‘FG lacks power to restrict withdrawals from state accounts’

A Senior Advocate of Nigeria (SAN), Chief Sebastine Hon, has clarified that the Federal Government lacks Constitutional powers to restrict withdrawals from the bank accounts of the state and local governments as proposed by the Nigeria Financial Intelligence Unit (NFIU).

The senior lawyer explained that Nigeria with a Federal System of Government cannot be run in the way of unitary system of government as being proposed by the NFIU.

In a statement released yesterday in Abuja, Sebastine Hon, explained that the Nigerian Federal Constitution has imbued the federating states with such financial independence that, once the Federal Government allocates money from the Federation purse to the State Governments, the former lacks the constitutional vires to breath down orders on the states and the local governments on how such money should be spent – as if these latter two are appendages of the former.

According to him, he maintained that Constitutional provisions did not make states and local governments appendages of the Federal Government.

His position was provoked by a statement credited to the Director of the NFIU of the Central Bank of Nigeria (CBN), Modibbo Hamman Tukur, that the Federal Government, through the CBN, is planning to stop cash payments from the accounts of all the three tiers of government – the Federal, State and Local Governments.

Tukur was reported to have said that the CBN will be acting pursuant to section 1 of the repealed Money Laundering (Prohibition) Act of 2011, which is re-enacted substantially and is now section 2(1) of the Money Laundering (Prevention and Prohibition) Act, 2022.

According to the NFIU Director, the reason is for the need to curb money laundering, which occurs when state officials withdraw more than permissible from those accounts in the name of estacodes.

Tukur had also hinted that the policy is meant to support and supplement the 11th-hour economic policies being introduced by the Federal Government, targeting the recovery of the naira from its free fall.

However, the senior lawyer in a reaction said: “As salutary as the proposal sounds, I hereby maintain that Nigeria as a federal as opposed to a unitary system of government, cannot be run this way.”

The statement read in part: “Our constitutional history, beginning with the 1979 Constitution, is intolerable of this. I will establish this with pronouncements of the Supreme Court – the highest of the land.

“In the locus classicus of Attorney-General of Bendel State vs. Attorney-General of the Federation (1982) 3 NCLR 1 at 190, Uwais, JSC (as he then was – later, CJN), held quite unassailably as follows:

“It seems to me therefore that once the Federal account is divided amongst the three tiers of government, the state governments collectively become the absolute owners of the share that is allocated to them (i.e. 35 per cent) so that it would normally be their prerogative to exercise full control over the share.

“Consequently, it will be inappropriate for the Federal Government to administer the share without the authorisation of the State Governments. This appears to be logical and in keeping with the fundamental principle of Federation on the autonomy of the constituent states.”