money they get from them as slush funds. They had also wondered if they would not device another strategy to circumvent or thwart the policy.

Since 1999, all the efforts and attempts to grant autonomy to the local government through constitutional amendment have always been thwarted by governors. Even several courts, including the Supreme Court have tried to intervene  on a number of occasions on the overbearing attitude of the governors on the local government to no avail. Not only are elections not conducted or chairmen and councillors frequently removed at will, sole administrators and caretaker committees are frequently set up to run their affairs all because of their revenue.

THISDAY gathered that it was against this background that the federal government alarmed by the continuous misuse of cash allocated to local councils across the country by state governments through the State Joint Local Government Accounts (SJLGA), outlawed the meddling of states in council allocations via the NFIU, which was excised from the EFCC.

However lofty the NFIU guidelines were, many had believed it had to surmount a legal hurdle as Section 162 (8) of the 1999 Constitution empowers the states to distribute allocation to councils “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.”

But in March 2022, to address the challenge, 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.

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

While this is still pending, the NFIU is determined to go ahead with the implementation of its guidelines.

In commending the court judgment, the agency vowed to provide details of transactions involving local government funds to the anti-corruption agencies: EFCC and ICPC.

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, Tukur declared that all transactions on local government monies would be disclosed to the anti-corruption agencies: ICPC and EFCC.

He said the federal government is always prepared to protect states and local governments by providing cash for their governance responsibilities. He added 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 stated.