Following the directive by the Nigerian Financial Intelligence Unit barring state governments from spending funds meant for local governments, banks have begun to dishonour cheques emanating from states on behalf of local governments, The PUNCH has learnt.

The spokesman for the NFIU , Mr Sani Tukur , confirmed to our correspondent that the directive had recorded 100 per cent compliance.

He said, “ So far , there has been 100 per cent compliance , thanks to the banks and the efforts they have made in ensuring that only cheques from local governments are honoured.

“ I am aware that some banks have been calling to say they received cheques from state governments but they have not been cleared by the bank . Of course , they should know by now that only cheques issued by specific local governments will be cleared .

“ As long as the cheques are not from the local government , they will not be honoured by any bank because they stand the risk of being sanctioned.”

The NFIU had on May 6 , 2019 issued ‘ Guidelines to Reduce Vulnerabilities Created by Cash Withdrawals from Local Government Funds throughout Nigeria ,’ which barred governors from tampering with funds meant for local government areas from June 1.

Essentially , the guidelines stipulate that state and local government joint accounts be operated solely as transit accounts from which funds will be distributed directly to the accounts of local governments .
Banks were directed to ensure the full implementation of the guidelines with effect from June 1.

But the governors, under the aegis of the Nigerian Governors Forum, had in a protest letter to the President on May 19 , 2019 , argued that nothing in the NFIU Act 2018 gives the agency the power to give such a directive.

Citing Sections 7 ( 6) ( a) and ( b ); Sections 162 ( 6 ) , ( 7 ) and ( 8 ) , the NGF contended that the constitution expressly confers on only the National Assembly and the state Houses of Assembly the powers to make provisions for statutory allocation of public revenue to the local councils in the federation.

The Akwa Ibom State Government had approached the Federal High Court in Uyo , last week asking the court to stop the implementation of the guidelines.

Justice A . Okeke refused to grant the restraining order and adjourned the matter till June 21 .

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LG Funds: Banks Reject Cheques Issued by Governors, Says NFIU