CBN Delays Direct LGA Fund Allocation to February Over Compliance Issues

The Central Bank of Nigeria (CBN) has extended the commencement of direct disbursements of Federation Account proceeds to the nation’s 774 Local Government Areas (LGAs) until February, following delays in compliance with required financial audits and account setup.

Investigations by DAILY ASSET reveal that, despite an earlier Federal Government directive mandating financial autonomy for LGAs starting in January, the apex bank was unable to process January allocations due to outstanding compliance requirements.

Sources indicate that the CBN had instructed all LGAs to conduct a full financial audit, a prerequisite for direct remittances. However, many councils failed to meet the January deadline, while some had yet to open accounts with the CBN, further delaying fund disbursement.

As a result, the 774 LGAs have not received their January allocations, even though the Federal Government and 36 states were paid over ten days ago.

The directive for CBN to remit funds directly to LGAs follows a Supreme Court ruling on July 11, 2024, which held that it was unconstitutional for state governments to control LGA funds, as the 1999 Constitution (as amended) recognizes LGAs as an independent tier of government.

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Additionally, the court ruled that LGAs without democratically elected officials should not receive allocations, thereby barring the Federal Ministry of Finance and CBN from disbursing funds to councils with appointed administrators.

Previously, LGA funds were routed through state governments via the Joint Accounts Committee (JAC)—a system widely criticized for enabling governors to manipulate funds, prompting the legal action by the Attorney General of the Federation (AGF), Chief Lateef Fagbemi (SAN).

In response to concerns from governors, President Bola Tinubu, during a December 26 meeting with the Nigerian Governors Forum (NGF) at his Lagos residence, clarified that the measure was taken in good faith to ensure financial independence for LGAs.

However, governors have opposed the “rushed implementation” of the Supreme Court ruling, arguing that several state-LGA joint projects, such as road construction, agricultural programs, and security initiatives, could be disrupted.

When contacted, CBN Director of Communications, Hajiya Hakama Sidi Ali, stated that she would provide further details but had yet to respond as of press time.