State Governors Resist FG’s Move to Open CBN Accounts for Local Governments

Nigeria’s 36 state governments are resisting efforts by the Federal Government to compel local governments to open accounts with the Central Bank of Nigeria (CBN). This development follows a recent Supreme Court ruling that reinforced the financial autonomy of the country’s 774 local government areas.

The Federal Government had planned to begin paying monthly revenue allocations directly into local government accounts with the CBN, in line with the Supreme Court’s directive. Initially, the states requested a delay in implementation to resolve certain technical issues — a request that was granted. However, just as preparations neared completion, governors began lobbying for local governments to continue using commercial banks instead of the CBN.

Their main argument is that there is no legal requirement compelling local governments to maintain accounts with the apex bank. Akin Oyebode, Chairman of the Finance Commissioners Forum, confirmed this position, describing any move to mandate the use of CBN accounts as illegal. He stated that local governments have always operated accounts with commercial banks without violating constitutional provisions.

“You can’t force me to open an account,” he said. “No local government, to my knowledge, has asked to open a CBN account. They already operate accounts with commercial banks.”

Oyebode emphasized that the debate over whether allocations should be paid directly to local governments or through the State/Local Government Joint Account (JAC) is an administrative issue. He highlighted that JAC has constitutional backing and is subject to state laws as provided in Section 7 of the 1999 Constitution. According to him, state Houses of Assembly have the legal authority to determine how local governments function, including financial oversight.

Citing Anambra State’s model, Oyebode said the state’s approach to managing local government funds is constitutionally valid. He acknowledged widespread concerns about misuse of local government funds through the JAC system but insisted that the real significance of the Supreme Court’s ruling lies in enforcing democratic governance at the local level — such as stopping arbitrary sackings of elected council officials.

He also explained that even if the Federal Government pays councils directly, state laws could still require pooling of funds via JAC. Oyebode stressed the need to revise the current revenue allocation formula, warning that about a third of local governments would become insolvent if paid directly under current financial structures. According to him, states currently use JAC to prioritize salary payments and distribute remaining funds based on service needs — a system he believes ensures basic operational stability.

He added that states also handle statutory financial obligations such as counterpart funding for Universal Basic Education Commission (UBEC) projects, which local governments would still have to support even with direct allocations.

On the question of using the CBN for local government accounts, Oyebode was firm. He argued that the apex bank is not equipped to serve the needs of over 700 local councils scattered across the country, noting that even state governments do not bank directly with the CBN. He described the apex bank as a wholesale institution, not structured for day-to-day transactions required by local governments.

“The Central Bank is not a retail bank,” he said. “It doesn’t even bank states. How will it bank local governments, many of which are in remote locations?”

Oyebode called for a legal interpretation of JAC’s role in the constitution and urged all stakeholders to seek further clarity from the Supreme Court. He maintained that resistance to changes in funding arrangements is largely to protect local government structures from abuse and ensure adherence to constitutional processes.

“What is clear, which is not subject to opinion, is that the constitution provides for state-level oversight,” he said. “If a state wants to oversee the management of local government finances, Section 7 of the constitution allows the House of Assembly to make laws.”