Constitutionality of NFIU Guidelines Limiting Cash Withdrawals from Local Government Funds

CASE TITLE: A-G., ABIA STATE & ORS v. A-G., FEDERATION & ORS (2024) LPELR-62426(CA)

JUDGMENT DATE: 21ST MAY, 2024

JUSTICES: HAMMA AKAWU BARKA, JCA
ABBA BELLO MOHAMMED, JCA
PETER CHUDI OBIORAH, JCA

DIVISION: ABUJA

PRACTICE AREA: CONSTITUTIONAL LAW

FACTS:

The appeal stemmed from the judgment of the Federal High Court, Abuja, in suit no. FHC/ABJ/CS/563/2019.

In May 2019, the Nigerian Financial Intelligence Unit (NFIU), a federal agency established by the NFIU Act 2018, issued guidelines effective from June 1, 2019. These guidelines aimed to regulate the operations of State Joint Local Government Accounts, particularly in terms of withdrawals and lodgments, to reduce crime vulnerabilities linked to cash transactions involving local government funds.

The Appellants, however, contended that the guidelines infringed upon the constitutional authority of State Houses of Assembly to legislate on the establishment of Local Government Councils and the management of their funds, as provided by Sections 7 and 162 of the 1999 Constitution (as amended).

The 37th Appellant, representing the state governors, wrote to the President on May 15, 2019, protesting the guidelines and requesting their withdrawal, but received no response. The Appellants then instituted an action in Court on the legality of the guidelines, arguing that the NFIU acted beyond its powers under the NFIU Act by issuing directives that contradicted constitutional provisions.

The trial Court delivered judgment against the Appellants, holding that their case was not proven, leading to this appeal.

ISSUES FOR DETERMINATION:

The Court considered the following issues:

1. Whether the trial Court was right when its suo motu raised the issue of the 37th Appellant’s locus standi having regard to Section 590(1) of the Company’s and Allied Matters Act, 2004 and proceeded to resolve the issue without affording the Appellants any hearing thereon?

2. Whether having regard to the materials before the Court, the trial Court was right in concluding that the 37th Appellant lacks the locus standi to institute the action?

3. Whether the trial Court was not wrong in holding that the provisions of the 2nd Respondent’s guidelines in question do not contradict or conflict with the provisions of Sections 7(1), (6) (a) and (b) and 162(6), (7) and (8) and 4th Schedule to the Constitution of the Federal Republic of Nigeria 1999 (as amended)?

4. Whether the trial Court was justified in relying on the provisions of Sections 1, 23(2)(a) of the Nigerian Financial Intelligence Unit Act (NFIU Act) to conclude that the 2nd Respondent was empowered and justified to make the provisions of the guidelines in issue?

COUNSEL SUBMISSIONS:

The learned counsel for the Appellant argued that the trial Court’s decision was incorrect in holding that the NFIU’s guidelines did not conflict with the 1999 Constitution and that the NFIU was empowered to issue such guidelines under the NFIU Act. He contended that the trial Court wrongly focused only on regulation 5 of the guidelines, ignoring broader constitutional issues under Sections 7 and 162 of the Constitution. The counsel argued that the guidelines infringed on the constitutional powers of state legislatures over local government finances and that any law inconsistent with the Constitution should be declared void. He further argued that the NFIU exceeded its statutory powers by issuing guidelines that regulated state joint local government accounts, as this authority is constitutionally reserved for state governments.

The counsel for the 1st Respondent defended the trial Court’s decision, arguing that the NFIU guidelines were consistent with the Constitution, particularly regarding cash withdrawal limits from local government accounts. The 2nd and 3rd Respondents similarly argued that the NFIU’s guidelines did not encroach on the constitutional powers of the state governments and were necessary to prevent money laundering and other financial crimes.

The Appellant’s counsel responded by maintaining that the NFIU’s guidelines unlawfully controlled how local government funds were managed, violating the constitutional powers of state assemblies. He urged the appellate Court to overturn the trial Court’s decision.

DECISION/HELD:

In the final analysis, the appeal was dismissed.

RATIO:

CONSTITUTIONAL LAW – CONSTITUTIONAL VALIDITY OF LEGISLATION: Whether the provisions of the guidelines issued by the Nigeria Financial Intelligence Unit limiting cash withdrawal from local government funds is inconsistent with the provisions of the Constitution

“For ease of reference, let me reproduce the provisions of Section 162 subsections 3, 4, 5, 6, 7 and 8 of the Constitution vis-à-vis the guidelines put in place by the 2nd Respondent, thus:

Section 162, Subsections (3), (4), (5), (6), (7) and (8) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) provided, as follows:

(3) Any amount standing to the credit of the Federation Account shall be distributed among the Federal and State Governments and the local government council in each State on such terms and in such manner as may be prescribed by the National Assembly.

(4) Any amount standing to the credit of the States in the Federation Account shall be distributed among the State on such terms and in such manner as may be prescribed by the National Assembly.

(5) The amount standing to the credit of local government councils in the Federation Account shall also be allocated to the States for the benefit of their local government council on such terms and in such manner as may be prescribed by the National Assembly.

(6) Each State shall maintain special account to be called “State Joint Local Government Account” 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.

(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.

(8) The amount standing to the credit of the local government council of the 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.”

Read along with the provisions of the guidelines promulgated by the 2nd Respondent which also read as follows:

Provision 1: It is hereby provided that these guidelines are irreversible.

Provision 2: It is hereby provided that the State Joint Local Government Account is only a collection account of funds to be shared to only Local Government Accounts in accordance with Section 162(7) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) and not for any other transaction or purposes.

Provision 3: It is hereby provided that with effect from 7th June, 2019, no withdrawal shall be done from the State Joint Local Government Accounts unless and until that withdrawal is going into a particular Local Government Account.

Provision 4: It is hereby provided that Local Governments (LGs) must be encouraged to have a Single Revenue Account, a Single Salary account, and a Single Running Cost Account for all payments and not to maintain additional accounts for the purpose of mitigating money laundering and helping investigations and accountability.

Provision 5: It is hereby also provided that with effect from 1st June, 2019, no cash withdrawal shall be made from any Local Government Account anywhere in the country for a CUMULATIVE AMOUNT exceeding N500,000.00 (Five hundred thousand naira only) per day. Any other transaction must be done through cheques or electronic funds transfers.

Provision 6: It is hereby provided that any State Government that is willing seek for any expert economic advice in the unlikely event of these guideline constituting an inconvenience to the management of that State can work with NFIU and/or the CBN.

Provision 7: It is hereby provided that the CBN, the various State governments, and Local Governments can work in synergy to encourage the expansion of electronic cash services and automated teller machines (ATMs) into the remotest location of the country.

My understanding of Section 162(6)(7) and (8) is therefore clear enough. As argued, the section simply governs the allocation of money from the federation account to the state’s joint local government account, and specifically, the allocation of money from the said state joint local government account to the local government accounts, period. On the other hand, what the guidelines stipulate is that the cash withdrawal from the said account be limited to N500,000 per day, with any other withdrawals to be made by way of transfers, etc. This does not impinge or usurp the powers of the Houses of Assembly prescribing the amount due to each local government as prescribed by the Constitution.

Accordingly, and in line with the guidance made in the case of Saraki vs. FRN (supra) as to the interpretation to be employed. See also Abegunde vs. Ondo State House of Assembly (2015) LPELR – 24588 (SC), and having carefully studied the provisions of the guidelines as well as the provisions of the Constitution under reference, I am inclined to see things from the viewpoint of the lower Court and Respondents’ counsel, that the guidelines enunciated by the 2nd Respondent in no way conflicted with the provisions of the Constitution. The case of Marwa & Ors. v. Nyako & Ors. (2012) LPELR-7837(SC), relied upon by the lower Court is quite apposite.

It has to be borne in mind that the vexed guidelines were necessitated by the urge to arrest the endemic and chronic corruption bedeviling the country and eating deep into the fabric of our civil administration. No doubt, the Apex Court when confronted with a similar scenario, did not think twice, commending the issuance of similar guidelines in combating the menace.

The Supreme Court, per UWAIFO JSC, in the case of Attorney General of Ondo State V. Attorney General of the Federation & 35 Ors. (supra) held, at page 417, paras D – H, that:

“where corrupt practices such as what informed the guidelines issued by the 2nd Defendant, acquire a pervasive national character, the Federal Government would be adjudged to act within the framework of the Constitution where legislation or regulations are put in place to tame the monstrous social malaise, as follows: “It would be right to conclude that where subject matter in its manifestation spreads across the states and even over the borders of Nigeria and is such that is best suited for legislation by the National Assembly upon a liberal construction of all relevant provisions of the Constitution, legislation thus made cannot be said to be an interference with the affairs of the states just because it is made applicable all over the federation. The purpose and mission of the Act are clear. The Act is meant to make justiciable by legislation on a declared state policy to abolish corrupt practices and abuse of power; it is to hearken to national and international concerns over corruption; it is to give a national leadership and impetus to the crusade while not standing in the way of the states; it seeks, among other things, to deal with and punish specific offences on corrupt practices, even including those committed outside Nigeria by citizens and persons granted permanent residence in Nigeria. See Section 66. It is not in any way a legislative jurisdiction. The eradication of corrupt practices and abuse of power will ensure the good government of Nigeria. I therefore answer the questions (i) and (ii) set down by the plaintiff in its brief of argument in the affirmative.”My Lords, in the same case of Attorney General of Ondo State vs. Attorney General of the Federation & 35 Ors. (supra), the apex Court held that on the strength of Sections 4(2) and 15(5) of the Constitution, as well as Items 60(a), 67 and 68 of the Exclusive Legislative List (Second Schedule, Part 1), the Federal Government is empowered to legislate for the entire Federation, including the local governments, on corruption related matters such as the purport of the Guidelines issued by the 2nd Defendant. In the same case, while emphasizing the position of the Apex Court on the issue, UWAIS CJN held that “it is submitted that “corruption” is not a subject under either the Exclusive or the Concurrent Legislative List and therefore being a residual matter, the National Assembly has no power to legislate upon it.

This submission overlooks the provisions of Section 4 subsection (4)(b) of the Constitution, which provides that the National Assembly has the power to make law in accordance with the provisions of the Constitution. Section 15 subsection (5) directs the National Assembly to abolish all corrupt practices and abuse of power.

The question is: how can the National Assembly exercise such powers? It can only do so effectively by legislation. Item 67 under the Exclusive Legislative List, read together with the provisions of Section 4 subsection (2), provides that the National Assembly is empowered to make law for the peace, order and good government of the Federation and any part thereof. It follows, therefore, that the National Assembly has the power to legislate against corruption and abuse of office even as it applies to persons not in authority under public or government office for the aim of making law is to achieve the common good. The power of the National Assembly is therefore not residual under the Constitution but might be concurrent with the powers of State House of Assembly and Local Government Council, depending on the interpretation given to the word “state” in Section 15 subsection (5) of the Constitution.

The rationale of the entire reasoning of the Apex Court can still be found in the same judgment at page 398, where Uwaifo JSC held that:

“We are faced with a desire to abolish all corrupt practices and abuse of power. Very gory details, perhaps with some measures of cynicism, of corrupt practices involving Nigerians and of the perception in which Nigeria is held in the international community on matters of corruption have been recorded. Our image in that regard, as said by Chief Babalola, is on the level of a pariah status. In those circumstances, an act has been enacted by the National Assembly promulgated as being within the powers of the National Assembly. Arguments have been canvassed by those in support of the Act that the National Assembly was empowered by virtue of Section 4(1)(2) and (3) to rely on Item 60(a), 67 and 68 of the Executive Legislative List and Para. 2(a) of Part III of the Second Schedule of the Constitution. In my opinion, upon a liberal view, that can be supported.” Per BARKA, J.C.A.

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