NFIU’s directive to govs, recipe for grassroots devt?




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The Nigeria Financial Intelligent Unit (NFIU) recently directed that with effect from June 1, this year, banks, governors, financial institutions, public officers, and other stakeholders are banned from meddling with the statutory allocations of local governments. ABDULRAHMAN ZAKARIYAU and MOSES JOHN, in this report, take a critical look at the implications of the directive.

As a result of the federal system of government that Nigeria operates, the state government and even local government depend largely on the monthly funds that usually come from the federal allocation account committee (FAAC). Consequently, the monies are usually shared among the 36 states and the 774 local government areas. However, in attempt to put the local government statutory allocation to judicious use, NFIU issued a new directive which will take effect as from next month.

The directive

About a year ago, the All Progressives Congress (APC)-led federal government by President Muhammadu Buhari signed the Nigeria Financial Intelligent Unit (NFIU) Bill into Law, the separated the agency from the Economic and Financial Crimes Commission (EFCC). NFIU is to ensure transparency, effective and efficient and management administration and operation of the Nigerian Financial Intelligence Unit.

Also, NFIU is expected to institutionalise best practices in financial intelligence management in Nigeria and strengthen the existing system for combating money laundering and associated predicated offences, financing of terrorism and proliferation of weapons of mass destruction.

On May 6, 2019, in statement by the acting chief media analyst of the NFIU, Ahmed Dikko, explained the steps taken to protect local government allocations.

The statement read in part: “The NFIU requests all financial institutions, other relevant stakeholders, public servants, and the entire citizenry to ensure full compliance with the provisions of the guidelines already submitted to financial institutions and relevant enforcement agencies, including full enforcement of corresponding sanctions against violations from 1st June, 2019.

“Having realised through analysis that cash withdrawal and transactions from 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, 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 from the federation account and from the state government.

“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. As far as the NFIU is concerned the responsibility of the account as a collection account is fully reinstated.”

Continuing, it read: “Therefore, it is no longer possible to allow the entire system to suffer the deliberate and expensive infractions or violations by public officials and/or private business interests. Henceforth, all erring individuals and companies will be allowed to face direct international and local targeted sanctions, in order not to allow any negative consequences to fall on the entire country.

“To be precise, with effect from 1st June any bank that allows any transaction from any local government account without monies first reaching a particular local government account will be sanctioned 100%, both locally and internationally.

“In addition, a provision is also made to the effect that there shall be no cash withdrawal from any local government account for a cumulative amount exceeding N500, 000 per day. Any other transaction must be done through valid cheques or electronic funds transfer.

“The complete guidelines have been released to the governor of the Central Bank of Nigeria, the chairman, Economic, and Financial Crimes Commission (EFCC), the chairman, Independent Corrupt Practices Commission (ICPC) and chief executive officers of all banks and other financial institutions.

“Any state government that is willing to seek any expert economic advice in the unlikely event of these guidelines constituting an inconvenience to the management of the state can work with the NFIU and /or CBN.”

What it implies 

Prior to the directive, according to revenue-sharing formula 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. Governors seize this percentage and if local governments are lucky, they get a fraction as decided by the all-powerful governors.

As it stands now, the 774 local government across the states will receive their 20.60 per cent share directly in their various account, with ability to withdraw not more N500, 000 per day, use cheques and electronic funds transfer all their transactions.

This is only applicable to the 774 local government recognised by the 1999 Constitution, as amended. The local government concentration is as follows; South-east 94, South-south 123, South-west 137, North-east 112, North-central 121 and North-west 186. 

It’s for social, economic devt

On his part, a statesman, development economist and former deputy governor of the CBN, Dr. Obadiah Mailafia, said the NFIU directive will translate to more social and economic development.

In a telephone chat with Blueprint Weekend, he said: “Over the years, the governors have literally cornered the resources of the local governments, all 776 of them. Today, they exist all but in name. The governors have arrogated to themselves the powers over the money disbursed to local governments. They literally control everything that happens at the local government level, contrary to the spirit and letter of our laws. Unfortunately, it has spelt the death-knell of local administration in our country. The intent of the NFIU decision is welcome. 

“But I have my misgivings as to its utility because it would simply mean that local government chairmen have a carte blanche to take the money and run away with it. We need a better arrangement that ensures more rigorous accountability for local government finances. We need the auditor-general of the federation to send his auditors to every local government area. We must demand rigorous financial accountability. 

“It would mean that local government finances will be placed at a better footing. It will also mean public finances will be linked to performance and outcomes. It means lesser corruption and greater public accountability. This should translate to more collective welfare and more social development at the local level.”

Also, an analyst, Yush’au Aliyu, said the directive will bring about social change and improvement in the economic wellbeing of the citizens at the local government level.  

“Local government is what it is today because of the fact that state government hijacked allocation that meant for local government. LGA has suffered a lot of setback in terms of infrastructure at the local government level, including creation of wealth; that is by creating more employment. So, by thus we are expecting the local council to ginger economic activities through the provision of infrastructural facilities, as well as engaging youth that level in some agricultural activities that will help the economy of that community.

“It might not change in 100%, but definitely we are expecting the scenario to change, at least we want there will be change in the administration of finances, as well as creating employment opportunity. We are optimistic that there will be a drastic change in the social welfare and economic wellbeing of the citizens at the local government level.” 

Good for democracy 

Similarly, on the political implications, a political analyst and public affairs commentator, Hide Ojo, said, “This directive will enable the local government to perform their role as the third tier of government. 

“You known the NFIU said the money due to local government must first reach the account before they can spend it and they can only make withdrawal of maximum of N500, 000. Aside from that any other transaction will be either by cheque or transfer. This means that there will be transparency and accountability. It will also ensure that local government is able to perform their statutory role. 

“On the surface, NFIU directive is a welcome development, it’s good for our democracy, it will enhance transparency and accountability, and it makes local government to have money trail – rather than withdrawing money and sharing it. This will also help in the aspect of payment of salaries. Now, the payment of salary will to be done through electronic transfer. Now, you know who is getting what, that way you can even detect who is a ghost worker in the local government.” 

On how the directive might affect the relationship between governors and local government chairmen, Ojo said, “I don’t think so; don’t forget is not the making of chairmen of local government, it is actually a federal order. In fact, it is not NFIU that initiated it; it was international financial institutions that more or less arm-twist the NFIU to act. If you read there NFIU statement, it said that failure to obey that regulation will warrant international sanction, so it is not entirely the making of NFIU, NFIU is just reacting to international pressure in other to enhance anti-corruption crusade and transparency.

“So, a very clever governor who has a good working relationship with is local government chairperson will still find a very clever way to ensure that they do his bidding. It is just that it may not be a lord and servant relationship that currently exists.” 

He, however, said, “But again it’s a double-edge sword because much as on the surface it will ensure transparency and accountability, there is a big challenge about what this will mean to the local government development authority, the LCDA that are created which are extra constitutional creation.”  

‘NFIU has no such powers’

A constitutional lawyer and principal partner at Kayode Ajulo & Co. Castle of Law, Dr. Kaylee Ajulo, in a chat with Blueprint Weekend, said the NFIU does not possess such powers.

He said: “In responding to this, let me start on the premise that Nigeria operates a federal system of government. And in a federation, the federating units ought to maintain autonomy on certain matters, including on finances, maintenance and traffic management, among others. 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.

“However, the reality is that several local government chairmen and councilors lament how governors take all the monies meant for them from Abuja and sometimes, hand them peanuts. The arguments on the part of some state governors are usually premised on the fact that local government chairmen misappropriate the funds.

“In determining whether the directive is constitutional, there is a need to ascertain whether NFIU possesses any iota of constitutional power which places a toga on it to give such directive. 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.”

The legal luminary further said, “As stated above, the NFIU does not possess the powers to give any directive as the only body empowered to give directives on allocation of funds to the local government is the various states Houses of Assembly pursuant to Section 162(8) of the 1999 Constitution. My concern, however, is that the independence of the third tier of government as guaranteed under the constitution be upheld otherwise, if care is not taken the actions of some governors will lead into erosion of local government administration in Nigeria.”

It’s to ridicule us – Govs

The Nigeria Governors’ Forum (NGF) described the Nigerian Financial Intelligence Unit (NFIU) directive as “unconstitutional, that it is aimed at ridiculing their collective integrity.”

The governors, in a letter issued on their behalf by the NGF spokesman, Abdulrazaque Bello-Barkindo, asked President Muhammadu Buhari to call the NFIU to order.

In the letter, the governors described the measures as a “brazen attempt by the NFIU to ridicule our collective integrity.”

“Extracting copiously from the constitution, governors drew the attention of the president to Section (6) (a) and (b) which confers on the states and national assembly the powers to make provisions for statutory allocation of Public revenue to the local councils in the federation and within the states, respectively,” read a statement Bello-Barkindo issued on their behalf.

“Similarly, the governors added, Section 162 (6) expressly provides for the creation of the States Joint Local Government Account (SJLGA) into which shall be paid all allocations to the LGAs of the state from the Federation Account and from the government of the state.

“The NGF chairman emphasises that nothing in the NFIU Act 2018 gives the body the powers that it seeks to exercise in the guidelines that it released and is, therefore, acting in excess of its powers and by so doing NFIU exhibits complete disregard of the constitution of Nigeria.”

Ozekhome on legality, constitutionality 

For renowned constitutional layer Mike Ozekhome, the directive is “patently illegal and unconstitutional.”

He said, “The above sorry state of affairs is such that one might be tempted to swallow the attractive pill of the NFIU to take u the self-assumed role of monitoring LGAs’ 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 to the LGAs the much-needed autonomy of having direct access to federal allocations as a first line charge like the judiciary. 

“This will surely break their asphyxiating umbilical cord tie from the apron strings of strangulating states. For now, the NFIU will be acting illegally and unconstitutionally to tamper with e mode and manner money is allocated to states from the federation account and how the states distribute them. We operate a constitutional democracy where every step taken by government must enjoy constitutional imprimatur.” 

Labour unions hail FG, banks 

Meanwhile, the Nigeria Union of Local Government Employees (NULGE) and the Senior Staff Association of Statutory Corporations and Government Owned Companies (SSASCGOC) on Wednesday, this week, applauded the federal government and the financial institutions for the smooth take-off of the Nigerian Financial Intelligence Unit (NFIU) in the country.

NULGE president, Comrade Ibrahim Khaleel, on his part, said the smooth take-off of the NFIU and the way the banks had cooperated for its smooth take-off, was encouraging, despite the opposition it faced from the governors who usually feed fat on local government funds.

“The federal government, especially President Muhammadu Buhari, should be commended for standing on the side of the people, rule of laws and the development of the country, by insisting on NFIU guidelines. Also, the financial institutions must be commended for strict adherence to the rules, while we praise the Unit itself for leading the way in doing a very good job.

“Effective regulation of arbitrary withdrawals of local government funds by state governments from the joint local government/state joint accounts by the Nigeria Financial Intelligence Unit (NFIU), as we have seen with the take off now, would reduce looting of council finances.

“To encourage the federal government, President Buhari, the banks and other financial institutions and the NFIU itself, the union will train its members across the length and breadth of the country to keep eagle eyes on the operations of the funds going to local government councils henceforth. I am assuring you, we will ensure that flagrant abuse of the system and the funds is stopped,” Khaleel said.

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