States oppose FG’s push for Local Governments to use CBN accounts
State governments have rejected the federal government’s plan to mandate Central Bank of Nigeria (CBN) accounts for local governments, arguing that the move is unconstitutional and unnecessary.
The federal government had proposed depositing monthly revenue allocations directly into CBN accounts following a Supreme Court ruling affirming financial autonomy for local councils. However, state governors, after initially securing a delay to address technical concerns, are now resisting the plan, insisting that local governments should continue banking with commercial institutions.
Chairman of the Finance Commissioners Forum, Akin Oyebode, defended the states’ position, emphasizing that local governments have traditionally operated accounts with commercial banks without violating any laws. He dismissed the federal government’s directive as unlawful.
“No local government has asked to open an account with the CBN,” Oyebode stated. “They already bank with commercial institutions, and there is no constitutional basis to force them to change that.”
He explained that the controversy revolves around whether local government funds should be paid directly or managed through the State/Local Government Joint Account (JAC), a system recognized by the constitution. He cited Section 7 of the 1999 Constitution, which grants state Houses of Assembly authority over local government administration, including financial oversight.
Oyebode acknowledged concerns that some state governments misuse local government funds under the JAC system but insisted that the Supreme Court ruling was more focused on strengthening local government autonomy rather than prescribing a specific method for fund disbursement.
He also warned that direct federal payments might create financial instability for many local councils, given the current revenue allocation formula. “Without adjusting these allocations, at least a third of local governments would struggle to meet basic obligations like salary payments,” he cautioned.
On the issue of CBN accounts, Oyebode argued that the federal government lacks the power to dictate where local councils should bank. He described the CBN as a financial institution primarily serving the federal government, not an operational bank suited for local government transactions.
“The CBN isn’t even structured to manage the finances of 36 states, let alone hundreds of local governments spread across the country,” he noted. “How will it provide banking services to these councils?”
He called for a clearer legal interpretation of JAC’s role in the constitution and urged all stakeholders to engage in meaningful discussions rather than impose financial policies that could disrupt local government operations.
Source: The Nation
