Diversification is the Only Way to Nigeria’s Prosperity
What is your opinion about the implementation of IFRS 9?
The implementation of IFRS 9 is on course in Nigeria. To ensure smooth implementation, the CBN provided Guidance Notes to Banks and Discount Houses on expectations of implementation of the new standard. The CBN also set up a project team from which banks could seek clarifications on grey areas of the implementation process. The banks have keyed into the implementation process and are developing and fine tuning strategies to ensure smooth take off in compliance with the deadline for conversion which is January 1, 2018. For instance, Diamond Bank had as of December 31, 2017 complied with the deadline. Generally, the implementation process is satisfactory, as a number of the processes (trainings, model designs, impact analysis, accounting policies among others) have been completed, especially by the banks. For insurance companies, it would appear they desire to wait for the take-off of IFRS 17 in 2021 by electing to exercise the Temporary Exemption approach instead of applying IFRS 9. To enjoy the exemption, they will have to pass the ‘predominance test.’ With the implementation of IFRS 9, it is hoped that the non-performing loans portfolio of banks would drop significantly.
On fraud matters in Nigeria, what are the roles of accountants?
In all modesty, ICAN has been at the forefront of supporting various governments’ and agencies’ initiatives at fighting the hydra-headed monster of corruption and other forms of fraud in the polity.
We are not resting on our oars. In 2015, we launched aN 50 million Whistle-Blower’ s Fund to protect and compensate our members who report any form of financial misdemeanor in the country. We weretherefore, andasexpected, elated when the Nigerian Senate passed the WhistleBlower Protection Bill of the federal government in June 2017 and you can see the level of success achieved by the federal government from the whistleblowers initiative.
ICAN keyed into Non-Compliance with Laws And Regulations, or (NOCLAR) in 2017. NOCLAR was issued by the International Ethics Standards Board for Accountants (IESBA) as a whistle-blowing initiative, which mandates professional accountants and auditors to expose any act of non-compliance to laws and regulations by their employers or clients to relevant authorities.
Similarly, the ICAN Accountability Index (ICAN-AI) being developed by the Institute is gathering momentum. This Index aims at improving the process for assessing public finance management and public governance practices across the three tiers of the Nigerian public sector including the federal, state and local governments.
Some of the specific objectives of the Index are to: encourage greater accountability and transparency in fiscal and Public Financial Management (PFM) practices in Nigeria; improve quality of governance and compliance with Fiscal Responsibility Act 2007; and tackle corruption by engaging quality professionals in public sector.
In fact, we made a presentation to the Federation Account Allocation Committee (FAAC) on the Index and we have the support of various government officials and political office holders in the development of the Index.
The challenges of insecurity and political uncertainties are still rife. Very high interest at over 20 per cent is stifling business growth and limiting SMEs access to credit and hampering SMEs’ potentials as a major employer of labour. Generally, government should create the enabling environment for businesses’ growth in terms of building a very strong infrastructural base, creating a supportive tax regime for SMEs and building a strong legal structure to protect SMEs. This is when we can have a truly diversified and inclusive economy
What’ s your score card on Nigeria’ s economy?
While there are still many hurdles to cross, we must acknowledge the fact that progress has been made especially in sustained decline in inflation rate for 18 consecutive months from the peak of 18.72 per cent in January 2017 to 11.23 per cent in June 2018.
Experts have projected a GDP rate of 2.4 per cent by the end of 2018 from the 0.8 per cent in 2017. Remittances by federal government agencies have also improved significantly e.g. N50 million by JAMB in five years to N7.8 billion.
However, the challenges of insecurity and political uncertainties are still rife. Very high interest at over 20 per cent is stifling business growth and limiting SMEs access to credit and hampering SMEs’ potentials as a major employer of labour.
Generally, government should create the enabling environment for businesses’ growth in terms of building a very strong infrastructural base, creating a supportive tax regime for SMEs and building a strong legal structure to protect SMEs. This is when we can have a truly diversified and inclusive economy.
Are you satisfied with the way the nation’ s budget is being handled?
It would be difficult for anyone to confess that he is satisfied with the way the nation’s budget is being handled. A lot of improvements are needed to bring the budgeting process in line with global leading practices by eliminating all fundamental challenges currently being experienced. For instance, the budget preparation and scrutiny are always late. This makes it difficult for stakeholders to plan appropriately. There is also the issue of assumptions underlying the budget estimates which are often over ambitious. We need to begin to learn from previous budget in preparing current ones. We do not have to impress anybody with high sounding but unrealistic assumption, especially in the area of crude oil production. The budget is also usually skewed in favour of recurrent expenditure. This is a disservice to the nation and an aberration. We equate budget performance in Nigeria with the release of funds such that nobody actually critically examines whether the budget is performing based on the parameters set in the budget or not. This is even compounded by the erratic release of budgeted funds to the respective agencies and units that need funds to execute projects and programmes. Unless and until all these fundamental challenges are dealt with sincerely and timely, the budgeting process in Nigeria would continue to be a challenge.
What is your position on the increasing debt portfolio of Nigeria?
The usual narrative is that Nigeria’s debt portfolio (even currently at over N21.7 trillion) is low and that the total public debt-to GDP ratio remains below normal threshold. This narrative is supported by the Debt Sustainability Analysis (DSA), which indicates that there is still ample space for Nigeria to continue to borrow from both internal and external sources. The advocacy is that in the 2018 financial year, Nigeria could still borrow US$6.25 billion and to be accessed on a 50:50 basis from external and internal sources. The crux of the matter is not whether to borrow or not to borrow, but that the debt profile is rising and much of what the funds have been applied to, are not quite evident, even though some of them would need some gestation period. If the discipline to apply the borrowed funds to productive use is present, of course borrowing becomes attractive. This is not the case with Nigeria where most of the borrowed funds cannot be adequately accounted for.
Remember as of April 2006, Nigeria’s external debt was significantly reduced by the repayment of US $30billion. We are again sliding to the 19852005 era when almost all resources were applied in paying interest on over-sized debts. In the last three years, external debt of over US$11.76bn has been accumulated and there is no end to the taste for external debts at all levels of government. My position, therefore, is that first of all, let there be stocking taking of our current debt profile and the projects to which the funds were applied and the benefits derived so far. On the basis of this cost-benefit analysis, it would be evident to all as to whether the country should continue to borrow or not. It is not a question of relating debt profile to GDP. It should be one of seeing borrowing as an exercise in morality.
Are you comfortable with the debt servicing plan?
The debt servicing ratio of about 63 per cent of revenue is unreasonable and has not helped the economy to grow. It is unsustainable and should bother every right thinking Nigerian. What I believe has misled the country is the wrong position of relating debt servicing to GDP. I think the relationship should be between debt-servicing and revenue generated. This would give a better idea of what situation is and help chart a path forward.