State governments across Nigeria are resisting efforts by the Federal Government to compel local governments to open accounts with the Central Bank of Nigeria (CBN) for direct allocation disbursements.
The Federal Government’s plan follows a recent Supreme Court ruling granting financial autonomy to Nigeria’s 774 local government areas. However, while the state governors initially requested a delay to sort out technicalities, they are now advocating for local governments to retain their commercial bank accounts instead.
Their main argument is that no law mandates local governments to bank with the CBN. Chairman of the Finance Commissioners Forum, Akin Oyebode, confirmed this stance, stating that forcing local governments to open CBN accounts would be illegal.
“You can’t force me to open an account,” Oyebode said. “No local government, to my knowledge, has requested an account with the CBN. Local governments already have bank accounts with commercial banks.”
He explained that the question of whether allocations should be paid directly to local governments or through the States/Local Government Joint Account (JAC) is an administrative issue, as JAC is constitutionally recognized.
According to him, Section 7 of the 1999 Constitution empowers state Houses of Assembly to make laws regarding the financial operations of local governments, including oversight of their funds. He cited Anambra State’s approach to managing LG funds as an example of states exercising their constitutional rights.
While acknowledging concerns that some states misappropriate local government funds through JAC, Oyebode insisted that the Supreme Court ruling was more about governance and tenure security than just direct funding.
“The ruling of the Supreme Court is groundbreaking,” he said, emphasizing that governors cannot remove elected local government chairmen and still expect access to federal allocations.
He also cautioned that many local governments could become insolvent if direct payments were implemented without first reviewing the revenue allocation formula. According to him, many councils already struggle to pay salaries, and JAC helps pool resources to meet financial obligations.
On the CBN account issue, Oyebode maintained that the Federal Government has no authority to dictate where local governments should bank. He argued that the CBN is a wholesale bank, not designed for direct banking services to local governments.
“How will the CBN bank all 774 local governments when it doesn’t even bank the 36 states?” he asked, stressing that local governments should be free to choose their banking arrangements.
He called for further legal clarification on the role of JAC, suggesting that the Supreme Court might need to provide additional interpretation. “Let’s go and get the interpretation again from the Supreme Court,” he said.
The standoff between state governors and the Federal Government over local government autonomy and funding is expected to continue, with both sides holding firm to their positions.
