Fresh setback for local govt autonomy as govs push back against CBN accounts

State governors across Nigeria are resisting federal efforts to mandate local governments to open accounts with the Central Bank of Nigeria (CBN) for direct allocation payments.

The federal government’s plan follows a recent Supreme Court ruling granting financial autonomy to local governments, aiming to ensure funds are deposited directly into their accounts. Initially, the governors persuaded federal authorities to delay the implementation to address technical issues. However, as the process neared completion, the governors began advocating for local governments to retain their accounts with commercial banks instead.

Their main argument is that there is no legal obligation for local governments to bank with the CBN.

Chairman of the Finance Commissioners Forum, Akin Oyebode, spoke on the position in an interview with The Nation, stating that forcing local governments to bank with the CBN would be unlawful.

“You can’t force me to open an account,” Oyebode said.

“No local government, to my knowledge, has gone to say we want an account in the CBN. Local governments already have bank accounts with commercial banks.”

He emphasized that whether revenue should be paid directly to local governments or routed through the Joint Account Allocation Committee (JAC) depends on constitutional interpretation.

“The conversation as to whether you pay local governments directly or through JAC is an administrative discussion,” he noted. “JAC itself is a provision in the constitution.”

Oyebode pointed out that Section 7 of the 1999 Constitution empowers state Houses of Assembly to legislate on local government administration, which includes financial oversight. Citing Anambra State as an example, he maintained that states have the right to decide how to manage local government funds.

Acknowledging concerns over potential misuse of local government allocations by states, Oyebode argued that the Supreme Court ruling was more about reinforcing autonomy than dictating payment methods.

“The ruling of the Supreme Court is groundbreaking,” he said. “You cannot sack a local government chairman and expect that you will receive the revenues. That is the real value of this judgment.”

He added that even if local governments receive direct federal allocations, state governments could still pass laws requiring them to manage funds through JAC.

Oyebode also warned that without restructuring the revenue-sharing formula, many local governments would struggle financially.

“By not reviewing those indices, if you pay local governments directly, at least a third of the local governments are going to be insolvent,” he said. “As of today, those local governments cannot even pay their salaries from their allocation.”

To address this, he explained that states currently use JAC to pool resources and prioritize salary payments before distributing remaining funds based on service needs. He also noted that local governments must contribute to initiatives like the Universal Basic Education Commission (UBEC), where states provide counterpart funding.

On the issue of CBN accounts, Oyebode maintained that the federal government lacks the authority to dictate banking choices for local governments.

“The owner of the account has the right to self-determination. The Central Bank is the bank of the federal government. The local government is not an appendage of the federal government,” he stated.

He also questioned the practicality of local governments banking with the CBN, arguing that the apex bank is not structured for retail banking services.

“The Central Bank is not a retail bank. It doesn’t even bank states, where there are only 36, not to talk of remotely located local governments,” he said.

Oyebode suggested seeking further constitutional interpretation on JAC’s role from the Supreme Court, emphasizing that state governments’ involvement in local government finances aligns with constitutional provisions.

“What is clear, which is not subject to opinion, is that the constitution provides for that,” he said. “If a state wants to oversee the management of local government finances, Section 7 of the constitution allows the House of Assembly to make laws.”