IDEAS Radio 10 May 2019 

Episode 34: Local Governments and NFIU regulations

Rotimi Sankore: And welcome to the final phase of Countdown 2019 on Nigeria Info 99.3 where we feature all the big and significant issues on the road to the 2019 handover at the presidential and governorship level, election of National Assembly and State Assembly leadership and appointment of ministers and commissioners. 

Remember, you can follow the programme on Twitter @Countdown2019NG, @RotimiSankore and @aghoghoobo, and you can tweet at us at the station handle, @NigeriaInfoFM.

Our big topic today on both the IDEAS segment with Ayo Obe and on the main programme: Are Local Governments finally going to get their rightful financial autonomy?  The National Financial Intelligence Unit has recommended that the Joint State Local Government Account can only be used to receive money, and that Local Government funds can only be disbursed after they have reached the rightful Local Government account and only for Local Government purposes.  The deadline for implementation is June 1.  So we start with that with Ayo, she will help us clarify what the Constitution says as well, as well as her informed and educated opinion on these recommendations.  And shortly after, we will engage you, our wonderful listeners.

Ayo Obe: Actually, hello listeners and hello Rotimi.  It’s great to be here, but what I’m going to be doing in the IDEAS segment is actually looking to see: what does … what do these new regulations mean … 

RS: Mean

AO: … mean – of the NFIU – mean in terms of Integrity, in terms of  Democracy, Ethics and Accountability. So I mean I’m happy to explain other … 

RS: What the Constitution says

AO: … things afterwards, but the essential point is that the Nigerian Financial Intelligence Unit (which is what the NFIU stands for) has proposed some guidelines and it’s also proposed some penalties for breach of the guidelines.  Now at the moment we don’t know whether these guidelines are going to actually have effect: there’s some suggestion that the State governments are likely to challenge the legality of the guidelines, or to say that the NFIU is going outside its remit.  But let’s … 

RS: Which is where the Constitutional issues come in.

AO: Yeah.  But let’s, in terms of our IDEAS approach, let’s look at whether or not we think that these guidelines, if they are in fact lawful, if they are in fact implemented: are they going to have an impact on issues like Integrity, Ethics and particularly on Accountability?  And of course, when we look at those in the round, we then see: Are they having any impact at all on our Democracy. Because as you know, at the moment we have a situation where we are supposed to have a … three autonomous spheres of government, the Federal, the State and the Local.  And just as the State Governments complain, or they used to, certainly they used to complain at the beginning of the Fourth Republic, that the Federal Government was treating them as though they were some kind of inferior body simply because they were smaller, and they had to take orders and instructions from the Federal Government, and that any institutions that were set up for the Federation (which includes them) were being treated by the Federal Government as its own.  And it’s the same complaint that the Local Governments have with regard to the State Governments – that the State Governments also treat the Local Governments as though: We’re bigger than you and therefore we’re more important, and anything that you want to do has to go through us. And the point is that what this ends up doing is, it ends up making Local Governments really not a democratically accountable part of the governance of this country.

RS: Or often ineffective.

AO: Well I mean, because they are, they would say that they’re not accountable.  They don’t control their funds, and therefore, they can’t be held accountable for the way those funds are spent.

RS: Talking about the funds, can we just touch briefly on what the revenue sharing formula is, for those listeners that don’t know.  So every month the Federal Government ‘grabs’ some people would say …

AO: No, no, before we start talking about what is ‘grabbed’, we also need to also be aware of what goes in, because the money that is spent by the States and the Local Governments, is not the only money that they get.  Ok? So there’s money that goes into the Federation Account, and it’s from there that we are talking about this sharing formula.

RS: Ok, so before I talk about the sharing formula, you can tell us about … 

AO: No, no, as I said, the point is that just as you have States talking about internally generated revenue, you also have Local Governments talking about their own internally generated revenue, that’s why they keep on coming up with these ideas that if you put up an advertisement or a signpost outside your office, you have to come and pay for it.  Now … 

RS: Ok, so the IGR of the Local Government and State is different from what is shared … 

AO: Yes, so what it … 

RS: That’s the point.

AO: No, from what is shared from the Federation account.  Now the money that goes into the Federation account, is that the Federal Government takes 52.68% from the Federation Account.  The States each, the 36 States, share 26.72% according to a formula that is also worked out; and then the Local Governments get 20.60% – that’s   the 774 Local Governments. Now, as you know, many states have tried to increase the number of Local Governments that they have, and in Lagos State for example, we have a grand total – I think – of 57 Local Council Development Areas, and they were all … and they’ve been in office since the … since July 2017, so the … but officially Lagos State only has a certain number of local governments, and so far, the increase has not taken effect.

RS: And then, this 20.60% for all the … 774 Local Governments, the allegation sometimes is that the Local Governments don’t even get them, or don’t get all of it because the State Governments sit on it or, decide that they are in charge of it.

AO: Well what the State Governments do, is that they say: Yes, we know that – for example let’s say, payment of primary school teachers, or repair of potholes in roads – we know that it’s the job of the Local Governments, but we, because we are bigger, we can do economies of scale, we can … 

RS: So the State Governments claim!

AO: … and so we will spend the money on behalf of the Local Governments.  And you know, that’s why, I mean, as I left my office at Boyle Street and it was all ‘shake, rattle ‘n’ roll’ as we were going down … to get to the … 

RS: The bridge.

AO: … even to get onto Awolowo Road and so on.  The condition of the Boyle Street, you would say that well, is anybody attending to this?  And so, anybody that lives in Lagos would know that there’s no journey that they undertake that doesn’t involve some ‘shake, rattle and roll’ because of the very poor condition of even the local roads, before we get to the State roads and the Federal roads.  And as you know, some State Governments become so concerned about the poor quality of the … state … of the Federal Roads in the State, that they undertake the repairs themselves. And because they do the repairs, they then say to the Federal Government: You owe us this money, you need to repay it.  Now, as to whether that happens with the Local Governments …

RS: Well the other big issue about this Financial Intelligence Unit recommendation also has to do with how money is withdrawn.

AO: Yes, well the Financial Intelligence Unit said that they notice that large amounts of what ought to go to Local Governments are being withdrawn in cash … 

RS: By state governments

AO: By … well, they’re being withdrawn in cash

RS: By state governments!

AO: I don’t say necessarily say that, because I don’t know that it’s only State Governments that withdraw in cash, but the point is that the amounts are going out in cash, and that by itself is a red flag.  Whether it’s the State Governments or the Local Governments, to be frank, it’s a red flag, that: Why should an arm of government be spending cash? It’s something that …  

RS: So they’ve put a cap on it.

AO: Yes, they’ve put a cap on the amount that can be taken out every day.

RS: Day, yes, N500,000 …

AO: I mean, N500,000, that’s half a million a day, which to you and I might not be small potatoes.  And of course, when you have these sort of blanket things in a federation where the cost of living varies from one part of the federation to another, you will find that it could –  if there are legitimate reasons for needing cash, then it could act as a draw – but I think that the essential point is that we ought to be able to trace where the money goes, and for that the transactions should be by cheque or online transfer and so forth.

RS: But in addition, they say that the money can also actually, should only be withdrawn from an actual Local Government account, 

AO: Yes.

RS: So the Federal Government will send to the Joint Account, and then, the money will go to the account of each Local Government to prevent the State Government from having direct access to it.

AO: Now what it, what the Constitution says is that: “Each State shall maintain a special account to be called ‘State Joint Local Government Account’” … I’m reading from section 162(6)  “… into which shall be paid all allocations to the Local Government Councils of the State from the Federation Account and from the Government of the State.” So the State Government can also make some allocation to its Local Governments.  And then it says “Each state shall pay …” (this is subsection 7) “Each State shall pay to Local Government Councils in its area of jurisdiction such proportion of its total revenue on such terms and in such manner as may be prescribed by the National Assembly.”  And then it says that: “The amount standing to the credit of Local Government Councils of a State shall be distributed 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.”  So at one level …

RS: Which is a potential problem.

AO: Well, I mean, if we have independent-minded …

RS: Houses of Assembly …

AO: … legislators, that would be one thing.  But we don’t. Equally we don’t really have enough independent-minded Local Government chairs.  And you know, even in Lagos State, I’m sure that very few of us know who our Local Government chairs are.  I happen to have the list of the people who were sworn in in July 2017. But really the turnout for the elections of Local Governments are very low; people hardly pay attention to who is standing and who is, and who is …

RS: But the whole point of this is that after June 1, that is, shortly after the President and the Governors have been sworn in, that corruption, which is being flagged, should reduce when this kicks in, and that the Local Governments can then be held accountable … 

AO: Well I think that’s really the point, yes.

RS: … for any money that they are spending … 

AO: Yeah.  Because at the moment … 

RS: … and in turn, for their performance.

AO: Because at the moment it’s a bit … there can be a bit of buck-passing going on.  The State Government can be saying: Ah, Local Governments should be paying teachers’ salaries.  And the Local Governments can be saying: Well, we would pay teacher’s salaries … 

RS: If we had the money.

AO: …  but the State Government is sitting on our money.  So the buck-passing aspect of it would need to come to a stop if these regulations come into effect.  But in the end, if we’re not actually keeping an eye on what our Local Governments are doing, then we’re probably not going to get the anti-corruption effect that this is supposed to bring, to bring about.

RS: There’s also a security dimension, because the statement from the NFIU says “Cash withdrawals and transactions …” that is .. what is happening now, “Cash withdrawals and transactions from  the States Joint Local Government Account pose the biggest corruption, money-laundering and security threat at the grass roots level.” In other words, that across the States, all those large ungoverned spaces where bandits and extremists take over, one of the reasons for this is that the Local Government don’t exist, and people just step in and fill the vacuum and just take over.

AO: And in fact, one should recognise, I mean, this is some time ago, but I remember somebody from a northern state coming to my law partner who, as you know is involved in politics, and he was, we were sort of having some minor complaints – what seemed to him minor complaints – about our Local Government, and he was saying Oh! You even have people to turn up!  Where I am, the Local Government Chair appears every quarter, collects the money that is allocated to his Local Government, distributes a little bit among the councillors, of course, his deputy – you know – Local government Chair, 

RS: And disappears …

AO: … gets something; pays some of the arrears of salary if he feels like it, and then you don’t see them again for the next three months, until the allocation is due to land.  So that, the lack of accountability is almost … it’s palpable.

RS: And that’s where the security threat aspect … 

AO: And in fact that’s why, in fact some of the headlines about this story say: New Rules to protect Local Government funds from governors.  And, which just shows that the relationship in which the Governors stand to these funds is that they are seen as rapacious and interloping marauders.

RS: Yes, so while the EFCC focuses mainly on the Federal and State level, the Local Governments really have not been …

AO: Well, now that the money is going to … if these measures take effect, the Local Government will be accountable.  And of course, as I said, that by itself is not necessarily going to prevent corruption. It’s when we as members of a Local Government community, decide to start holding our Local Government elected representatives, that is our councillors, and our chairs and their deputies, their vice chairs, to … accountable for what they’re doing, and to say to them: Ah, this road, what’s going on?  Why hasn’t it been fixed?

RS: But if this then happens, then the buck-passing becomes difficult, because the money can only actually be withdrawn from the Local Government Account … 

AO: Yes, I agree, buck passing … I agree Rotimi, 

RS: … and only then, to … up to N500,000 …

AO: … buck passing becomes difficult, but if the person who … on whose table the buck lands says: “Ehn, so what?  I have the buck. What are you going to do about it? If you can find me?

RS: And it’s in his pocket.

AO: Then, you … that by itself, it really requires us …

RS: We don’t have a lot of women Chairs

AO:  It requires us as citizens to wake up, smell the coffee and start to also hold these people accountable, rather than seeing it as whatever the Federal, the State Government wants to do, they can do with it.  So yes, I think that from an IDEAS point of view, it can have an impact, but we shouldn’t be complacent about saying that it will automatically have the impact that we want it to have in IDEAS terms.

RS: Ok.  Alright. Thank you so much Ayo Obe.

AO: Can I just ask our listeners to please continue to check us out on our website at www.ideasradio.ng and also to follow us on Twitter @ideasradiong and of course, you can always