The Nigerian Accountant 2012 - The Institute of Chartered ...

Contents 

The Nigerian 

ACCOUNTANT 

(ISSN: 0048 – 0371) 

is published quarterly 

for N400 by the 

INSTITUTE OF CHARTERED 

ACCOUNTANTS OF NIGERIA, 

Plot 16, Professional Centre 

Layout, Idowu Taylor Street, 

Victoria Island, 

P.O. Box 1580, Lagos. 

The views expressed by 

correspondents or contributors 

in this journal are not 

necessarily those of the 

Institute. 

3 

April/June, 2012 

FINANCIAL REPORTING 

* 

Financing Local Government 

Projects Through the Capital Market: 

A Proposition for Self-Reliance In 

Finance 

16 

FEATURES 

* 

Financial Imbalance and Fiscal 

Autonomy in Nigerian Local 

Governments: Benue State Experience 

22 

CONFERENCE 

42 

EVENTS 

* 

Vol.45, No.2 

2012 ANNUAL DINNER & AWARDS: 

Rewarding Excellence 

44 

SEMINAR 

* 

Retirement & Implications 

of Life Out of Office 

46 

BUSINESS 

* 

Maximising Opportunities 

In the Nigerian Economy: 

Accounting Technicians’ 

Perspective 

The Institute reserves the right 

to refuse, cancel, amend or 

suspend an advertisement or 

insertion and no liability can 

be accepted for loss arising 

from non-publication or late 

publication of any advertisement 

or insertion. All articles are 

subject to editing. 

© No part of this publication 

may be reproduced without the 

prior written permission of the 

publishers. 

* 

ICAN Advises Govt on Adopting 

Parliamentary System 

* Communiqué of the 7th Northern 

Districts Accountants Conference 

Utilising Approved Taxes and 

* 

Levies Collection Act 2004 for 

Effective Revenue Generation at 

States Level: The Roles of Chartered 

Accountants 

29 

COVER ARTICLE 

* 

Rebuilding Trust in Nigerian 

55 

HEALTH 

PARKINSON DISEASE 

* 

59 

IFRS ADOPTION 

* 

The Challenges and Prospects 

of Adopting the International Financial 

Reporting Standards: The Nigerian 

Experience 

Banking Industry 

2 From the Editor 10 News 

THE NIGERIAN ACCOUNTANT 1 

April/June, 2012

THE INSTITUTE OF CHARTERED 

ACCOUNTANTS OF NIGERIA 

(Established by Act of Parliament No.15 of 1965) 

OFFICERS & COUNCIL MEMBERS 2011-2012 

President 

Francis OJAIDE (Professor), OON, MSc., PhD, FCA 

Vice President 

Doyin OWOLABI, BSc., MILR, MNIM, FCA 

1 st Deputy Vice President 

Kabir Alkali MOHAMMED (Alhaji), mni, FCIS, FCA 

2 nd Deputy Vice President 

Chidi Onyeukwu AJAEGBU, ACS, MBF, FCA 

Honorary Treasurer 

Onome Joy OLAOLU (Mrs.), BSc., MSc., ACPIN, FCIB, FCA 

Members 

Solomon Oluwole ADELEKE (Deacon), FCA 

Afolabi Abiodun AJOMALE (Chief), FCA 

Ishola Rufus AKINTOYE (Ass. Professor) MBA, MSc, PhD, FCA 

Shakirat Adepeju BABATUNDE (Alhaja), BSc (Hons), MBA, MSc, FCA 

Sunday Abayomi BAMMEKE, BSc., FCA 

Ahmed Bawa BELLO, BSc, MBA, ACA 

Adaku Chilaka CHIDUME-OKORO (HRH.), BSc., MSc., FCA 

Samuel Olufemi DERU (Otunba), FCA 

Pius Ehiemen EBHOMIELEN (Professor, Rev.), PhD, FCA 

Uchenna Ifesinachi EROBU (Mrs.), FCA 

Comfort Olujumoke EYITAYO (Mrs.), mni, FCA 

Tijani Musa ISA (Mallam), BSc., FCA 

Razak JAIYEOLA (Alhaji), BSc., FCA 

Sebastian Seddi MAIMAKO (Ass. Professor), PhD, FCA 

Monica Ngozi OKONKWO, MSc., ACIB, FCA 

Nnamdi Anthony OKWUADIGBO (Mazi), BSc., FCA 

Innocent OKWUOSA, MSc, ACIB, FCA 

Fatai Oyebade OYEDEPO (Prince), MBA, FCA 

Olusola OYETAYO, BSc., FCA 

Sebastian Achulike OWUAMA (Major-Gen., retd.), BSc., FCA (IPP) 

* 

Tayo PHILLIPS, MBA, FCA 

Oladipo Aboaba SMITH, BSc., FCA 

Titus Alao SOETAN (Deacon), FCA 

Mohammed TANKO (Professor), MSc., PhD, ACA 

Josephine Oluseyi WILLIAMS (Mrs.), BSc., FCA 

Registrar/Chief Executive 

Olutoyin Adeagbo ADEPATE, OON, BSc., MBA, FCA 

Auditor 

Thomas AYORINDE & Co. (Chartered Accountants) 

Editorial Board Members 

Mazi Nnamdi OKWUADIGBO 

Oladipo Aboaba SMITH 

Innocent Iweka OKWUOSA 

Dr. L.O. OBOKOH 

Mr. Yohanna Gyang JUGU 

Dr. C.A. OKAFOR 

Dr. (Mrs.) Olubunmi F. OSEMENE 

Dr. Joseph Kwakhor ACHUA 

Dr. Austin U. NWEZE 

Dr. David D. SOBANDE 

Dr. M.A. OLADOJA 

Mr. Frederick Iluyomade OGUNJUBOUN 

Dayo AJIGBOTOSHO – Editor 

Muyiwa DARE – Assistant Editor 

Sunkanmi OLOKETUYI – Staff Writer 

Ruth IDUMUEKWU – Reporter 

Orhue GUOBADIA – Adverts Manager 

Correspondence should be addressed to:- 

The Corporate Affairs Department 

The Institute of Chartered Accountants of Nigeria, 

Plot 16, Professional Centre Layout, Idowu Taylor Street, 

Victoria Island. P.O. Box 1580, Lagos. 

Tel: (01) 7642294, 7642295 Fax: (01) 4627048 

E-mail: corporateaffairs@ican.org.ng ICAN Website: www.ican-ngr.org 

EDITOR 

In Nigeria today, trust between the citizens 

and the Government is nothing to write home 

about. In like manner, citizens’ trust in social 

systems has broken down and suspicion is 

rife. Failure of banking for instance has shattered 

people’s confidence in the industry and this is 

not just in Nigeria. The problem of the Nigerian 

banking industry has been attributed partly to the 

aftermath the consolidation exercise characterised 

by challenges such as over capitalisation, credit 

concentration, skill gaps, narrow deposit source, 

the attitude of resistance to change and, of 

course, the pervasive corruption in the system. 

The extravagant lifestyle and character flaws of a 

section of the banks leadership also contributed 

in no small way to bringing a number of banks to 

their knees. 

Since banking is very important in every 

economy, whatever misfortune hits the sector 

automatically affects other sectors. Thus, economic 

activities have dwindled all over the world due 

to the failure of banking. Now that Nigeria is 

embracing the International Financial Reporting 

Standards (IFRS) and Cashless Economy, how 

can banks and their reputation be salvaged in 

the country such that they truly transit to the 

new regime without the debilitating effects of the 

situation engendered by the breakdown of trust? 

The author of our cover article says there is 

the need to analyse and identify areas which are 

most at risk and develop training programmes 

and products to address deficiencies such as 

lack of infrastructural support, corruption, lack 

of adequate enlightenment and publicity, lack of 

appropriate dispute resolution when problems 

occur, power outage and inadequacy, lack of 

trust and resistance to change attitude, policy 

inconsistencies and so on. These are some of 

the issues you will encounter in our lead article 

entitled “Rebuilding Trust in Nigerian Banking 

Industry”. 

Your comments and contributions are welcome. 

Please write to: corporateaffairs@ican.org.ng; 

or daajigbotosho@ican.org.ng 

* Denotes Past President From The 



Health 

PARKINSON DISEASE 

What is Parkinson’s Disease? 

Parkinson’s disease is the 

second most common neurodegenerative 

disorder and 

the most common movement 

disorder. It is characterised by progressive 

loss of muscle control, which leads 

to trembling of the limbs and head 

while at rest, stiffness, slowness, and 

impaired balance. As symptoms worsen, 

it may become difficult to walk, talk, and 

complete simple tasks. 

The progression of Parkinson’s 

disease and the degree of impairment 

vary from individual to individual. Many 

people with Parkinson’s disease live long 

productive lives, whereas others become 

disabled much more quickly. Premature 

death is usually due to complications such 

as falling-related injuries or pneumonia. 

In the United States, about 1 million 

people are affected by Parkinson’s 

disease and worldwide about 5 

million. Most individuals who develop 

Parkinson’s disease are 60 years of age 

or older. Parkinson’s disease occurs in 

approximately 1% of individuals aged 

60 years and in about 4% of those aged 

80 years. Since overall life expectancy 

is rising, the number of individuals 

with Parkinson’s disease will increase 

in the future. Adult-onset Parkinson’s 

disease is most common, but early-onset 

Parkinson’s disease (onset between 21- 

40 years), and juvenile-onset Parkinson’s 

disease (onset before age 21) also exist. 

Descriptions of Parkinson’s disease 

date back as far as 5000 BC. Around that 

time, an ancient Indian civilisation called 

the disorder Kampavata and treated 

it with the seeds of a plant containing 

therapeutic levels of what is today known 

as levodopa. Parkinson’s disease was 

named after the British doctor James 

Parkinson, who in 1817 first described the 

disorder in great detail as “shaking palsy.” 

What Causes Parkinson’s 

Disease? 

A substance called dopamine acts as 

a messenger between two brain areas 

– the substantia nigra and the corpus 

striatum - to produce smooth, controlled 

movements. Most of the movementrelated 

symptoms of Parkinson’s disease 

are caused by a lack of dopamine due to 

the loss of dopamine-producing cells in 

the substantia nigra. When the amount 

of dopamine is too low, communication 

between the substantia nigra and 

corpus striatum becomes ineffective, 

and movement becomes impaired; the 

greater the loss of dopamine, the worse 

the movement-related symptoms. Other 

cells in the brain also degenerate to 

some degree and may contribute to 

non-movement related symptoms of 

Parkinson’s disease. 

Although it is well known that lack of 

dopamine causes the motor symptoms 

of Parkinson’s disease, it is not clear 

why the dopamine-producing brain cells 

deteriorate. Genetic and pathological 

studies have revealed that various 

dysfunctional cellular processes, 

inflammation, and stress can all contribute 

to cell damage. In addition, abnormal 

clumps called Lewy bodies, which contain 

the protein alpha-synuclein, are found 

in many brain cells of individuals with 

Parkinson’s disease. The function of 

these clumps in regards to Parkinson’s 

disease is not understood. In general, 

scientists suspect that dopamine loss 

is due to a combination of genetic and 

environmental factors. 

What Genes are Linked to 

Parkinson’s Disease? 

In most individuals, Parkinson’s 

disease is idiopathic, which means that 

it arises sporadically with no known 

cause. However, about 15% of individuals 

have family members with Parkinson’s 

disease. By studying families with 

hereditary Parkinson’s disease, scientists 

have identified several genes that are 

associated with the disorder. Studying 

these genes helps understand the 

cause of Parkinson’s disease and may 

lead to new therapies. So far, five genes 

have been identified that are definitively 

associated with Parkinson’s disease. 

1. SNCA (synuclein, alpha non A4 

component of amyloid precursor): SNCA 

makes the protein alpha-synuclein. In 

brain cells of individuals with Parkinson’s 

disease, this protein aggregates in 

clumps called Lewy bodies. Mutations in 

the SNCA gene are found in early-onset 


2. PARK2 (Parkinson’s disease 

autosomal recessive, juvenile 2): The 

PARK2 gene makes the protein parkin. 



Health 

Mutations of the PARK2 

gene are mostly found in 

individuals with juvenile 

Parkinson’s disease. Parkin 

normally helps cells break 

down and recycle proteins. 

3. PARK7 (Parkinson’s 

disease autosomal recessive, 

early onset 7): PARK7 

Trembling fingers 

mutations are found in earlyonset 

Parkinson’s disease. The PARK7 at increased risk because of a family 

gene makes the DJ-1 protein, which may history of the disorder. 

protect cells from oxidative stress. • Head trauma, illness, or exposure 

4. PINK1 (PTEN-induced putative to environmental toxins such as pesticides 

kinase 1): Mutations of this gene are and herbicides may be a risk factor. 

found in early-onset Parkinson’s disease. 

The exact function of the protein made What are the Symptoms of 

by PINK1 is not known, but it may Parkinson’s Disease? 

protect structures within the cell called The primary symptoms of Parkinson’s 

mitochondria from stress. 

disease are all related to voluntary and 

5. LRRK2 (leucine-rich repeat kinase involuntary motor function and usually 

2): LRRK2 makes the protein dardarin. start on one side of the body. Symptoms 

Mutations in the LRRK2 gene have been are mild at first and will progress over 

linked to late-onset Parkinson’s disease. time. Some individuals are more affected 

Several other chromosome 

regions and the genes GBA 

(glucosidase beta acid), 

SNCAIP (synuclein alpha 

interacting protein), and UCHL1 

(ubiquitin carboxyl-terminal 

esterase L1) may also be linked 

to Parkinson’s disease. 

Who is at Risk for 


• Age is the largest risk 

factor for the development and 

Lost reflexes 

progression of Parkinson’s 

disease. Most people who develop than others. Studies have shown that by 

Parkinson’s disease are older than 60 the time that primary symptoms appear, 

years years of age. 

individuals with Parkinson’s disease will 

• Men are affected about 1.5 to 2 have lost 60% to 80% or more of the 

times more often than women. 

dopamine-producing cells in the brain. 

• A small number of individuals are Characteristic motor symptoms include 

the following: 

• T r e m o r s : 

Trembling in fingers, 

hands, arms, feet, legs, 

jaw, or head. Tremors 

most often occur while the 

individual is resting, but not 

while involved in a task. 

Tremors may worsen when 

an individual is excited, 

tired, or stressed. 

Parkinson’s 

disease is not 

preventable 

• Rigidity: Stiffness 

of the limbs and trunk, 

which may increase during 

movement. Rigidity may 

Stiffness of 

the limbs 

produce muscle aches and pain. Loss 

of fine hand movements can lead to 

cramped handwriting (micrographia) and 

may make eating difficult. 

• Bradykinesia: Slowness of 

voluntary movement. Over time, it may 

become difficult to initiate movement and 

to complete movement. Bradykinesia 

together with stiffness can also affect 

the facial muscles and result in an 

expressionless, “mask-like” appearance. 

• Postural Instability: Impaired or 

lost reflexes can make it difficult to adjust 

posture to maintain balance. Postural 

instability may lead to falls. 

• Parkinsonian Gait: Individuals 

with more progressive Parkinson’s 

disease develop a distinctive shuffling 

walk with a stooped position and a 

diminished or absent arm swing. It may 

become difficult to start walking and to 

make turns. Individuals may freeze in 

mid-stride and appear to fall forward while 

walking. 

Secondary Symptoms of 

Parkinson’s Disease 

While the main symptoms of 

Parkinson’s disease are movementrelated, 

progressive loss of muscle 

control and continued damage to the 

brain can lead to secondary symptoms. 

These vary in severity, and not every 

individual will experience all of them. 

Some of the secondary symptoms 

include: 

Anxiety, insecurity, and stress 

• 

Confusion, memory loss, and 

dementia (more common in elderly 

individuals) 

• Constipation 

• Depression 

Difficulty swallowing and excessive 

salivation 

Diminished sense of smell 

Increased sweating 

Male erectile dysfunction 

Skin problems 

• Slowed, quieter speech, and 



Health 

monotone voice 

• Urinary frequency/urgency. 

What Other Conditions Resemble 


In its early stages, Parkinson’s 

disease can resemble a number of 

other conditions with Parkinson-like 

symptoms known as Parkinsonism. 

These conditions include multiple system 

atrophy, progressive supranuclear 

palsy, corticobasal degeneration, Lewy 

body dementia, stroke, encephalitis 

(inflammation of the brain), and head 

trauma. Alzheimer’s disease and primary 

lateral sclerosis can also be mistaken 

for Parkinson’s disease. Other similar 

conditions include essential tremor, 

dystonic tremor, vascular Parkinsonism, 

and drug-induced Parkinsonism. 

How is Parkinson’s Disease 

Diagnosed? 

An early and accurate diagnosis 

of Parkinson’s disease is important in 

developing good treatment strategies to 

maintain a high quality of life for as long 

as possible. However, there is no test 

to diagnose Parkinson’s disease with 

certainty (except after the individual has 

passed away). A diagnosis of Parkinson’s 

disease – especially in the early phase 

– can be challenging due to similarities 

to related movement disorders and 

other conditions with Parkinson-like 

symptoms. Individuals may sometimes 

be misdiagnosed as having another 

disorder, and sometimes individuals 

with Parkinson-like symptoms may 

be inaccurately diagnosed as having 

Parkinson’s disease. It is therefore 

important to re-evaluate individuals in the 

early phase on a regular basis to rule out 

other conditions that may be responsible 

for the symptoms. 

A neurologist who specialises in 

movement disorders will be able to make 

the most accurate diagnosis. An initial 

assessment is made based on medical 

history, a neurological exam, and the 

symptoms present. For the medical 

history, it is important to know whether 

other family members have Parkinson’s 

disease, what types of medication have 

been or are being taken, and whether 

there was exposure to toxins or repeated 

head trauma in the past. A neurological 

exam may include an evaluation of 

coordination, walking, and fine motor 

tasks involving the hands. 

Several guidelines have been 

published to assist in the diagnosis of 

Parkinson’s disease. These include the 

Hoehn and Yahr scale and the Unified 

Parkinson’s Disease Rating Scale. Tests 

are used to measure mental capacity, 

behaviour, mood, daily living activities, 

and motor function. They can be very 

helpful in the initial diagnosis, to rule out 

other disorders, as well as in monitoring 

the progression of the disease to make 

therapeutic adjustments. Brain scans 

and other laboratory tests are also 

sometimes carried out, mostly to detect 

other disorders resembling Parkinson’s 

disease. 

The diagnosis of Parkinson’s disease 

is more likely if: 

1. At least two of the three major 

symptoms are present (tremor at 

rest, muscle rigidity, and 

slowness); 

2. The onset of symptoms started on 

one side of the body; 

3. Symptoms are not due to 

secondary causes such as 

medication or strokes in the area 

controlling movement; and 

4. Symptoms are significantly 

improved with levodopa. 

What is the Treatment for 


There is currently no treatment to 

cure Parkinson’s disease. Several 

therapies are available to delay the onset 

of motor symptoms and to ameliorate 

motor symptoms. All of these therapies 

are designed to increase the amount of 

dopamine in the brain either by replacing 

dopamine, mimicking dopamine, or 

prolonging the effect of dopamine by 

inhibiting its breakdown. Studies have 

shown that early therapy in the nonmotor 

stage can delay the onset of motor 

symptoms, thereby extending quality of 

life. 

The most effective therapy for 

Parkinson’s disease is levodopa 

(Sinemet), which is converted to 

dopamine in the brain. However, because 

long-term treatment with levodopa 

can lead to unpleasant side effects (a 

shortened response to each dose, painful 

cramps, and involuntary movements), 

its use is often delayed until motor 

impairment is more severe. Levodopa 

is frequently prescribed together with 

carbidopa (Sinemet), which prevents 

levodopa from being broken down before 

it reaches the brain. Co-treatment with 

carbidopa allows for a lower levodopa 

dose, thereby reducing side effects. 

In earlier stages of Parkinson’s 

disease, substances that mimic the action 

of dopamine (dopamine agonists), and 

substances that reduce the breakdown 

of dopamine (monoamine oxidase 

type B (MAO-B) inhibitors) can be very 

efficacious in relieving motor symptoms. 

Unpleasant side effects of these 

preparations are quite common, including 

swelling caused by fluid accumulation in 

body tissues, drowsiness, constipation, 

dizziness, hallucinations, and nausea. 

For some individuals with advanced, 

virtually unmanageable motor symptoms, 

surgery may be an option. In deep brain 

stimulation (DBS), the surgeon implants 

electrodes to stimulate areas of the brain 

involved in movement. In another type 

of surgery, specific areas in the brain 

that cause Parkinson’s symptoms are 

destroyed. 

An alternative approach currently 

being explored is the use of dopamineproducing 

cells derived from stem 

cells. While stem cell therapy has great 

potential, more research is required 

before such cells can become of 

therapeutic value in the treatment of 


In addition to medication and surgery, 

general lifestyle changes (rest and 

exercise), physical therapy, occupational 

therapy, and speech therapy may be 

beneficial. 

How Can People Learn to 

Cope with Parkinson’s 

Disease? 

Although Parkinson’s disease 

progresses slowly, it will eventually 

affect every aspect of life – from 

social engagements, work, to basic 

routines. Accepting the gradual loss of 

independence can be difficult. Being well 

informed about the disease can reduce 

anxiety about what lies ahead. Many 

support groups offer valuable information 

for individuals with Parkinson’s disease 

and their families on how to cope with 

the disorder. Local groups can provide 

emotional support as well as advice 

on where to find experienced doctors, 

therapists, and related information. It 

is also very important to stay in close 



Health 

contact with health care providers to 

monitor the progression of the disease 

and to adjust therapies to maintain the 

highest quality of living. 

Can Parkinson’s Disease be 

Prevented? 

Scientists currently believe that 

Parkinson’s disease is triggered 

through a complex combination of 

genetic susceptibility and exposure to 

environmental factors such as toxins, 

illness, and trauma. Since the exact 

causes are not known, Parkinson’s 

disease is at present not preventable. 

What is the Prognosis of 


The severity of Parkinson’s disease 

symptoms vary greatly from individual to 

individual and it is not possible to predict 

how quickly the disorder will progress. 

Parkinson’s disease itself is not a fatal 

disease, and the average life expectancy 

is similar to that of people without the 

disease. Secondary complications, such 

as pneumonia, falling-related injuries, 

and choking can lead to death. There are 

many treatment options that can reduce 

some of the symptoms and can prolong 

the quality of life of an individual with 


Parkinson’s Disease at a 

Glance 

• 

Parkinson’s disease is a 

neurodegenerative disorder which 

leads to progressive deterioration 

of motor function due to loss of 

dopamine-producing brain cells. 

• 

Primary symptoms include tremor, 

stiffness, slowness, impaired 

balance, and later on a shuffling 

gait. 

• 

Some secondary symptoms 

include anxiety, depression, and 

dementia. 

• 

Most individuals with Parkinson’s 

disease are diagnosed when they 

are 60 years old or older, but 

early-onset Parkinson’s disease 

also occurs. 

• 

With proper treatment, most 

individuals with Parkinson’s 

disease can lead long, productive 

lives for many years after 

diagnosis. 

(Culled from the internet) 

INSTRUCTIONS 

TO AUTHORS 

Authors seeking to have their articles published in The Nigerian Accountant 

are advised to adopt the following guidelines: 

1. Article must be well researched on contemporary issues in the field of 

Accounting, Audit, Investigations and Forensic Accounting; Taxation and 

Fiscal Policy Management; Consultancy and Information Communication 

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Management and Corporate Finance Management; Banking; Insurance; 

Manufacturing; Capital Market; Finance; etc. 

2. All articles should be typed on standard A4 paper and must not exceed 

twenty pages in 12points font and double spaced. 

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other page should include author’s information). 

4. The second page should include the title and an abstract of not more than 

150 words. 

5. The paper must be properly referenced. The American Psychological 

Association style is preferable in the following format: 

a) In the text: Author’s name and year of work e.g. Lucey (1997) or 

(Lucey, 1997) at the end of sentence. Page numbers must be 

included for direct quotations, e.g. (Lucey, 1997, p. 8). 

b) List of references: arranged in alphabetical order in the author-date 

format, e.g. 

Book Reference 

Lucey, T. (1997). Management Information Systems 

(8 th ed.), London: Letts Educational. 

Journal Article Reference 

Wainer, H. (1997). Improving tabular displays: With NAEP 

tables as examples and inspirations. Journal of Educational 

and Behavioural Statistics, 22, 1-30. 

Internet Reference 

Baker, F.M. & May, A.J. (2007). Survey Research in Accounting. 

Unpublished manuscript retrieved January, 2008 from 

http://www.maybaker.org/journals/webref.html. 

Two Hard copies of the paper saved in Microsoft word should be sent to 

the editor while the Soft copy should be forwarded to: 

corporateaffairs@ican.org.ng 

daajigbotosho@ican.org.ng or 

dayoajigbotosho@yahoo.com. 



Financial Reporting 

FINANCING LOCAL 

GOVERNMENT PROJECTS 

THROUGH THE CAPITAL MARKET: 

A Proposition For Self-Reliance In Finance 

By ADEPOJU ADELEKE and CHRISTOPHER EHINOMEN 

One of the recurrent problems of the three-tier system in Nigeria is the dwindling revenue generation 

as characterised by annual budget deficits and insufficient funds for meaningful growth and viable projects 

development. Unfortunately, the local government being at the lowest level of the ladder is mostly affected by 

the inadequate revenue to perform its statutory responsibilities. This paper advocates for local governments to 

access funds from the capital market with which they can execute capital projects. Given the inadequate funding 

sources of local governments in the face of increasing responsibilities, and judging from the benefits that may 

accrue there from, the paper strongly recommends that local governments should singularly or jointly seek capital 

market funds to execute projects. Suggestions were made on how to access funds from the capital market. 

The 1999 constitution of the Federal 

Republic of Nigeria recognises 

three tiers of government viz: 

Federal, State, and Local, 

and each level of government has its 

own functions allocated to it under the 

constitution. 

In practice, the magnitude of the 

resources (financial, human, materials 

and natural) available to each local 

government vary across the country and 

within a state. Consequently, the level 

of economic development and social 

transformation vary across the local 

government areas in the country. This 

has led to a wide disparity in the socioeconomic 

well being of people across the 

Nigerian populace. 

According to Akindele and Olaopa 

(2002), the most severe problem facing 

public institutions in Nigeria is the Fiscal 

one, particularly in local government 

areas. This problem has been provoked 

by a number of factors including over 

dependence on statutory allocations from 

both the State and Federal governments. 

In the 1976 Local Government Reform, 

local government was included in the 

mainstream of the country’s intergovernmental 

fiscal relations with 

defined share of the federation account 

among other statutory provisions and 

administrative arrangements. 

OBJECTIVES OF LOCAL 

GOVERNMENTS 

As highlighted by Olowo (1997), Local 

governments are established or are 

created to perform five classical roles in 

the society: 

1. To promote democracy 

and political stability, i.e. popular 

participation, access to citizens, 

citizenship training, accountability 

and responsiveness; 

2. To promote economic 

growth by providing the necessary 

linkages between the micro and 

macro economic activities through 

the provision and maintenance of basic 

infrastructures; 

3. To promote effective public 

administration of goods and services at 

each level of government and to specialise 

in the provision of those social amenities 

and services that are feasible and viable; 

4. To provide and fund primary 

education to the citizen, and primary 

health care delivery system; and 




5. To encourage agriculture and 

agricultural practices at the grassroots 

levels. 

No doubt, local governments are 

saddled with much responsibilities 

and functions which require adequate 

funding to execute them. Unfortunately, 

over the last three decades, inadequate 

finance has been identified as the 

major factor constraining 

the effectiveness of Local 

Government administration 

in Nigeria. This problem have 

become intractable despite 

various commissions of Local 

Government. 

As observed by Adedokun 

(2004) one of the recurrent 

problems of the three-tier system 

in Nigeria is dwindling revenue 

generation as characterised 

by annual budget deficits and 

insufficient funds for meaningful 

growth and viable projects 

development. Unfortunately, 

the local government being of 

the lowest rang of the ladder 

is mostly affected by the 

inadequate revenue to perform 

its statutory responsibilities. 

At present, local government 

receives 20% of the federation 

accounnt. In addition, proceeds 

from the value added tax (VAT) 

and the excess crude oil account 

are also allocated to them. But 

all these are inadequate to meet 

their financial needs. Local 

Government System in Nigeria 

needs a moderate amount of 

financial autonomy to be able 

to discharge its responsibilities effectively. 

Despite the fact that there are 

constitutional provisions for statutory 

allocations and internally generated 

revenue, Local Governments are 

tightly controlled and surbordinated 

by state governors through funding 

mechanisms, including manipulations of 

the disbursement of financial transfers 

to them. This tends to compound their 

inadequacy of funding. 

Awotokun (2005) observed that the 

1999 constitution never explicitly provided 

for the local government as a third tier 

of government. This is why some state 

governors can tamper with the revenue 

allocation to this tier of government thereby 

hampering their finances. Ekpo and 

Ndebbio (1998) pointed out that though 

the revenue allocation system mandates 

that a certain fraction of the federation 

account be allocated to local governments, 

these funds are never enough to meet 

expenditure requirements. This is so 

because the size of the account is related 

to revenue from oil, which is subject to 

fluctuations, and the expectations of local 

‘ 

Despite the fact that there 

are constitutional provisions 

for statutory allocations 

and internally generated 

revenue, Local Governments 

are tightly controlled and 

surbordinated by state 

governors through funding 

mechanisms, including 

manipulations of the 

disbursement of financial 

transfers to them. This 

tends to compound their 

inadequacy of funding. 

‘ 

government far exceed the available 

resources. So the local governments are 

perpetually in need of external funding. 

The inadequacy of sources of finance for 

this level of government has led to the 

examining of other sources of funding. 

The CAPITAL MARKET option is being 

proposed in this paper. 

SOURCES OF LOCAL 

GOVERNMENT REVENUE 

There are two main sources of revenue 

to local governments. These are internal 

and external sources. The external 

source includes statutory allocation from 

the federation account, state allocation. 

Value Added Tax grants and others (see 

Table 1). 

The internal revenue includes local 

(poll) tax, property tax or rates, user fees 

and charges and loans. The external 

sources of revenue to local government 

are external because their size, when and 

how to generate them are invariably not 

directly determined nor influenced by the 

local government. 

As shown in Table 1, the statutory 

allocation (external sources), constitute 

the major source of revenue to local 

governments; accounting for as high 

as 94 percent of the total revenue for 

some local governments within the period 

under consideration. This situation tends 

to put some local governments in almost 

complete dependency on the federal and 

state governments. Consequently, there is 

little or no self-reliance as far as finance is 

concerned with these local governments. 

A study of Table 1 also reveals that 

some local governments were running 

deficit budgets, therefore, they were forced 

to go on borrowing in order to discharge 

their constitutional and statutory roles in 

the country. 

CONSTRAINTS IN SOURCING 

FOR FUNDS BY LOCAL 

GOVERNMENTS 

As earlier observed, one of the major 

constraints in the effectiveness of local 

government administration in Nigeria 

is inadequate finance. Finance is the 

basic wheel that enables an organisation 

to move along a chosen path. This is 

because finance is the “sinews of war” for 

all functional organisation in any economy. 

It is a crucial prerequisite which enables an 

organisation, public or private to maintain 

itself and effectively meet its commitment 

to individual and groups who consume its 

output of goods and services. 

Local government is a public sector 

organisation with assigned functions and 

responsibilities, administrative structure 

and financial arrangement for maintaining 

both itself and rendering its statutorily 

assigned functions to its citizens. This 

way, the generic centrality of finance to 

organisational performance also applies 

to local government. 

Finance has two basic elements. 

These are the revenue and expenditure 

elements. This study is most appropriately 

focused on the revenue aspects of finance 

and to develop alternative sources of 




revenue for the local governments. 

But it is pertinent to ask what are 

the constraints in the effectiveness of 

the present sources of revenue to local 

governments. This paper will attempt to 

answer this question. 

1. As observed by Akindele 

and Olaopa (2002) a major factor that 

impacts on fiscal federalism in Nigeria 

and makes the local government 

not to be self reliant in finance is 

the continuous creation of new states and 

local government under the assumption 

that these new entities would become 

development centres. In 1976, there were 

12 States and 30 Local Governments in 

Nigeria. However, by 1991, the total number 

of States and Local Governments had 

increased to 30 and 589 respectively, at 

present, there are 36 States and 774 Local 

Governments in the Federation. There are 

still agitation for the creation of additional 

states, and the National Assembly 

appears to be favourably disposed to 

grant the request. One implication of 

this continuous growth in the number 

of states and local governments is 

that the statutory allocation of funds for 

each tier of government have dwindled 

and become inadequate for supporting 

their expenditures. The creation of new 

states and local governments tends to 

induce high overhead costs such as 

increased provision of secretariats, staff 

emoluments, rental of building, etc, with the 

consequence that outlays on maintenance 

and new capital expenditures are low. 

The result is that many states and 

local governments run overall deficits 

in their fiscal operations, which are 

financed through contractors’ finance as 

well as credit from state-owned banks. 

Defaults in meeting these obligations have 

contributed in many cases to distress in 

the financial system. 

2. As Bello-Imam (1990) 

observes, another factor is the fact 

that financial transfer in Nigeria 

mostly takes the form of statutory 

allocation, and is one of the most 

politicised issues in the country. 

Consequently, about twelve different 

ad-hoc commissions/ committee have 

been set up between 1946 and 1999 to 

study and review the revenue allocation 

formula. Apart from these Commissions/ 

Committees, there have been many 

executive tampering with the allocation 

formula just like the amendment effected 

in 1984. Irrespective of the outcomes of 

these various commissions/committees, 

it has been practically impossible for 

the local governments to perform their 

statutory assigned functions principally 

because of inadequate revenue. In 

addition, the efficiency and effectiveness 

expected of local governments have 

been unrealistically high because both 

the Federal and State Governments 

have consistently given additional 

responsibilities to this level of government 

without commensurate additional 

finances. An example is the current 

additional burden of funding primary 

school education which has been placed 

on the shoulders of the local governments. 

Further exacerbating the situation 

is the irregularity and uncertainty of 

payment of statutory allocation to the local 

governments by both the state and the 

federal governments (Adebayo, 1970). 

3. The third factor is that as a 

result of the statutory allocations to local 

governments, both the federal and some 

state governments have had occasions 

to abolish some of the traditional sources 

of revenue like poll or community tax. 

Furthermore, some state governments 

have gone even further to usurp some 

of the viable sources of revenue of local 

government such as fees and charges from 

markets, thereby increasing the latter’s 

dependence on statutory allocation. 

Yet again, some state governments, 

and even the federal government have 

had occasions to compulsorily acquire and 

take over some solid mineral resources 

land and rights located in some local 

government domain and territory. Such 

mineral rights could serve as sources 

of revenue to the concerned local 

governments. 

4. Fourthly, is the fact that because 

the Federal Government was statutorily 

obliged to pass the allocation for the 

local governments to the supervising 

state government for distribution, most 

of the states often misappropriated the 

allocation for their local governments 

units. This situation becomes problematic 

in situations where a local government is 

in the opposite camp with the reigning 

state government, or the local government 

chairman is not in a good book with the 

state Chief Executive. 

In some states where 10 percent of 

their internally generated revenue is paid 

to their respective local government units, 

most often, these allocations were never 

paid as at when due, a practice which 

often destabilise the budgets of the local 

governments. 

It is also observed that as a result 

of the sudden relative affluence of the 

local governments, some of them have 

embarked on prestigious and ‘white 

elephant’ projects, and in some cases 

have become apparently corrupt in their 

operations both of which are antithetical 

to efficiency and effectiveness at this level 

of government. 

It is observed also, that another 

constraint to self-reliance in local 

government finance is the negative 

impact of the new found wealth of 

local governments; which since 1976 

has dampened the tempo of self-help 

efforts, learning by doing good citizenry 

and social responsibilities by the people 

whose practice had hitherto complimented 

government efforts at the community level. 

This lack of self-help has led to lack of 

growth and development process, which 

would have brought increased revenue 

to the government. Having discussed 

the sources and constraints to revenue 

generation by the local governments, and 

having concluded that local government 

would perpetually be lacking in adequate 

revenue to discharge their statutory 

functions; unless something drastic is 

done; the pertinent question to ask is 

this: “Which alternative source of revenue 

would give the local government the 

chance to lay the required solid grass 

root foundation for a self-reliant, self 

sustainable, and self-fulfilling functions 

effectively?” 

SOURCING FOR FUND FROM 

THE CAPITAL MARKET 

There is no easy answer to the above 

question. However, this paper proposes 

that local government should attempt to 

embark on sourcing for funds from the 

capital market in order to be self-reliant 

in finance. 

The Nigerian financial system review 

committee headed by Pius Okigbo 

(1976) recommended, and the federal 

government approved that state and local 

governments can on their own approach 

the stock market to raise long-term 

capital for development projects and in 

the process subject their operations to 

market discipline. 




With the introduction of the Structural 

Adjustment Programme (SAP) in 1986, 

and the subsequent adoption of realistic 

policy instruments such as the Foreign 

Exchange Market (FEM), the deregulation 

of interest rate structure, and dividend 

policy, the Nigerian stock market has 

become a more viable option for capital 

formation in which local governments can 

effectively participate. 

Increasingly, governments in Nigeria 

are now using the capital market facilities 

for strengthening their capital structure, 

for modernisation and expansion of 

operations. 

Local governments can singularly or 

jointly co-operate to source for fund from 

the capital market. The rationale for this 

recommendation is that the capital market 

would strengthen intergovernmental cooperation 

and relations. 

Application to the Security and 

Exchange Commission to raise money 

from the capital market can be singularly 

or jointly made by two or more Local 

Governments for specific projects such 

as mass transportation, slaughterhouses, 

development of amusement parks, etc. 

For raising money from the capital 

market, the following documentations are 

required: 

(a) A write-up of the profile of the 

government involved stating inter-alia; 

(i) Geographical location. 

(ii) Estimated population. 

(iii) Major economic product of 

the concerned governments. 

(iv) Major industries of the area. 

(v) 

Sources of revenue for the 

past three years. 

(vi) Existing debts of the local 

governments. 

(b) Latest income and expenditure 

and statement of Assets and Liabilities. 

(c) Loans obtain a priori. 

(d) Feasibility Report on the Projects 

to be financed as all bonds must be 

project-tied. 

(e) Letter of authority from the local 

government authorising the Central Bank 

of Nigeria to deduct from source in case of 

default of both principal and interest due 

on the Bond. 

(f) Federal Minister of Finance’s 

letter of consent to the issue. 

(g) A copy of the edict authorising the 

issue. 

(h) Copies of the beneficiary project 

(company’s) account for 5 years. 

(i) Memorandum and Articles of 

Association of the beneficiary company 

(project). 

(j) Certificate of Incorporation of the 

beneficiary company. 

(k) Relevant resolution passed by the 

Board of the beneficiary company. 

(l) A trustee for the issue must be 

appointed and must be an independent 

body without any judiciary relationship 

with the issuer. From the above analysis, 

capital market provides a major strategy 

for revenue generation for the Local 

Table 1: 

SUMMARY OF LOCAL GOVERNMENTS’ FINANCES 

Year Current (i) Federation (ii) State (iii) Value (iv) Internal (v) Grants Recurrent Current 

Revenue Account Allocation Added Tax Revenue & Others Expenditure Surplus (+) 

2/ /Deficit (-) 

1993 19,874.5 18,316.4 253.1 0.0 1,035.6 269.4 13,966.5 5,908.0 

1994 19,223.1 17,875.5 466.4 0.0 1,205.9 229.5 14,884.2 4,338. .9 

1995 24,412.7 17,586.5 625.4 3,558.1 2,110.8 242.9 16,317.2 8,095.5 

1996 23,789.6 20,443.3 685.1 3,306.9 2,211.1 0.0 16,620.1 7,169.5 

1997 31,254.4 30,600.9 578.9 7,586.1 2,506.9 139.2 21,856.5 9,397 

1998 44,948.2 43,870.3 750.4 10,170.8 3,331.6 94.5 29,192.2 15,756.0 

1999 60,800.6 118,589.4 419.8 9,559.8 4,683.8 2,266.9 41,613.9 19,186.7 

2000 151,877.3 128,500.5 1,923.1 13,908.8 7,152.9 10,303.2 93,899.9 57,977.4 

2001 171.523.1 128,896.7 1,598.6 20,102.7 6,020.4 15,300.9 122,712.7 48,810.4 

2002 172,151.1 291,406.9 1,672.3 18,727.2 10,420.8 12,434.1 124,701.6 47,449.5 

2003 370,170.9 291,406.9 2,119.8 39,648.4 20,175.5 16,820.3 211,633.0 158,537.9 

2004 468,295.2 375,656.3 3,625.7 45,985.2 22,407.8 20,620.2 295,654.7 172,640.5 

2005 597,219.1 493,000.3 3,243.9 55,793.6 24,042.5 21,138.8 374,514.6 222,704.5 

2006 674,255.7 550.796.3 3,434.8 75,920.0 23,225.1 20,879.5 398,181.2 276,074.5 

2007 832,300.0 568,300.0 3,000.0 105,100.0 21,300.0 134,600.0 683,600.0 148,700.0 

Source: Central Bank of Nigeria Survey of Local Government Councils and Federation Accounts Reports. 




Governments. This option guarantees 

adequate funding of Local Government 

Projects, and thereby enables them to 

discharge their statutory functions. 

METHODS OF RAISING FINANCE 

IN THE CAPITAL MARKET 

Before embarking on sourcing for 

funds from the capital market, the local 

government must first identify a project 

and then prepare a feasibility report. A 

feasibility report is essential to ensure 

that the project is economically, financially 

and technically viable. From the feasibility 

report, the financial structure will determine 

the most prudent methods of funding the 

project in terms of costs. If part of the 

funds will be provided by way of equity, it 

will be funded through debt instruments 

in which case a bond or loan stock may 

be issued. The project may also require 

the issuance of a combination of debt 

and equity. 

To enhance the marketability of 

the bond/loan stock, the government 

concerned might be required to guarantee 

the stock by the issuance of standing 

payment order on their statutory Revenue 

Allocation Account with the CBN in addition 

to the mortgages/security provided. This is 

necessary since the project has no past 

financial records on which investors can 

analyse and access the risk. Investors 

therefore, need to be adequately 

protected although they will rely more 

on the earnings from the project and the 

willingness of the local government to 

meet her obligations. 

BENEFITS OF RAISING FUNDS 

THROUGH THE CAPITAL MARKET 

Capital market is a medium whereby 

eligible government can source for funds 

through offer of equity to the public as 

well as raise debt instrument known as 

debenture stock. There are a number of 

benefits which accrue to local government 

to embark upon more projects and to 

complete such projects within the tenure 

of office of the government: 

1. Capital market enables local 

government to borrow long-term finance 

via the sale of loan stock or debenture/ 

bonds. This process enables a government 

to embark upon more projects and to 

complete such projects within the tenure 

of office of the government. 

2. The capital market provides 

cheap and long-term funds for project 

developments by the local government. 

3. There will be better accountability 

for use of the funds and the regulatory 

agencies including the stock exchange 

will normally request for financial reporting 

on such projects to be financed which will 

reduce some of the leakages in the local 

government accounting. 

4. Capital market financing breeds 

discipline among government to evaluate 

its performance on a continuing basis with 

1993-2007 (N million) 

Capital Total Overall Financing (a) Loans (b) Opening (c) Other 

Expenditure Expenditure Surplus (+) Cash Funds 

/Deficit (-) Balance 3/ 

5,508.0 19,475.3 399.2 -399.2 39.9 – -439.1 

4,082.9 18,967.1 256. 0 -256.0 71.5 – -327.5 

6,126.1 22,443.3 1,969.4 -1,969.4 50.5 – -2,019.9 

6,045.5 22,665.6 1,124.0 -1.124.0 -11.0 – -1,113.0 

8,083.4 29,939.9 1,314.5 -1,314.5 -1,51 – 204.6 

14,864.7 44,056.9 891.3 -891.3 9.1 523.0 -4,303.2 

18,827.3 60,441.2 359.4 -359.4 2,88 2,499.4 -3,118.4 

59,964.9 153,864.8 -1,987.5 1,987.5 8.9 3,356.0 -5,103.1 

48,661.8 171,374.5 148.6 -148.6 259.6 3,756.3 -3,904.9 

45,118.6 169,820.2 2,330.9 -2,330.9 3,734.6 4,928.1 -7,259.0 

150,0802 361,713. 2 8,457.7 -8,457.7 – 6,805.4 -15,263.1 

165,395.9 461,050. 6 7,244.6 -7,244.6 – 8,714.4 -15,959.0 

213,463.2 587,977.8 9,241.3 -9,241.3 – 51,707.2 -60,948.5 

267,656.7 665,838.0 8,417.8 -8,417.8 – -20,560.1 -12,142.3 

143,800. 0. 827,400.0 4,900.0 -4,900.0 2,800.0 37,300.0 -45,000.0 

1/ Provisional 

2/ Includes 

Stabilisation Fund. 

Gen. Ecology and 

share of Excess Oil 

Revenue in 2007 & 

2008 and Budget 

augmentation. 

3/ Positive 

(+) sign connotes 

decrease while 

negative (-) sign 

connotes increase in 

‘Other Funds’. 

4/ Local 

Government Survey 

started in 1993. 




other local governments. 

5. Federal and state statutory 

allocation to local governments can be 

more judiciously used for other purposes 

that are not necessarily income generating. 

6. Only economically viable 

projects will be financed, thus reducing 

the tendency to spend money on “white 

elephant projects”. 

7. Planning, lending and scheduling 

of operations become relatively tension 

free thereby promoting peaceful 

governance. 

8. Furthermore, the local 

government would attract into 

her territory, investors who will 

genuinely show concern for the 

growth and development of the 

area. 

9. More pleasing and 

rewarding is the fact that 

capital market enables a local 

government to have a snapshot 

of its market capitalisation and 

project performance, while 

investors are able to value their 

share investment through price/ 

earning ratios. Investors are also 

strengthened when they find 

that their share certificates are 

useful tools in raising loans for 

personal needs. 

10. To sum it up, capital 

market financing of local 

government projects enhances 

distribution of wealth and 

indirectly improves individual’s 

economic well being. With 

access to cheap funds by the 

local government, funds become 

available to train staff, and generally 

upgrade the welfare of employees for 

effective performance on the job, and for 

improved performance of government’s 

statutory and constitutional functions. 

CONCLUSION 

Given the inadequate funding sources 

of local governments in the face of their 

increasing responsibilities, and judging 

from the benefits that may accrue there 

from, it is hereby strongly recommended 

that local governments should singularly 

or jointly seek capital market funds to 

argument their other sources of finance. 

This is because, capital market will 

provide a major strategy for revenue 

generation for the local government for 

achieving self reliance in financing. This 

option guarantees adequate funding of 

government projects. 

To be successful in this venture, 

there must be improved management 

techniques at the local government level. 

There is also need for government officials 

to be more honest, sincere and responsible 

in the discharge of their functions. 

In conclusion, local governments must 

note that being financially self-reliant is 

‘ 

Capital market financing of 

local government projects 

enhances distribution 

of wealth and indirectly 

improves individual’s 

economic well being. With 

access to cheap funds by 

the local government, 

funds become available to 

train staff, and generally 

upgrade the welfare of 

employees for effective 

performance on the job. 

‘ 

not an easy task. They must therefore 

find ways and means of removing the 

various socio-economic obstacles across 

their ways; and increase their capacity 

for internally generated revenue. This is 

a major path of honour to self-reliance in 

finance. It is only through this that they 

will be in a position to be more effective in 

performing their statutory functions. 

REFERENCES 

1. Adebayo Adedeji (1970), Finance 

in Nigeria: Problems and Problems, Ile- 

Ife University Press. 

2. Adedokun, A. (2004), Local 

Government Tax Mobilisation and 

Utilisation in Nigeria: Problems 

and Prospects, Department of Public 

Administration and Local Government 

Studies, The Polytechnic Ibadan. 

3. Adeleke, A. (1994), Promoting 

Inter-Governmental Co-operation and 

Relations at the Local Governmental 

Level Through National Resources 

Mobilisation. Paper Presented at 

a Seminar on Inter-governmental 

Cooperation and Economic Development 

in Oyo State House of Chiefs, Secretariat, 

Ilorin. October 10-12. 

4. Akindele, S.T. and Olaopo, O. 

(2002), Fiscal Federalism and Local 

Government Finances in Nigeria, 

Government Printers, Lagos. 

5. Awotokun Kunle (2005), Local 

Government Administration under 1999 

Constitution in Nigeria, Department of 

Local Government Studies, Obafemi 

Awolowo University, Ile-Ife. 

6. Bello-Imam, I.E. (ed.), Local 

Government Finance in Nigeria, NISER. 

Ibadan. 

7. Ekpo, O. and Ndebbio, J.U. 

(1998), Local Government Fiscal 

Operations in Nigeria, AERC Research 

Paper 73, African Economic Research 

Consortium, Nairobi. 

8. Emenuga, C. (1993), The Search 

for an Acceptable Revenue Allocation 

Formula, The National Question and 

Economic Development in Nigeria, 

Ibadan, Nigeria Economic Society. 

9. Gboyega, Alex (1998), “Sources 

of Local Government Finance and 

Effective Revenue Generation 

Strategies”, in NISER (ed.), Effective 

Development Planning, Budgeting and 

Management at the local level, Ibadan, 

September 1988. 

10. Olowu Dele (1997), 

“Intergovernmental Relations and 

Effective Local Government in Nigeria,” 

Unpublished Memograph, Department 

of Local Government Studies. Obafemi 

Awolowo University, Ile-Ife. 

11. Federal Republic of Nigeria 

(1976), The Nigerian Financial System 

Review Committee Report, Federal 

Government Printers, Lagos. 

12. Federal Republic of Nigeria, 1999 

Constitution of the Federal Republic of 

Nigeria, Lagos Government Printers. 

* Dr. Adepoju Adeleke and Dr. 

Christopher Ehinomen are Lecturers 

in the Department of Economics 

and Business Studies, Redeemer’s 

University, Mowe, Ogun State. 



News 

I Respect Chartered Accountants 

– Emir of Ilorin 

The Emir of Ilorin, Alhaji (Dr.) Ibrahim Sulu-Gambari, has 

reiterated that his great respect for Chartered Accountants 

dated back to his student days in England. He disclosed this at 

his palace in Ilorin while playing host to the 47 th ICAN President, 

Professor Francis Ojaide on Tuesday, March 13, 2012. Sulu- 

Gambari said this respect was borne out of the fact that 

Accountants are highly responsible and rated alongside legislators 

in developed countries. The former Justice and the 11 th Emir of 

Ilorin also disclosed that two of his children are Accountants. 

Earlier, Ojaide had told the Emir that his courtesy visit to the 

palace was part of activities to mark his 3-day district tour to 

Prof. Ojaide congratulating a Fellowship awardee while Prof. Eghosa 

Osagie, Special Guest of Honour and Registrar smile 

The Emir of Ilorin, HRH, Ibrahim Sulu Gambari with ICAN President, 

Professor Francis Ojaide in his place 

Ilorin & District Society of the Institute. He explained further that 

the visit was to ascertain the positive contributions of Chartered 

Accountants to the growth and development of Kwara State. 

The Emir at this juncture, said “although corruption has eaten 

so deeply into all part of the nation’s economy and has hindered 

growth and development at all level of governance, however, no 

member of the Institute has been found wanting in my domain 

as liable to any corrupt practices”. 

ICAN Confers Fellowship Status 

0n 611 Members 

No fewer than 611 members of the Institute were conferred 

with the fellowship status at the 10 th ICAN Conferment of 

Fellowship Status Ceremony held on Wednesday, April 4, 2012 

at the ICAN centre, Amuwo Odofin, Lagos. The Fellowship status 

is the highest level attainable by a member in his/her professional 

career as a Chartered Accountant. 

In his keynote address at the event, the 47 th President of the 

Institute, Professor Francis Ojaide noted that the Fellowship status 

is conferred on members who have been found fit by their actions, 

standards and behaviour in upholding the ethics and conduct of 

the accountancy profession. “The status also connotes integrity, 

honesty, diligence, intelligence and leadership qualities which 

make Fellows of the Institute worthy ambassadors in their fields 

and position of authority,” he stated. 

In his paper entitled “Reclaiming the Future Through 

Empowerment Generation”, the special guest of honour, Prof. 

Eghosa Osagie charged the conferees to prepare for greater 

tasks now and in the potentially perilous years ahead. 

He said it was certain that current problems of unemployment 

are bound to assure crisis proportions in the future unless a 

credible and well thought out plan for addressing this economic 

and social problem are developed by key stakeholders in the 

country. 

He also emphasised that if government at the three tiers alone 

is expected to proffer sustainable and effective solutions to the 

malaise of unemployment, solution may be elusive. Among those 

conferred with the Fellowship status was the Assistant Director, 

Financial Services of ICAN, Mr. Mukaila Lawal, bringing the 

number of Fellows of the Institute to 7,425. 

Provide Legislative Support to 

the Executive to Achieve Good 

Governance – Ojaide 

The 47 th President of the Institute, Professor Francis Ojaide has 

called on the Honourable members of the Ondo State House 

of Assembly to support the Executive in its functions to provide 

good governance to the people of the state. 

The ICAN President who was on a two day visit to Akure and 

District Society of the Institute, made this call in his address to 

the state legislators during his courtesy visit to the State House 

Assembly in Akure. Stating the purpose of his visit, Ojaide said 

that ICAN is desirous of assisting institutions to create wealth for 

their stakeholders. 

His words: “Our visit to this Honourable House is a strategic 

move in furtherance of our desire to assist institutions, both private 

and public, to create wealth for their stakeholders through good 

governance. Our spread is global and our membership base is 

robust enough to cater for every expert financial advice required 



News 

President Ojaide presenting a gift to the Speaker of Ondo State 

House Assembly, Hon. Samuel Adeshina 

by any organisation”, he said. He therefore encouraged the 

Honourable House to further improve on its roles in promoting 

accountability and transparency in government. 

In his response, the Speaker of the House, Hon. Samuel 

Adesina said Chartered Accountants in the employment of 

the state are very resourceful and hardworking. According to 

Hon. C.F.G. Akinwolemiwa, a Fellow of the Institute, despite 

challenges and turbulent times faced by members of the House, 

they are working round the clock to see that accountability and 

transparency are put in place to ensure good governance. 

Misconduct Will Not be Condoned 

from Members – Ojaide 

The President of the Institute, Professor Francis Ojaide has 

said that any misconduct will not be condoned from any 

member of ICAN no matter how highly placed in the society. 

This was declared by the Vice President, Mr. Doyin Owolabi, 

who represented the President at the opening ceremony of the 

18 th Special Candidates’ Course held in Lagos on Monday, April 

23, 2012. 

He urged the candidates to ensure that they live above board in 

their business and commercial relations, adding that their conduct 

Cross section of participants at the 18th Special Candidates’ course 

must seek to conform to best practices and promote the ideals of 

the Accountancy Profession. “Indeed, all cases of misdemeanor 

by any member, no matter how highly placed, will be referred to 

the Investigating Panel and if a prima facie case is established, 

the issue will be referred to the Disciplinary Tribunal,” he declared. 

Wishing the candidates successful training session, he said 

that the training would be the last one to be held, as members of 

other professional bodies recognised by the Council of the ICAN 

will write all papers in Professional Examination II, which is the 

final stage before admittance into the membership of ICAN. 

The Special Candidates’ Course was conceived by the 

Council in 1996 to provide candidates of other member-bodies 

of International Federation of Accountants (IFAC) an opportunity 

to become members of ICAN. Since inception, the strategy has 

achieved the twin objectives of increased membership without 

compromising standards and getting foreign properly trained 

accountants to acquaint themselves with the local environment 

in which they will operate. 

There Is Confidence In Accountancy 

Profession – Rector, Kwara Poly 

The Rector of Kwara Polytechnic, Ilorin, Alhaji Masud Elelu has 

enthused that there is confidence in accountancy profession 

because of its qualitative training process. The Rector stated this 

in his office on Tuesday, March 13, 2012 when the President of 

the Institute Prof. Francis Ojaide paid him a courtesy visit. 

He also noted that the number of student’s application to study 

accounting in the school through JAMB is one of the highest. 

This, he said, attested to the high teaching standard offered by 

the accounting department of Kwara Polytechnic on one hand 

and the high labour market demand for chartered accountants 

on the other hand. 

Speaking further on the academic standard of the Polytechnic 

and accounting department in particular, Elelu said: “I have 

recently received a letter from your Institute Secretariat in Lagos 

that the accreditation of our accounting department has been 

approved by your Council. The ICAN accreditation team visited 

the accounting department of the school in December, 2011 and 

has found out that it met all the required minimum standard,” 

He therefore requested for more ICAN publications as well 

as all necessary assistance deemed fit in terms 

of accounting equipments like, accounting IT 

laboratory, scholarship for outstanding students, 

setting up of library etc. in order to sustain and 

even surpass the set standard. 

In his response, Prof. Francis Ojaide 

commended the management team of the 

Institution for maintaining hitch free academic 

sessions as well as its academic quality and 

standard. He urged the management team to 

ensure that members of ICAN in employment 

of the school are properly placed in line with the 

current civil service gazette. On the requests of the 

Rector, Ojaide advised the school to parley with 

the Ilorin & District Society as there is so much to 

enjoy from the Institute such as the scholarship 

scheme, books donation, etc. 



News 

the President and dancing session. The event was 

well attended by dignitaries which include Chief Mrs. 

Elizabeth Adegite, ICAN Past President and Pioneer 

Chairperson and founder of SWAN; Mrs. Margaret 

Unubun, Executive Secretary, ABWA; Olutoyin Adepate, 

ICAN Registrar/Chief Executive; Abel Asein, Deputy 

Registrar, Technical; as well as Directors and Assistant 

Directors from ICAN. 

Professor Ojaide showing gifts presented to him by SWAN 

SWAN Honours 47 th ICAN President 

The Society of Women Accountants of Nigeria (SWAN) on 

Thursday 10 th May 2012 honoured the 47 th President of the 

Institute, Professor Francis Ojaide, by hosting him to a luncheon 

at the La Scalar Restaurant, MUSON Centre, Onikan, Lagos. 

In her opening address, SWAN Chairperson, Mrs. Olatokunbo 

Obafemi-Adegbola who expressed appreciation to God Almighty 

for a successful tenure of Ojaide as ICAN President stated that 

what SWAN stands for is to fill every gaps omitted by ICAN. This 

role, she stated, is being performed by ensuring that young women 

are encouraged to join the prestigious accountancy profession 

by giving them scholarship. She noted 

that women accountants who retired after 

meritorious years of service are also not 

left out as they are also engaged. 

Responding, Ojaide appreciated the 

executive and entire membership of 

SWAN for a befitting luncheon held in his 

honour. He pointed out that SWAN had 

been a good back bone to the Institute 

in the area of caring for the needs of the 

women accountants. He however urged 

the Society not to relent in their efforts but 

press on to higher grounds. 

The SWAN luncheon is an annual 

event geared towards appreciating the 

incumbent ICAN President for serving 

the Institute and its entire membership 

meritoriously for a one year period. 

It is also an avenue for the women 

accountants to unwind and rejoice with 

the incumbent ICAN President as well 

as to appreciate God for His mercy 

throughout the presidential year. 

The high points of the event were 

the cutting of cake, gift presentation to 

ICAN Has Broken Barrier 

Between Academics and 

Professionals 

– Unilorin VC 

The election of Professor Francis Ojaide as the 47 th 

President of ICAN has been described as breaking 

the barrier between academic and professional 

accountancy. This was observed by the Vice Chancellor 

of University of Ilorin, Professor Ishiaq Oloyede while 

receiving Ojaide who had paid a courtesy call on him in the 

University. He also said that since the world has become a global 

village where everything flows seamlessly, ICAN, being a foremost 

accountancy body, has embraced this by electing an academic 

professor as its President. 

“It is important to note that the current Head of Department, 

Accounting, Professor Adeyemo Aderinto, and many other 

lecturers in the department are ICAN members, likewise many 

chartered accountants in practice in the State are now applying 

for their PhD programmes,” he added. 

The ICAN President who was on a 3-day visit to the Ilorin & 

District Society of ICAN also seized the opportunity to interact 

with the students of Accounting and 

Finance of the University. 

Professor Ojaide also visited 

the State House where he was 

received by the Deputy Governor of 

Kwara State, Elder Peter Kisira on 

behalf of the Governor who was not 

around to receive him personally. 

In his short address, Ojaide 

appreciated the unwavering 

support of the State government 

to ICAN Ilorin & District Society 

and its activities in the State. He 

also acknowledged the receipt of 

an 18-seater Toyota Hiace bus 

donated by the State government 

to the District Society, N3million 

rent payment for the NNDC/ICAN 

Study centre and another donation 

of N1million to host the ICAN 

President and his entourage. 

Ojaide however solicited from 

Prof. Ojaide with Vice Chancellor of Al-Hikmah University, 

Ilorin, Prof. Sulyman Abdulkareem 

the governor, 6-plots of land in a 

strategic location of the State to 

build a befitting District Secretariat 



News 

and office. 

Responding, the deputy governor, acknowledged the 

enormous contribution of Chartered Accountants to prudent 

financial management and resource control in the state. He gave 

an assurance that the governor would be positively disposed to 

the request made by ICAN President. The President also visited 

Al-Hikmah University, Ilorin, Kwara State. 

Give Us Examination Centre, 

Liaison Office In Ilorin 

– District Society 

The Ilorin and District Society of the Institute has urged the 

47 th President of ICAN, Professor Francis Ojaide and the 

Institute’s Council to build an ICAN examination centre in Ilorin as 

well as a Liaison office. This request was made by the Chairman 

of the District, Alhaji Tunde Abdulkareem during members forum 

organised as part of activities in hosting the ICAN President who 

visited the district. 

Abdulkareem noted that the geographical location of Kwara 

State puts it at an advantage for easy accessibility by both 

northerners and southerners. He said if an examination centre 

and a liaison office are built in Ilorin, it will relieve the Institute of 

the high cost of hiring halls annually for its examinations. 

The District Chairman also disclosed that the Kwara State 

government donated a brand new Toyota Hiace bus worth 

N6.9million to the Ilorin district, apart from the N3million it 

approved for the ICAN Special Student Programme under the 

NNDC/Kwara State government partnership arrangement. 

Examination Malpractice: 

ICAN Blacklists Three 

Professional Students 

In line with its discipline and zero tolerance for examination 

malpractices, the Institute has blacklisted three students caught 

cheating during November 2011 Professional Examinations. The 

three students are Gbolahan Kayode Ologunro; Olaniyi A. 

Atere; and Rukayat Bisola Osunniran. 

On 15 th November 2011, during November 2011 Professional 

Examinations at Amuwo Odofin Centre, Gbolahan was caught 

with a piece of paper containing some notes related to Financial 

Accounting paper he was writing. He was made to write his own 

statement which upon investigation found him guilty. The exhibit 

and the invigilator’s report are also evidences against him. 

Olaniyi was caught on 16 th November 2011, during November 

2011 Professional Examinations at Abuja centre, with some notes 

related to Business Communication and Research Methodology 

paper he was writing. He was made to write statement which upon 

investigation found him guilty. The exhibit and the invigilator’s 

report are also evidences against him. 

Rukayat was also caught on 16 th November 2011, during 

November 2011 Professional Examinations at Amuwo Centre, 

with four pages of Management Accounting pathfinder, relating to 

Management Accounting paper she was writing. She was made 

to write statement which upon investigation, found him guilty. The 

exhibit and the invigilator’s report are also evidences against him. 

After due investigations, the Council of the Institute decided 

that the three students should be blacklisted and banned from 

all the Institute’s examinations. They were deregistered as 

candidates and have all the papers taken during the November 

2011 diet professional examination cancelled. 

ICAN Suspends Member for 

Six Months Over Misconduct 

The Institute has slammed a six-month suspension on one of its 

members, Mr. Olusegun Oyebola (MN 011715) over infamous 

conduct in a professional respect contrary to paragraph 1.2.0 (a) 

and (b) of Chapter 1 of the Professional Code of Conduct and 

Guide for Members of the Institute and punishable under the 

said Rules and Section 12(1) (a) of the Institute of Chartered 

Accountants of Nigeria Act Cap 185 Laws of the Federation of 

Nigeria 1990. 

Mr Olusegun Oyebola was suspended for acting without 

integrity after he failed and refused to substantiate his written 

allegation of fraud against one Babatunde Ajala, a fellow member 

of the Institute, when called upon to do so by the Institute’s 

Investigating Panel. 

He has therefore committed an offence contrary to paragraph 

1.2.0 (a) and (b) and paragraph 1.2.1 of Chapter 1 of the 

Professional Code of Conduct and Guide for Members of the 

Institute and punishable under the said Rules and Section 12 (1) 

(a) of the Institute of Chartered Accountants of Nigeria Act Cap. 

185 Laws of the Federation of Nigeria 1990. 

Mr Oyebola, therefore, was suspended from membership of the 

Institute for six months. He was ordered to return his membership 

certificate and License to Practice to the Institute forthwith. The 

suspension period shall start running from the date the certificate 

and license are returned. However, he is at liberty to re-apply to 

the Institute’s Tribunal for re-admission after the suspension had 

been served. If Mr Oyebola fails, neglects or refuses to return his 

certificate, after three weeks of the judgment, his name would 

automatically be struck out of the membership register. 

New Exco for District Society 

JOS 

Mr. Clement Suhunshak 

Mr. Emmanuel Egegwu 

Mr. Pam Yakubu Gyang 

Mr. Jonathan Madaki 

Mr. Martin O. Kutu 

Mr. Julius T. Dooiyor 

Mrs. Loretha E. Takon 

Mr. Adewale A. Adeleye 

Mr. A.A. Ajani 

Mr. I.O. Famoroti 

Dr. (Mrs.) Rauta Bitrus Jat 

— Chairman 

— Vice Chairman 

— Secretary 

— Assistant Secretary 

— Treasurer 

— PRO 

— SWAN Coordinator 

— Ex-Officio 






Events 

The 2012 Annual Dinner and 

Awards of the Institute held 

at Harbour Point, Victoria 

Island, Lagos, on 27 th April 2012. 

The event which is usually packaged 

with glamour and glitz was designed 

to honour and recognise individuals 

and Corporate Organisations who 

have distinguished themselves in 

greater measures by contributing 

to the growth of ICAN and Nigeria 

as a country. The Awards were 

presented to deserving individuals 

and corporate bodies in three major 

categories: Members, Non-Members 

and Corporate Organisations. 

In his speech at the event, the 

President of the Institute, Professor 

Francis Ojaide said “this is an 

annual event during which members 

and friends of the Institute gather to 

unwind, celebrate our successes and 

some of our achievers. The Institute 

and its honourable members have 

made significant progress in many 

areas both locally and internationally and this actually calls for 

celebration, hence our gathering here tonight”. 

Earlier in his welcome address, the Chairman of Publication 

and Image Committee, Mazi Nnamdi Okwuadigbo explained 

that the annual dinner and awards was specially designed for 

members to interact and rob minds with their colleagues, family 

members and friends in a relaxed and stress-free and serene 

atmosphere. However, he reiterated that Institute’s awards are 

not meant for just anybody, saying that they are specially aimed 

at accomplished personalities who were well screened before 

final selection. 

The awardees were carefully 

and diligently selected by the 

Annual Dinner and Awards Sub- 

Committee of the Publications 

and Image Committee of ICAN 

and were duly approved by the 

Council of the Institute. In order 

to ensure that the awards do not 

go to undeserving recipients, 

we involve our members in 

the nomination by sending 

nomination forms to them to 

suggest distinguished persons 

and institutions they feel are 

deserving of the awards. The 

2012 ANNUAL DINNER & AWARDS: 

Rewarding Excellence 

Prof. Francis Ojaide, ICAN President pose with the ICAN Merit Award recipients at the dinner 

Prof. Francis Ojaide, ICAN President; Sen. Ibikunle Amosun, Governor, 

Ogun State; Mrs. Amosun; and Doyin Owolabi, ICAN Vice President 

end product of the exercise is what all of us have gathered here 

to witness tonight,” he expatiated. 

In the members’ category, two people who received the awards 

for their immense contributions to accounting profession and the 

nation as a whole are: the Ogun State Governor, Senator Ibikunle 

Amosun, FCA and Auditor-General for the Federation, Mr Samuel 

Tyonongo Ukura, FCA. 

In the non-members category, the Chairman of House of 

Representatives Committee on Diaspora, Mrs. Abike Dabiri-Erewa 

was honoured. She was recognised for her philanthropic posture 

to accounting profession and 

her roles in the development 

of Nigeria. 

In the Corporate Bodies 

category, the Central Bank 

of Nigeria (CBN) was 

honoured. The apex bank 

was recognised for its 

immense contributions to 

the economic and financial 

growth of the nation, through 

the banking sector reforms 

and its cashless economic 

project, which is positioning 

Nigeria at par with other 

countries of the world. 



News 

FROM OTHER BODIES 

IFAC Calls for Improved Financial 

Reporting Standards 

Ian Ball, Chief Executive Officer of the International Federation 

of Accountants (IFAC), asks what possible reason governments 

could have for not implementing financial reforms. The sovereign 

debt crisis has shed a very bright light on the poor quality of 

financial reporting and financial management by governments. 

The financial problems in Greece that triggered the sovereign 

debt crisis centered on the concealing of deficit and debt positions. 

These crises have made it clear that accounting for financial 

performance and position is a job that governments are, in 

general, performing very badly. 

Logically, this should lead to significant reform. We saw how 

financial reporting failure in the private sector early in this century 

lead to dramatic action, including the passage of the Sarbanes- 

Oxley Act, and the creation of regulatory bodies for private sector 

audits in most major countries. 

Given the current state of affairs, now is the time for 

governments to implement financial reporting reform for the 

public sector, and take the necessary steps to prevent further 

crises. Yet, it is astounding that there has been virtually no public 

acknowledgement that this crisis is a result of poor public sector 

accounting practices. 

Many governments still adhere to the cash basis of accounting, 

which does not provide a comprehensive and transparent picture 

of their economic situation. 

Why has the current crisis not led to calls for action? Aren’t 

good accounting, solid financial management and transparency 

in the best interest of governments and the public they serve? 

There appears to be a lack of political will and drive for sound, 

transparent reporting on the part of governments. It is critical that 

governments take steps now to establish greater trust between 

themselves and their constituents, starting by signaling intent 

to produce sensible financial statements. Higher quality, and 

more consistently applied standards in accounting, auditing, and 

financial management will address the key cause of the crisis 

― the lack of transparent, consistent, and measurable financial 

reporting. 

The need for transparent reporting by governments is long 

overdue, and independently developed accrual accounting 

standards are necessary in enhancing government reporting 

and accountability. 

ICAEW Complains to PM Over 

Accountant Comments 

ICAEW Chief Executive, Michael Izza has taken the government 

and Prime Minister David Cameron to task over comments 

senior members of the Cabinet have made about the accountancy 

profession. In a letter to Cameron, he says that, while such 

remarks may be tongue-in-cheek, they undermine the significant 

contribution that the profession makes to the UK economy. 

The Institute has received complaints from members who have 

found some of the comments offensive. For example, during the 

Budget speech on 21 March, George Osborne seemed to question 

accountants’ ethical standards. “Under the last government,” 

he said, “it was the boast of some high earners that, with the 

help of their accountants, they were paying less in tax than their 

cleaners. I regard tax evasion and – indeed – aggressive tax 

avoidance – as morally repugnant.” 

Cameron also comes in for criticism for implying that the 

profession is narrowly focused on cutbacks, rather than helping 

businesses to grow. Discussing the public deficit in an interview 

recently with the BBC’s political editor Nick Robinson, Cameron 

said “Let me be clear, we are not just a bunch of accountants 

here to fix the deficit. We want a growing economy and we want 

a different country where we really recognise that graft and effort 

and hard work should be rewarded.” 

IAASB Releases 2011 Annual Report, 

Foundations for the Future 

The International Auditing and Assurance Standards Board 

(IAASB) has released its 2011 Annual Report, Foundations 

for the Future. The annual report highlights the IAASB’s work in 

the public interest to strengthen audits globally and build robust 

standards for audit, assurance and related services, and its 

commitment to enhance the communicative value and relevance 

of auditor reporting. 

The report covers new and enhanced international standards 

issued by the IAASB, and draws attention to the IAASB’s new 

guidance material and implementation support. It also spotlights 

IAASB’s continual outreach activities, efforts to maintain strong 

platforms for dialogue with stakeholders, and to promote the 

adoption and effective implementation of the clarified International 

Standards on Auditing (ISAs). 

“In 2011, the IAASB continued building on the clarified ISAs. 

It has explored many new and challenging auditing topics, from 

auditor reporting and financial statement disclosures to new 

pronouncements on auditing financial instruments and using the 

work of internal audit functions. Our work has been propelled 

by the global financial crisis and the renewed importance of 

strong financial infrastructures to support financial stability,” said 

IAASB chairman Prof. Arnold Schilder. “Our efforts have also 

extended to new standards supporting other assurance and 

related services engagements, particularly those of relevance to 

practitioners serving the needs of smaller entities. I am pleased 

with how proactive the board has been in helping to address 

a number of the important issues facing the profession and its 

many stakeholders today, while laying the foundation for further 

progress in the future,” added Schilder. 

The annual report details over 100 outreach activities 

undertaken during 2011, including liaisons with regulators and 

investor groups whose input is critical to the future of auditing. It 

includes a report from Prof. Linda de Beer, the chairman of the 

IAASB Consultative Advisory Group (CAG), which outlines the 

work of the CAG in providing input to the IAASB. 

PSASB Issues Exposure 

Draft 47-Financial Statement 

Discussion and Analysis 

The International Public Sector Accounting Standards Board 

(IPSASB) has published Exposure Draft (ED) 47, Financial 

Statement Discussion and Analysis — a proposed new standard. 

The ED proposes minimum required content while still providing 



News 

sufficient flexibility for entities to prepare and publish financial 

statement discussion and analysis that best portrays their specific 

circumstances. 

Because of the close link between financial statement 

discussion and analysis and an entity’s financial statements, ED 

47 proposes that: 

• The guidance be issued as an International Public Sector 

Accounting Standard (IPSAS) with the same authority as IPSASs 

concerning accrual-based financial statements; 

• Financial statement discussion and analysis be prepared 

and presented in conjunction with an entity’s financial statements; 

and 

• The qualitative characteristics governing preparation of 

financial statements be applied to financial statement discussion 

and analysis. 

ED 47 includes implementation guidance and an illustrative 

example that show how an entity might prepare its financial 

statement discussion and analysis to comply with the proposed 

requirements. 

IPSASB Chairman, Andreas Bergmann notes, “The purpose 

of the financial statement discussion and analysis is to provide 

additional information to users of an entity’s financial statements 

for accountability and decision-making purposes. Financial 

statement discussion and analysis complements and supplements 

the information in the accrual-based financial statements with 

further insights and perspectives.” 

IFAC Urges G-20 to Act Against 

Inconsistent, Unreliable Public 

Sector Financial Reporting 

In a letter submitted this month, the International Federation of 

Accountants (IFAC), the global organisation for the accountancy 

profession with members and associates in 127 countries, urged 

the G-20 Deputies and Finance Ministers at their April 2012 

meeting in Mexico to take action to encourage governments 

to seriously address the quality of public sector financial 

management systems and institutions. The letter, which is a 

follow-up to previous submissions to the G-20 in 2009, 2010, 

and 2011, focuses solely on public sector financial management, 

transparency, and accountability. 

In March this year IFAC convened a seminar titled The 

Sovereign Debt Crisis, a Matter of Urgency ― From Lessons 

to Reform, which included presentations, debates, and discussion 

involving key decision makers, politicians, and public sector 

finance management leaders. Outcomes from the seminar 

included the identification of the compelling and urgent need for 

governments to address seriously the quality of public sector 

financial management systems and institutions. There was a call 

for the adoption of accrual accounting and budgeting to better 

measure and manage fiscal positions; noting that the current 

crisis emphasised the deficiencies associated with cash-based 

arrangements. A common theme that emerged was that, in many 

countries, the risks associated with the poor fiscal measurement 

and management exposed by the sovereign debt crisis are 

amplified by the fiscal risks associated with the aging population. 

Urgent and fundamental work is needed to determine the 

nature of institutional change required in public sector financial 

management, transparency, and accountability 

The four-key recommendations in the letter are in line with 

IFAC’s mission to contribute to the development, adoption, and 

implementation of high-quality international standards; and by 

doing so, contribute to the development of strong international 

economies: 

• IFAC recommends that the G-20 facilitate urgent and 

fundamental work, to be conducted or commissioned by the 

Financial Stability Board (FSB), to consider the nature of 

institutional changes that are needed in public sector financial 

management to protect the public and investors in government 

bonds. 

• IFAC encourages the G-20 to make explicit that the FSB’s 

role encompasses public sector arrangements, as part of its 

aim “to coordinate at the international level the work of national 

financial authorities and international standard setting bodies 

and to develop and promote the implementation of effective 

regulatory, supervisory and other financial sector policies”. In 

acknowledging the importance of the public sector as part of 

the FSB’s role, IFAC encourages the establishment of a working 

group within the FSB architecture, which is specifically tasked 

with examining enhanced public sector financial reporting, 

transparency and accountability. 

• IFAC recommends that the G-20 actively encourage 

and facilitate the adoption of accrual-based accounting by 

governments and public sector institutions, which promotes 

greater transparency and accountability in public sector finances, 

and allows for monitoring of government debt and liabilities for 

their true economic implications. 

• IFAC recommends that the G-20 encourage FSB to include 

International Public Sector Accounting Standards (IPSASs) as a 

set of standards key for sound financial systems and deserving 

of timely implementation. 

IFAC Welcomes Publication of Single, 

Spanish Translation of the Handbook 

of International Standards on 

Auditing and Quality Control 

The International Federation of Accountants (IFAC), the global 

organisation for the accountancy profession with members and 

associates in 127 countries, welcomes the Spanish translation of 

the Handbook of International Standards on Auditing and Quality 

Control. 

This single Spanish translation is the result of a two-and-a-halfyear-long 

collaborative effort by Instituto de Censores Jurados 

de Cuentas de España (ICJCE) and Instituto de Contabilidad y 

Auditoría de Cuentas, and a review committee led by Federación 

Argentina de Consejos Profesionales de Ciencias Económicas 

(FACPCE), with representatives from IFAC member bodies in 

Bolivia, Chile, Colombia, Costa Rica, Mexico, Panama, Paraguay, 

and Uruguay, and other key stakeholders. 

The translated publication includes an unofficial Table of 

Equivalencies showing differences between terminology used in 

Spain and that commonly used in Latin America. It has also been 

reviewed by the Directorate General of Translations (DGT) of the 

European Commission for its acceptability in the European Union. 

According to Rafael Cámara, president of ICJCE, “ICJCE 

is especially delighted with the publication and would like to 

congratulate all those involved. This publication represents the 

first time a Spanish translation of these high-quality international 

auditing standards has been published in Spain, and is the 

culmination of several years of work.” 



Conference 

ICAN 

COMPLIANCE 

WITH FINANCIAL 

REPORTING 

COUNCIL (FRC) 

REGULATIONS 

In accordance with sections 

41 and 42 of the Financial 

Reporting Council (FRC) of 

Nigeria Act, No 6, 2011 on 

registration of professional 

members, the Institute is about 

to forward the names of its 

financial members to FRC. 

Similar requests for lists of 

financial members have been 

received from other regulatory 

agencies and are in process. 

You are therefore enjoined to 

settle all outstanding dues to 

the Institute not later than May 

31, 2012. Please be informed 

that only financially up-to-date 

members who have met their 

obligations to the Institute in 

respect of Annual Subscription 

and Faculty Dues up to and 

including year 2012 will be 

forwarded to FRC secretariat. 

Please act now! 

O.A. Adepate 

Registrar/Chief Executive 

ICAN Advises Govt on Adopting 

Parliamentary System 

Ladi Smith, Council member (left); Doyin Owolabi, ICAN Vice President; and 

Alh. Auwal Balarabe, Kano State Auditor-General 

The Federal Government has been called upon to urgently review the 

1999 Constitution with the view of adopting a Parliamentary System of 

Government which is perceived to be less expensive to run. This advice 

was contained in the Communiqué issued at the end of the 7 th Northern Districts 

Accountants Conference of the Institute of Chartered Accountants of Nigeria 

(ICAN) with the theme “Resource Productivity and Revenue Assurance at 

States Level: The Role of Chartered Accountants” held at the Royal Tropicana 

Hotels Ltd., Kano between April 16–19, 2012. 

The participants also suggested that state governments are encouraged to 

look inward and tap into the opportunities offered by improved tax collection 

system, developed agricultural industry and vibrant manufacturing sector. For 

revenue assurance, state governments were advised as a matter of priority to 

embark on the process of reduction in the cost of governance. 

The state governments were also called upon to engage and encourage 

Chartered Accountants to support the efforts of States in the collection of taxes, 

levies and other internally generated revenues. However, Chartered Accountants 

are advised to adhere strictly to their professional ethics in order to remain relevant 

in the fight against corruption. 

States are encouraged to overhaul the legal, regulatory and tax systems within 

their jurisdiction with the aim of providing enabling environment for local and 

foreign investments. They were also advised to strive hard to complement efforts 

of the Federal Government in the area of improvement in physical infrastructures, 

with particular emphasis on power and transportation. 

States governments are encouraged to take steps at addressing the current 

security challenges affecting the economic activities which have further impacted 

negatively on their income-generating capacity. 

On political situations in the country, Chartered Accountants are advised to go 

into active politics with the aim of influencing the implementation of policies that 

will fast track the resource productivity and revenue assurance at states level. 

He therefore urged ICAN as a leading Accounting Professional body in Nigeria, 



Conference 

to champion the course of developing a blue-print on 

how to eradicate corruption in Nigeria. 

In his keynote address, the ICAN President, Prof. 

Francis Ojaide, who was represented by the Institute’s 

Vice President, Mr. Doyin Owolabi, congratulated 

the organising committee for putting together the 

conference which is aimed at critically looking at 

the role of Chartered Accountants in enhancing 

the resources and revenue of the states. He noted 

further that resource control is the heart of ethics, 

macroeconomics and politics. “It is indeed, all about 

justice, social inclusion and giving every Nigerian his/ 

her rightful due at all times” he stated. 

Declaring the Conference closed, Mr. Ladi Smith 

reiterated that, in line with the conference theme and 

the address of the Kano State Governor during the 

opening and various papers presented, the Nigerian 

economy would only move forward if corruption could 

be tackled through proper resource productivity and 

revenue assurance. 

Ladi Smith (left) presents a gift to Engr. Rabiu Musa Kwankwaso, Kano State 

Governor with other Kano District Society members in attendance 

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF NIGERIA 

Communiqué 

of the 7 th Northern Districts Accountants Conference 

PREAMBLE 

The 7 th Northern Districts Accountants Conference of the 

Institute of Chartered Accountants of Nigeria (ICAN) was held at 

the Royal Tropicana Hotels Ltd., Kano Lagos from April 16–19, 

2012. The theme of the Conference is Resource Productivity 

and Revenue Assurance at States Level: The Role of 

Chartered Accountants. 

PARTICIPATION 

The conference recorded 128 participants and officials, 

comprising of Chartered Accountants, students and other 

professionals. After exhaustive deliberations and discussions, 

participants came up with the following resolutions and 

recommendations: 

1. State Governments are encouraged to look inward and tap 

into the opportunities offered by improved tax collection system, 

developed agricultural industry and vibrant manufacturing 

sector. 

2. State Governments should, as a matter of priority, 

embark on the process of reduction in the cost of governance 

for revenue assurance. 

3. Chartered Accountants should be engaged and 

encouraged to support the efforts of States in the collection of 

taxes, levies and other internally generated revenues. 

4. The conference recommended the urgent review of the 

1999 Constitution with the view of adopting a Parliamentary 

system of government which is perceived to be less expensive 

to run. 

5. Chartered Accountants are advised to adhere strictly to 

their professional ethics in order to remain relevant in the fight 

against corruption. 

6. States are encouraged to overhaul the legal, regulatory 

and tax systems within their jurisdiction with the aim of providing 

enabling environment for local and foreign investments. 

7. States should strive to complement efforts of the 

Federal Government in the area of improvement in physical 

infrastructures, with particular emphasis on power and 

transportation. 

8. States should take steps at addressing the current 

security challenges affecting economic activities which have 

further impacted negatively on their income-generating capacity. 

9. Chartered Accountants are advised to go into active 

politics with the aim of influencing the implementation of 

policies that will fast track the resource productivity and revenue 

assurance at states level. 



Business 

Maximising Opportunities 

In the Nigerian Economy: 

Accounting Technicians’ Perspective 

By OLAWALE OLASILE ABIOLA 

If you get to seashore, every shell 

you don’t pick as it arrives goes 

back to the sea. So, you can be at 

the shore and return home without 

a shell, just because you are not 

smart and sensitive enough to know how 

to grasp them. Making timely moves is 

the only way to maximise opportunities. I 

want you to know that every great destiny 

is traceable to great opportunities. 

The Webster’s Dictionary defines 

opportunity as, “A set of circumstances 

providing a chance or possibility”. 

The Chamber’s Dictionary says it’s, 

“An occasion offering a possibility, 

advantageous condition, a chance, 

opening or prospect.” The Oxford 

Dictionary defines it as, “A good chance, 

a favourable, occasion”, while the Roget’s 

says, it’s a favourable, advantageous 

combination of circumstances”. 

Opportunity, therefore, is a chance for 

great possibilities in a man’s life. It is a 

gateway to great success. It’s life blocks 

with which great destinies are built. I don’t 

believe that people lack opportunities; 

they are only blind to them. Many people 

miss opportunity because it is dressed 

in overalls and it looks like work. Many 

people don’t like the word “work”. They 

think opportunity is a chance to enjoy 

what they don’t earn or work for, but that’s 

not true because where there is no pain, 

there will be no gain. 

Also, opportunity is the capacity to see 

greatness when others focus on problem 

in a situation. You look at a situation 

at hand, and by the abilities loaded in 

you, you are able to determine where a 

particular good would sell and you go a 

step further by taking it there. 

Maximising opportunities is the ability 

to make the best use of the discovered 

opportunity (meaning you have to 

discover an opportunity before you can 

maximise it). It involves taking advantage 

to high capacity the available opportunity 

by judiciously taking necessary step 

for the usage of the opportunity. Many 

opportunities have been discovered but 

are yet to be fully maximised. 

In the case of Nigerian economy, there 

are many opportunities that are yet to be 

discovered because they disguised as a 

problem. Some have been discovered 

but yet to be fully maximised. Nigerian 

economy consists of many opportunities 

that are waiting for people to make use 

of them. An Accounting technician as 

a professional can make use of the 

enormous opportunities in Nigerian 

economy. 

WHO IS AN ACCOUNTING 

TECHNICIAN? 

According to Janusz Santocki, “The 

basic difference between a technician 

and a professional is that the former 

possesses the know-how while the latter 

in addition to the know-how, understands 

why it should be done”. 

I am pleased with one of ICAN 

advertisement about ATS in one of 

the past ICAN News which read thus: 

“ICAN’s Accounting Technicians Scheme 

(ATS) is a great take off for the young 

Accountant on his way to a distinguished 

professional career in Accounting. 

Bearing ICAN’s professional seal of 

credibility, ATS graduates are thorough 

bred poised to provide accounting 

service of intermediate nature and assist 

Chartered Accountants in their jobs.” 

As an AAT Chartered Accountant 

who had passed through the ATS in 

my professional career, I will define 

an Accounting Technician as “an 

intermediate professional who had built a 

solid foundation in his or her accounting 

professional career which will allow 

him or her to stand firm throughout the 

accounting career and also have capacity 

to face storm and challenges in his or her 

career. He is in the best position to work 

and assist a Chartered Accountant in his 

day to day work”. 

OVERVIEW OF NIGERIAN ECONOMY 

Nigeria is a nation with population of 

over 150 million, 36 states and a federal 

capital territory. A nation that God blessed 

with many natural resources but only 

crude oil has been in utilisation leading 

to the neglect of others, e.g. Agriculture. 

Nigeria is a developing nation, which 

provides great opportunities for business. 

This is a nation where N450billion revenue 

is earned daily. 

According to the Minister of Agriculture 

and Rural Resources, Nigeria spent 

N98trillion ($628billion) between 2007 

and 2010 on importation of food into 

the country, this translates to N24trillion 

yearly. In 2010 alone, the country spent 

N632billion on wheat, N356billion on 

rice, N217billion on sugar, N97billion on 

fish. That’s about N1billion per day on 



Business 

importing rice alone from a nation whose 

farm land is not as fertile as ours. 

How can a nation so blessed, yet 

have people so poor, hungry and 

malnourished? How can we invest so 

much in the farmland of other nations 

while we as a nation allow our farmland 

to turn into bushes and forests? 

A recent statement by the Executive 

Director of the Nigeria Export promotion 

Council (NEPC) stated that, “a total of 34 

minerals in commercial quantities have 

been found in Nigeria, far more than 

the value of Oil deposits”. The minerals 

include Silver, Tin, Columbite, Calcium 

and Lime stones. 

In the 1960’s, agriculture provided 

employment, income and foreign 

exchange earnings for Nigeria. However, 

since the discovery of crude oil in 

Nigeria, agriculture has been neglected. 

Our Importation is far higher than our 

exportation. We have gone to the level 

of importing common toothpicks! Our 

consumption as a nation is far higher than 

our production. All these are the signs 

that there are many opportunities yet to 

be discovered and or maximised in the 

Nigerian Economy. 

Distinguished Professional colleagues, 

with proper strategic planning, cooperation 

and understanding, we can create and 

take advantage of this large market and 

feed not only Nigeria but Africa and the 

rest of the world. It is also an indication 

that there are many opportunities waiting 

to be utilised in the Nigerian economy by 

Accountants in the country. 

INVESTMENT OPPORTUNITIES AND 

SECURITY ISSUE IN NIGERIA 

No doubt, Nigeria is an investment 

haven with countless lucrative investment 

opportunities including oil and gas, 

solid mineral, agriculture, tourism, 

telecommunication, power and steel, 

transportation, trade processing zone, 

financial sector, real estate/property, 

manufacturing, sport, entertainment, 

fashion, etc. It is important to note that the 

rate of growth of investment is fantastic 

and exponential in any of these sectors. 

Investors are at advantage of presenting 

their products and services to alreadymade 

market taking advantage of the 

population of over 150 million. 

However, these opportunities are 

masked with many shortcomings in 

which security is a major part. If there are 

security problems in Nigeria, no business 

man would stay in the country to explore 

opportunities. Companies like MTN, Airtel, 

and Etisalat would not have ventured into 

security risk and come to this country to 

do business. Those who spread rumour 

about security and corruption problems in 

Nigeria are saying so to stop others from 

making money in the country. Figures 

don’t lie; they are the biggest testimony 

for how conducive Nigerian economy for 

business and opportunities are. 

In telecommunications, statistics 

reveals that mobile phone users in Nigeria 

are increasing everyday. With N2,000 

you can buy handset and a SIM card and 

get connected to mobile network. The 

Industry is saturated with foreign Investors 

such as the operators (e.g. MTN, Airtel, 

and Etisalat) and Vendors (e.g. Huawei, 

Erricson, Nokia, Siemens, and Motorola). 

This shows that the security issue is not 

a means to overlook the opportunities in 

the Nigerian economy. Moreover, there is 

no where in the world where there is no 

security threat. 

Nigeria is a developing country 

and one of the best places to invest 

or build a business is in a developing 

environment. Though the risk is high, so 

also is the reward. If you are hungry for 

entrepreneurship ideas and information, 

then sit back and grab a cup of coffee 

and listen as I discuss fastest growing 

business opportunities in Nigerian 

Economy. 

FASTEST GROWING BUSINESS 

OPPORTUNITIES IN NIGERIA 

Agricultural Sector 

(i) Catfish and Poultry Farming: 

The primary reason I listed catfish farming 

as one of the fastest business in Nigeria 

is because it’s an emerging industry that 

hasn’t reached its peak or full potential. 

The major players in this business are 

usually regional players. What this means 

in essence is that each major player in 

the catfish business farming industry is 

focusing only on a particular business 

terrain within the geographical location of 

the farm. So, all you need to do is look 

for a region with a growing demand that 

haven’t been covered by a major player 

and situate your business there. 

As for poultry farming, the ban imposed 

by the federal government of Nigeria with 

respect to the importation of live or frozen 

poultry chicken has only helped explode 

the demand. When accessing any of these 

business opportunities listed above, you 

must note three important facts. First, 

food is one of the basic necessities of 

man, thus making catfish and poultry 

farming a huge potential. Second, the 

population in Nigeria is estimated to be 

over 150 million and still growing. So, that 

means a growing demand for food. The 

third fact is that even if the local market 

with 150 million Nigerians get saturated, 

there’s still a growing demand for catfish 

all over the world. So do your own indepth 

analysis and put your money to 

work. 

Textile Sector 

(i) Importation of Wears: 

Importation of clothes (designer wears) 

into Nigeria is another fast growing 

business opportunity you can tap into, but 

you will be breaking the law if you engage 

in this business now, because there’s 

ban by the federal government on the 

importation of wears. I listed this business 

opportunity in order for us to know that 

there is market for designer wears in 

Nigeria. We can produce designer wears 

with high quality locally since there is an 

existing high demand for it. 

(ii) Sewing of Specialised 

Uniforms: You can set up a small scale 

textile firm that will specialise in sewing 

uniforms. The demand for uniforms is on 

the increase in Nigeria; from the crèche 

to the labour market, uniforms are highly 

in demand but it’s advisable you do your 

own detailed research before venturing 

into the business. 

Transportation Sector 

(i) Inland Water Way Transport: 

Inland water ways is one of the fastest 

growing business opportunities in 

Nigeria. Infact, I believe the sector is still 

not well tapped because I am yet to see a 

modern commercial boat or ferry service 

system in Nigeria. Though, there are a 

few operators in this industry, I am yet to 

see the modern facilities being used by 

the developed countries. Another reason 

inland water way transport business 

proves viable is because population in 

states such as Lagos, Ogun and Rivers 

are rapidly on the rise thereby resulting in 

traffic congestion on the roads. Since the 

roads are becoming heavily congested, 

the next means of transporting the 

inhabitants of these heavily populated 

states is its water ways. With proper 

planning, good management team and 

adequate funding, you can break into 

this industry and carve a niche for your 

business. 

(ii) Haulage and Logistics: Haulage 

and logistics is another fastest growing 

business opportunity in Nigeria. Though 

it’s considered a risky business; you 



Business 

can break even if you have a strategic 

business management team on ground. 

Good management is the key to surviving 

in the business of haulage and logistics. 

(iii) Outsourced Bus Service: This 

is similar to haulage and logistics but the 

cargo in this case is humans. I am not 

talking about the regular road transport 

bus service. In fact, the opportunities in 

this business are yet to be fully utilised. In 

this case, you are providing transportation 

services to firms and corporate entities. 

Some corporate organisations can’t 

afford an in-house transport system for its 

executives and staff, so this is where you 

come in. You provide the cars or buses, 

provide the drivers and you are paid on a 

monthly basis or contract basis for the use 

of your transport services. Another area 

of target is schools. Most schools would 

like to provide transport facilities for their 

students but they can’t afford it and this 

is where you come in. You provide a bus 

service system and send out a proposal 

to schools to use your bus services. Just 

imagine 20 or more young schools jointly 

using your student bus service system 

and you will catch the vision of this idea. 

Information and Communication 

Technology (ICT) 

When it comes to ICT, I will say Nigeria 

is lagging behind when compared to the 

western world. It may sound like bad 

news to you but to entrepreneurs and 

investors, it is good news. ICT is still an 

emerging trend that hasn’t reached its 

peak. So, a lot of opportunities exist in the 

sector. I won’t go into the capital intensive 

business opportunities that exist in the 

ICT sector; rather, I will stick to small and 

medium scale business opportunities. 

(i) Cyber Café: The demand to stay 

connected to the rest of the world is rapidly 

on the increase and the cost of internet 

connection is still on the high side when 

compared to what is obtainable in the 

western world, thereby making cyber café 

an alternative for internet users; and an 

investment opportunity for entrepreneurs. 

Also, many big organisations had 

embraced Information Technology in 

their operations, e.g. WAEC, JAMB, 

ICAN, etc. This business can be started 

either on a small, medium or large scale 

but I will advise a large scale if you can, 

because size can be a competitive edge 

for you in this business as customers 

won’t like to be kept waiting. Customers 

of this industry want speedy and efficient 

service and most importantly, they want 

to be sure of finding a vacant computer 

system anytime they want to surf the web 

without having to queue up. If you can get 

a good location, provide speedy internet 

access and provide complementary 

services. You are in for a breakthrough. 

(ii) E-Service: Just as the world is 

going e-crazy; so also is Nigeria catching 

up with the trend. E-services provision 

is still a virgin business opportunity 

that hasn’t fully been tapped. Under 

the umbrella of providing e-services; 

you can find the following fast growing 

business opportunities: E-payment, bulk 

sms services, web design and hosting, 

database management services, e-portal 

management, etc. 

(iii) Recharge Card: This is a 

business opportunity that requires a very 

small amount as a start-up fund; you can 

venture into this business opportunity 

because good population of Nigerians 

purchase recharge card every day. 

Education 

The need for education is on the 

increase and the burden to provide 

quality education is getting heavier 

for the government to bear, therefore 

leaving room for private and institutional 

investors. The following are ways you can 

tap into the potential opportunity. 

(i) Schools: A lot of institutional and 

private investors have gone into building 

quality schools and providing quality 

education but the potential has not been 

reached. With a population of over 150 

million Nigerians, where 65% are below 

40; there’s still untapped potential in this 

sector. You can access this business 

opportunity from different entry levels. 

You can tap into this sector by providing 

either crèche, primary, secondary or 

tertiary education but all entry levels 

holds strong potential. Please carry out 

your own analysis before investing in any 

level of this business opportunity. 

(ii) Seminars: Not everyone loves 

being educated within four walls of school. 

Some prefer street smart education or 

high speed learning and that’s where 

you come in. You can set up a seminar 

company that organises coaching 

services according to the current needs 

and trends of the society. 

(iii) Training Centers: Specialised 

training or educational centers is 

another fast growing yet to be fully 

tapped business opportunity in Nigeria. 

Examples of specialised learning 

centers are Leadership training schools, 

entrepreneurial centers, training centre 

for the gifted and physically challenged, 

training centre for hobbies and crafts, etc. 

(iv) Tutorial Centers: With the 

proliferation of academic and professional 

examinations, tutorial centers have 

joined the list of fastest growing business 

opportunities in Nigeria. You can access 

this business opportunity by choosing or 

specialising on a training need. You can 

focus your proposed tutorial centre on 

any of the following: ATS, ICAN, GMAT, 

WAEC, JAMB, GSCE, CIS, job interview 

training, etc. 

Green Energy and Technology 

With a global increase in the awareness 

of environmental degradation and its 

hazard, the world has resorted to finding 

an alternative “green energy.” Nigeria is 

not left out in this global awareness that 

has created massive opportunities for 

smart entrepreneurs and investors. If you 

feel green is the next business trend on 

board, you can go for it. Below are the 

fastest growing business opportunities in 

the green energy and technology sector 

of Nigeria. 

(i) Waste Management: With an 

increased awareness in the need for 

environmental conservation; opportunity 

has popped up in Nigeria in the area of 

waste management. When analysing the 

waste management business opportunity, 

I observed that two factors are responsible 

for the potential in the business and you 

must make sure these two factors are 

in place before deciding on an area of 

service. One is a bursting population and 

the second is a strong environmental 

policy and its enforcement. So far, there 

are two states in Nigeria that have taken 

the lead with respect to these two factors 

and these are Lagos and Imo states while 

other states are joining. But I believe 

great potential still lie in other states of 

Nigeria. Do your own personal research 

before venturing into this industry. 

(ii) Waste Recycling: The next 

fastest growing business, yet to be 

fully tapped as business opportunity in 

Nigeria is waste recycling. I don’t need to 

expatiate on this as the details are clear. 

You can venture into either bottle and can 

recycling or nylon recycling. You can even 

embark on a waste to green (manure) 

project as Nigeria has a huge demand 

for organic and inorganic fertilizer. 

(iii) Alternative Power: Another 

fastest growing business opportunity 

in Nigeria is alternative power supply. 

In recent times; Nigeria has seen an 

explosive increase in the demand of 

power supply thus creating an avenue 



Business 

for smart entrepreneurs to capitalise on. 

Solar energy, wind energy and bio energy 

are some of the alternative power supply 

system that are currently making waves 

in the country but the present alternative 

power supply service providers cannot 

meet up with the demand thereby leaving 

room for other creative investors. With a 

good plan, adequate capital and a strong 

business team; you can break into this 

market. 

Entertainment 

Over the years now in Nigeria, 

entertainment business is growing fast 

compared to the developed countries. 

Stated below are various sub-sectors 

in entertainment that you can invest 

or participate to get a good Investment 

returns: 

1. Comedy: I am not saying you 

should turn to a comedian but you can 

be a business manager, financial adviser, 

etc, to them because they make good 

money. 

2. Chair, Table and Tent rentage 

3. Ice Block business 

4. Cold Room 

5. Decorations 

6. Event Planning 

7. Etc. 

Please note, that there are numerous 

business opportunities and potentials 

available in the Nigerian economy, I 

believe the ones listed above (though 

there are many others) are potential 

money spinners always do your own 

feasibility study before investing in any of 

these business opportunities. 

CONDITIONS THAT MAKE A 

BUSINESS OPPORTUNITY 

FEASIBLE 

1. Real Demand 

The first condition that makes a 

business opportunity viable is market 

demand. Your business idea or opportunity 

must have real market demand. Your 

business opportunity must either satisfy 

a need or solve a problem. 

2. Good Return on Investment 

The next condition that makes a 

business opportunity feasible is the 

Return On Investment (ROI). Any 

business opportunity you intend to pursue 

must show a strong possibility of yielding 

a good return on investment. Moreover, 

all what a business is meant to do is to 

either satisfy a need or solve a problem 

for a profit. 

3. Competitive 

The third condition that makes a 

business opportunity feasible is its 

competitiveness. Except your business 

idea is the first of its kind, there is bound 

to be competition. If your business idea or 

opportunity is not competitive, just forget 

it because it will never stand a chance. 

4. Liquidity 

This point is very clear as availability 

of cash is not the same as availability 

of profit. The presence of good liquidity 

which is as a result of efficiency of the 

company is a good condition for viability 

of a business. A company that is efficient 

but not profitable is better than a company 

that is profitable but not efficient. 

5. Meet the Objectives of the 

Entrepreneur 

This point is also very clear and easy 

to understand. Before ever starting a 

business, there are certain aims and 

objectives you intend to achieve using 

that business as leverage. For a business 

opportunity to be viable, it must meet your 

objective. 

6. The Competence of the 

Entrepreneur and his Team 

Lastly, one of the most important 

factors that make a business opportunity 

worth pursuing is the competence of 

the entrepreneur and his business 

management team. A business 

opportunity will only be feasible if it is 

backed by a strong business team. I say 

this because I have seen a good and solid 

business opportunity that fails to break 

even because of the incompetence of the 

team. 

TRIANGLE CAPACITY 

This talks about three major capacities 

that an Investor should have before 

venturing into a business. 

1. Financial Capacity: This is the 

ability to source for fund and finance 

the business start up fund and working 

capital requirement for the first few years 

of operation. The financial need of a 

business can be determined through 

proper feasibility study. 

2. Managerial Capacity: This is the 

ability to plan, control and make effective 

and efficient business decisions. It 

further involves having human skill and 

high conceptual skill. You can’t go into 

a business all because you have the 

financial capacity; you should also have 

the managerial skill it entails for the 

business to be successful. Even if you 

have the financial muscle to employ good 

managers to your business, you must 

also have the ability to manage them. 

3. Technical Capacity: This is 

the ability to understand and have 

the knowledge of the nitty-gritty of 

the business. You should have a core 

understanding of the production process 

of the business. Even, it is advisable to 

have a technical understanding of the 

business outside your field if you are in 

a partnership with others that have the 

technical capacity. 

BUSINESS ENVIRONMENTAL 

SCANNING 

This is also known as Environmental 

Analysis. It’s a very crucial step to take in 

order to maximise business opportunity by 

understanding the business environment 

where the business will operate. A 

systematic scan of the environment 

is thus a useful place to start so as to 

identify and gauge current influences 

on the organisation and the drivers of 

change for the future. A common tool for 

undertaking this is known by its acronym 

PESTLE. 

The acronym represents various 

facets of the environment: 

Political: Stability and supranational 

influences; electoral shift; fiscal, 

competition, trade and industry policy; 

legislative intention. 

Economic: Growth trends and cycles; 

budget and trade imbalances; inflation 

and exchange rates; disposable income 

and savings. 

Social: Demographics; hierarchical, 

gender and ethnic structure; mobility; 

education; lifestyle; cultural changes. 

Technological: Applied science; 

infrastructure and process developments; 

government support; obsolescence. 

Legal: Consumer, employment and 

commercial (Business) law; regulatory 

frameworks; governance. 

Environmental: Energy; natural 

resource; waste, emissions; carbon, 

water and bio-diversity markets; 

protocols, regulations and green taxes. 

The category descriptors are just 

some of the generic issues that need 

thought. Every business organisation 

will have specific aspects to consider. 

These will then drive strategies to exploit 

opportunities, or to deflect and protect the 

business from threats from exogenous 

change. 

Business environmental scanning 

will eventually leads to Scenario Plan/ 

Building also known as “What if” 

analysis and Sensitivity analysis. This is 

trying to understand the effect of changes 

in variables in the business environment 

and what the business needs to do if the 



Business 

changes finally occurred. 

STRATEGIES TO IDENTIFY 

BUSINESS OPPORTUNITIES IN 

NIGERIAN ECONOMY 

A population of over 150 million will 

definitely require the basic needs of life, 

e.g. food, shelter and clothing. Discussed 

below are steps to capture the business 

opportunities in Nigerian Economy: 

1. Abraham Maslow Hierarchy 

of Need: These are Psychological 

needs, Security and safety needs, 

Belongingness needs, Esteem needs 

and Self Actualisation needs. An 

in depth understanding into these 

categories of needs can help discovered 

many business opportunity in Nigerian 

Economy. 

2. Be Conscious of what goes on 

around you: This means that indentifying 

what you use your money to buy all the 

time and which is not peculiar to you 

alone but many other people. That shows 

that there is a business opportunity. 

3. Cultivate the habit of reading 

National Newspaper: By doing this you 

will discover where there are business 

opportunities, what people need in 

terms of products and services they 

are yet to be satisfied with. Take your 

insight away from the Negative part of 

the News and look very well to discover 

the opportunities hidden in the News. 

Remember, we are continually faced by 

great opportunities brilliantly disguised as 

insoluble problems. 

4. Where there is a problem 

there is an opportunity: The existence 

of a problem is an assurance that 

there is an opportunity. When others 

are concentrating on the problem and 

complaining, open your eye to the 

opportunity and be optimistic to take the 

right step. 

5. Government Economic policies: 

The economic policy of the government 

is another good area to identify business 

opportunity. Government can decide to 

encourage a particular sector through 

their policy, this will make government to 

relax some terms like tax payment on the 

sector because they want to encourage 

commercial production in the sector that 

will fast track economic growth and 

development. An example is pioneer 

status (Tax holiday for a period of time) 

granted to some pioneer product, e.g. 

telecommunication sector. MTN, Airtel 

and other operators and vendors in 

telecommunication industry in Nigeria 

enjoyed this benefit. 

FOREIGNER’S VIEW OF BUSINESS 

OPPORTUNITIES IN NIGERIAN 

ECONOMY 

Below is an extract from the article 

written by Henry Bellingham a British 

and a member of UK Parliament under 

secretary of state for African and overseas 

territories. 

“The figures speak for themselves. 

With GDP growth increasing year on 

year (forecast at seven per cent in 2011), 

a population of 150 million set to double 

over the next 40 years, an expanding 

middle class and rich reserves of natural 

resources, UK companies cannot afford to 

overlook Nigeria as a potential business 

destination. 

Nigeria is the UK’s second largest 

market in Africa (after South Africa), 

exporting £2.3bn worth of goods 

and services in 2010. And there are 

ambitious plans to double this under the 

Government’s Growth and Prosperity 

agenda in the next five years. 

In agriculture, for example, the 

Nigerian government is keen to attract 

investment and technical expertise in 

this largely untapped industry. Nigeria is 

also home to the most lucrative telecoms 

market in Africa, which is growing at twice 

the African average – offering a wealth 

of openings for the UK’s ICT sector. 

Meanwhile the education and training 

market in Nigeria continues to grow with 

Nigerians seeking UK standards. 

Any compelling business proposition 

has its challenges, of course, which is why 

it’s key that firms have access to the right 

resources and advice, all in one place, 

when seeking to expand overseas. One of 

the things we emphasise is the importance 

of good research. The other thing we 

emphasise is that support is out there. 

It was with this in mind that UKTI, Access 

Bank and the Foreign and Commonwealth 

Office (FCO) held two ‘Making Nigeria 

Your Goal’ road-shows last month (29 - 30 

March 2011) in London and Manchester. 

These events were designed to present 

realistic assessments about doing 

business in Nigeria whilst providing a 

networking environment for UK firms to 

connect with potential Nigerian partners. 

Aside the big names – Shell, Unilever, 

Guinness, Standard Chartered, Virgin 

Atlantic and British Airways – which have 

a presence in Nigeria, the real excitement 

in recent years has come from finding 

smaller firms that are making inroads in 

the country. 

Among them are McKinney Rogers, a 

global business performance consultancy, 

which plans to open a second office in 

Lagos by the end of the year and Van Elle, 

the UK’s leading geotechnical company, 

which has an office in Lagos.” 

If a foreigner can say all these 

about Nigerian Economy, that is a good 

indication that the business opportunities 

in Nigerian Economy is so vast that 

Nigerians alone cannot maximise its 

usage. 

QUALITIES OF AN ENTREPRENEUR 

1. Ideal: Ideas are simply thoughts, 

plans or mental impressions on the 

mind. It is a necessary first step for 

every entrepreneur before going into a 

business. 

2. Focus: I read about a reporter 

who interviewed Warren Buffet and Bill 

Gates at different times. When asked 

“what is your most important key to 

success”, without hesitation they replied: 

Focus, Focus, Focus! 

3. Leader: Leadership is the ability 

to influence others. The capacity to make 

others achieve your goals for you while 

they achieve their personal goals. 

4. Reader: He needs to be a good 

reader to be a good leader.” The illiterate 

of the 21 st century will not be those who 

cannot read and write, but those who 

cannot learn, unlearn and relearn” – Alvin 

Toffler 

5. Time Consciousness: The 

capacity to spend the 24 dollars given to 

you by God everyday wisely. 

6. Happy with what he does: 

“success is not the key to happiness 

but happiness is the key to success. If 

you love what you are doing you will be 

successful” – Albert Schweitzer. 

7. Good Planner: Successful 

actions are results not of accidents or 

luck but rather of an analysis of situation 

and the preparation and proper execution 

of plans. Because of a changing 

environment and other variables, plans 

will not always succeed as originally 

conceived. But planning will maximise 

success and minimise failure. 

8. Insight: What makes the 

difference between successful people 

and failures is the word insight, which, 

if you break up, is a combination of two 

words: “in” and “sight”. Sight is the ability 

to see. With in-sight, you have the power 

to see things from inside. It is about the 

operation of your inner eye. What a failure 

calls a problem is what the successful 

person sees as opportunity. There is 

nobody that lacks opportunity to succeed; 

we only have people who do not recognise 



Business 

their opportunity. An Entrepreneur must 

have eyes that recognise opportunities. 

9. Integrity: He must always act with 

honesty, probity and integrity. 

10. Good Listener: “Know how to 

listen and you will profit even from those 

who talk badly” – Plutarch. 

11. Imagination: Imagination is 

simply image formation. It functions like 

the film in a camera or like the memory 

card. When you have an image on the 

film or memory card, you can print it on 

a postcard. It is the image on the film 

that is printed out for you on post card. 

Whatever pictures that stays on the film of 

your mind or in your memory long enough 

will eventually be printed out for you in 

real life. “Imagination is more important 

than knowledge. Knowledge is limited. 

Imagination encircles the world” – Albert 

Einstein. 

12. Constant Failure: Success 

grows from aches of failure. “Failure is the 

key to success; each mistake teaches us 

something” – Morihei Ueshiba. “You have 

to make tons of mistakes to have a chance 

at succeeding” – Mark Zukerberg. “If you 

are not failing every now and again, it’s 

a sign you are not doing anything very 

innovative” – Woody Allen. 

13. Informative: The quality of your 

life cannot be better than the quality of 

information available to you. Information 

is the key to transformation. If you break 

up ‘information’ into two parts, you would 

have ‘in’ and ‘formation’. Formation in 

construction simply means to create 

in a shape. It therefore implies that 

information is the knowledge that forms 

you internally. It is your in-formation that 

determines your out-formation. 

14. Dreams: Your dream today is 

the raw material with which God will 

construct your tomorrow. If you do not 

have a dream, you do not have a future. 

“The future belongs to those who believe 

in the beauty of their dreams” – Eleanor 

Roosevelt. 

15. Association: “I have never met 

a man so ignorant that I couldn’t learn 

something from him” – Galileo Galilei. 

However much you think you know, you 

do not know everything yet. It is important 

for you to deliberately move towards 

people who have already become what 

you want to become. 

16. Education: Either formal or 

informal, it’s necessary for him to be 

a successful businessman. The best 

definition of education that I have 

ever come across is that which says, 

“Education is that which we remember 

when we have forgotten all we have 

learnt” – Author unknown. 

SUCCESS STORY OF 

ENTREPRENEURER IN NIGERIA 

1. Aliko Dangote: Born in 1957 

in Kano. Reputed for its groundnut 

pyramids. Barely 13 years and out of 

elementary school, Aliko was thrown to 

the streets to provide for himself in what is 

a conventional practice by some families 

to toughen their wards on the challenges 

of life. He started out understanding his 

uncle, Sanusi Dantata after his father’s 

death. After the jungle training, so to 

speak, a maternal grandfather, Alhaji 

Dantata could have thrust greatness 

upon him. But there would be no spoonfeeding; 

rather Aliko Dangote got a loan 

of N500,000 from the uncle in 1977 to 

start his business, with an order to offset 

it within three years. It was an assistance 

Dangote needed to achieve greatness 

for himself. He repaid the loan within 3 

months and has never looked back since 

then. From a debtor in 1977, Aliko now 

sits atop a conglomerate that parades 

over 20 companies. 

Aliko‘s humbly beginnings started 

mainly with buying and selling, this saw 

Dangote becoming the market leader in 

such consumable products like sugar, 

rice and cement. Having completed the 

first stanza of its life span trading, the 

conglomerate moved up to next stanza; 

manufacturing. He regrets not catching 

the vision of manufacturing on time and 

staying too long in trading. He wished he 

had started earlier. He said his formulas 

for successes are: (1) Daring (2) Hard 

work (3) Vision, in his words “because 

you can’t just get into your car right now 

and not know where you are going” (4) 

Determination (5) Never look down on 

people. 

Dangote believes there is no greater 

country than Nigeria; he thinks the 

opportunity in Nigeria is enormous. His 

definition of a rich man is not the man 

that has his money intact in the bank, 

but a wealthy man has his money out 

there, creating opportunities for others 

in terms of Job creation and Investment. 

He was rated as Africa’s richest man this 

year and awarded GCON, a national 

award that is meant for Vice president, 

President of the Senate, Chief Justice 

of Nigeria. He is the first private sector 

Nigerian to receive the National award 

without being a civil servant. 

2. Mike Adenuga: Nicknamed 

“the Guru”, Adenuga debuts on Forbes 

billionaires’ list after making waves with 

mobile technology. His telecoms carrier 

Globacom recently launched a 4G 

network, and he’s invested $1 billion in 

a submarine cable connecting Nigeria 

to the rest of the world. He worked as 

a cab driver and a security guard to 

pay his tuition fee when schooling at 

United States of America. He made his 

first million at age 26 selling lace and 

distributing Coca-Cola, and then won 

a contract to build military barracks 

in the late 1980s. He owns a stake in 

the Equitorial Trust Bank and chairs 

Niger Delta oil exploration firm Conoil. 

Adenuga is a soccer devotee and 

sponsors a number of tournaments. 

3. Femi Otedola 

4. Etc. 

HOW CAN YOU START AND WHAT 

DO YOU NEED TO DO TO START? 

1. Have an idea of a business 

opportunity and discover it. Understudy 

an existing same or similar business to 

gain an understanding of the business. 

The first thing to do to start a business is 

not to look for money to start but an idea. 

2. Prepare a feasibility study, if you 

can’t prepare, engage the service of a 

consultant. 

3. Register the business with 

Corporate Affairs Commission (CAC) as 

a business name first; you can convert 

to limited company as the business 

expands. 

4. Source for the start-up fund 

through personal savings; you can 

introduce debt into your capital structure 

later when the business has stabilised. 

5. It is not compulsory to start with an 

office (though this may not be applicable 

to some business); you can start in your 

private home. What is paramount to start 

the business is customer. Build a strong 

network of customers first. 

6. Avoid related party transactions, 

this can kill your business easily. Devoid 

family relationship in business. 

7. Maintain a good record. This 

is very important, as it will allow you 

to monitor the cost and income of the 

business. 

8. Open a bank Account. Well 

you might not necessarily start with 

a corporate bank account to avoid 

unnecessary bank charges. You can 

start with your personal bank account 

but be aware because there will be 

need for a separate company account 

especially when your customers start to 

pay you cheque. 



Business 

9. Obedient to government policies 

concerning your business. It’s a must for 

you to understand the government policy 

concerning the products and or services 

you are about to invest into to avoid 

investing on goods and services that are 

against government policy. 

10. Pay your tax. When it’s time for 

you to pay tax, do so on time to avoid 

penalties and interest. Obtain your tax 

identification Number (TIN) from the 

relevant tax authority. 

11. Produce the company’s letter 

head, Invoice and business cards. 

12. If necessary form a partnership 

business. 

DON’T SELL YOUR OPPORTUNITY, 

KEEP IT 

When you discover your opportunity, 

never sell it at any price because you 

will regret it. A doctor sold the idea and 

formula of Coca-Cola to Asa Candler 

who was then a clerk for five hundred 

dollars, but now it is worth billions of 

dollars. I was on a lunch break on 14 

September 2011 with a friend when I 

read on my mobile phone a short article 

about 50 cents and our own Chinua 

Achebe. It reads thus: 

“50 Cent has been undone by one 

of Africa’s greatest novelists, Chinua 

Achebe. The rapper’s latest movie has 

been renamed ahead of its release, due 

to a conflict with Achebe’s most famous 

work. Things Fall Apart, published 

by Achebe in 1958, is Nigeria’s most 

famous English-language novel. It 

has sold more than 8 million copies 

worldwide. Unfortunately, 50 Cent was 

not aware of this. He spent much of 

2010 shooting a film of the same name, 

the story of an American football player 

diagnosed with cancer. “It’s a project that 

I wrote, produced and financed myself,” 

he explained last year. Directed by Mario 

Van Peebles, it premiered at the Miami 

film festival in March and is expected to 

be released soon. 

Unfortunately for Fiddy, his film will 

not keep its original title. After being 

contacted by Achebe’s legal team, 50 

Cent allegedly offered $1m to hold on 

to the title. Achebe, 80, took this as an 

insult. “The novel with the said title was 

initially produced in 1958 (that is 17 

years before [50] was born),” replied his 

lawyers, according to Naijan. “[It is] listed 

as the most-read book in modern African 

literature, and won’t be sold for even 

£1bn.” The film has now been renamed 

to All Things Fall Apart.” 

BUSINESS KILLERS ARE AROUND; 

WATCH OUT 

Stated below are the business 

killers in Nigerian Economy but they 

should not stop you from maximising 

the opportunities; just be prepared to 

manage them: 

1. Unstable power supply 

2. Low Infrastructure 

3. High cost of production 

4. Corruption 

5. Giving away quality for quantity 

6. Unstable government policy 

7. High rate of pirated product in 

the market 

8. Presence of multi tax system 

9. Cultural differences 

10. Preference for Imported Goods. 

CONCLUSION 

MTN came to Nigeria at a time when 

nobody wanted to invest in Nigeria, at 

a time when Nigerians did not have 

phones. Even a bank in Nigeria refused to 

loan MTN cash to operate, another bank 

rejected MTN’s offer but today see the 

difference. What about cowbell? When 

they came to Nigeria, they made milk in 

a sachet, they identified the opportunity 

in the industry and make use of it, they 

are the first company to package milk in a 

sachet for sale in Nigeria. Peak Milk was 

laughing at them – they said “Cowbell 

was the milk for the poor”, but they are 

right because 3 million poor people could 

afford N10 a day for sachet milk. Let’s do 

the calculation – 3 million people buying 

milk at N10 that was N30milion every 

single day. In a month they grossed 

N900million (almost N1billion). Even 

Peak milk had to make sachet milk in 

order to survive in the market. What about 

GLO, people said they will not succeed 

because they believe GSM market is 

already saturated with MTN, Airtel (then 

Econet) and Mtel presence in the market. 

GLO understudy the market, discovered 

the loopholes and gained entrance into 

GSM market through introduction of per 

second billing, MTN and Airtel had to 

follow per second billing system in order 

to survive in the market. 

So what have people told you? What 

have they said you cannot do, or you 

do not qualify for, or you do not have 

experience for? They told Cowbell, they 

told MTN and GLO but today the story 

has changed. Don’t listen to what people 

are saying or what life is showing you. 

What you believe is what you become. 

Yes, you can, should be your attitude. 

Remember, success is not about where 

you graduated from, but what graduates 

out of you. The future belongs to those 

who believe in the beauty of their dreams. 

Don’t be pushed by your problems; be led 

by your dreams. Defeat is not the worst 

of failures; not to have tried is the true 

failure. 

REFERENCES 

1. Ajaero, Tony Martins (2010), 

“15 Fastest Growing Business 

Opportunities in Nigeria”, www. 

strategicbusinessteam.com/smallbusiness-opportunity/15-fastestgrowing-business-opportunity-in-Nigeria. 

2. Ajaero, Tony Martins (2010), 

“Five Conditions That Makes a 

Business Opportunity Feasible”, 

www.strategicbusinessteam.com/ 

smallbusinessstartupsadvice/fiveconditions-that-makes-a-businessopportunity-feasible. 

3. Bishop David Oyedepo (2010), 

“The Voice of Victory”, Lagos, Nigeria. 

4. Guardian.co.uk, Wednesday 14 

September 2011, www.guardian.co.uk/ 

music/2011/sep/14/chinua-achebe-50- 

cent. 

5. Henry Bellingham (2010), 

“Making Nigeria Your Goal”, Event on 

29 March, 2010 at Arsenal FC, Emirates 

Stadium, London. 

6. Institute of Chartered Accountants 

of Nigeria, ICAN News Journal, October/ 

December 2000, Vol.5, No.4, Back cover 

page. 

7. Janusz Santocki (1987), 

“Educating Tomorrow’s Accountants”, 

Management Accounting (January), 

pg.45-46. 

8. Sam Adeyemi (2006), “Idea 

Rules the World”, 3 rd Printing (revised), 

Pneuma Publishing, Lagos, pg.11-12. 

9. Sam Adeyemi (2008), “Success 

Is Who You Are”, 2 nd Printing, Pneuma 

Publishing, Lagos 

10. University of Leicester (2009), 

MSc in Finance Module for Strategic 

Financial Management, pg.24. 

11. William A. Cohen (2001), “How to 

Make it Big as a Consultant”, 3 rd Edition, 

American Management Association 

(AMACOM), Cohen Maxims. 

12. Winning Attitudes, Edition 05, 

pg.6&7. 

13. www.forbes.com/profile/mikeadenuga. 

* Mr. Wale Abiola, Managing 

Consultant, Aspire Consulting 

delivered this paper at the 2011 AAT 

Annual Conference in Lagos. 



IFRS Adoption 

The Challenges and Prospects 

of Adopting the International 

Financial Reporting Standards: 

The Nigerian Experience 

By AUSTIN UCHE NWEZE 

In this era of scientific and technological evolution, the world has been reduced to a global village, thus necessitating the 

adoption of a set of uniform accounting standards. Perhaps, this explains why all the various national accounting standards 

are being collapsed and harmonised into one set known as International Financial Reporting Standards (IFRS). Obviously, 

such a sweeping innovation must be fraught with some challenges and prospects. The study therefore is intended to survey 

the challenges and prospects of adopting the IFRSs in the Nigerian. The method adopted is basically a comparative analysis 

of IFRSs and SASs. The findings are quite revealing in that there is going to be a radical revolution in terms presentation 

of Financial Statements, Provisioning for loan losses and impairment of assets, measurement and presentation of financial 

instruments, employee benefits, deferred tax, intangible assets in the financial statements. The paper looked at the quantum 

of benefits derivable from the adoption of IFRSs and commends Nigeria for adopting IFRS from January 2012. 

Key Words: International Financial Reporting Standards, Financial Statements, Financial Instruments, Employee Benefits, 

Intangible Assets. 

The most populous country in Africa and the largest in 

area of the West African states, Nigeria was an early 

twentieth century colony that became an independent 

nation in 1960. A country of great diversity because 

of the many ethnic, linguistic, and religious groups that live 

within its borders, Nigeria is also a country with a long past. 

The history of the peoples that constitute the present state 

dates back more than 2,000 years. The earliest archaeological 

finds were of the Nok, who inhabited the central Jos Plateau 

between the Niger and Benue rivers between 300 B.C. and 200 

A.D. A number of states or kingdoms with which contemporary 

ethnic groups can be identified existed before 1500. Of these, 

the three dominant regional groups were the Hausa in the 

northern kingdoms of the savanna, the Yoruba in the west, and 

the Igbo in the south. 

Nigeria, with an estimated population of 151.54 million, is 

the largest market for goods and services in registered with 

Corporate Affairs Commission under Part A. Of these, 26 are 

licensed commercial banks, 49 are insurance companies and 

2 are reinsurance companies. The Nigeria Stock Exchange has 

216 listed companies with a combined market capitalisation of 

5.4 trillion (about US$35 billion) as at January 13, 2010. Other 

enterprises operating in the country are in excess of two million. 

Despite the above statistics, the productive capacity is neither 

satisfying the needs of the people nor increasing growth. A 

key policy strategy is repositioning the Nigerian economy is 

the attraction of foreign direct investments into the Nigerian 

economy to provide investible funds. Foreign direct investments 

in Nigeria have been declining from: from US$6.94 billion as at 

September 30, 2009 primarily due to the perceptions of risk in 

Nigeria. 

The risk is grossly exaggerated because the federal 

government has committed itself to programmes, including 

scientific risk management approaches, which will ensure 

that Nigerians offers good opportunity for investors to create 

wealth. The perception of Nigeria as a risky country for the flow 



IFRS Adoption 

of Foreign Direct Investments can, in part, be attributed to the 

limited financial reporting and disclosures made by reporting 

entities to Nigeria. This is so because some of the entities in 

Nigeria. This is because some of the entities do not provide 

investors with sufficient economic information that will enable 

them to understand that risk profiles of such entities and permit 

informed judgments and decisions. 

The Nigerian market is increasingly becoming a sophisticated 

market. Customers are becoming more discerning and 

governance framework is gradually being improved through 

various codes of corporate governance which have been 

introduced. The competitive environment which environment 

which now exists as a result of market-oriented economic 

policy reforms enacted by the government of Nigeria further 

creates opportunities for potential investors. 

Today, business has become more global and thus has lost 

a significant part of its national identity. Nigeria indeed is a part 

of this globalisation. In recent times a number of companies 

have raised capital from international stock markets; others 

have established significant presence in other jurisdictions. 

Also, a good number of Nigerian entities hold the securities 

issuers. Therefore for a better understanding and appreciation 

of the risks and consequently making decisions about the flow 

of economic capital, it makes sense to have a global finance 

reporting benchmarks. International and national investors 

will better be placed to make rational economic decisions 

when financial information is comparable between countries 

competing for foreign direct investments. The global adoption 

of a single set of financial reporting standard, no doubt, will 

enhance such comparability and create an enabling environment 

for all investors to be able to effectively compare investment 

opportunities across the global market. The globalisation of 

capital markets is an irreversible process, and there are many 

potential benefits to be gained from mutually recognised and 

respect international accounting standards. 

Common standards cut across borders by reducing the 

need for supplementary information. They make information 

more acceptable, thereby enhancing evaluation and analysis 

by users of financial statement. Users become more confident 

with the information they are provided with, and presumably this 

reduced uncertainty promote an efficient allocation of resources 

and reduces capital cost. There are however some inherent 

problems with aligning with international standards. This is 

due to the competing perspective of different nations, along 

with the universal tendency to resists change. Too cooperation 

comes only from compromise and sometimes to detriment of 

quality. On the regulatory side, allowing the use of different 

standards by foreign and domestic companies not only detracts 

from comparability but may also undermine domestic financial 

reporting. The ultimate effect of various proposals in Nigeria to 

ease requirements for foreign issuers could significantly erode 

comparability. It will be in the interest of the Nigerian economy 

for listed companies to adopt globally accept, high-quality 

accounting standards with International Financial Reporting 

Standards (IFRS) over the earliest possible transition period, 

given the increasing globalisation of capital markets. 

A significant number of small indigenous accounting firms 

are now seeking international networks because businesses 

are engaging in more international transactions, cross-border 

listing is now commonplace and accounting firms are beginning 

to follow their growing corporate clients into the countries 

in order for these firms to continue to provide services to 

these clients wherever they are. It should be noted also that 

governments are been persuaded to engage in wide raging 

reviews that recognise the importance of reassuring the 

markets and the public at large that corporate reporting and 

governance frameworks are sufficiently robust. 

Introduction to IFRS 

Historically, multinational and global companies were 

required to prepare separate financial statements for each 

country in which they did business, in accordance with each 

country’s generally accepted accounting principles. In 1973, 

the International Accounting Standards Committee (IASC) was 

formed in response to the growing need to develop a set of 

common financial standards to address the global nature of 

corporate financing. In 2000, the IASC received support from 

the International Organisation of Securities Commissioners 

(IOSCO), the primary forum for international cooperation among 

securities regulator. The IOSCO recommended its members 

(currently 181 organisations including the U.S. Securities 

& Exchange Commission and the Committee of European 

Securities Regulators) permit multinational companies to use 

IASC standards along with reconciliation to national GAAP. In 

2001, the IASC reorganised as the International Accounting 

Standards Board to incorporate representatives from national 

standard-setting organisations. 

The term IFRS has both a narrow and broad definition. 

Narrowly, it refers to the specific set of numbered publications 

issued by the IASB. Broadly it refers to all publications approved 

by the IASB, including standards and interpretations issued 

by its predecessor, the IASC. Unlike U.S. GAAP, there is no 

hierarchy to IFRS guidance. All standards and interpretations 

have equal levels of authoritativeness. (Fay, R.G. et al, 2008). 

Per definition the standards comprise: 

• International Financial Reporting Standards (IFRS) 

— standards issued after 2001 

• International Accounting Standards (IAS) 

— standards issued before 2001 

• 

Interpretations originated from the International 

Financial Reporting Interpretations Committee (IFRIC) 

— issued after 2001 

• Standing Interpretations Committee (SIC) 

— issued before 2001 

• 

Conceptual Framework for the Preparation and 

Presentation of Financial Statements (2010). 

The list contains all standards and interpretations regardless 

if they have been suspended. 

By comparison, Nigerian GAAP is made up of the following: 

• The Companies and Allied Matters Act (CAMA) 

LFN 2004 

• Statements of Accounting Standards (SAS) issued by 

the Nigerian Accounting Standards Board (NASB) 

• 

Other local legislation and industry specific guidelines 

such as BOFIA, Prudential Guidelines, Insurance Act 

and SEC Rules 

• International best practice (optional). 



IFRS Adoption 

List of International Financial Reporting Standards and 

International Accounting Standards 

The following IFRS statements are currently issued: 

• IFRS 1 First time Adoption of International Financial 


IFRS 2 Share-based Payment 

IFRS 3 Business Combinations 

IFRS 4 Insurance Contracts 

• IFRS 5 Non-current Assets Held for Sale and 

Discontinued Operations 

• IFRS 6 Exploration for and Evaluation of Mineral 

Resources 

IFRS 7 Financial Instruments: Disclosures 

IFRS 8 Operating Segments 

IFRS 9 Financial Instruments 

IFRS 10 Consolidated Financial Statements 

IFRS 11 Joint Arrangements 

IFRS 12 Disclosure of Interests in Other Entities 

IFRS 13 Fair Value Measurement 

IAS 1: Presentation of Financial Statements. 

IAS 2: Inventories 

• 

• 

• 

• 

IAS 3: Consolidated Financial Statements originally 

issued 1976, effective 1 Jan 1977. Superseded 

in 1989 by IAS 27 and IAS 28 

IAS 4: Depreciation Accounting Withdrawn in 1999, 

replaced by IAS 16, 22, and 38, all of which 

were issued or revised in 1998 

IAS 5: Information to be Disclosed in Financial 

Statements originally issued October 1976, 

effective 1 January 1997. Superseded by 

IAS 1 in 1997 

IAS 6: Accounting Responses to Changing Prices. 

Superseded by IAS 15, which was withdrawn 

December 2003 

IAS 7: Cash Flow Statements 

• 

Estimates and Errors 

• 

IAS 8: Accounting Policies, Changes in Accounting 

IAS 9: Accounting for Research and Development 

Activities – Superseded by IAS 38 effective 

1.7.99 

IAS 10: Events after the Balance Sheet Date 

IAS 11: Construction Contracts 

IAS 12: Income Taxes 

• 

Liabilities – Superseded by IAS 1. 

• 

on 1 January 2008) 

• 

Prices – Withdrawn December 2003 

IAS 16: Property, Plant and Equipment 

IAS 17: Leases 

IAS 18: Revenue 

IAS 19: Employee Benefits 

• 

• 

Rates 

• 

IAS 13: Presentation of Current Assets and Current 

IAS 14: Segment Reporting (superseded by IFRS 8 

IAS 15: Information Reflecting the Effects of Changing 

IAS 20: Accounting for Government Grants and 

Disclosure of Government Assistance 

IAS 21: The Effects of Changes in Foreign Exchange 

IAS 22: Business Combinations – Superseded by 

IFRS 3 effective 31 March 2004 

IAS 23: Borrowing Costs 

• 

• 

Benefit Plans 

• 

Economies 

• 

IAS 24: Related Party Disclosures 

IAS 25: Accounting for Investments – Superseded by 

IAS 39 and IAS 40 effective 2001 

IAS 26: Accounting and Reporting by Retirement 

IAS 27: Consolidated Financial Statements 

IAS 28: Investments in Associates 

IAS 29: Financial Reporting in Hyperinflationary 

IAS 30: Disclosures in the Financial Statements of 

Banks and Similar Financial Institutions – 

Superseded by IFRS 7 effective 2007 

IAS 31: Interests in Joint Ventures 

• 

IAS 32: Financial Instruments: Presentation 

(Financial instruments disclosures are in 

IFRS 7 Financial Instruments: Disclosures, 

and no longer in IAS 32) 

IAS 33: Earnings Per Share 

• • 

Contingent Assets 

IAS 38: Intangible Assets 

• 

Measurement 

• IAS 41: Agriculture. 

IAS 34: Interim Financial Reporting 

IAS 35: Discontinuing Operations – Superseded by 

IFRS 5 effective 2005 

IAS 36: Impairment of Assets 

IAS 37: Provisions, Contingent Liabilities and 

IAS 39: Financial Instruments: Recognition and 

IAS 40: Investment Property 

There are several approaches to embracing IFRS in a 

jurisdiction. These include situation where: 

IFRS are, by, domestic accounting principles; 

IFRS are integrated into domestic accounting standards, 

* 

using the exact words in the IFRS, but with the possibility 

of local Jurisdiction restricting accounting alternatives 

provided in the IFRS and the provision of additional 

commentary to assist implementation; 

IFRS are incorporated into local legislation without 

* 

amendments after a formal review; 

IFRS are the benchmark towards which domestic 

* 

accounting are moving, through a gradual process of 

convergence or harmonisation. 

IFRS are considered “principle based” set of standards 

in that they establish broad rules as well as dictate specific 

treatments. 

Overview of the Key Drivers of IFRSs 

The key drivers of the Uniform Global Accounting Language, 

according to Oyedele (2011), are: 

(i) Increasing demand for public accountability and 

transparency by all stakeholders. 

(ii) Facilitate Industry perception of improved transparency 

and comparability for investors and rating agencies. 

(iii) More efficient access to capital for global corporations 

(iv) Need to attract international investors and to enable 

easy monitoring of overseas investments. 

(v) Reduced cost of financial reporting for global 



IFRS Adoption 

companies comparison between public entities 

In Nigeria, IFRS shall impact on our laws in the following 

include (but are not limited to) the following: 

Provisioning for Bank Loan Losses 

Fair value accounting of financial instruments 

IFRS has new requirements for the impairment of assets in 

Impairment provisioning for financial assets 

the financial statements. Obviously, this shall weigh heavily on 

Risk management disclosures 

the requirements of our Prudential Guidelines of 1990. 

The scope of consolidation 

Yes, IFRS requires that impairment for loan portfolio be based 

• Application of the components approach for property, on an incurred loss model. In order to calculate impairment 

plant and equipment 

or loan loss, banks (for instance) will have to segment the 

Accounting for business combination 

portfolio into homogenous groups, define impairment triggers, 

Impairment testing of goodwill 

calculate statistical parameters and consider fair value of 

• Significant increased disclosure in general. collaterals. FIRS may have to analyse tax technical issues and 

(IPSAS). 

(vi) More room for management’s judgment and truer 

reflection of economic reality with principles based 

market leadership. 

(vii) Ability to analyse impact on tax-related issues 

ways: 

Change in Nomenclature 

Both by the provisions of the Statement of Accounting 

Standard (SAS) Number 2 and the Companies and Allied 

Matters Act, 1990, Financial Statements comprise: 

(viii) Ability to understand interaction with strategic initiatives (a) Statement of Accounting Policies 

to generate value from synergies. 

(b) Balance Sheet 

(c) Profit and Loss Account (Income Statement) 

The International Financial Reporting Standards 

(d) Notes on the Accounts 

(IFRS) and the US GAAP 

(e) Statement of Cash Flow by SAS 18 of 1997 

In the United States of America, the American Institute of (f) Value Added Statements 

Certified Public Accountants (AICPA), observed that differences (g) Five-year Financial Summary. 

remain between US Generally Accepted Accounting Principles 

and International Financial Reporting Standards, thus: 

Great strides have been made by the FASB and the IASB to 

By IAS, paragraph 10, a complete set of financial statements 

comprises: 

converge the content of IFRS and U.S. GAAP. The goal is that 

by the time the SEC allows or mandates the use of IFRS for 

(a) A statement of financial position at the end of the 

period; 

U.S. publicly traded companies, many key differences will have (b) A statement of comprehensive income for the period; 

been resolved Because of these ongoing convergence projects, (c) A statement of changes in equity for the period; 

the extent of the specific differences between IFRS and U.S. (d) A statement of cash flows for the period. 

GAAP is shrinking. Yet significant differences do remain. For 

example: IFRS does not permit Last In First Out (LIFO) as an 

(e) Explanatory notes including statements of accounting 

policies. 

inventory costing method. IFRS allows the revaluation of assets 

in certain circumstances. IFRS uses a single-step method for 

impairment write-downs rather than the two-step method used 

in U.S. GAAP, making write-downs more likely. IFRS requires 

capitalisation of development costs, when certain criteria are 

met. Perhaps the greatest difference between IFRS and U.S. 

GAAP is that IFRS provides less overall detail and industryspecific 

guidance (AICPA). 

It therefore follows that IFRS is fundamentally different from 

US generally accepted accounting principles (GAAP) in that 

it is much more principles-based. It requires more judgment 

by management and more disclosure. The Securities and 

Exchange Commission (SEC) released a roadmap in November 

2008 indicating that IFRS adoption by SEC registrants would 

It must also be noted that whereas our local standards did 

not require any disclosure for: changes in comparative figures; a 

statement on changes in equity; management’s critical judgment; 

entity’s objective, policies and processes for managing capital, 

IAS (IFRS) paragraphs 1.38, 1.41, 1.106, 1.122 and 1.134 

respectively require disclosures on changes in comparative 

figures; a statement on changes in equity; management’s 

critical judgment; entity’s objective, policies and processes for 

managing capital. 

Implications 

Both our Companies and Allied Matters Act, 1990 and our 

Statement of Accounting Standards numbers 1 and 2 are to be 

amended accordingly. 

occur in 2014 – 2016, if not earlier. U.S. regulators have been 

working with the IASB to converge many aspects of U.S. GAAP 

and IFRS in the past few years, and these efforts are ongoing. 

While the current credit and liquidity crisis has been blamed 

by some on fair value accounting – which in fact forms part 

of IFRS – the economic reality of the crisis is reported by the 

accountants and not vice versa. 

International Financial Reporting Standards and 

NIGERIAN Generally Accepted Accounting Principles: 

Some of the accounting issues that Nigerian companies 

From Historical Cost to Fair Value 

By IAS 12, paragraph 20, assets are to be carried at fair value. 

Implications 

Both our Companies and Allied Matters Act, 1990 and our 

Statement of Accounting Standards are to be amended to reflect 

the above change. 

Deemed Cost in Place of Depreciation 

By the requirements of IFRS, the term Deemed Costs shall 

replace Depreciation. 

are likely to encounter which may also have tax implications 



IFRS Adoption 

document management decisions, coordinate changes to meet 

requirements and design process changes. 

Investment in Securities: Tax issue may arise from hybrid 

instruments, such as those or which the recipient of “interest” 

is treated as receiving a dividend but which the payer gets an 

interest deduction. A change in the definition of equity arising from 

a change in accounting standards may unexpectedly eliminate 

the tax benefits of hybrid instrument because the income may be 

treated as interest rather than dividend and thus impact global 

tax planning and the effective tax rate. Issues of this nature also 

likely to arise when accounting for other types of arise when 

accounting for other types of financial instruments (equity, fixed 

income and derivatives). FIRS will have to assess how existing 

rules apply considering the above issues. 

Impairment: Federal Inland Revenue Services (FIRS) may 

have to consider issuing transition guidance on the treatment 

of impairment losses determined under 

IFRS. 

Transition Adjustment: The tax 

considerations associated with the 

conversion to IFRS, like other detail 

review of tax laws and administration. 

Adjustments would require in equity, 

retained earnings and reserves. Specific 

taxation rules will have to be redefined 

to accommodate these adjustments. 

For instance, tax laws which limits relief 

of tax looses to four years should be 

reviewed. This is because adjustments 

may be in huge looses that may not be 

recoverable in four years. Accounting 

issues that may present significant tax 

burden, on adoption of IFRS, include: 

determination of impairment, loan 

loss provisioning and investment in 

securities/financial instruments. 

Regulatory Bodies: The 

enforcement and regulatory authorities 

in Nigeria whose mandates require them to exercise significant 

roles may create inconsistent implementation of IFRS unless 

they engage in rigorous training of relevant staff and determine to 

facilitate sharing of enforcement decisions amongst themselves. 

Reporting Entities, including SMEs: The scope of 

application of IFRS with respect to the size of entities, as well as 

whether IFRS will apply only for the preparation of consolidated 

financial statements are issues to be addressed. There is an 

international standard for small and medium size entities (IFRS 

for SMEs) which jurisdictions are also expected to consider for 

adoption. 

External Auditors and other Professional Service 

Providers: It is imperative that peer review programmes 

among auditors must be taken seriously since they are a useful 

oversight mechanism and do provide information on difficulties 

‘ 

The overriding advantages 

to the marketplace 

participants of global IFRS 

adoption is to permit better 

comparability of like entities 

anywhere in the world, 

and for any entity, better 

access to a wider capital and 

liquidity pool and simplified 

financial infrastructure. 

‘ 

encountered in the financial reporting and/or audit process 

(especially where the challenges are sector specific). A technical 

partners’ forum (of accounting firm) that can identify financial 

reporting issues that require clarification in order to avoid 

inconsistencies is strongly recommended. 

Others: There are clear differences between IFRS and our 

local standards in the measurement and presentation of financial 

instruments, employee benefits, deferred tax, provisions and 

intangible assets in the financial statements. 

The Challenges of International Financial 


Accounting Education and Training: Practical 

implementation of IFRS requires adequate technical capacity 

among preparers and users of financial statements, auditors and 

regulatory authorities. As a result of these, there has been shortage 

of accountants and auditors who are technically competent in 

implementing IFRS in Nigeria. Usually, 

the time between when a decision is 

made to implement the standards and 

the actual implementation date is not 

sufficiently long to train a good number 

of professionals who could completely 

apply international standards. 

Tertiary Institutions: The extent of 

integration of IFRS modules into tertiary 

institutions’ accounting education 

curricula and coordination of such 

accounting education programmes with 

professional institutions’ qualification 

and regulation is a major challenge 

to the implementation of IFRS in 

Nigeria. This significance of tertiary 

education in the adoption of IFRS 

cannot be over emphasised. Most of 

the professional bodies require tertiary 

education certificate as pre-requisite 

for enrolling for their professional 

examinations. The input and output 

of the tertiary education system have 

a huge impact on the success of IFRS implementation in 

Nigeria. Accordingly, tertiary education as been identified as a 

critical success factor that requires urgent attention. The efforts 

of NASB through its existing strategic partnership, “Linkage 

Programmes with Nigerian Universities”, need to be expanded 

and strengthened. The NASB, in conjunction with the NUC and 

professional accounting bodies, should as a matter of urgency 

design a programme for fast tracking the teaching and learning 

of IFRS in Nigeria tertiary institutions so as to equip graduates 

of accounting with the required skills and knowledge to meet the 

expected surge in the demands for IFRS professionals. A “Train 

the Trainers” programme is also recommended for lecturers in 

the tertiary institutions. A study conducted in 2008, by NASB, on 

“Gap Analysis” of accounting curriculum content and statement 

of accounting standards in tertiary institutions. This underscores 

the need for a concerted and coordinated effort that will assist 

in the introduction and sustenance of the teaching and learning 



IFRS Adoption 

of various enterprises within the region. 

of IFRS in Nigerian tertiary institutions. This problem becomes 

* Ability to compile meaningful data on the performance 

even more pressing when the minimum number of years needed 

to produce the first batch of IFRS knowledgeable accounting Governments and National Standard Setting Bodies 

graduates is taken into consideration. 

Assist governments in attracting international investors 

* 

as adoption of IFRS enables international investors 

Professional Programmes: There is the need to introduce 

easy monitoring of overseas investments. 

an IFRS implementation programme will adequately access 

the state of readiness of relevant professional accountancy Local and Domestic Companies 

organisation and institutes. This should be conducted with a 

Easier access to external capital; 

view of ensuring availability of resources and continuous support 

Global comparability of financial statements; and 

for such organisation and institutions. 

Transparency and enhanced disclosures and seal of 

* 

quality. 

Training Resources: Training material on IFRS are not 

readily available at affordable costs. In addition, there is dearth 

of professionals knowledgeable in IFRS in Nigeria. 

Conclusion 

From the foregoing discussion, one can infer that there are 

great challenges and prospects associated with the adoption of 

Other Issues: Transitioning from national financial reporting 

standards to IFRS has the potential to create a need for 

clarification or interruption of the provisions of certain IFRS in 

relation to certain country-specific circumstances; there is a 

International Financial Reporting Standards. However, after a 

thorough Cost Benefit Analysis, the decision is that the benefits 

are more than the Cost. Hence, Nigeria stands to be commended 

for adopting IFRSs from January 2012. 

shortage of expertise in the field of IFRS which can affect not 

only the private sector but also regulations which can affect not 

only the private sector but also regulators and other government 

agencies. 

References 

1. AICPA (2011) “IFRS: An AICPA Backgrounder”, ifrs. 

com. 

2. Deloitte (2005), “Differences between Australian 

Perceived Benefits of IFRS 

The overriding advantages to the marketplace participants 

of global IFRS adoption is to permit better comparability of like 

Equivalent to International Financial Reporting Standards 

(A-IFRS) and International Financial Reporting Standards”, 

A-IFRS vs. IFRS 

entities anywhere in the world, and for any entity, better access 3. Ernst & Young (2008), “Converting to IFRS: Effects on 

to a wider capital and liquidity pool and simplified financial US Banking & Capital Markets Institutions.” 

infrastructure. 

4. Fay, R.G.; Brozovsky, J.A.; Edmonds, J.E.; Lobingier, P.A. 

The benefits of IFRS adoption are numerous. In general, it 

offers organisations opportunity for a fresh look at their processes 

and policies. It also gives room for one basis of accounting 

and Hicks, S.A. (2008), “Incorporating International Financial 

Reporting Standards (IFRS) into Intermediate Accounting” 

VirginiaTech: Invent the Future. 

(simplify local statutory reporting, cross-border transactions, 5. “http://en.wikipedia.org/wiki/List_of_International_ 

strengthening of controls and efficiencies in future reporting). 

Furthermore, it may lead to standardisation of practices across 

countries (that is consistency of global accounting policies and 

procedures, shared service centre deployment and streamlined 

merger and acquisition activities). 

Finally, it can lead to improved comparability across 

borders and within global industries with worldwide peers and 

competitors. A more specific consideration may reveal individual 

Financial_Reporting_Standards” 

6. Ingold, J. (2009), “Preparing for IFRS”, IBM Global 

Business Services. 

7. Nigerian Accounting Standards Board (2010), “Report 

of the Committee on the Road Map to the Adoption of 

International Financial Reporting Standards in Nigeria”, 

(online) accessed on September 21, 2011, Global Convergence, 

www.nasb.org 

benefits as here under: 

8. Obazee, J.O. (2010), “Acceptance Speech”, Chairman, 

International investors 

Committee on the Roadmap for the Adoption of IFRS in Nigeria. 

Ability to make useful and meaningful comparisons of 9. Oyedele, T. (2011), “Tax Implications of IFRS”, ICAN 

investments 

* 

portfolios in different countries. 

2011 MCPE. 

10. Oyedele, T. (2011), Taxation Implications of 

Multi-national companies 

IFRS Conversion for Companies Operating in Nigeria, 

Easy consolidation of financial statements; 

PriceWaterHouseCoopers. 

Better management control; as harmonisation would aid 11. Rudrappan, D. (2010), “IFRS – The Move Towards 

* 

internal communication of financial information; and Global Standards”. 

Easier to comply with the reporting requirements of 

12. Umoren, A. and Nwobu, O. (2010), “Nigerian SASs and 

* 

overseas Stock Exchanges. 

IFRSs: A Comparison”. 

Regional Economic Groups (example, ECOWAS, etc) 

* Dr Austin Uche Nweze is a Lecturer in the Accounting 

Promotion of trade within the region through common Department of Enugu State University of Science and 

* 

accounting practices; and 

Technology. 



Cover Article 

Rebuilding Trust 

In Nigerian Banking 

Industry 

By CHUKE NWUDE 

The importance of a bank in any economy cannot be overemphasised. It is 

only when banks operate efficiently within financial systems that economies 

can grow and thrive. The failure of banks around the world has caused huge 

damage to the economies of many countries. This underscores the importance 

of sound banking systems to global prosperity and why banking system is 

heavily regulated in every economy. Currently, Nigerian banking industry is 

embracing International Financial Reporting Standards (IFRS) and cashless 

economy. From the mood of the banking public, there is need to cross some 

Ts and dot some Is in banks. Therefore the objective of this paper is to point 

out the critical trust and confidence issues that need to be addressed in this 

era of IFRS and cashless economy. More importantly, what can be done to 

restore trust and stability in Nigerian financial institutions? To come up with 

the issues, the author engaged archival and interactive research approaches. 

From the study, it was obvious that banks do not fail rather it is the people who 

work in them, who lead them, who operate their risk management systems, 

who trade their financial products, who make their loans. The operators of 

these functions collectively have to take responsibility for the performances, 

good or bad, of their banks. Too many of the bank personnel are woefully 

undertrained and ill-equipped to carry out their functions professionally. Even 

though the way banking has been conducted has dramatically changed over 

the last few decades, the core principles of banking namely, prudence; good 

judgment; propriety; conservatism; capital adequacy; and ethical conduct have 

remained unchanged. Consequently, the paper recommends ethical revolution 

in training bank personnel, especially in the areas of corporate governance, 

regulatory matters, incentive structure, and product formulation along the 

value chain with regards to the needs of the economy. To smoothly operate 

cashless economy in Nigeria, stable power supply and domestic producers 

of ICT equipment must be in place. 

Banking institutions occupy a 

central position in the financial 

system of every economy. As 

the human heart collects blood 

and pumps it to all parts of 

the body for them to function well, so does 

the financial system makes sure there is 

continuous flow of credit in the economy. It 

collects funds from the surplus units of the 

economy and sends it to the deficit units to 

fulfill its financial intermediation function. It is 

the banks that dominate the financial system 

and play greater percentage of its financial 

intermediation role. For the economy to 

perform well in terms of production of goods 

and services, creation of employment and 

development of the economy, the financial 

sector championed by banks has to be safe 

and sound. However, it has been discovered 

that Nigerian deposit-taking institutions have 

not really been trusted by the Nigerian public 

over time. The truth is that the Nigerian 

public has had a wary relationship with the 

country’s deposit-taking institutions over time 

since the first major banking failures occurred 

in the country in 1929 (Appendix 1). Since 

then, available records indicate that no less 

than 71 deposit-taking institutions have been 

liquidated on account of distress (Appendices 

1 – 4). In mid-2007 we witnessed a global 

financial crisis triggered in the United States 



Cover Article 

sub-prime mortgage sector. The spread 

and scope of the crisis generated broader 

financial vulnerabilities across global 

financial markets. The crisis seriously 

weakened balance sheets of numerous 

institutions with exposures to sub-prime 

related instruments. Consequently, credit 

conditions tightened in the financial 

markets, while the crisis spread to the real 

economy prompting recession in most 

industrialised or advanced economies, 

including European Union, Japan, China, 

India, Brazil and Russia. Since then, the 

financial markets have been experiencing 

major downturn characterised by highly 

volatile stock markets and significant 

losses in prices. The price collapse 

within stock markets has resulted in 

massive wealth destruction, credit 

contraction, and impairment of banks 

assets, liquidation and loss of confidence 

in the global financial markets. In Nigeria, 

the stock market was seriously affected, 

losing about 70 per cent of its market 

value in 2008. Bank stocks were hard 

hit on the market with possible second 

round effects on balance sheets and 

lending capabilities. The impact of the 

crisis has therefore led to falling export 

revenues, declines and reversals in 

capital flows, significant fall in banking 

sector market capitalisation and All-share 

index, declining credit growth, increased 

provisioning, increase in lending rates as 

well as inter-bank market rate, reflecting 

tightness in the money market and 

increased volatility on foreign exchange 

markets. 

Nigeria being a big petroleum exporter, 

the rising oil prices in recent past triggered 

borrowings and investments particularly 

in oil and gas, telecommunication, 

transport, building and construction, etc 

in the country. Amid the boom, banks 

lent heavily, even to speculators in the 

stock market, which left many banks 

over-exposed when commodities prices 

crashed owing to the global financial 

crisis, with huge bank losses on margin 

loans and share-backed facilities, low 

valuation with many banks trading below 

book value and declining assets values. 

In October 2008, some of the Nigerian 

banks showed serious liquidity strain and 

CBN had to give them financial support in 

form of access to the Expanded Discount 

Window (EDW). As at June 4, 2009, 

the total outstanding at the EDW was 

N256.6 billion, most of which were owed 

by the five banks, representing 40 per 

cent of banking sector credit in Nigeria. 

Moreover, some of the instruments 

discounted at the window were of doubtful 

value and threatened to undermine 

its efficacy as a means of temporary 

accommodation for banks. Indeed, some 

of these banks became regular users of 

the standing lending facility at the CBN 

and, simultaneously, were net-takers 

in the inter-bank placements market 

under the Bank guarantee arrangement, 

indicating that they had a deep-rooted 

liquidity problem. Therefore, to save 

the banks and, thereby, strengthen the 

banking industry, protect depositors and 

creditors, and restore public confidence, 

the CBN injected N420billion into the five 

banks in 2009 and removed their chief 

executives as related to failure of risk 

management and corporate governance 

in an effort to prevent a systemic banking 

crisis. The injection of this fund (Tier 2, 

capital) into these five banks is sufficient 

to resolve and stabilise these institutions 

to enable them continue normal business 

operations. Additional N200billion was 

injected to accommodate the next three 

other banks, making the total N620billion. 

From the foregoing it is clear that the 

Nigerian banking system has enormous 

challenges and there is need to address 

them urgently to prevent the situation 

snowballing or exploding into a full-blown 

crisis. Consequent upon this scenario 

there is need to implement the requisite 

regulatory policy to position the Nigerian 

financial system as a strong platform for 

launching our financial institutions into 

profitable operations at international 

levels. This paper therefore seeks to 

redirect our attention to the recent setback 

of the international financial system in 

the wake of the economic crises with a 

view to addressing the minds of bank 

operators and regulators alike to the 

required regulatory, legal and institutional 

frameworks in the new global economic 

order. 

Following this introduction is section 

two which reviews the current landscape 

of Nigerian financial system and recent 

efforts by CBN to rebuild Nigerian Banking 

Industry to key into the international 

financial system. Section three highlights 

the research method adopted in the study 

while section four proposes regulatory 

areas that require further strengthening 

in the Nigerian banking system with the 

fifth section concluding the paper. 

LANDSCAPE OF NIGERIAN 

FINANCIAL SYSTEM AND THE 

REBUILDING OF THE NIGERIAN 

BANKING INDUSTRY 

The Current Landscape of 

Nigerian Financial System 

The 2004-2005 bank consolidation 

exercise which was luckily concluded 

before the global financial meltdown has 

provided opportunity for the Nigerian 

banks to register themselves as part 

of the global financial intermediation 

network. Many of our banks now have 

subsidiaries in West Africa, Europe and 

America. As at June 2009, the number 

of offshore subsidiaries and offices of 

Nigerian banks stood at sixty-three (63). 

In addition, our banks are increasingly 

attracting offshore credits. In view of the 

increasing investment of Nigerian financial 

institutions abroad and their exposure to 

the vagaries of the international financial 

market, a revamped legal and regulatory 

framework as well as adequate 

institutional structures are germane to 

their success in competing at the global 

financial market without sacrificing the 

stability of the local financial system. 

The Central Bank of Nigeria, like most 

other regulators, no doubt believes that 

robust, proactive, stricter but efficient 

regulatory framework is essential to 

stemming recurring bubble-burst cycle 

of the international financial system. 

An effective regulatory framework will 

ensure early appreciation of emerging 

products, technology, competition and 

financial system integration trends. A 

good appreciation of these products 

and trend is necessary for effective 

oversight of the financial system. 

Moreover, appropriate regulatory, legal 

and institutional frameworks are required 

to strengthen market discipline through 

encouragement of self regulation by 

enforcing observance of generally 

accepted best practices, standards 

and codes. Nevertheless, since the 

emergence of the meltdown in mid 2007, 

it has been a daunting task for market 

operators and regulators alike to navigate 

out of the disruption in the global financial 

market. The international financial 

system has been facing challenges in its 

responsibility of re-allocation of financial 

resources, risk pooling, management, and 



Cover Article 

pricing. Even the transaction facilitation 

function of the global financial system 

is exercised cautiously in the present 

global financial terrain. The financial 

market has become characterised 

with various crunches – liquidity, credit 

and assets quality dropped sharply. 

Financial intermediation has taken the 

back seat with statistics on bank lending 

indicating declines across the globe. 

The regulatory, legal and institutional 

framework have been stretched to their 

limit and obviously proven too lethargic 

to respond to demands of the highly 

fluid international financial landscape. 

Globalisation of finance is advancing 

rapidly while regulatory jurisdictions are 

still rigidly observed thereby fostering 

regulatory arbitrage among market 

participants. These lapses are reflected 

in the neglect of regulating structured 

investment vehicles, derivatives and the 

like. In Nigeria, the credit rating agencies 

are unregulated yet the financial system 

regulators value their opinions in rating 

securities holdings by financial institutions 

even when such ratings come with bias. 

Being complacent with these opinions, 

regulators were unduly confident of 

market discipline and self regulation 

thereby ignoring early warning signals 

emanating from the market. 

During the period 2006 to first quarter 

of 2008, the Nigerian financial system, 

as exemplified by the banking industry 

and capital market, was evolving rapidly 

and gaining increasing attention of global 

financial market players. The Nigerian 

capital market became the beautiful 

bride spurred by the consolidation 

of the banking industry. International 

institutional investors were endeared 

to the Nigerian Stock Exchange by the 

prospects for better returns. The banking 

consolidation was equally followed 

by the strengthening of the insurance 

industry with the recapitalisation of 

insurance companies. A snapshot view 

of the Nigerian banking industry at year 

end 2006 indicated that Nigeria had 

the fastest growing banking industry in 

Africa; astounding growth was recorded 

in capital, assets, credit and profitability 

along with greater branch network; big 

ticket loans and several huge syndicated 

loans were being underwritten by Nigerian 

banks while the size of non-performing 

loans was on the decline. Furthermore, 

the Nigerian Stock Exchange at that time 

was among the top five stock exchanges 

in terms of returns on investment. 

However, the Nigerian financial 

system has, since 2 nd quarter of 2008, 

exhibited signs of vulnerability to the 

vagaries of the disrupted global financial 

market. Without down playing internal 

factors, the secondary effect of the 

global financial crisis has shown up in 

the oil and gas industry as well as the 

stock market. Therefore, the prospects 

of the Nigerian financial system depend 

on its ability to reinforce the gains of 

consolidation by effective resolution of 

the post consolidation challenges mainly 

to re-invigorate it by dealing with large 

non-performing loans resulting from the 

concentration of assets in stock market 

and oil and gas. It also needs to embrace 

international best practice in ethics, 

transparency, anti-money laundering and 

disclosures. 

Sequel to the consolidation, the banks 

seemed to have been intoxicated by the 

level of capital they had at their disposal 

and the management of the resultant 

excess capital became an issue. 

The quest to remunerate the 

shareholders through fantastic returns 

was a catalyst to wrong investment 

decisions. The narrow option of sectors 

available for banks to invest and the 

preference for the short end of the market 

constrained appropriate deployment of 

mobilised capital and deposits. Therefore, 

most banks ended up in the then booming 

oil and gas sector and the capital market 

which soon came crashing taking along 

the banking industry on the downward 

trip. The credit concentration in the above 

mentioned sectors is indicative of lax risk 

management capacity of the banks and 

a poor mix of their credit portfolio. The 

real sector may not have got as much 

attention as it required from the banking 

industry ostensibly because of the poor 

supportive infrastructure for that sector 

which was contributory to the lean returns 

from the real sector. The infrastructure 

challenge of the real sector was therefore 

an incentive for banks to continue their 

focus on the lucrative sectors without 

minding the sustainability or lack of it 

thereof. The problem of the industry 

was further compounded by the narrow 

deposit sources. The over- reliance on 

government deposits, which are usually 

hot funds which vaporise within weeks 

of revenue allocation, usually triggers 

industry-wide liquidity challenges. 

Furthermore, the banking industry was 

starving of requisite human resource 

needed post consolidation. It was 

expedient for banks after consolidation 

to re-evaluate their model and develop 

new blueprint for their businesses in 

view of their enhanced size. However, 

dearth of skills robbed most of the 

banks the opportunity to re-strategise 

appropriately, rather it was business as 

usual. In effect, opportunities were not 

adequately evaluated for term prospects, 

activities at the short end increased with 

maximum gestation of six months for 

stock exchange and downstream oil and 

gas deals. Few banks considered less 

risky and new frontiers to explore and 

most of the banks did not embrace or 

position themselves to leverage on longer 

tenured opportunities. Added to this is 

the carry-over of old habits. The mode 

of capitalisation of some of the banks, as 

was recently discovered, exposed them 

to capital market manipulation, disguised 

use of outlawed credit facilities, supposed 

credits to core investors – all became 

the ghosts that haunted the banks till 

date. Therefore consolidation and postconsolidation 

challenges such as over 

capitalisation, credit concentration, 

skill gaps, and narrow deposit source 

contributed to the bad shape of Nigerian 

banks today. 

Recent Efforts of CBN to Rebuild 

Nigerian Banking Industry 

New Legislation: The Central 

Bank of Nigeria in realisation of the 

need to strengthen its capacity for 

effective financial system oversight post 

consolidation, pursued changes in its 

enabling legislation to position it legally 

to respond to the emerging challenges. 

The new CBN Act 2007 therefore 

empowers the Bank by granting the Bank 

full autonomy in line with international 

best practice. This has given the Bank 

capacity to decisively act in the interest of 

the stability of the financial system without 

undue interference and unnecessary 

recourse to fiscal authorities. Moreover, 

the Act strengthens sanctions for 

misreporting and other misconduct by 

banks. Additionally, the Act empowered 

the CBN to enter into information sharing 

arrangement with regulatory bodies 

outside Nigeria, thereby enhancing its 

ability to obtain information on offshore 



Cover Article 

subsidiaries and branches of Nigerian 

banks. The CBN therefore has the 

requisite legal backing for monitoring and 

regulating activities of Nigerian banks 

in the international financial market. 

Credit administration has been a critical 

challenge to Nigerian banks and the lack 

of appropriate infrastructure such as 

credit bureau impacted negatively on the 

ability of banks to stem the rate of nonperforming 

loans in the country. The new 

Act gave the CBN the powers to license 

and regulates credit bureaux in Nigeria. 

Based on the provision of the Act, the 

Central Bank issued guidelines for the 

licensing, operations and regulation 

of credit bureau after which it licensed 

three credit bureaux. The Bank has also 

mandated credit reporting by all banks 

to a minimum of two credit bureaux to 

enhance optimal usage of credit checks 

on customers and rate of default in the 

industry. 

Restructured Regulatory and 

Institutional Framework: The Central 

Bank of Nigeria has adopted risk based 

supervision approach for effective 

surveillance and regulation of the banking 

industry. The Bank released contingency 

framework for addressing systemic 

distress in the banking industry. The CBN 

is also facilitating greater collaboration 

with other regulatory bodies such as SEC, 

NAICOM, PENCOM and NDIC to ensure 

the soundness of our financial institutions 

and the overall stability of the Nigerian 

financial system. Thus, the Central Bank 

of Nigeria, as well as the other regulatory 

agencies mentioned above have 

commenced Consolidated Supervision of 

financial institution under the aegis of the 

Financial Sector Regulators Coordinating 

Committee (FSRCC). 

Stricter Regulation and Disclosure 

Requirement: The CBN is not unaware 

of the incursions by Nigeria banks into 

the international financial terrain and 

the need for stricter monitoring is not 

lost on the Bank. The CBN is regularly 

monitoring the activities of the Nigerian 

banks abroad to avoid undue exposure 

to the risk inherent in that terrain as well 

as to ensure compliance to international 

best practices, standards and guidelines. 

The bank is therefore implementing 

stricter regulation through regular 

issuance of guidelines and circulars in 

respect of identified risk areas. CBN 

promised to execute comprehensive 

memorandum of understanding (MoU) 

with other host regulators in the countries 

where Nigerian banks operate. The bank 

equally deployed resident examiners to 

obtain up to the moment knowledge of on 

goings within the industry. Its monitoring 

activity is further enhanced by daily online 

transmission of returns by financial 

institution over the E-FASS infrastructure. 

Banks have been encouraged to embrace 

adequate disclosure and provisioning for 

bad assets while also operating uniform 

December 31 st financial year-end for the 

banking industry. 

RESEARCH METHOD 

Notwithstanding the progress being 

made by CBN in strengthening our 

financial system, there are obvious needs 

for concerted efforts towards instituting a 

robust banking system which is sound 

for full integration into the international 

financial system. In carrying out this 

study archival research process and 

interactive sessions with the senior bank 

regulatory officials, bank operators and 

bank customers were adopted in order 

to sift out the facts relevant to rebuilding 

Nigerian banks and restore the waning 

trust in the system. 

CRITICAL ISSUES IN RESTORING 

TRUST IN NIGERIAN BANKS 

This section reports findings from the 

archival and interactive researches. The 

sources consulted but not necessarily 

quoted verbatim include David (2009), 

Greenspan (2009), Warren-Buffet (2009), 

Yusuf (2011), Salami (2009), Rauch 

(2011), Martin (2005), Pierre (2001), 

Paulson (2008), OECD (2009), NDIC 

(2002), Mayer (2009), Sanusi (2009), 

Liliana (2002), John Lipsky (2007), Garry 

(2008), Gardner (2011), ECB (2009), 

CBN (2010), Cally et al (2002), Adewunmi 

(2009) and Kekere-Ekun (2011). All the 

above sources completely acknowledge 

the fact that restoring trust in banks is 

essential to stimulating transition to any 

form of reporting standard. They believe 

that trust in business is a concept most 

commonly associated with brands. Brand 

leadership largely depends on consumer 

preference, mainly exhibited by trust in the 

product. The loss of trust in a brand can 

lead to serious financial consequences 

which can necessitate complete 

failure and doubtful financial reporting. 

Central bankers, financial regulators 

and governments around the world are 

focusing on issues of capital adequacy 

and liquidity. No amount of capital will be 

adequate to save a bank if its customers 

lose all faith and trust in the organisation. 

No doubt Lehman Brothers, Citibank, 

Merrill Lynch, RBS, Lloyds Bank, Bear 

Stearns, all believed they had adequate 

capital as prescribed by the Federal 

Reserve or Bank of England, just before 

they went bust. Most banks in Nigeria 

have been reputationally tarnished by 

the events since 2008. To rebuild lost 

trust, or to assist banks to maintain 

their reputations and transit to IFRS 

and cashless economy, we first need to 

analyse and identify what areas are most 

at risk from the breakdown of trust and 

then to develop training programmes and 

products to address those deficiencies. 

Below are some of the areas. 

Lack of Depth of Trained Personnel: 

Certainly there is lack of depth of trained 

personnel in Nigerian banks. Hence, 

training and upskilling of local nationals 

become a crucial element in solving this 

problem. There is need for knowledge 

on Investment banking products. There 

should be a greater focus on financial 

product training with special emphasis 

on Product knowledge, risk analysis/ 

management, ethical selling skills, 

and branch management skills with a 

sustained credit training programme for 

all branch managers. Selling skill should 

focus more on relationship management, 

providing advice and financial solutions 

to bank customers. There is need to 

ring-fence retail banking from investment 

banking and prohibit retail and investment 

banks from common ownership. 

Untrustworthiness of Bank 

Leadership: Are the leaders of banks, 

at Chairman and CEO level, trusted 

and have they performed adequately? 

If no, then there should be continuous 

proof of banking qualifications and 

continuing education in both products 

and risk management to build effective 

leadership teams and succession plan. 

There is need for continuous nonexecutive 

Director training, towards 

organisational development, Leadership 

skills, regulatory compliance, and Asset 

and liability management. The society 



Cover Article 

must demand personal trustworthiness 

from the leaders of its institutions. Warren 

Buffett had to say: “Avoid business 

involving moral risk; no matter what the 

rate, you can’t write good contracts with 

bad people.” Here’s what Alan Greenspan 

said in testimony in July 2002: “Our 

market system depends critically on 

trust – trust in the word of our colleagues 

and trust in the word of those with whom 

we do business.” serious improvements 

in personal trustworthiness. The three 

particular sources of inculcating trust 

worthiness in bank leadership are 

Business Schools: Here in addition 

to MBA programs, there should be 

executive-education programs as well. 

Universities should be urged to undertake 

large-scale programs to reexamine the 

fundamental role of personal ethics and 

character and to teach it in a variety of 

ways. Boards of Directors: Here’s 

what Warren Buffet wrote in Berkshire 

Hathaway’s 2009 Shareholder Letter is 

very important, “The CEOs and directors 

of the failed companies, however, have 

largely gone unscathed. Their fortunes 

may have been diminished by the 

disasters they oversaw, but they still 

live in grand style. It is the behaviour of 

these CEOs and directors that needs 

to be changed.” Industry/Professional 

Bodies: Executives of professional/ 

industry associations need to recognise 

that short-term selfish behaviour is 

harmful to their constituencies in anything 

beyond the short run and focus on broader 

agenda that improve the long-term health 

of their members. 

Financial Inclusion: Other names for 

Financial Inclusion can be Broadening 

Financial Outreach, Enhancing Public 

Confidence. In reality all are talking about 

the same issue which is the delivery of 

financial services at affordable costs to 

disadvantaged and low income segments 

of the Nigerian society. In Nigeria, 80% 

of the adult population earn less than 

N20,000 per month, 72% of the population 

live in rural areas of whom the majority do 

not have any formal employment, 70% of 

the adult population do not currently use 

any basic banking services (i.e. current 

account, ATM card, savings account, or 

any kind of loan), 2% of the rural population 

have access to financial services, while 

60% of the population have access to 

mobile telephones. The primary reasons 

given by survey respondents for not 

having a bank account are the absence 

of a regular income, distance from a bank 

branch, lack of knowledge about banking 

services, arbitrary unpredictable costs of 

banking services and lack of confidence 

on the banks. It is generally recognised 

that unrestrained access to public goods 

and services is an absolutely necessary 

condition for an open and efficient society. 

Financial services are in the nature of 

public goods. Therefore it is essential 

that the availability of banking and 

payment services to the entire population 

without discrimination should be the 

prime objective of public policy in such a 

society. In Nigeria, serving the population 

with adequate financial products is quite 

imperative. 

Structural Imperatives: The recent 

restructuring of deposit-money financial 

institutions into Commercial Banks 

(Regional, National and International), 

Merchant Banks; and Specialised Banks 

(which include non-interest banks, 

microfinance banks, development banks 

and mortgage banks), is a step in the right 

direction and to re-focus these institutions 

to perform only their statutory functions 

would benefit the industry. 

Regulatory Environment: To 

integrate Nigeria’s financial system 

into the regional and global financial 

system there is need to strengthen 

effective supervision of the banking 

industry, regulation, transparency; and 

risk management system. Banks are 

expected to embrace the global best 

practice in corporate governance, 

ethics and professionalism, smooth and 

efficient payment standards, international 

reporting standards, disclosure, improve 

on self-regulation, enhance the capital 

base and risk management culture. 

There is need for banks to become more 

innovative in their intermediation function, 

especially to increase financing to the 

productive sectors in order to diversify the 

productive base of the economy. 

Regulators and senior managers in the 

financial services sector need to buy into 

the key concepts of Governance, Risk 

and Compliance (GRC) as three pillars 

of an effective cultural framework. The 

regulators (CBN, NDIC, SEC) must better 

co-ordinate in enforcement of existing 

regulatory powers. More Principles Based 

Regulation can work more effectively 

than highly prescriptive regulation and 

has the potential to provide an effective 

basis for rebuilding trust and confidence 

in the financial system. 

Corporate Governance: A major plank 

on which the CBN hinged its intervention 

in the eight rescued banks on August 

14, 2009 surrounded weak corporate 

governance structures. According to 

Walker’s Report, “The need is now to 

bring corporate governance issues closer 

to centre stage. Better financial regulation 

has much to accomplish, but cannot 

alone satisfactorily assure performance 

of the major banks. These entities must 

also be better governed.” Furthermore, 

the Report stated “Board conformity with 

laid down procedures such as those for 

enhanced risk oversight will not alone 

provide better corporate governance 

overall if the chairman is weak, if the 

composition and dynamics of the board is 

inadequate and if there is unsatisfactory 

or no engagement with major owners. 

The behavioural changes that may be 

needed are unlikely to be fostered by 

regulatory fiat, which in any event risks 

provoking unintended consequences. 

Behavioural improvement is more likely to 

be achieved through clearer identification 

of best practice and more effective but, 

in most areas, non-Statutory routes to 

implementation so that boards and their 

major owners feel “ownership” of good 

corporate governance.” Board members 

and chairmen would have to work harder 

in future, devoting far more time to the job 

and prove to the regulators in an interview 

they have the experience to understand 

some of the complex activities banks 

are involved in. Non-executive board 

members need to spend significantly more 

time on the job than they do now and get 

more structured institutional support in 

developing competencies to perform their 

oversight functions effectively through 

the Board Committees. Chairmen should 

devote probably not less than two-thirds 

of their time to the business of the entity. 

Incentives Structure: In objective 

terms the levels of salary and bonus 

paid in the financial services sector are 

vast and do not always reflect the profit 

made or the effort expended. Similarly, 

losses made or failure has not to date 

attracted any corresponding downside in 



Cover Article 

remuneration. Remuneration based on 

good Governance, Risk and Compliance 

(GRC) which are the three pillars of senior 

management responsibility is highly 

recommended. Though the concept of 

rewarding innovation, controlled risk 

taking and success is ok but within the 

financial services sector remuneration 

and especially bonuses, should be 

structured so as to reward innovation 

and profit, balanced by other factors 

which include ethics, risk mitigation and 

compliance. The current culture of very 

high salaries and extremely high bonuses 

often leads to excessive risk taking and 

should be severely discouraged. Where 

a firm could not demonstrate that its 

remuneration policies took account of 

risk, pressure should be brought to bear 

by the regulators for the bank to review its 

remuneration policy. Incentives for senior 

managers and traders to recklessly 

pursue short-term profit whilst failing to 

adequately control risks to their business 

must be prevented. 

Paradigm Shift in Regulation: 

There is need to widen the perimeter of 

financial sector surveillance. Institutions 

and markets, possibly with differentiated 

layers of risk should be regulated in 

such a way as to allow them to graduate 

from simple disclosure to higher levels 

of disclosure as their contribution to 

systemic risk increases. Mechanisms also 

are needed to allow for the assessment 

of, and the response to, systemic risks 

posed by unregulated or less regulated 

financial sector segments. Prudential 

regimes should encourage incentives that 

support systemic stability, discourage 

regulatory arbitrage; and adopt a broad 

concept of systemic risk, factoring in 

the effects of leverage, funding, and 

interconnectedness. It should encourage 

and demand in good times capital 

provisioning and liquidity norms in order to 

build a buffer that in bad times can help to 

offset pro-cyclical pressures. Regulators 

need better information on a much wider 

range of financial institutions, including 

‘off balance sheet’ risks to involve better 

consolidated supervision, and the risks 

of financial inter-linkages. Investors also 

need more disclosure and a higher level 

of granularity in information provided. 

Careful consideration will have to be given 

to the costs and benefits of enhanced 

information collection and disclosure, 

especially the additional information that 

regulators require. Progress is needed in 

tackling political and legal impediments 

to the regulation and resolution of crossborder 

institutions. 

Developing harmonised insolvency 

regimes governing the resolution of large 

cross-border financial firms and early 

remedial action frameworks would be 

a desirable feature of a reformed crisis 

management framework of the future. If 

there is absent action on these fronts, the 

risk is that national authorities will begin 

to resist financial globalisation. Greater 

flexibility for central banks to provide 

liquidity and also to focus greater attention 

on credit and asset booms is needed. The 

breakdown of markets has highlighted 

the need for a better understanding of the 

monetary policy transmission mechanism, 

including whether central banks should 

support liquidity in term markets. For 

central banks in many emerging market 

countries, facing capital outflows and 

exchange rate pressures, the provision of 

additional liquidity can be more complex 

as it may fuel a drain of foreign exchange 

reserves. The current crisis underlines 

the need for better crisis responses. 

Actions taken by national authorities 

have at times appeared piece-meal and 

uncoordinated both within countries 

and internationally, which has risked 

undermining confidence, weakening the 

impact of policy responses, and distorting 

markets. 

Increased concern about credit risk, 

and the realisation of losses, underscores 

the need for fiscal support during the 

containment and restructuring process. 

This has included enhanced depositor 

protection and government guarantees 

for certain wholesale bank liabilities; bank 

recapitalisation; and in some cases the 

direct purchase by government or the 

central bank of bank and other assets. 

A clear exit strategy to allow the 

authorities to withdraw market support 

and a transition to a new and more 

stable financial market structure will 

require careful planning and international 

cooperation in order to avoid market 

distortions and to promote a revival of 

markets at a reasonable level of systemic 

risk. More work on the approach to this is 

required by Ministries of Finance, central 

banks, and regulators. 

Improved regulation and enhanced 

disclosure by banks: Improved regulation 

and enhanced disclosure by banks 

improved regulation and enhanced 

disclosure by banks are the major driver 

of change in the banking sector. 

Inadequacies of Recent 

Legislations: It can be observed that 

recent legislations and regulatory 

approaches are reactionary and aimed 

at preventing the reoccurrence of an 

already resolved issue. They are not 

robust enough to monitor the changing 

global financial landscape, anticipate 

emerging issues and trigger preventive 

or proactive solutions, multi-faceted and 

multi-jurisdictional thereby harbouring 

opportunities for regulatory arbitrage, 

ineffective due to inadequate institutional 

support, thereby pointing to the need to 

reform the IMF to position it to play a more 

active role in ensuring global financial 

system stability. 

Establishment of Financial Stability 

Committee: The recent jolting of the 

world financial system has provoked 

the need to re-assess the models for 

regulating the financial system. One of 

the lessons learnt is that the approach of 

multiple regulatory authorities addressing 

different type of institutions or market may 

not sustain the evolving global financial 

system. The financial system in Nigeria 

and across the globe is evolving and 

financial institutions are spreading their 

activities across markets. The embrace 

of universal banking and the rapid uptake 

of the concept by Nigerian banks calls for 

more coordinated approach in regulating 

the financial system. The argument 

has shifted towards the realignment of 

regulatory structures based on objectives 

rather than markets or products. The 

OECD in its draft policy framework 

favoured regulation based on regulatory 

objectives which are identified based on 

a thorough understanding of the financial 

landscape. In 2008, the US Treasury 

Secretary in his blueprint for regulatory 

reform also made a case for objective 

based structure for regulation. The 

objectives of financial system regulation 

are to ensure market stability, safety and 

soundness of financial institutions and 

protection of investors and consumers 

of financial products. In view of the fact 

that there is no regulatory body in the 

country that can lay claim to having sole 

responsibility for the three objectives 



Cover Article 

outlined above, it is essential for the 

country to move away from passive 

coordination of regulatory activities 

through the current FSRCC mechanism 

and set up a legislatively backed Financial 

Stability Committee which will coordinate 

the activities of the regulatory agencies 

towards the achievement of the above 

stated objectives of financial system 

regulation. 

Coordinated Regulation: By 

extension, it is necessary that regulatory 

activities should be well coordinated. 

This may be achieved either through 

joint examination exercise and regular 

interaction of regulatory agencies or 

streamlining of regulatory portfolio of each 

agency to cut across markets, institutions 

and products. The latter requires that all 

financial regulators should be restructured 

based on regulatory objectives. In effect, 

there will be a regulator that will focus on 

market stability across all markets within 

the financial system. Similarly, another 

regulator will be focused on the soundness 

of financial institutions notwithstanding 

whether they are banks, stock broking 

firms or insurance companies. The third 

financial regulator will see to the adequate 

protection of investors in and consumers 

of financial products and instruments. 

Adoption of IFRS and IAS: The 

prospect for our financial institutions to 

compete favourably in the international 

financial market is anchored on the 

compliance of the Nigerian financial 

system to internationally acceptable 

standards and codes. The Central Bank 

of Nigeria is therefore at the forefront 

of efforts towards the adoption of 

the International Financial Reporting 

Standards for our banks and by extension 

all publicly quoted companies. Similarly, 

the International Standard on Auditing is 

germane for a successful foray into the 

international financial market. 

Anti-Money Laundering: The Central 

Bank of Nigeria is aware of its commitment 

to collaborate with international 

organisation in stemming the ill of money 

laundering. Success recorded in this 

regard includes the setting up of the 

NFIU within the EFCC and the removal 

of Nigeria from the list of non-cooperating 

countries by the FATF. However we should 

not rest on our oars in addressing the 

issues raised in the 2009 progress report 

on Nigeria’s mutual evaluation exercise 

by the Inter-Governmental Action Group 

against Money Laundering in West Africa. 

The Central Bank of Nigeria should 

address the areas in which the country 

is non-compliant some of which include 

correspondent banking, foreign branches 

and subsidiaries, new technologies 

and non-face to-face business, special 

attention for higher risk countries. 

Bank Charges: All banks charges 

to customers should be made known to 

every customer at the inception even 

before extending any credit facility or 

service delivery to the customer. The 

balance of the credit facility outstanding 

against a customer at any stage or period 

of the credit contract should be adequately 

communicated to the customer. A situation 

where a loan customer is always in doubt 

of his loan balance and interest amount 

attached should be prevented. When 

there is need to change the interest rate, 

especially upward review, the consent 

of the customer must be sought. The 

customer should be alerted in case he 

has financial capacity to repay off the 

facility and avoid the enhanced interest 

charge. Even if he has no financial 

capacity to pay off he should know what 

he owes the bank in terms of principal 

and interest. The penalties attached to 

early liquidation of debt should be made 

known to the customer so that he can 

make informed choice or decision to 

engage such facility or not. A situation 

where money is deducted from customer 

bank account without clear indication of 

what he owes and the interest portion 

attached, can cause disaffection and 

breach of trust. Early withdrawal from 

debt liability should be encouraged at 

no cost to the borrower. To simplify the 

process of levying charges on bank 

customers’ bankers tariff has to be printed 

and circulated to all the stakeholders 

for guidance. Charges on normal bank 

statement should stop. Presently up to 

N5000 is being charged and this is wrong 

and unacceptable. Payment of COT by 

current account holders is quite enough 

to compensate banks for this. After all it 

is obligatory on the banks to update their 

customers on the state of their accounts. 

There should be regular spread between 

the deposit and lending rates in fairness 

to customers. Imagine a bank charging 

up to N50,000 for bulk counting. Is it not 

outrageous? 

Care for Real Sector: It is urgently 

important to improve on what happens 

in the real sector of economy because 

that is the bedrock of successful banking 

industry. Packaging bankable projects in 

the real sector and nursing them to fruition 

will improve the well being of banks. The 

banks suppose to service the productive 

sectors but ironically banks huge profits 

while the firms that operate in the real 

sector die off or rake losses. A bank 

should be a bridge or collection point of 

funds from surplus units to deficit units 

and distribute the money productively 

within the economy. A bank success 

depends on the success of the industries 

it finances. A check on the investment 

profile of banks will definitely show the 

neglect of the value-chain investment in 

the real sector especially agricultural and 

agro-allied industries. 

Bankers Committee: The disciplinary 

spirit of the bankers committee has to 

be rekindled as it has waned over time. 

Discipline must be engendered in every 

facet of banking activity. Aggressive 

marketing and unregulated competition 

among banks has to be regulated to 

restore sanity and ethics back to the 

profession. The committee should work 

for equitable distribution of public sector 

funds among the operating banks in such 

a manner that it is well diversified to put off 

risk to the barest minimum. The committee 

should commission a case study of failed 

banks in Nigeria to find out the problems 

and identify the early warning signals of 

a failing banking institution to serve as 

a guide. The result of the consolidated 

examinations of banks by CBN, NDIC, 

SEC, NSE, etc, should be laid bare before 

the committee for their deliberations 

and input towards further steps to take 

to resolve relevant disturbing issues 

from each report. Independent directors 

should be represented in the committee 

meeting to air their views on vexing 

issues on the performance of the banks 

they superintend. Collection of brokerage 

commission on deposits mobilised by 

bank officials should stop. Payment of 

commission to public sector officials 

who authorise public funds deposits in 

banks should stop and made a criminal 

offence to the giver and the receiver. This 



Cover Article 

kind of payment breeds greediness and 

corruption in the banks. 

Modification of Investment Profile: 

Uncontrolled investment expansion, 

uncontrolled gigantic branch expansion 

which affects the liquidity of the banks 

should be meticulously put on check. 

Checks and balances should be instituted 

in order to track and halt underfunding of 

bogus investment projects. Investment 

has to be engaged by banks when 

there is strong evidence of financial 

capacity to do so. The excess money 

mobilised by banks after recapitalisation 

bred speculative investments by banks. 

Wholesome lending would have been 

encouraged if refineries, PHCN, etc, were 

privatised but the reverse is the case. 

Margin loans must be regulated and it 

is meant for those who understand the 

risk involved. Banks are erecting bubble 

assets if they continue to carry a loan that 

has gone bad. If a loan facility’s interest 

payment is in default for up to 90 days, 

provision should be made on it as bad. 

There should be objective criteria and 

principles that back the decision to invest 

or give loan. 

Credit Department: The credit 

department should be staffed in such a 

way that no credit customer of a bank can 

divide a plot of land into three parcels, 

collect C of O for each parcel, with 

factory on each (which is fictitious) and 

distribute to three or more banks each 

parcel of land as collateral for borrowing. 

It is a known fact that this scenario plays 

out in the bank’s credit department with 

the collusion of credit staff. Offering exit 

planks to delinquent bank customers 

is not bad but it should be done in line 

with the rules and regulations. At times 

attempt to monopolise the account of a 

customer lands the bank credit staff into 

exceeding his limit. Credit staff should be 

trained on forecasting cash flows for up to 

the tenor of loan facilities especially when 

extending credit to the real sector. This 

will help in the recovery of loans. Again a 

bank advertised for women to collect loan 

and buy jewellery. Where is the source of 

repayment? Where is the cash flow going 

to come from? 

Bank/Customer Collaboration: A 

bank that took the risk to finance an 

emerging or budding entrepreneur on his 

first outing will be the bank of his first choice 

when he finally hit the big ticket. Banks 

are advised to grow with their customers. 

Banks should be driven by the dreams of 

their customers but currently what obtains 

is that banks are driven by their bottom 

line, which is wrong. Banks should invest 

in business development, fund research 

on investment from their tier 1 capital 

and dig to the background of customers 

frequently. Beyond profitability banks 

suppose to have a sense of responsibility 

towards the communities where they 

operate and invest in the environment. 

Bankers lacked the knowledge and skill 

to package bankable projects. It is hereby 

recommended that banks can send their 

staff on training in that area or institute 

educational institutions that cater for bank 

issues and pay performance bonus to all 

the bank staff that excels in this respectproject 

packaging. 

Customers’ Education: There is 

gap in educating the customers on the 

regulatory requirements on the banks. 

With such ignorance the customers push 

bank staff into committing abominable 

things to keep the customers. Insider 

dealing is a prominent factor in banks 

drive to make profit whether personal or 

corporate profit. Guide to bank charges or 

bankers tariff should be published regularly 

as changes occur and circulated to bank 

customers. This will go a long way in 

instilling confidence and trust in the minds 

of the banking public. Establishment of 

client-customer relationship committee, 

permanently funded by banks and CBN 

is needful in order to ensure thoughtswords-actions 

congruency on the part 

of banks and banking public. Creation 

of a forum for customers’ voice in the 

management of their accounts by banks 

is very necessary. 

Bankers Professional Standard 

Board: As trust is the bedrock of 

value capital there is need to establish 

professional Standard Board that will 

determine the code of conduct or ethics 

for bankers. People see banking as a 

job or conveyor belt and not as a career 

because of the heavy rewards. There is 

no continuous professional training for 

bankers outside the entry requirement of 

B.Sc/MBA. Even as at that anybody who 

wants to develop professionally in his 

chosen career should endeavour to train 

through engagement at his private time, 

of professionally qualified individuals in 

the specialised areas like accounting, 

credit administration, information 

technology, pure administration, 

investment banking, retail banking 

and other niches in banking. Already 

professionally engaged bankers need to 

constantly pass through the continuous 

professional development programme of 

the CIBN. Banking should be practiced 

as a profession. As it is presently there 

are cases of non-conformity with the 

standard code of conduct by majority of 

bankers, duty of care is wholesomely 

neglected by bankers. It seems no more 

an offence for bankers to take undue 

advantage of customers especially the 

illiterate and not-so-literate customers. 

Right now so many bankers are afraid of 

the regulator due mainly to the unclean 

nature of their activities, even when they 

have constructive criticisms to make or 

offer. So we need more of courageous 

professional bankers to challenge the 

excesses of the regulators. The bankers 

professional Standard Board will see to it 

that punishment is meted out not only to 

bank operators but also to the regulator. 

Credit and Status Enquiry: Currently 

Credit and Status Enquiry among bankers 

no longer make credible sense because 

of customer snatching syndrome. No 

more circulation of confidential reports 

from one banker to another. As we 

know, the key operators of banks are 

the customers, bankers, and regulators. 

Trust must be established among these 

three to engender peace in the industry 

and allow circulation of Credit and Status 

Enquiry to be. 

Advocacy on Unbanked Population: 

Banks should provide cost effective 

products for the unbanked population. 

To make sure banks do not transact 

with anonymous customers the issue 

of ascertaining national identity should 

be addressed by the National Identity 

Management Commission (NIMC). We 

need to retool our banking models to 

accommodate and serve the interest of 

the rural dwellers. One of our problems 

is that we imitate foreign models without 

taking time to study them well to see how 

we can modify them to suit our needs. 

The Microfinance banks should operate 

with bicycles, motorcycles to locate rural 



Cover Article 

customers, source and finance rural 

domestic productions in their areas of 

operations. Training should be intensified 

to build up capacity for the microfinance 

banks. Regulation should be modified or 

segregated to suit each rural setting. This 

is very important because the regulation 

that is good for Lagos might stop 

innovation in another area. User-friendly 

regulation is what is required in different 

rural locations in Nigeria. To beef up the 

level of savings, which is a measure of 

customers’ confidence in the system, 

the microfinance should approach rural 

customers in clusters to minimise the 

problem of national identity, get closer to 

their needs, and harmonise the nature of 

services required. Most importantly, to 

capture the unbanked rural dwellers there 

is need to reduce lending and deposit 

amounts spread visa-vis the lending and 

deposit interest rates spread. 

Building Trust: To build trust in 

Nigerian banks there is need to stop 

insider dealing and incessant fraud, instil 

transparency in bank charges, restore 

healthy cooperation among banks 

and stop unhealthy competition, base 

placement of bank staff on positions 

of authority on area of specialisation, 

and stop corrupt money from entering 

into banks to avoid corruption and 

greediness into banking activities. It has 

said severally in different fora that corrupt 

money was imported into the banks from 

public sector by public sector authorities 

and this transported corruption into the 

banks. Bankers have to reprofessionalize 

to develop competency framework to 

even regulate the regulators by good 

conduct. The concept of ombudsman has 

to be there to check bankers by bankers. 

Training and retraining to build capacity 

and develop more areas of specialisation 

is very essential. 

Transition to Cashless Economy: 

Due to excessive inventory of cash 

and the consequent high cost of cash 

management the regulator is now 

canvassing for transition to cashless 

economy. But before such transition 

can smoothly take off it is important that 

we address some knotty issues such 

as broadening the reach of financial 

services inclusion of the unbanked. 

There is still lack of infrastructural 

support, corruption in the system, lack 

of adequate enlightenment and publicity, 

lack of appropriate dispute resolution 

when problems occur, power outage and 

inadequacy, lack of trust and resistance 

to change attitude, policy inconsistencies 

and fraudulent practices abound. 

Consequent loss of jobs and labour 

related issues has not been addressed. 

With these deficiencies around untimely 

transition to cashless economy can 

cause defrauding by counter party, 

encourage dupes (419ners), 

discourage savings in banks, 

discourage rural banking and host 

of others. However if the scheme is 

properly executed with the right and 

adequate infrastructural facilities 

it can mop up excess liquidity 

(idle funds) in circulation, reduce 

inflation rate, cut time consumed 

in transactions, and engender 

trust in the system. Nevertheless, 

before the implementation there 

is need to address electricity or 

power inadequacy, improve on 

the coverage of financial services 

delivery, improve on the low card 

penetration in Nigeria, and configure 

the cards in understandable rural 

languages. 

Enforcement: The CBN 

has shown its steadfastness to 

enforce its regulatory provisions 

and directives. It is essential 

that the Bank and other financial 

regulatory authorities work 

collectively in ensuring that the banking 

system is operated strictly based on 

prudential guidelines and directives. We 

cannot afford lapses in regulation and 

enforcement in an environment that is fast 

producing internationally active banks. 

CONCLUSION 

The global financial market is wide 

open for the participation of Nigerian 

financial institutions. Competitiveness 

in the international financial system, 

however, demands that our financial 

institutions comply with international 

benchmarks in operations and reporting. 

The adoption of such standards as 

IFRS and cashless economy are not 

negotiable for the Nigerian financial 

system. Intermediating globally requires 

that we fine tune our laws, and regulatory 

institutions to meet the requirement of 

the global financial market. The Central 

Bank of Nigeria, on its part, seems 

ready to enforce strict compliance 

to regulations. The Bank is equally 

committed to consolidated supervisory 

framework to enhance coordination 

with other regulatory agencies towards 

attaining market stability, safety and 

soundness of financial institutions and 

public confidence in the Nigerian financial 

system. Therefore we need to solidify 

the foundation of our financial system to 

‘ 

If you have reasons to 

distrust the integrity of a 

customer, close his account. 

Never deal with a rascal under 

the impression that you can 

prevent him from cheating you. 

Pay your officers such salaries 

as will enable them to live 

comfortably and respectably 

without stealing; and require 

of them their entire services. 

If an officer lives beyond his 

income, dismiss him. 

‘ 

serve as a sure footing for our financial 

institutions which are playing within the 

global financial landscape. 

I conclude this paper by drawing 

attention of bankers to the famous letter 

written to American banking institutions 

in December 1863 by Hugh McCulloch, 

then newly appointed U.S. Comptroller 

of the Currency and later the U.S. 

Secretary of the Treasury, as captured 

from a write-up by Kekere-Ekun (2011). 

Here are some excerpted highlights: Let 

no loans be made that are not secured 

beyond a reasonable contingency. Do 

nothing to encourage speculation. Give 

facilities only to legitimate and prudent 

transactions. Distribute your loans rather 

than concentrate them in a few hands. 

Large loans to a single individual or 

firm, although sometimes proper and 

necessary, are generally injudicious, 

and frequently unsafe. Large borrowers 



Cover Article 

are apt to control the bank. If you doubt 

the propriety of discounting an offering, 

give the bank the benefit of the doubt 

and decline it. If you have reasons to 

distrust the integrity of a customer, 

close his account. Never deal with a 

rascal under the impression that you 

can prevent him from cheating you. Pay 

your officers such salaries as will enable 

them to live comfortably and respectably 

without stealing; and require of them 

their entire services. If an officer lives 

beyond his income, dismiss him; even 

if his excess of expenditures can be 

explained consistently with his integrity, 

still dismiss him. Extravagance, if not 

a crime, very naturally leads to crime. 

The capital of a bank should be reality, 

not a fiction; and it should be owned by 

those who have money to lend, and not 

by borrowers. Pursue a straightforward, 

upright, legitimate banking business. 

‘Splendid financing’ is not legitimate 

banking, and ‘splendid financiers’ in 

banking are generally either humbugs 

or rascals. My audience – the readers, 

regulators, distinguished bankers and 

bank customers, our legislators and the 

judiciary, these are the tenets we have 

to go back to in order to rebuild trust 

and grow confidence in our financial 

institutions. 

BIBLIOGRAPHY 

1. Adewumi, D.O. (2009) ‘ICT as a 

Critical Tool for Competitiveness,’ An 

Invited paper delivered at the CIBN 3rd 

Annual Banking and Finance Conference 

on “Competing Successfully in Global 

Financial Markets” held at Congress Hall, 

Transcorp Hilton Hotel, Abuja, September 

25, 2009. 

2. Akin Kekere-Ekun (2011), 

Rebuilding Trust, Growing Confidence 

in Financial Institutions, An Invited paper 

delivered at the CIBN 5 th Annual Banking 

and Finance Conference on ‘’The Future 

of Banking: The Next Fundamental Steps’’ 

at Congress Hall, Transcorp Hilton Hotel, 

Abuja, September 27, 2011. 

3. Cally Jordan & Giovanni 

Majnoni (2002), Financial Regulatory 

Harmonisation and the Globalisation 

of Finance; World Bank Policy Research 

Working Paper 2919. 

4. Central Bank of Nigeria (2010), 

CBN Regulation on the Scope of 

Banking Activities and Ancillary 

Matters, No.3, 2010. 

5. European Central Bank (2009) 

The Euro Area Banking Lending 

Survey; ECB Eurosystem. 

6. Gardner, D. Colyn (2011), Bank 

Leadership in the Post Financial Crisis 

Era – Lessons From the Credit Crunch 

for Banking Institutions, An Invited 

paper delivered at the CIBN 5 th Annual 

Banking and Finance Conference on ‘’The 

Future of Banking: The Next Fundamental 

Steps’’ at Congress Hall, Transcorp Hilton 

Hotel, Abuja, September 27, 2011. 

7. Garry Jacobs, (2008) International 

Financial Crisis and Single World 

Currency; The Mother’s Service Society 

World Academy of Art and Science. 

8. Jesse’s Café Americain (2009), 

Bank Credit Growth Drops Precipitously; 

http://jessescrossroadscafe.blogspot. 

com/2009/04/bank-credit-growthdropsprecipitously.html 

9. John Lipsky (2007), International 

Financial Markets – Stability and 

Transparency in the 21st Century; 

Social Democratic Party Caucus. 

10. Liliana Rojas-Suarez (2002), 

International Standards for 

Strengthening Financial Systems: 

Can Regional Development Banks 

Address Developing Countries 

Concerns?, Conference on Financing 

for Development: Regional Challenges 

and the Regional Development Banks, 

Institute for International Economics. 

11. Mallam Sanusi Lamido Sanusi 

(2009), ‘Competing Successfully in 

a Global Financial Market’, Being a 

goodwill address delivered by Governor, 

Central Bank of Nigeria at the 3rd Annual 

Banking & Finance Conference held on 

Thursday, September 24, 2009 at the 

Congress Hall, Transcorp Hilton Hotel, 

Abuja. 

12. Martin Brownbridge (2005), ‘The 

Impact of Public Policy on the Banking 

System in Nigeria’, 2005. 

13. Mayer Brown (2009), EU 

Regulation of Credit Rating Agencies 

Approved; Mayer Brown Publications, 

http://www.mayerbrown.com/publications/ 

article.asp?id=6529&nid=6&print=Y 

14. NDIC Annual Report, 2002. 

15. OECD (2009), Policy Framework 

for Effective and Efficient Financial 

Regulation: General Guidance (Draft 

for Consultation); OECD – Joint CMF 

IPPC Task Force on Financial Regulation 

– Committee on Financial Markets 

and Insurance and Private Pensions 

Committee. 

16. Paulson, Henry M. (2008), 

Blueprint for Regulatory Reform; US 

Department of the Treasury. 

17. Pierre Siklos (2001) “Money, 

Banking and Financial Institutions: 

Canada in the Global Environment”, 

2001. 

18. Martin Brownbridge (2005) ‘The 

Impact of Public Policy on the Banking 

System in Nigeria’, 2005. 

19. Rauch, M. Hubert (2011), 

Broadening the Reach of Financial 

Services, An Invited paper delivered 

at the CIBN 5 th Annual Banking and 

Finance Conference on “The Future of 

Banking: The Next Fundamental Steps’’ 

at Congress Hall, Transcorp Hilton Hotel, 

Abuja, September 28, 2011. 

20. Salami Doyin (2009), ‘Competing 

Successfully in Global Financial 

Markets: The Dynamics of Change’, An 

Invited paper delivered at the CIBN 3rd 

Annual Banking and Finance Conference 

on “Competing Successfully in Global 

Financial Markets” held at Congress Hall, 

Transcorp Hilton Hotel, Abuja, September 

24, 2009. 

21. David Walker (2009), Sir David 

Walker – “A Review of Corporate 

Governance in UK Banks and 

Financial Industry Entities”, Final 

Recommendations – November 26, 2009. 

22. Greenspan Alan (2002), 

Testimony of Chairman Alan Greenspan 

– Federal Reserve Board’s Semi- 

Annual Monetary Policy Report to the 

Congress before the Committee on 

Banking, Housing and Urban Affairs, 

U.S. Senate – July 16, 2002. 

23. Warren Buffet (2009), 

Warren Buffet – Letter to Berkshire 

Shareholders Discussing 3 rd Quarter 

Result 2001 and Final Report 2009, 

www.berkshirehathaway.com/qtrly/ 

web1101.html 

24. Yusuf Niyi (2011), Transitioning 

to a Cashless Economy: Issues, 

Challenges and Benefits, An Invited 

paper delivered at the CIBN 5 th Annual 

Banking and Finance Conference on “The 

Future of Banking: The Next Fundamental 

Steps’’ at Congress Hall, Transcorp Hilton 

Hotel, Abuja, September 28, 2011. 

* Dr. Chuke Nwude is a Lecturer 

in the Department of Banking and 

Finance at the University of Nigeria 

Nsukka, Enugu Campus. 



Cover Article 

Appendix 1: 

Failed Banks in Nigeria (1930 – 1960) 

S/No Commercial Year Established Year Failed 

1. The Industrial and Commerce Bank 1929 1930 

2. The Nigerian Mercantile Bank 1931 1936 

3. Nigerian Penny Bank 1945 1946 

4. The Nigerian Farmers & Commercial Bank 1947 1953 

5. Pan Nigerian Bank 1951 1954 

6. Standard Bank of Nigeria 1951 1954 

7. Premier Bank 1951 1954 

8. Nigerian Trust Bank 1951 1954 

9. Afro Seas Credit Bank 1951 1954 

10. Onward Bank of Nigeria 1951 1954 

11. Central Bank of Nigeria* 1951 1954 

12. Merchants Bank 1952 1960 

13. Metropolitan Bank of Nigeria 1952 1954 

14 Provincial Bank of Nigeria 1952 1954 

15. Union Bank of British Africa 1952 1954 

16. United Commercial (Credit) Bank 1952 1954 

17. Cosmopolitan Credit Bank 1952 1954 

18. Mainland Bank 1952 1954 

19. Group Credit & Agricultural Bank 1952 1954 

20. Industrial Bank 1952 1954 

21. West African Bank 1952 1954 

Source: Umoh, P.N. (2002) Bank Depositor Protection: The Nigerian Experience, NDIC Quarterly, Vol. 12, No. 2, June, 2002. 

Appendix 2: 

List of Failed Banks: 1994 – 2003 

S/NO BANKS YEAR FAILED 

1. Abacus Merchant Bank Ltd. January 16,1998 

2. ABC Merchant Bank Ltd. January 16,1998 

3. Allied Bank of Nigeria Plc January 16,1998 

4. Alpha Merchant Bank Plc September 08,1998 

5. Amicable Bank of Nigeria Ltd. January 16,1998 

6. Century Merchant Bank Ltd. January 16,1998 

7. Commerce Bank Ltd. January 16,1998 

8. Commercial Trust Bank Ltd. January 16,1998 

9. Continental Merchant Bank Plc January 16,1998 

10. Co-operative & Commerce Bank January 16,1998 

11. Credit Bank Nigeria Ltd. January 16,1998 

12. Crown Merchant Bank Ltd. January 16,1998 

13. Financial Merchant Bank Ltd. January 21,1994 

14. Great Merchant Bank Ltd. January 16,1998 

15. Group Merchant Bank Ltd. January 16,1998 

16. Highland Bank Nigeria Plc January 16,1998 

17. ICON Ltd. (Merchant Bankers) January 16,1998 

18. Ivory Merchant Bank Ltd. December 22,2000 

19. Capital Merchant Bank Ltd. January 21,1994 

20. Lobi Bank of Nigeria Ltd. January 16,1998 

21. Mercantile Bank of Nigeria Plc January 16,1998 

22. Merchant Bank of Africa Ltd. January 16,1998 

23. Nigeria Merchant Bank Ltd. January 16,1998 

24. North-South Bank Nigeria Plc January 16,1998 

25. Pan African Bank Ltd. January 16,1998 

26. Pinnacle Commercial Bank Ltd. January 16,1998 

27. Premier Commercial Bank Ltd. December 22,2000 

28. Prime Merchant Bank Ltd. January 16,1998 

29. Progress Bank of Nigeria Plc January 16,1998 

30. Republic Bank Ltd. June 29,1995 

31. Rims Merchant Bank Ltd.** December 22,2000 

32. Royal Merchant Bank Ltd. January 16, 1998 

33. United Commercial Bank Ltd. September 08,1994 

34. Victory Merchant Bank Ltd. January 16,1998 

35. Savannah Bank Plc February 15,2002 

36. Peak Merchant Bank February 28,2003 

Source: NDIC (2001) Annual Report & Statement of Accounts, P.38 & 39. FGN: Official Gazettes of 15/2/02 and 28/2/03. 



Cover Article 

Approved Banks 

Appendix 3: 

Approved Banks as at End of Bank Consolidation 

July 6, 2004 – December 31, 2005 

Merged Partners 

1. Access Bank Plc (Mr. Aigboje Imoukhuede) Access Bank Plc, Marina Bank, Capital Bank Nigeria Limited 

2. Afribank Bank Plc (Mr. Francis Akinkuotu) Afribank Bank Plc, Afribank International (Merchant Bankers) 

3. Diamond Bank Plc (Mr. Emeka Onwuka) Diamond Bank (Lion Bank & AIB International Bank, Acquired) 

4. Econbank Nigeria Plc (Mrs. Funke Osibodu) Ecobank Plc 

5. Fidelity Bank Plc (Mr. Reginald Ihejiahi) Fidelity Bank Plc, Manny Bank Plc, FSB International Plc (Merged) 

6. First Bank Plc (Mr. Jacobs Ajekigbe) First Bank Plc, FBN Merchant Bankers (Absorbed)/ MBC Int’L Bank Plc (Acquired) 

7. First City Monument Bank Plc (FCMB) 

(Mr. Ladi Balogun) 

8. First Inland Bank Plc (Mr. Okey Nwosu) First Atlantic Bank Plc, Inland Bank Plc 

9. GT Bank Plc (Mr. Tayo Aderinokun) GT Bank Plc 

10. Intercontinental Bank Plc 

(Dr. Erastus Akingbola) 

Midas Merchant Bank FCMB, Co-operative Development Bank Plc, Nigeria-American 

Bank (Merged) 

Intercontinental Bank Plc, Gateway Bank Plc, Global Bank Plc, Equity Bank Nig. Limited 

(Merged) 

11. IBTC-Chartered Bank (Mr. Atedo Peterside) Investment Bank and Trust Company (IBTC), Chartered Bank Plc and Regent Bank 

Limited (Merged) 

12. Oceanic Bank Int. Plc (Dr. Mrs. Cecilia Ibru) Oceanic Bank International Plc, International Trust Bank (Merged) 

13. Platinum/Habib Bank (Mr. Francis Atuche) Platinum Bank Nigeria Ltd, Habib Bank International (Merged) 

14. Skye Bank (Mr. Akinsola Akinfemiwa) Prudent Bank Plc, EIB International Bank, Bond Bank, Reliance Bank Ltd, 

& Co-operative Bank. 

15. Spring Bank Plc (Mr. Mike Chukwu) Citizens International Bank, ACB Bank Plc, Guardian Express Bank, Omega Bank Plc, 

Trans International Bank Plc, Fountain Trust Bank 

16. Sterling Bank (Mr. Balatunde Dabiri) NBM Bank Nigeria Ltd, Magnum Trust Bank, Trust Bank of Africa, NAL Bank Plc, 

Indo Nigeria Bank 

17. United Bank for Africa Plc (Mr. Tony Elumelu) Standard Trust Bank Plc, United Bank for Africa Plc, Continental Trust Bank (Acquired) 

18. Union Bank Plc (Dr. Godwin Oboh) Union Bank Plc, Universal Trust Bank Plc (Acquired), Union Merchant Bank (Merged), 

Broad Bank Nigeria Limited (Acquired) 

19. Unity Bank Plc (Alhaji Faldu Bello) NNB International Bank Plc, Centrepoint Bank Plc, Societe Bancier, 

Tropical Commercial Bank, Bank of the North, First Interstate Bank, 

New African Bank, Pacific Bank & Intercity Bank Plc 

20. Wema Bank Plc (Mr. Adebisi Owoyemi) Wema Bank Plc, National Bank Plc, Lead Bank Plc 

21. Zenith Bank Plc (Mr. Jim Ovia) Zenith Bank Plc 

22. ETB (Mr. Ike Oraekwuotu) Devcom Bank and Equatorial Trust Bank Limited 

23. NIB/Citibank (Mr. Emeka Enunwa) Citibank 

24. Stanbic Stanbic 

25. Standard Chartered Bank Limited 

(Mr. Simeon Millet) 

Standard Charted Chartered Bank Limited 

Appendix 4: 

Liquidated Banks After Bank Consolidation as at December 31, 2005 

1. All States Trust Bank 6. Fortune Bank 11. City Express Bank (acquired by UBA) 

2. Hallmark Bank 7. Liberty Bank (acquired by UBA) 12. Gulf Bank (acquired by UBA) 

3. Trade Bank 8. Triumph Bank 13. Assurance Bank (acquired by Afribank) 

4. African International Bank 9. Eagle Bank 14. Afex Bank (acquired by UBA) 

5. Societe Generale Bank 10. Metropolitan Bank 



Conference 

Utilising Approved Taxes and Levies Collection 

Act 2004 for Effective Revenue Generation at 

States Level: The Roles of Chartered Accountants 

By KABIRU I. DANDAGO 

1.0 INTRODUCTION 

Taxes and levies are important sources of revenue generation 

all over the world, accounting for the greater part of the revenue 

that is annually generated in most of the advanced economies of 

the world (Dandago, 2011). In an economy with more than one 

tier of government, efforts must be made to ensure that each 

tier of government is in control of some taxes and levies so that 

revenue assurance could be equitably established at each tier of 

government. Before the 1997 budget pronouncement, Nigerian 

taxpayers had been complaining of multiple taxes to the extent 

that businesses were suffering from heavy cost of production, 

which ultimately had been bringing about high prices of goods 

and services. 

With effect from 1 st April, 1997, the Federal Military Government, 

in furtherance of its philosophy of investor-friendly tax regime, 

announced that it would tackle the multiple dimensional problems 

consequent on the multiplicity of taxes at federal, state and local 

government levels. It further directed the joint tax board (JTB) 

to publish the list of all approved taxes and levies collectible by 

each tier of government. After an exhaustive study of the issue 

nationwide, JTB prescribed a list of all taxes and levies that every 

tier of government in Nigeria can legitimately collect. The taxes 

and levies are based on the provisions of the Constitution of the 

Federal Republic of Nigeria and the various tax statutes in the 

country. In fact, the 1998 Act on those taxes and levies collectible 

by the three tiers of government in the country was amended in 

2004, through Cap T2 Law of the Federation of Nigeria. 

With this development, it is hoped that complaint on multiplicity 

of taxes in Nigeria would be a thing of the past; all that is required 

of each of the three tiers of government is an aggressive utilisation 

of the taxes and levies approved for it to massively generate 

revenue that could be used in executing developmental projects. 

The relevant tax authorities at each tier of government are to 

make good use of those approved taxes and levies on behalf of 

their governments. 

Webster’s Dictionary describes ‘tax’ as a charge imposed by 

governmental authority upon property, individuals or transactions 

to raise money for Public (expenditure) Purposes. Again, Dandago 

and Alabade (2000:2) define tax as “a compulsory contribution 

made by individuals and organisations towards defraying the 

expenditure of the government”. Levies, on the other hand, 

are the compulsory payment made by capable individuals and 

organisations in an economy for the financing of a particular 

developmental project. 

The subjects to a government for taxes and levies are 

individuals (natural persons) and organisations (artificial persons). 

The income they earn; the profit they realise; the capital gains they 

make; and their consumption of goods and services are all subject 

to assessment for taxing, levying, or charging purposes, as per the 

provisions of relevant tax laws in the country. Tax assessment and 

collection are done by a government agent, called tax authority, 

with a view to avoiding cases of multiplicity of taxes and levies. 

The tax agent needs the support of tax experts that are widely 

recognised as chartered accountants. 

A chartered accountant is a professionally trained member of 

the Institute of Chartered Accountants of Nigeria (ICAN) or any 

other internationally recognised accountancy professional body. 

This person is expected to be thoroughly trained in the principles 

and practices of taxation, and to have deeper understanding and 

intimate knowledge of the problems and solutions to the imposition 

of taxes and levies at different tiers of government in a federal set 

up, like Nigeria. He/she is expected to play some roles in ensuring 

effective revenue generation, using taxes and levies approved 

for each tier of government in the country. 

Taxes and levies, therefore, represent an important source 

of revenue to government of any nation. As every government 

engages in a number of economic and political activities, which 

require spending of money, the fund generated through the 

natural resources available to the government is always grossly 

inadequate for achieving set goals and, so, more funds must 

be raised through taxes and levies. In fact, taxation is the most 

durable source of revenue to any serious society, from time 

immemorial to date (Abdulrazaq, 2002). 

Revenue generation, however, is not the only purpose of 

taxation in modern economic system. It is now apparent that 

taxation, as a strong instrument of fiscal policy, is used for 

economic stabilisation; for regulation and control of the activities 

of businesses; and for redistribution of income with a view to 

narrowing down the gap between the rich and the poor. With 

this development in the scheme of things, in the modern world 

economy, it has become imperative for every tier of government 

in a federal set up, like Nigeria, to effectively utilise the taxes and 

levies available to it to attain the purposes mentioned above, 

one of which is revenue generation to execute developmental 

projects. 

This paper is aimed at discussing the roles chartered 

accountants could play in ensuring that the taxes and levies 

approved for states governments to collect are effectively utilised 

for massive revenue generation necessary for execution of 

developmental projects at the state level. This would go a long 

way in making the “love” of taxation to be inculcated in the minds 

of the present and prospective taxpayers, as they see the positive 

impact payment of taxes and levies could make in their lives. 

The rest of the presentation is in four sections. Section 2 

discusses the general purposes of taxation. Section 3 presents 

the approved taxes and levies collectible at the state level, as per 

Act 2004. Section 4 highlights the roles chartered accountants 

could play in ensuring the effectiveness of those taxes and levies 

for massive revenue generation, and Section 5 summarises and 

concludes the paper. 



Conference 

2.0 PURPOSES OF TAXATION 

A good tax system should be able to meet up with the modern 

principles of taxation for it to serve all the modern purposes of 

taxation. These principles or ‘canons’ are: equity (it should be fair 

and equitable); convenient (it should be administratively simple 

to implement); certainty (it should be clear and unambiguous); 

economical (it should be revenue productive, that is, its cost 

of collection should not be higher than or equal to the amount 

collected as income/revenue); and neutrality (it should be neutral, 

that is, it should not change the consumption pattern of individual 

tax payers or influence the production decision of businesses, 

after it has been levied). 

A good tax system should amount to the achievement of the 

following purposes: 

2.1 Revenue to Cover Expenditure: Taxation is the most 

important source of revenue for governments, all over the world. 

Tax payers (individuals and firms) enjoy government services, in 

one way or the other and, so, they pay tax to cover part of the cost 

of these services. Government provides infrastructural facilities 

and welfare packages, for all to enjoy, using funds generated 

mainly through taxation (Adesola, 1998). 

2.2 Economic Stabilisation: Taxation is one of the two 

main instruments of fiscal policy; the other being government 

spending/expenditure (Buhari, 1993). Fiscal policy is about the 

way government generates and expends revenue, in such a way 

that the economy would be moving in a stabilised direction. Direct 

taxes could be used to stimulate economic growth and direct the 

economy towards sustainable development. They could be used 

to reduce level of inflation in an economy from a high level to a 

desired level. For example, companies income tax rate could 

be reduced from 30% to 25% to enable companies retain more 

earnings to be used in financing more viable projects. This would 

amount to employing more people, producing more goods and 

services, reducing prices of goods and services and increasing 

the national income level and reducing crime rate and other antisocial 

activities. All other direct taxes could be used to enhance 

the robustness and bubbling of the economy. 

2.3 Regulation and Control: Taxation is used to regulate 

the production patterns of firms on goods and services and to 

control the consumption behaviour of the citizens. Indirect taxes, 

like import duties, are used to control the importation behaviour of 

importers of durable and consumer goods and services. Excise 

duties are used to regulate the production patterns of producers 

of some goods and services. Export duties are used to regulate 

the production patterns of producers of some exportable goods 

and services. Value Added Tax (VAT) is used to control the 

consumption behaviour of consumers of VATable goods and 

services (Naiyeju, 1996). These indirect taxes bear different rates 

which are subject to changes by government, depending on the 

economic regulation or control purpose to be achieved. 

2.4 Income Re-Distribution: Taxation is an instrument for 

narrowing down the gap between the rich and the poor. It is the 

income earners (individuals or firms) that are to pay tax, based 

on the amount earned, and the income tax realised is to be used 

in providing infrastructural facilities and welfare packages for all 

to enjoy, especially the incapacitated among the citizens in the 

economy. With this arrangement, the disparity in standard of 

living between the rich and the poor would be narrowed down 

to a bearable level. Without taxation, especially the progressive 

taxes, the disparity between the “haves” and the “have-nots” 

may aggravate (Oremade, 1986). Taxation, therefore, is serving 

the purpose of closing or narrowing down the gap between the 

rich and the poor, by collecting income tax from the rich and 

redistributing it to the poor, in a systematic way (through execution 

of public goods projects). 

From a humble beginning of charges, levies and fines on 

agricultural products, solid mineral extracting activities to delivery 

services provisions, development has led many countries to put 

in place laws empowering those in positions of authority to tax 

income of individuals and corporate bodies; tax their profits; 

tax their capital gains; tax their consumptions and tax their 

transactions related to import or export. This taxing/levying is 

done with a view to achieving the purposes mentioned above. 

3.0 TAXES AND LEVIES COLLECTIBLE BY STATE 

GOVERNMENTS 

Internally generated revenue (IGR) sources at the States level 

in Nigeria are many. Decree No. 21 of 1998, as amended by Cap 

T2 Law of the Federation of Nigeria, 2004, gives a list of taxes and 

levies approved for collection by the three tiers of government in 

Nigeria. Those related to the State Governments are as follows: 

3.1). Taxes and Levies: The following are the taxes and 

levies that are approved for collection by the State Governments 

in Nigeria: (i) Personal income tax (applies to residents of the 

state); (ii) Withholding tax (individuals only); (iii) Capital gains 

tax (individuals only); (iv) Stamp duties (applies to instruments 

executed by individuals only); (v) Road taxes (e.g. vehicle 

licenses); (vi) Taxes on pool bets, lottery and casino wins; (vii) 

Business premises and registration fees; (viii) Development levy 

(applies to taxable individuals only); (ix) Streets name registration 

fees (state capital only); (x) Fees for right of occupancy on urban 

land owned by the state government; (xi) Market taxes and levies 

where state finance is involved; and (xii) Miscellaneous revenue 

(e.g. rent on government property, income from investment, etc). 

3.2 Fines, Fees and Rates: School fees, water rate, etc. 

3.3 Licenses: These cover amount received for issuance 

of licenses of various types. 

3.4 Earnings from Sales: Sale of government properties 

e.g. vehicles, houses, etc. 

3.5 Rent from Government Properties: Include rent of 

government houses, land, etc. 

3.6 Interest Payment and Repayment of Loan: 

These are interest payments by state government employees 

and government companies, on loans granted by the state 

government. 

3.7 Re-imbursements: These are refunds for services 

rendered to the Federal and Local Government(s), public 

corporations and other statutory bodies owned by the State 

Government. 

3.8 Miscellaneous: Other sources than those mentioned 

above, e.g. dividend from investment in quoted or unquoted 

companies, etc. 

These sources of revenue are available to each of the 36 states 

governments in Nigeria, but they appear to be poorly utilised for 

revenue generation by most of the states governments. By their 

training and inclination, chartered accountants are expected to 

show the states governments the way of putting these sources of 

revenue to good use for massive revenue generation that would 

give way to execution of developmental projects. 

4.0 THE ROLES OF CHARTERED ACCOUNTANTS 

Chartered Accountants are expected to guide the states 

governments as to how to effectively utilise the taxes, levies and 

other sources of IGR available to them to massively generate 

revenue in a number of ways. They should play the role of guiding 

the states governments in the area of: (i) articulating solutions 



Conference 

to problems of revenue generation through the taxes and levies; 

(ii) finding solutions to the problem of revenue accounting, 

accountability and transparency; (iii) conducting SWOT analysis 

on sources of revenue at the states level; and (iv) creating 

awareness on the need to make each state economy a tax-based 

economy. 

4.1 Problems of Revenue Generation at States Level 

From the works of Mukhtar (1996), Isyaku (1997), Abdulkadir 

(1998), Ibrahim (2002), Ishaq (2002) and Williams (2002) the 

problems of internal revenue generation at States Government 

level are: [i] tax evasion; [ii] tax avoidance; [iii] lack of trained, 

effective and motivated revenue staff; [iv] nonchalant attitude of 

some tax officials; [v] problem of assessment; [vi] lack of effective 

tax administration; [vii] slow legal proceedings; [viii] lack of up-todate 

statistics on tax payers; [ix] lack of commitment to pursue 

IGR available to the states governments; [xiii] non-collection of 

development level from taxable persons. 

Chartered Accountants are to assist states governments 

with solutions to all the identified problems, through training and 

retraining of the staff of Boards of Internal Revenue (BIRs) on 

effective tax-netting, tax assessment and tax collection strategies. 

They should partner with the BIRs in solving the perennial 

problem of poor tax-netting of businessmen and women. They 

also have a role to play in educating accounting staff/salary 

officers of organisations in both the public and private sectors 

on the implementation of PAYE system for optimum collection of 

personal income tax revenue from salaried workers. 

4.2 Revenue Accounting at States Level 

To ensure accountability and transparency, accounting and 

control of government revenue at States level in Nigeria is required 

to be carried out as follows: 

(i) A revenue cashbook is maintained. 

(ii) Receipt (in triplicate) is issued for any money received. 

(iii) All receipts issued shall be entered into the cashbook 

serially. 

(iv) Revenue collector’s pay-in-form is prepared at the end 

of every day, to be used in making payment to the subaccountant, 

quoting relevant heads and sub-heads 

(or codes). 

(v) 

Revenue cashbook shall be examined by the subaccountant 

to ensure that no other revenue is kept by 

the revenue collector. 

(vi) The duplicate of the receipts should accompany the 

revenue collector’s pay-in-form submitted to the subaccountant 

(after the original must have been given to 

the payer) and the triplicate should be retained on an 

audit trail. 

(vii) If the revenue collector paid the money collected to the 

sub-accountant in cash, treasury receipt is issued 

immediately, but where a teller is attached in lieu of 

cash, the main cashier should ensure that the deposit 

reflect in the bank statement before the issuance of the 

treasury receipt. The treasury receipt is an indication 

that the revenue collector has accounted for all the 

revenue collected. 

(viii) After all the revenue collectors have made return to 

the main cashier, who had issued treasury receipt, the 

head of account will transfer, on monthly basis, all the 

revenue collected to the sub-treasurer using the 

appropriate special cash transfer account numbers. 

Some of the reasons why the states governments should 

maintain proper accounting books and records include the 

following: to provide financial information to all users (internal and 

external); to ensure effective internal control; to prevent and/or 

detect fraud; to ensure proper accountability, transparency and 

probity; and to confer credibility and confidence on the officials 

of the government. 

The question is: where are the chartered accountants as 

states governments face the problem of revenue accounting, 

accountability and transparency? With their presence in 

the economy of the states, adherence to the procedures of 

revenue accounting prescribed above, and the demonstration of 

accountability and transparency in revenue generation, should 

not be a big deal to the states government! 

4.3 Conduct of SWOT Analysis 

SWOT Analysis entails an analysis of the Strengths, 

Weaknesses, Opportunities and Threats (SWOT) of the States 

Governments sources of IGR in order to generate strategic 

options. Chartered Accountants could, through regular conduct of 

this analysis for the states, help in formulating revenue objectives 

that are SMART (Specific, Measurable, Achievable/Attainable, 

Realistic and Time-bound) and SIMPLE (Suitable, Implementable, 

Measurable, Practical, Logical and Evaluable). If chartered 

accountants are to work on the SWOT of states governments on 

IGR, they could come up with findings, like the following, which 

would aid in setting realistic revenue objectives that are SMART 

and SIMPLE: 

4.3.1 Strengths: The following are the major Strengths of 

States Governments’ sources of IGR. 

• Greater capital gains and rent accruing to individuals 

through disposal of land and renting of houses, which if properly 

tapped, can help to improve internally generated revenue. 

• Increase in internally generated revenue through the 

imposition of development levy on all taxable individuals and 

other miscellaneous taxes. 

4.3.2 Weaknesses: In order to enhance internally generated 

revenue accruing to the State Governments, there is the need to 

improve on the following weaknesses: 

• Lack of commitment to educate and enlighten Nigerian 

taxpayers of their civic responsibility of paying taxes to the 

government. 

• Lack of commitment to collect all relevant taxes that are 

under the jurisdiction of the state governments, e.g. withholding 

tax from rent and capital gains tax from individuals. 

• Poor tax statistics, lack of effective research unit to gather 

and collect tax statistics and lack of tax intelligence service that 

can identify tax evaders for appropriate sanction. 

4.3.3 Opportunities: Amongst the opportunities that abound 

for the States Governments in IGR are the following: 

• Potentials for increase in internally generated revenue 

• Potentials for higher productivity in revenue generation 

through adequate tapping of all available sources of revenue. 

through training and better motivation to revenue staff. 

4.3.4 Threats: The following are the threats facing internal 

revenue generation at the States Governments level: 

• Lack of requisite training and tax education for tax officials 

• High tax evasion due to increase in cost of living and poor 

• Poor records keeping by businessmen and women to 

makes it difficult for them to perform their duties effectively. 

tax statistics. 

serve as the basis for realistic tax assessment. 

Chartered Accountants have to make themselves available 

for regular SWOT analysis of revenue sources, generation and 

utilisation at the states government levels. As they distance 

themselves away from the BIRs, it means that they are not playing 

the role expected of them in the area of revenue generation and 



Conference 

utilisation at the states governments’ level. 

4.4 Awareness Creation on Tax-Based Economy 

Chartered Accountants are to play the role of educating the 

people on the two main types of revenue available to governments 

for the execution of capital and recurrent projects: Tax revenue 

and Non-tax revenue. The non-tax revenue sources are mainly 

natural resources like crude oil, solid minerals, precious minerals, 

groundnut, cocoa, etc. These sources could not last forever; they 

are bound to become extinct or dried up in a matter of time. They, 

therefore, could not assure any economy of revenue that would 

ensure economic development. 

Tax-based revenue sources are all the forms of taxes in an 

economy: direct taxes (PPT, PIT, CIT, CGT, Edu T, etc) and 

indirect taxes (VAT, Excise Duties, Import Duties, Export Duties, 

etc), in the case of Nigeria. Taxation is the surest and everlasting 

source of revenue from the beginning of society to the end of the 

world. It is taxation; therefore, that assures revenue for economic 

development at all levels. 

An economy that relies heavily on natural resources in 

generating revenue for development is termed resource-based, 

while the one that relies mainly on taxation for development is 

termed tax-based or knowledge-based. It is apparently clear, in 

the modern world, that resource-based economies are regarded 

as developing economies or backward economies of the world, 

due to the fact that the resources available to them make the 

government functionaries in those economies to become lazy, 

corrupt and greedy, while their citizens develop apathy on the way 

the resources are managed since they are natural endowments. 

With the greed and laziness in the government functionaries, 

they are bound to fail in the implementation of all the excellent 

Development Plans, Rolling Plans, Visions, NEEDS/SEEDS and 

other economic development blue prints that could be thought 

out, and, therefore, leaving the economy to remain perpetually 

backward or underdeveloped. With the apathy in the majority of 

the citizens, they are bound to remain in absolute and chronic 

poverty, ignorance, diseases and perpetual hopelessness. 

Tax-based economies are, not surprisingly, the developed 

economies of the world, due mainly to the fact that the 

governments of those economies are finding it necessary to be 

prudent, transparent, accountable, just and fair in spending tax 

payers’ money, thereby achieving the objective of sustainable 

development. It is sustainable revenue that would ensure the 

development of all the four interwoven sectors of an economy: 

Manufacturing Sector; Services Sector; Extractive Sector; and 

Agricultural Sector. For sustainable economic development, at 

states governments’ level, the four sectors are to be emphasised, 

using the revenue generated on sustainable basis. 

Chartered accountants are to be apportioned with a substantial 

part of the blame for the states governments’ inability to make their 

economies tax-based or knowledge-based and for their inability to 

use whatever revenue available to them in ensuring sustainable 

economic development in their states. They are expected to 

demonstrate professionalism in playing their roles of serving as 

professional advisers to the states governments. 

5.0 CONCLUSION 

The paper argues for the important roles that are to be played 

by chartered accountants in ensuring effective utilisation of 

all sources of internally generated revenue available to states 

governments for executing developmental projects at states 

level. It reviews the four major purposes of modern taxation; and 

the need to ensure sustainable revenue generation, through 

taxes, levies, and other sources of revenue available to states 

government, for sustainable economic development. These 

sources of revenue are as provided for in the amended provisions 

of Act 2004 on Approved Taxes and Levies to the three tiers of 

government in Nigeria. 

The paper highlights four major roles Chartered Accountants 

are to play in ensuring effective utilisation of sources of IGR 

available to states governments for massive revenue generation. 

Discharging those roles suggests that Chartered Accountants 

are to take it as a responsibility to show the states governments 

the way of refocusing their economies to be tax-based or 

knowledge-based as against the present circumstance of the 

states economies being absolutely resource-based! 

REFERENCES 

1. Abdulkadir, A.S. (1998). Revenue and Expenditure in 

Nigerian L.G. (A case study of Kano Municipal LGA.). A Project 

submitted for the award of BSc. Economics, BUK (Unpublished). 

2. Abdulrazaq, M.T. (2002), CITN Nigeria Tax Guide and 

Statutes, Lagos: The Chartered Institute of Taxation of Nigeria 

(CITN), 1 ST Edition. 

3. Adesola, S.M. (1998), Tax Law and Administration in 

Nigeria, Ife: Obafemi Awolowo University Press Limited. 

4. Alabede, J.O. (2001), Introduction to Nigerian Taxation, 

Kano: Debis-co Publishing Company Limited. 

5. Buhari, A.L. (1993), Straight to the Point: ICAN/ 

Polytechnic Public Finance, Ilorin: University of Ilorin Press 

Limited. 

6. Dandago, K.I. and Alabede, J.O. (2000), Taxation and Tax 

Administration in Nigeria, Kano: Triumph Publishing Company 

Limited. 

7. Dandago, K.I. (2001), Integrating the Discipline of 

Taxation into National Psyche. A Paper presented at the 1 st 

International Tax Conference, organised by the Nigerian Joint 

Tax Board (JTB), Abuja-Nigeria. 

8. Ibrahim, A.U. (2002), Tax Administration in Nigeria 

(A Case Study of Kano State Board of Internal Revenue), BSc. 

Economics Project submitted to the Department of Economics, 

BUK (Unpublished). 

9. Isyaku, G.A. (1997), Management of Revenue Accruing 

from Taxation in Nigerian Economy With Reference to Katsina 

State, MBF project submitted to the Dept. of Economics, BUK 

(Unpublished). 

10. Ishaq, I. (2002), The Role of Taxation in the Economic 

Development of Kano State, BSc. Economics Project submitted 

to the Department of Economics, BUK (Unpublished). 

11. Muktar, A.M. (1996), Problems and Prospects of Tax 

Administration (A Case Study of Kano State Board of Internal 

Revenue), PGDBF Project Submitted to the Department of 

Economics, BUK (Unpublished). 

12. Naiyeju, J.K. (1996), Value Added Tax: The Facts of a 

Positive Tax in Nigeria, Lagos: Wordsmiths Limited. 

13. Oremade, J. (1986), Petroleum Profits Tax in Nigeria, 

Ibadan: Evans Brothers (Nigerian Publishers) Limited. 

14. Webster’s Dictionary of the English Language, College 

Edition, Surject Publications, India, p.1574. 

15. Williams, A. (2002), Taxation and Nigerian Economy, 

A paper delivered at a seminar by the Nigerian Institute of 

Taxation. 

* Kabiru I. Dandago, PhD, FCA, FNIM, ACTI, MNES, MIMC, 

Professor of Accounting and Chair, Bayero Consultancy 

Services Unit, Bayero University, Kano, delivered this paper 

at the 7 th Northern Districts Accountants’ Conference in 

Kano. 



Seminar 

Retirement & Implications of 

Life Out of Office 

By 

FOLASHADE OLUFEMI ONANUGA 

Retirement is a state of being 

withdrawn from active service 

on account of having reached 

a pre-determined organisational 

retirement age or period. 

It is, therefore, a transfer from one way 

of life to another, i.e. a termination of a 

comfortable and stable pattern of life and 

a transition to a new one of uncertainties. 

It involves a lot of changes in values, 

monetary involvements and social aspects 

of life. It signifies a transition from active 

working life with adequate or manageable 

financial capability to less rigorous work 

schedule or lack of any tangible work 

schedule at old age. 

People who plan their retirement well 

in advance adjust well to retirement and 

may likely go through it as an honeymoon 

phase in which they are quite active or 

may go through a Rest and Relaxation 

phase of recuperating from the stresses 

and strains of employment. 

CATEGORISATION OF RETIREMENT 

Retirement can be categorised into 

three broad groups, i.e.: 

— Compulsory/involuntary 

retirement. This is usually imposed 

on an employee by the employer for 

various reasons, e.g. grounds of 

ill-health, mental or physical 

incapability, etc. 

— Voluntary retirement. This involves 

personal withdrawal of service by 

the employee due to various 

reasons ranging from better 

income to dissatisfaction with work 

schedule. 

— Mandatory/Regular retirement. 

This occurs when an employee is 

made to withdraw his/her services 

from a long time work schedule 

having attained the mandatory 

retirement age/duration according 

to the organisation’s policy. 

EFFECTS OF RETIREMENT 

Irrespective of the type of retirement, 

the transition is associated with some 

stress situations like economic, social, 

psychological and occupational stress. 

Retirement stress could emanate from 

(1) Money – insufficient funds; (2) Ill-health; 

‘ 

An unplanned 

retirement creates 

problems of boredom, 

isolation, distress and 

feeling of dissatisfaction 

of a seemingly 

unfulfilled life. 

‘ 

(3) Ageing; (4) Search for meaningful 

activity; (5) Work in retirement; (6) Marital 

status; (7) Caring for other family members; 

(e.g.) grandchildren or elderly parents; 

(8) Relocation; (9) Problem of managing 

surplus time at their disposal; (10) Problem 

of managing irregular or non-payment of 

retirement benefit. 

Anxieties of Retirement 

— The thought of retirement provokes 

anxiety in the life of a prospective 

retiree. Anxiety is a pervasive 

and unpleasant feeling of tension, 

apprehension and a feeling of 

impending disaster. 

— Anxiety is different from fear. Fear 

is a response to a clear and present 

danger. Anxiety is often a response 

to an undefined or unknown threat 

which may stem from internal 

conflicts, feeling of insecurity or 

forbidden impulses. 

— In both fear and anxiety, the body 

mobilises itself to meet the threat, 

as the muscles become tense, 

breathing is faster and the heart 

beats more rapidly. 

— Retirement anxiety by its nature, 

involves fears and worries about 

the future of the individual as a 

result of the cessation of working 

life. It involves fear that usually 

results from change. Change 

however is inevitable but most 

people tend to resist change 

because it is not always convenient. 

MAJOR SOURCES OF 

RETIREMENT ANXIETY 

1. Inadequate Fund – Money is 

needed for the payment of bills 

which may hitherto had been 

taken care of by the office. Utility 

bills, driver’s salary, etc, pose 

challenges which may result in 

stress and frustration and 

consequently high blood pressure. 

2. Challenge of Managing a New 

and Lower Social Status – This is 

a most difficult challenge faced 



Seminar 

by a retiree who had reached the 

peak of her career. Frustrations set 

in as the realisation that they have 

to do everything for themselves 

dawn on them. No more junior 

officers to run errands or wait on 

them. 

3. Inadequate Planning for 

Retirement – An unplanned 

retirement creates problems of 

boredom, isolation, distress and 

feeling of dissatisfaction of a 

seemingly unfulfilled life. 

4. Difficulty in Time Management 

– How to utilise time judiciously 

after retirement. 

SOURCES OF PRE-RETIREMENT 

ANXIETY 

1. Poor time Management. 

2. Total dependence on present 

salary – since the family income 

stands as the single most important 

determinant of life satisfaction and 

morale in retirement, prospective 

retirees are faced with the anxiety 

and problem of what the attitude of 

their friends and family members 

will be after retirement. 

3. Problem of securing alternative 

residential and office 

accommodation – The problem 

of quitting official quarters for 

rented apartments after retirement 

is also a major concern of most 

prospective retirees as most 

Nigerian workers are unable to build 

their own houses before retirement. 

It is frustrating not to have a roof 

over one’s head at retirement, and 

as such, efforts must be made 

before retirement to solve this 

problem. 

4. Ignorance of what to do with gratuity 

following retirement. 

5. Attitude of friends and family which 

may be lukewarm or negative when 

financial strength is reduced. 

EFFECTS OF PRE-RETIREMENT 

ANXIETY 

1. Anxiety level becomes very high as 

from 55years of age. 

2. There is increased incidence of 

stress. 

3. Emotional balance is difficult to 

achieve. 

4. Depression is common. 

5. Incidence of cardiovascular 

diseases is seen. 

6. Future plans become uncertain. 

The anxiety of the prospective retiree 

is heightened and compounded by 

a lack of security, especially among 

those who have little to fall back on 

after retirement. Occupational stress is 

accentuated by the employee’s frantic 

effort to secure alternative job before the 

finality of retirement. Some workers offwork 

time is spent in exploring possible 

businesses or trades in which they would 

be engaged following retirement and these 

restlessness often lead to a high stress 

and anxiety. 

Retirement life demands great 

managerial ability. To have a pleasant 

post-retirement life style, a retiree has to 

device an effective means of managing 

some challenges inherent in retirement. 

The challenges are that of insufficient 

financial resources, problems of shelter, 

challenges of a new and low social status, 

challenges of a declining health. 

PROBLEMS CONFRONTING THE 

RETIREE 

— Sudden loss of income. 

— Financial insufficiency and anxiety. 

— Deteriorating health condition. 

— Anxiety about suitability of post 

retirement accommodation. 

— The realisation that reliance on 

children as a form of social security 

is fading away. 

— Lack of pre-retirement planning 

and counseling. 

Therefore with this realisation, an 

individual who is bound to retire someday 

must decide for him/herself the type of life 

he/she wishes to live. 

MANAGEMENT STRATEGIES IN 

RETIREMENT 

— Engage in part time assignments to 

make more money. 

— Engage in political activities. 

— Lead a moderate life style. 

— Dedicate more time to religious 

activities. 

— Exercise regularly. 

— Visit age long friends. 

— Be yourself and lead a well 

balanced life. 

— Eat sensibly. 

— It is essential that all workers 

and retired persons be counseled 

on the need for a holistic preparation 

for retirement. The holistic 

preparation must cover areas 

such as financial preparation, 

psychological preparation and 

preparation towards the use 

of the expected retirement benefits, 

time management and preparation 

for retirement home. 

BENEFITS OF PRE-RETIREMENT 

PLANNING & COUNSELLING 

It would enable the prospective retiree 

and all those who are retired to: 

1. Make adequate financial 

preparation for retirement thereby 

avoiding incidence of retirement 

adjustment failure; 

2. Prepare psychologically for 

eventual retirement thus overcoming 

its attendant fear and anxiety; 

3. Adapt meaningfully to life after 

retirement; 

4. Manage effectively their financial 

resources as a source of investment 

against old age when a retiree 

is commonly confronted with 

dwindling income; and 

5. Protect one’s self esteem and family 

front as a credible investment for 

post retirement life style. 

THINGS TO KNOW 

— Retirement is inevitable, if death 

does not occur earlier. 

— It is certain, the office will outlive the 

individual as we will all grow old. 

— The fact that you have left a stable 

environment does not mean your 

world has collapsed. 

— Having control of your time should 

be greatly desired so that longevity 

can be prolonged. 

— Money that you do not multiply will 

eventually be eroded away. 

— True wealth and riches come from 

others serving you and not you 

serving others. 

— Multiplying resources at hand 

requires exposure and interaction 

and detailed study so that you do 

not end up in wrong hands. 

* Mrs. Folashade Olufemi Onanuga, 

Executive Director (Technical), Lagos 

State Pension Commission presented 

this paper at the retirement seminar 

for professionals organised by the 

Society of Women Accountants of 

Nigeria (SWAN). 



Features 

Financial Imbalance and 

Fiscal Autonomy in Nigerian 

Local Governments: 

Benue State Experience 

By JOSEPH KWAGHKOR ACHUA 

The objective of this paper is to find ways of ensuring the fiscal autonomy of local governments in Nigeria for sustainable 

development. A review of revenue profile of local governments in Benue State of Nigeria indicates a continuous downward 

movement of internally generated revenue, and their consequent dependence almost entirely on the Federation Account; a 

development that has serious implications on their fiscal autonomy. This has given rise to financial imbalance crisis in the 

local governments due to the gross inadequacy of generated revenue in fulfilling their statutory responsibilities and public 

expectations. The imperatives of harnessing revenue-raising capacity of the local governments to guarantee fiscal autonomy 

and sustainability are discussed. 

Keywords: Local governments, fiscal autonomy, Benue State, Nigeria. 

Government performance in 

the pursuit of development 

objectives is influenced by all 

the levels of government. Some 

degree of continuing centralisation is 

necessary, but level of government should 

be matched with sustainable suitability for 

particular functions. Local governments, 

as a third level of government in Nigeria, 

exist primarily to serve the interest of the 

citizens at the grassroots. They have a 

variety of roles and functions meant to 

deliver a wide range of services under 

the 1999 Constitution of the Federal 

Republic of Nigeria (as amended), which 

gives them the authority to provide for 

grassroots’ good governance through 

powers of general competence. 

The main roles of local governments 

involve the provision of public goods 

and services that have natural monopoly 

or externality characteristics to local 

communities. These include certain 

physical infrastructure such as local roads, 

bridges, water drainage and some health 

services. Towards accomplishing these 

ends, local governments have legislative 

and regulatory functions defined in 

statutes that enable them to make and 

enforce local laws within their jurisdictions. 

Invariably, the effective harnessing of 

available revenue resources is essential 

in financing these functions. The import of 

local governments philosophy is that they 

have to be financially stable to achieve 

the laudable goal of promoting the wellbeing 

of local communities. 

The objective of this paper is to find 

ways of ensuring the fiscal autonomy 

of local governments in Benue state of 

Nigeria for sustainable development. 

This discourse is based on the premise 

that there is undoubtedly room for further 

improved financial management in the 

local governments (Angahar, 2005) for 

sustainable development within the 

confines of the existing statutes and 

institutions. 



Features 

INTERNALLY GENERATED 

REVENUE EFFORTS IN LOCAL 

GOVERNMENTS OF BENUE STATE 

Effective public sector management 

in Nigeria largely depends on the ability 

of the lower levels of government to 

harness their resources. Therefore, local 

governments need to develop an elastic 

revenue base that grows with the economy 

and that is not beyond their administrative 

capacity to collect. Unfortunately, the 

continuous downward movement of 

internally generated revenue (IGR) efforts 

in all the local governments in Benue 

State is alarming and cannot be ignored. 

In 2003, for instance, a critical analysis of 

the report of the Auditor-General for Local 

Governments in Benue State (Benue 

State of Nigeria, 2004) reveals that out of 

the total receipts of N12,644,827,867.80 

(100%), N11,409,702,194.50 (90.2%) 

was from statutory allocations from the 

Federation Account, N1,151,823,039.63 

(9.2%) was from Value Added Tax (VAT), 

while a paltry sum of N83,293,633.71 

(0.7%) was derived from IGR. This was a 

decline from 1.2% in 2000 (Benue State 

of Nigeria, 2002), and a far cry from the 

national average of 5.5% for 2003 fiscal 

year (CBN, 2006). In 2003, the cost of staff 

salaries for running Primary Education 

alone in the state’s local governments 

accounted for N5,009,672,440.64. Within 

this period, as has been the experience 

over the years, no local government in the 

state raised enough revenue for the whole 

year to pay even one month’s salary of 

its staff. The implication is that while the 

revenue generation effort is declining at 

arithmetic progression, the expenditure 

and expectations of the people are 

increasing at a geometric progression. 

The immediate consequences are that 

some council activities are scaled down 

or postponed. Worse still, some owe 

staff salary arrears for several months, 

in addition to other huge debts. New 

institutional arrangements may be needed 

if the local governments’ performance is 

to be strengthened as has been aptly 

decried by the Auditor-General for Local 

Governments in Benue State: 

This therefore means that in the 

absence of statutory allocation that 

comes to the Local Governments, no 

council can afford to go at least half way 

in meeting its statutory duties. From the 

look of things, the Local Councils MUST 

double their efforts if they would not be 

seen to be living a parasitic life. They 

must strive to tap revenue for the well 

being of the Local Government[s] (Benue 

State of Nigeria, 2004, p.13). 

The precarious financial situation 

should, therefore, represent an 

opportunity for the local governments 

to implement the much needed reforms 

to boost their revenue systems and to 

look at new approaches for revenue 

enhancement and cost saving. Managing 

crisis momentum appears to be a 

critical stage in the transformation of 

organisations towards organisational 

excellence (Rochet, 2007). Crisis 

momentum is usually the starting point 

of the change process. The financial 

imbalance crisis could, therefore, be 

a momentum for change, a situation to 

foster the evolutionary process through 

which change would happen. 

The accomplishment of Benue State 

government’s vision – “Our Benue, 

Our Future” – largely depends on a 

well planned horizontal and vertical 

integration of the state and its local 

governments through a determined 

effort to enhance performance. Hence, 

the division of responsibilities between 

levels of government needs to be 

carefully examined before a plan can 

be established for the improvement of 

local governments so that each level of 

government should be matched suitability 

with particular functions. The vision 

envisages that local governments should 

be developmental in their operations; 

they should exercise their powers and 

functions in a way which maximises the 

social development and economic growth 

of communities; and they should plan and 

manage development in an integrated 

and sustainable manner, and promote 

spatial and social integration. The vision 

presupposes that local governments 

should be responsive and accountable, 

and deliver services which meet community 

needs in an efficient and equitable 

manner; and to promote democratic 

values, both within the community and 

within its institutions. These mandates 

place local governments at the centre of 

building local environments in which the 

communities can develop and grow. 

However, the task is daunting because 

local governments can only rise to the 

challenge of playing these critical roles 

if they are financially and institutionally 

empowered. It is therefore critical that 

the local governments in Benue state 

are transformed fiscally to effectively 

rise above the challenges. The capacity 

of local governments to raise revenue is 

important to their financial sustainability 

in promoting the well-being of their local 

communities. In the light of all these, 

enhancing local governments’ revenueraising 

capacity in Benue State is 

imperative if the vision is not to end as 

a mere political rhetoric that may hardly 

leave anything to show for it. 

LOCAL GOVERNMENTS’ 

OVERDEPENDENCE ON 

FEDERATION ACCOUNT 

Financial autonomy goes beyond the 

powers of an economic unit to control 

and manage its financial resources. 

It also implies some degree of selfsufficiency 

and self-reliance in funding 

(Okafor, 1999). Recent reforms have 

substantially expanded the autonomy 

of local governments by ensuring their 

direct access to their allocations from 

the Federation Account. However, in the 

context of self-sufficiency and self-reliance, 

just a few, if any, local governments can 

be said to be autonomous. As a measure 

of autonomy, a local government should 

be able to generate enough funds to take 

care of, at least, its operating costs. 

The acid test for financial autonomy 

is internal revenue generated. Similarly, 

the test for internal revenue effort is the 

percentage of recurrent expenditure 

covered by internally generated revenue. 

(Okafor, 1999, p.20). 

Even the national average of the acid 

test for 2003 was 1:0.1 (CBN, 2006). 

These measures are despicable in the 

case of Benue State. The near total 

dependence of local governments in 

Benue State on the Federation Account 

is a very worrisome situation. Any 

government, no matter the level, that 

lacks the fiscal capacity to raise ownsource 

of revenue to accomplish its 

objectives, or a substantial part thereof, 

cannot determine its fate in the longrun. 

The local governments’ incapacity 

to raise fund internally (Samaila, 2007) 

makes their craving for autonomy in 

Benue state, as it is in most other states 

of the federation, a mere mirage. 

The continued existence of these local 

governments depends on the assumption 

that the constitutional provisions will be 

adhered to at all times, and that there 

will always be a steady flow of revenue 

from the Federation Account. In as much 

as these are desirable expectations, 

evidence abound that the implementation 

may be, sporadically or even on a 

sustained basis, truncated by natural 

factors or political mischief. It is no hidden 

matter that some Nigerian leaders have 

little or no respect for the Constitution 

and the rule of law (Egwemi, 2007). 

The experience Lagos State had with 



Features 

former President Olusegun Obasanjo, 

whose government refused to remit the 

state’s local governments’ allocations for 

several months in spite of a court order, 

is a case in point. Such experiences are 

commonplace in Africa when different 

political parties control the centre as 

those at sub-levels of government. The 

consequences of the rivalry could be 

intensive, extensive and intrusive. This 

also partly explains why voters in the 

local communities are compelled to, 

sometimes, vote against their wishes, 

just for fear of being in the opposition 

and the attendant consequences. The 

situation applies between states and local 

governments because of the states’ roles 

in regulating the activities of the local 

governments in their jurisdictions. The 

implication is that there can hardly be a 

meaningful democracy without economic 

self-sustenance at the grassroots, 

through the local governments. 

No doubt, Nigeria is blessed with 

natural resources that guarantee steady 

flow of revenues from the Federation 

Account. However, oil production, which is 

the mainstay of our economy, provides the 

most dramatic illustration of the problems 

posed by resource riches for developing 

countries: very large, quickly growing, 

but time-limited production and revenue 

flows, combined with a high degree of 

volatility as a result of fluctuating world 

prices. The effect of volatility in oil prices 

took its toll on the Nigerian economy 

with a drastic drop in oil revenue due to 

the unprecedented drop in world market 

prices of the commodity when the market 

oil prices dropped from $147/barrel in 

July to an all time low of $48.80/barrel in 

late November of 2008. That was below 

the budget benchmark of $50/barrel for 

the year. The current global recession 

has shown that the future of petroleum 

in the world market is decidedly gloomy. 

Persistent research and innovations may 

soon vitiate the relevance, and hence 

financial value, of the commodity. When 

this fear is combined with the attendant 

weak administration characterised 

by “dutch disease” 1 , ownership of 

such wealth provides ample scope 

for inefficient policies, discretionary 

behaviour, and outright corruption 2 , all 

of which could contribute to poor growth 

performance and eventual dissipation 

of national oil wealth. In addition, the 

instability in the economy could make 

the harnessing of these resources very 

difficult, or even impossible. For instance, 

with the intractable crises in the Niger 

Delta over resource allocation, instability 

looms high. This could affect continuous 

flow o funds from the Federation Account. 

Where any of the above scenarios 

occurs, even temporarily, the implication 

of overdependence on the Federation 

Account could be that the financial 

autonomy of local authorities would 

be further undermined, and that some 

of them would be moving towards 

“bankruptcy”. Worse still, if petrodollar 

wealth no longer becomes the mainstay 

of Nigeria’s economy, then the political 

power of local governments and states 

may largely depend on their self-sufficient 

and self-reliable economic power. Even 

the electoral weights of states and local 

governments may largely depend on 

their economic viability. This has raised 

concern among stakeholders at both the 

local and state levels. Local governments’ 

autonomy is desirable but should be 

determined by their fiscal autonomy as 

well (Nwoko, 2002). The inability to attain 

fiscal autonomy, and the consequent 

fiscal imbalance which constrains the 

local governments from accomplishing 

their statutory responsibilities, has 

aggravated the poverty of the people. 

POVERTY IN BENUE STATE 

LOCAL GOVERNMENTS 

There is remarkable poverty in Nigeria 

both in spread and depth (Uche, 2000), 

with higher incidence in rural settlements 

than in towns and cities (Nshe, 2007). 

On all indicators of poverty, rural areas 

perform worse than urban centres. 

Plausible explanations for this disparity 

include the neglect of rural economy, 

pro-city infrastructural development 

strategy and ineffective local government 

administrative structures and processes 

(Aseota and Omorogbe, 2004). The 

cyclical nature of poverty is that there is 

a tendency for its causes and effects to 

be self-reinforcing. The overall picture 

of poverty as perceived by the poor is 

increasing isolation from government, 

lack of opportunities and fragile sense 

of security (Zasha, 2001). Consequently, 

the people are poor because they have 

been neglected by the government, and 

the government may be unable to raise 

revenue from the people because they 

are poor. Categorised as the 8 th poorest 

State in Nigeria, the poverty in Benue 

State is severe and progressive, and 

is predominantly a rural phenomenon 

(Iorchir, 2006). 

Through its traditional responsibilities 

(service delivery and regulation), local 

influence of government exerts a great 

influence over the social and economic 

well being of local communities. This 

makes th role of local governments so 

crucial that they should see themselves as 

not simply administering to residents, but 

also responding to them. Eradication of 

poverty is a front burner issue in harnessing 

resources in local governments. Ability to 

pay and convenience are major principles 

of taxation, which is the main source of 

local governments’ IGR. Poverty in the 

rural areas therefore negates these 

principles and consequently constrains 

revenue generating efforts in rural 

local governments. The citizens’ and 

government partnership must be selfreinforcing 

for an effective and sustainable 

internal revenue generation by the local 

governments. 

OWN-SOURCE REVENUE-RAISING 

EFFORTS AT LOCAL 

GOVERNMENTS 

The Constitution of the Federal Republic 

of Nigeria (as amended) expressly 

empowers the local governments to collect 

revenues from several sources. One 

major administrative problem today for 

many Local Government Councils is their 

inability to collect fully the revenues due to 

them. In almost all of them in Benue State, 

there are huge gaps between reported 

and projected revenues. This could 

be attributed to: (i) poor administrative 

capacity to assess the revenue base; (ii) 

poor administrative capacity to enforce 

the taxes; (iii) explicit and intentional tax 

evasion and resistance from taxpayers; 

(iv) corruption, including embezzlement 

of revenues; (v) external pressure on the 

local Finance Departments to provide 

optimistic projections; and (vi) political 

pressure on the local tax administration 

to relax on revenue collections. Given 

these scenarios, fundamental issues 

to be addressed in the context of local 

government fiscal reforms are to redesign 

the current revenue structure and to 

strengthen the financial management 

system. Moreover, measures are required 

to enhance taxpayers’ compliance and 

to improve the accountability of tax 

collectors and administrators. 

Today, numerous challenges require 

local governments to adopt new 

approaches to meet the high expectations 

of citizens, businesses and other 

governments. Tighter budgets, complex 

legislations, regulatory reforms and the 

expectations of an increasingly savvy 

customer base should cause revenue 

department of local governments to 



Features 

map out an aggressive path to high 

performance. A local government must 

endeavour to maximise its internal 

revenue efforts if it is to attain a meaningful 

financial autonomy. Such efforts must be 

geared towards maximising revenue yield 

from the traditional sources, expanding 

the revenue base and exploiting capital 

market funding (Okafor, 1999). 

Maximising Revenue Yield from 

the Traditional Sources 

Revenue yielding innovations 

outline leading-edge practices for local 

government revenue departments. 

The distinguishing characteristics of 

innovations are highlighted by the 

operational strategies, organisation 

structures, business processes, channel 

strategies, business applications and 

technologies. Achieving these require 

that local governments are run in a 

business-like manner. In some local 

governments, the elected and nonelected 

administrators may not have 

the necessary skills and there may 

be insufficient resources available for 

the task. A fundamental requirement 

when further redesigning the local tax 

system is greater emphasis on the costeffectiveness 

of revenue collection, 

taking into account not only the direct 

costs of tax administration, but also the 

overall costs to the economy, including 

the compliance costs to the taxpayers. In 

addition, losses through corruption and 

tax evasion need to be reduced. Such 

improvements may take a long time to 

achieve, although additional simplification 

of the local revenue system should 

provide a positive contribution towards 

these aims. Local governments can 

explore methods to reduce the financial 

gap caused by their weak revenue-raising 

efforts by outsourcing revenue collection 

to private collectors to increase revenues 

from existing sources. 

One way of doing this is to engage 

professional agents who have the 

competence to correctly assess and 

collect the revenues due to the local 

governments. In this regard, structured 

contract agreements should be drawn 

to provide for minimum collections over 

a specified period of time, while extra 

revenue over the specified minimum 

could attract graduated rates of extra 

commission for the contractor. The use 

of competent professional agencies, as 

exemplified by Lagos State Government, 

drives high performance through 

innovations. These high-performing 

revenue agencies employ strategies 

which include: 

(a) Using marketing campaigns 

and other activities to improve public 

understanding of tax requirements and 

perceptions of fairness to encourage 

voluntary compliance. Through this 

outreach they create their revenue 

“brand.” 

(b) Taking an increasingly targeted 

and proactive approach to collections 

and compliance. These agencies use risk 

models and management strategies to 

help detect non-compliance and mitigate 

undesirable outcomes. 

(c) Putting a customer-centric 

philosophy into practice by providing 

greater convenience to taxpayers, 

streamlining the filing and payment 

processes, and integrating service 

delivery around taxpayer needs. 

(d) Harnessing advanced customer 

relationship management processes to 

dramatically improve both the quality and 

responsiveness of their service. These 

agencies can implement sophisticated 

customer contact centres designed to 

provide proactive assistance to taxpayers. 

(e) Using rigorous performance 

metrics and tapping into shared services 

and outsourcing to continuously refine 

their operations and redeploy resources 

for a greater return. High performing 

agencies can improve both processes 

and technology to support a new servicesoriented 

attitude. 

Driving high performance determines 

the role specific innovations will have in 

driving tomorrow’s high-performing local 

governments through outsourcing the 

revenue generation efforts. 

Expanding the Revenue Base 

The internal revenue base of the 

local governments can be expanded 

by developing viable projects that can 

yield revenue. This could be done 

in collaboration with private sector 

investors. Examples include building of 

markets and parks. It is heart-warming 

that some local governments are 

applying many of the innovations already, 

although to varying degrees, especially in 

the transportation industry by operating 

Mass Transit Services. Attempts for 

economic diversification will also help 

to expand the revenue base like in the 

rural areas, for instance, a longer-term 

strategy introducing new cash crops. 

Moreover, co-production of services by 

Councils and local communities could 

be helpful. Such measures are welcome 

as well as promising for the future fiscal 

sustainability of local authorities. Portfolio 

investment in risk-less government 

bonds could also bring in a steady 

harvest of portfolio returns. This may 

also harness the investment culture of the 

local governments. The present situation 

where allocation from the Federation 

Account is completely shared out without 

any consideration for investment is a 

dangerous trend for the future. The 

state government legislation governing 

the operation of local governments 

and associated administrative policies, 

procedures and processes includes, or 

implicitly have, some of these principles 

embedded within them. These should 

be exploited for enhanced revenue 

generation and improved performance 

of the local governments. Essentially, the 

successes of these innovations depend 

substantially on the management of the 

revenue accruing from these sources. 

Exploiting Capital Market Funding 

Local governments in Nigeria have 

grossly underutilised the enormous 

potentials of sourcing funds from the 

capital market. Capital from this source 

is very suitable for capital projects with 

economic viability such as water supply 

schemes, market stalls, abattoirs and 

market parks. However, the capital market 

facility as a source of funding is guided 

by the need to subject the beneficiaries 

to the discipline of the market in the use 

of such funds (Okafor, 1984). Like other 

fundraisers in the capital market, the local 

government desiring to raise funds must 

convince the market regulators that the 

fund is going to be invested in projects 

that are economically viable, and the 

beneficiaries must provide accurate and 

regular information to the public about 

the investment. These “conditionalities” 

may be some of the reasons why local 

governments shy away from capital 

market’s funds. Though fiscal indiscipline 

is common to all the tiers of governments 

in Nigeria, it seems to be worse in the 

local governments (Bitrus, 2007). Another 

reason for the non patronage of the 

capital market may be lack of awareness. 

In view of this, the state government’s 

efforts at attracting a Capital Trade Point 

of the capital market to the state by the 

last administration should be encouraged 

and sustained by the present government 

to ensure accomplishment. This is in 

consideration of its potential benefits not 

just to the local governments but also to 

many other stakeholders in the state. 

Local governments seeking to achieve 

high performance will do so only by 

delivering the optimum balance of better 



Features 

outcomes with greater cost-effectiveness, 

a measurement that that could be 

referred to as “public service value.” 

However, with the benefit of hindsight, 

harnessing the revenue resources, even 

after overcoming its own problems, may 

not bring about enhanced performance 

in the local governments of Benue state. 

Making judicious use of the funds accruing 

to them for the interest of the people 

has remained a matter of concern. The 

problems associated with the difficulties 

of optimising revenue generation and 

its effective deployment to enhance the 

well-being of their communities must first 

be addressed. Mgbanyi and Agba (2007) 

identified poverty, corruption, lack of fiscal 

responsibility and accountability as the 

most ubiquitous and insidious constraints 

to success of government programmes. 

CONCLUSION 

Local governments exist primarily to 

serve the interest of the citizens at the 

grassroots levels. However, concerns 

are being raised about the continuous 

downward movement of internally 

generated revenue efforts in all the 

local governments in Benue State with 

the attendant financial imbalance crisis. 

The crisis should be acknowledged as a 

change situation to foster the evolutionary 

process to enhance local governments’ 

revenue-raising capacity. The 

overdependence of local governments in 

Benue state on the Federation Account 

makes the craving for local government 

autonomy in state a mirage. Local 

governments’ autonomy is desirable 

but should be determined by their fiscal 

autonomy. Maximising revenue yield 

from the traditional sources, expanding 

the revenue base and exploiting capital 

market funding have been suggested as 

ways of harnessing the local governments’ 

revenue base. Outsourcing revenueraising 

efforts, sustainable financial 

management, fiscal responsibility, 

accountability, and poverty eradication, 

are imperatives to adding “public service 

value,” for enhanced fiscal performance 

of the local governments in Benue state 

for sustainable development. The findings 

herein, and recommendations thereof, 

may be relevant to many other states of 

the federation. 

FOOTNOTES 

(1) “Dutch disease” is the 

deindustrialisation of a nation’s economy 

that occurs when the discovery of a 

natural resource raises the value of that 

nation’s currency, making manufactured 

goods less competitive with other nations, 

increasing imports and decreasing 

exports. The term originated in Holland 

after the discovery of North Sea gas. See 

http://www.investorwords.com/1604/ 

dutch_disease.html. While it most often 

refers to natural resource discovery, it can 

also refer to any development that results 

in a large inflow of foreign currency, 

including a sharp surge in natural 

resource prices, foreign assistance, 

and foreign direct investment (Ebrahim- 

Zadeh, 2003). 

(2) In Transparency International’s 

Corruption Perception Index a number of 

oil-rich countries have rather low scores. 

For the results of the 2004 survey see 

http://www.transparency.org/cpi/2004/ 

cpi2004.en.html 

REFERENCES 

1. Angahar, P.A. (2005), “An 

Assessment of the Implementation 

of Reforms in the Nigerian Tax 

System and Administration at the 

Local Government Level in Benue 

State,” Nigerian Journal of Management 

Sciences, Vol. 1, No. 1, pp.104-113. 

2. Aseota, A. and Omorogbe, 

V.O. (2004), “An Assessment of the 

Role of Micro-finance Institutions 

in Alleviating Poverty in Nigeria,” 

Multidisciplinary Journal of Research 

Development, Vol.3, No.1, pp.6-16. 

3. Benue State House of Assembly 

(2008), The Report of the Public Accounts 

Committee on the Report of the Auditor- 

General for Local Governments on the 

Accounts of Local Governments in Benue 

State for the Year ended 31 st December, 

2001. 

4. Benue State of Nigeria (2004), 

Report of the Auditor-General for Local 

Governments on the Accounts of Local 

Governments in Benue State for the Year 

Ended 31 st December, 2003. 

5. Benue State of Nigeria (2002), 

Report of the Auditor-General for Local 

Governments on the Accounts of Local 

Governments in Benue State for the Year 

Ended 31 st December, 2000. 

6. Bitrus, S. (2007), Local 

Government and Democratic 

Consolidation in Nigeria: Challenges 

and Options, Journal of the National 

Association of Science, Humanities 

and Education Research, Vol. 5, No.1, 

pp.261-267. 

7. Central Bank of Nigeria (2006), 

Statistical Bulletin, Vol. 17, December. 

8. Ebrahim-Zadeh, C. (2003), 

“Dutch Disease: Too Much Wealth 

Managed Unwisely,” Finance and 

Development, A quarterly Magazine of 

the IMF, March, Vol. 40, No. 1, available 

at http://www.imf.org/external/pubs/ft/ 

fandd/2003/03/ebra.htm#top 

9. Egwemi, V. (2007), Political 

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Sustainable Development in Nigeria: 

Focus on Third Term Agenda, Journal 

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Humanities and Education Research, 

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10. Iorchir, D. (2006). “Reducing 

Poverty in Benue State Nigeria: 

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Enterprises,” Journal of Business 

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11. Mgbanyi, D. and Agba, T. 

(2007), The Implications of Poverty 

on Democracy and Sustainability 

in Nigeria, Journal of the National 

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12. Nshe, E.M. (2007), Democracy 

and National Sustainability: Focus on 

Poverty and Unemployment, Journal 

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Humanities and Education Research, 

Vol. 5, No.1, pp.198-201. 

13. Nwoko, C. (2002), “Fiscal 

Federalism and Military Rule,” Nigerian 

Journal of Banking and Finance, Issue 

No.5, pp.1-17. 

14. Okafor, F.O. (1984), Investment 

Decisions: Evaluation of Projects and 

Securities, Cassel: London. 

15. Okafor, R. (1999), “Issues in 

Public Sector Financial Management: 

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Banking and Finance, No.2, pp.15-26. 

16. Rochet, C. (2007), “Making 

Crisis a Momentum for Change 

within Public Services,” International 

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17. Uche, C.U. (2000), “Poverty 

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Address by DFID Benue State on Poverty 

and Welfare in Benue State held at 

Midway Inn Hotels, Makurdi, on July 9. 

* Mr Joseph Kwaghkor Achua 

is a Lecturer in the Department of 

Accounting, Benue State University, 

Makurdi, Nigeria. 



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