The Nigerian Accountant 2012 October/December Edition

HealthAppendicitisAppendicitis occurs when theappendix — a finger-shapedorgan connected to theend of the large intestine— becomes infected. Symptomsof appendicitis include abdominalpain, often starting near the bellybutton. The pain may move down tothe lower right side of the abdomen.Appendicitis is the leading causeof emergency abdominal surgery(appendix surgery is called anappendectomy) and is most likely tostrike people between the ages of 10 and30 — although it can occur at any age.Appendicitis is one of the causes ofserious belly pain. It happens when theappendix, a part of the large intestine,becomes infected and inflamed.Appendicitis is most common in peoplebetween the ages of 10 and 30, althoughit can occur at any age.Common symptoms of appendicitisinclude:• Pain in the belly. The pain may beginaround the belly button.• Pain in the belly that gets strongerand moves below the belly buttonto the lower right side.• Pain that does not go away andgets worse when the person moves,walks, or coughs.• Pain in any part of the belly or onthe side.• Nausea, throwing up, and notwanting to eat.• Constipation, back pain, and aslight fever.• A general feeling of being sick, anda pain that is hard to describe.If the inflamed appendix is not surgicallyremoved and the infection gets worse,the wall of the appendix can break open(rupture). This spreads infection into thebelly area, causing peritonitis. Peritonitisis a serious condition that, in rare cases,can lead to death.SymptomsThe main symptom of appendicitis isbelly (abdominal) pain. The pain can feellike indigestion or like you need to have abowel movement or pass gas. Many peoplefeel the first pain near the belly button. Thenit moves to the lower right side of the belly.But the pain can be in different parts ofyour belly or even on your side. The painmay get worse if you move, walk, or cough.You may also have a fever or feel sick toyour stomach.Many people who have had appendicitissay the pain is hard to describe. It may notfeel like any pain you have had before. Itmay not even be a very bad pain, but youmay feel like something is wrong. If youhave moderate belly pain that does not goaway after 4 hours, call your doctor. If youhave severe belly pain, call your doctorright away.You may have appendicitis if:• You have pain in your belly. The painmay begin around your belly button.•The pain in your belly gets strongerand moves below your bellybutton on your right side (thelower right quadrant). This is themost common place to feel painwhen you have appendicitis.•The pain does not go away andgets worse when you move, walk,or cough.• You have pain in any part of yourbelly or on your side.•You feel nauseated or throw upa few times. You also may not feellike eating.•You have constipation, back pain,a slight fever, or a swollen abdomen.Some people do not have the symptomslisted above. Older people, childrenyounger than 2 years, and pregnant womenmay not have pain in the lower rightpart of the belly. Other people feel painin the side, because the appendix is ina different position than normal.Pain in the abdomen is verycommon. For more information, seethe topics Abdominal Pain, Age 12and Older and Abdominal Pain, Age11 and Younger.There are also many conditionswith symptoms similar to appendicitis.But because appendicitis can becomeserious in a short amount of time, callyour doctor right away if you have any of thesymptoms listed above. Treatment is mucheasier if the appendix has not ruptured. Inmost people, the appendix does not ruptureuntil they have felt sick for at least 24 hours.Air Pollution May CauseAppendicitisAir pollution is already linked torespiratory and cardiovascular ills, and nowresearchers say the dirty air you breathemay also cause appendicitis.Authors of a new study published in theOctober 5 issue of the Canadian MedicalAssociation Journal found that cases ofappendicitis go up when the air is dirtier.“This makes us think about theunderlying cause of appendicitis thatcould potentially be linked IR medicinein the division of gastroenterology atthe University of Calgary in Alberta. “Airpollution is a modifiable risk factor. If thesefindings are confirmed and we are able tolegislate better air pollution control, cleanerair, then potentially we could prevent morecases of appendicitis.”But at this early point in the research, theimplications are not so clear-cut, warnedanother expert. “It’s provocative, but there’sa huge difference between correlatingany number of factors with a disease andproving that any of these factors mightactually cause a disease, and this studyfails to show causation,” said Dr. F. PaulBuckley III, assistant professor of surgeryat the Texas A&M Health Science CenterCollege of Medicine and a surgeon at Scott& White Healthcare Round Rock, Texas.“Do we all want to decrease pollution?THE NIGERIAN ACCOUNTANT 16October/December, 2012

Health‘The only treatmentfor appendicitis issurgery to removethe appendix(appendectomy).The goal is to removethe appendix beforeit ruptures andspreads infectionto the abdomen(peritonitis).‘Yes. Is that going to decrease the incidenceof appendicitis? I doubt it,” said Buckley.Parts of the findings were presented at aconference a year ago. No one really knowswhy appendicitis, or swelling and infectionof the appendix, occurs.Appendicitis cases rose significantlyin the late 19th century and early 20thcentury, as industrialisation took hold.Cases declined in the middle and later partsof the last century, at about the time cleanair legislation gained headway. Meanwhile,countries that are just now industrialisinghave increasing rates of the condition, thestudy authors stated.A prevailing theory is that appendicitisoccurs when the opening to the appendix,a pouch-like organ attached to the largeintestine, gets blocked. Specifically, someexperts believe that lower fiber intakeamong citizens of industrialised countriesleads to obstruction of the appendix bythe stool. But that doesn’t explain thedecreased incidence of appendicitis in thesecond half of the 20th century, Kaplansaid.Air pollution is already linked with a widerange of health conditions, most notablyrespiratory diseases and cardiovasculardisease, including heart attack and stroke.Kaplan and his colleagues lookedat more than 5,000 adults who werehospitalised in Calgary with appendicitisbetween April 1, 1999, and the end of2006. This data was cross-referencedwith an analysis of air pollutants the weekprior to the admissions. “We found thatindividuals were more likely to come inwith appendicitis in weeks with higherconcentrations of air pollutants, specificallyozone and nitrogen dioxide,” Kaplan said.More appendicitis admissions took placeduring Canada’s warmest months (Aprilthrough September, when people are morelikely to be outdoors), and men seemedmore likely to be affected by air pollutantsthan women. It’s unclear why this genderdifference exists, the researchers said.Kaplan theorises that inflammationmay explain the link — if it proves to exist— between air quality and appendicitis.“It’s speculative, but air pollution mightbe driving inflammation which triggersappendicitis,” he said. “We’re a few stepsaway before we can make that statement.We need to confirm and replicate thesefindings.”Treatment OverviewThe only treatment for appendicitisis surgery to remove the appendix(appendectomy). The goal is to removethe appendix before it ruptures and spreadsinfection to the abdomen (peritonitis).If your doctor is not sure if you haveappendicitis, you may have to wait forseveral hours at home or in the hospitalbefore a decision about surgery is made.Your doctor may send you home andhave you come back in 6 or 8 hours to berechecked.Surgery to remove the appendix canbe done one of two ways — laparoscopicor traditional. Experts do not agree onwhich surgery is best. It often depends onwhat your surgeon prefers. Laparoscopicsurgery uses three or four small cuts orincisions, and traditional appendectomyuses one larger incision. Most people feelbetter immediately after surgery. Somepeople can even go home the same day.If your appendix has burst and there isinfection in your abdomen, you may haveto stay in the hospital longer. Your treatmentwill include intravenous (IV) fluids andantibiotics. Surgery for a burst appendixmay be more complicated. If you have aburst appendix, a radiologist may place adrain in your belly to help remove some ofthe infection before you have surgery toremove it. In this case, the appendix willbe taken out a few weeks later. After youhave your appendix removed, the doctormay leave the incision (cut) open to healfrom the inside to the outside. You mayalso have a drain placed within the woundto help drain the infection.You will also have to stay in the hospitallonger if you have health problems that getworse after surgery.Sometimes a doctor will recommendsurgery even if he or she is not sure youhave appendicitis. Surgery can eliminatethe chances of a ruptured appendix. If youhave surgery and your appendix is normal,your appendix will still be removed so thatit will not cause future problems.Surgery: What to ExpectSurgery is done for many reasons.Often it is done to repair an injury, suchas a broken bone, or to relieve symptoms,such as numbness caused by a herniateddisc. Sometimes it is done to diagnose acondition (biopsy) or to cure a condition,such as appendicitis.Many minor surgeries can be donein your doctor’s office or at a same-daysurgery center. Preparing for minor surgerymay take only a few hours. Major surgery isusually done in a hospital operating room.Except in an emergency, major surgerymay require days or even weeks of testingand preparation.Before surgery, your surgeon may askyou to see your regular doctor for an examand possibly tests. A surgeon may ask thisto make sure that surgery is not likely to betoo hard on you.You will also have an appointment withyour surgeon before your surgery. For thisappointment, take along a surgery questionform (What is a PDF document?) to helpyou understand your treatment. Yoursurgeon will explain why your surgery isneeded, what it will involve, what its risksand expected outcome are, and how longit will take you to recover. Talk to yoursurgeon about any concerns you haveabout the surgery. You may also want toask about treatments you might try otherthan surgery.Your surgeon or a nurse will give youa list of instructions to help you preparefor your surgery. Most surgery centersand hospitals have a before-surgery(preoperative) form and a surgery consentform for you to fill out. You may also need tosign a form that identifies the correct bodyarea for surgery. This information helpsthe surgical team prepare for your surgery.After surgery, you will be taken to arecovery (postoperative) area wherenurses will care for and observe you for 1to 4 hours. Then you will either be movedto a hospital room or go home. If you gohome, the recovery nurse usually gives youwritten instructions to follow. Your surgeonmay also give you special instructions.* Culled from www.health.comTHE NIGERIAN ACCOUNTANT 17October/December, 2012

TechnicalAnother Look at the Assumptions of theBreakeven AnalysisA Case for Joint ProductsBy ENYI PATRICK ENYIA major constraining assumption of the break-even concept is that there is only one product line. Though, this assistedgreatly in perfecting the normal breakeven analysis model; it, however, prevented the use of the concept in analysing multiproductbreakeven points. Earlier attempts to address this theoretical hitch used the weighted Contribution Margin Ratio (CMR)approach which has the propensity to over-allocate. This paper uses the Reversed Contribution Margin Ratio (RCMR)approach to perfect a new model for apportioning the joint-products break-even point to the constituent product lines. Theassociated statistical correlation test revealed a perfect inverse relationship between the normal CMR and the resulting RCMRfor the individual product thus proving the linearity and precision of the new model. The implication of this development is thatthe assumption of ‘only one product line’ no longer holds in breakeven analysis and hence, recommended to be expungedfor pedagogical purposes.It is not, often that you see a manufacturing or trading firmdealing with only one product line in modern times. This maybe so in earlier business ages when competition is minimal andcompetitors are few. Modern day business requires the spirit ofcompetitiveness which a single product line can no longer satisfy.In trying to fit into a competitive world, a business has todecide which of its operating costs are relevant and whichare not. Fortunately, accounting theorists of the past came upearlier with the concept of marginal costing (fashioned after theeconomic theory of marginal cost and marginal revenue) andtheir consequent break-even point theory and analysis. Goingby the economists custom of holding other things constant whiledealing with a particular variable as in their penchant use of thephrase ceteris paribus, the break even analysis is supposed todeal with only one product line as portrayed by the assumptionthat: there is only one product line (Samuelson, 2010). Thisassumption, though, has been used successfully over theyears to aid the analysis of operational budgets and short termdecision making processes, has seriously limited the use of thebreak-even analysis in providing solutions to short term decisionmaking problems in our present economic world of multi-productbusinesses. The idea for this paper arose from the need to offer abetter model that can deal holistically with break-even analysis inorder to adequately address the problem associated with joint ormulti-products especially during operational budget preparations.LITERATURE REVIEW AND DEVELOPMENT OFTHEORETICAL MODELThe Concept of BreakevenIn the words of Gutierrez and Dalsted (2008) breakeven inrelationship to investment analysis is a useful tool for studying therelationship between fixed costs, variable costs and returns. Tothem, a breakeven point defines when an investment will generatea positive return using a given price necessary to cover all costs.THE NIGERIAN ACCOUNTANT 25October/December, 2012

TechnicalFirst among the limitations cited by this work is that the conceptis best suited for the analysis of one product line. Using a slightlydifferent term, Accounting for Management defines a breakevenpoint as the level of sales at which profit is zero. This means thatthe breakeven point sales are equal to fixed costs plus variablecosts. This is further explained using the following equation:[Breakeven Sales = Fixed Costs + Variable Costs]The mathslover website on its own part defines breakevenanalysis as the relationship between cost, volume and profits atvarious levels of activity with emphasis on the breakeven point.On the other hand, it refers to the breakeven point as a pointwhere total money received from sales is equal to total moneyspent to produce the items. Please, note here that the referencemade to production also include value added to purchase goodsfor resale by trading concerns.According to the mathsolver website, the breakeven analysis,amongst other things, enables a business organisation to:1. Measure profits and losses at different levels of activity.2. Predict the effect of changes in the prices of the products.3. Analyse the relationship between fixed costs and variablecosts.4. Predict the effect on profitability of changes in cost andefficiency.Apart from the uses enunciated above, it listed the overridingassumptions of the breakeven analysis as follows:1. It assumes that selling prices are constant no matter thelevel of output.2. It assumes that all productions are sold without opening/closing inventories.3. It assumes that fixed costs remain fixed at all levels ofoutput.4. It assumes that variable costs per unit remain the sameno matter the output level.5. It can only apply to single product or a single mix ofproducts.While this paper is not contesting the validity of the first fourassumptions above, evidence will be shown later to prove that thelast assumption of single product or single mix no longer holds.Meanwhile, let us look at some of the supporting analysis for thebreakeven model.Contribution MarginAccounting for Management defines contribution margin asthe amount remaining from sales revenue after variable expenseshave been deducted. This is the amount available to cover fixedexpenses and to provide profits for the period. The contributionmargin concept is explained using the following equation:[Contribution Margin = Sales Revenue – Variable Cost]The unit contribution margin can be calculated in likemanner, i.e.Unit Contribution Margin = Unit Selling Price – Unit Variable CostComputation of Breakeven PointAs defined earlier, the breakeven point is the point where totalrevenue matches total costs and can be calculated using eitherthe equation method or contribution margin method. The twomethods are, however, equivalent.contribution• Equation Method – The equation method centers on theapproach to the preparation of the income statement.The format for this statement can be expressed as:[Profit = Sales – (Variable Expenses + Fixed Expenses)]Rearranging this equation slightly yields the following equationwhich is widely used in cost, volume, profit (CVP) analysis:Sales = Variable Expenses + Fixed Expenses + ProfitFrom earlier definitions the breakeven point is the level ofsales where profits are zero. Therefore, the breakeven point canbe computed using the following formula:Q s = Qv + f + 0Where:Q = Breakeven Quantitys = Unit Selling Pricev = Unit Variable Costf = Fixed CostsRearranging the formula and bringing like terms together, wehave:Q = f / (s – v)Example: Given that s = 280; v = 165; f = 45,000; thenQ = 45,000 / (280 – 180) = 450 unitsThe breakeven sales in Naira can then be computed bymultiplying the breakeven quantity by the unit selling price. i.e.BEP (Naira) = 450 x 280 = N126,000.• Contribution Margin MethodThe contribution margin method is a short-cut of the equationmethod. It centers on the idea that each unit sold provides acertain amount of contribution margin that goes towards offsettingfixed costs. This unit contribution margin is then used to divide thefixed cost value. This is exactly what we did using the equationmethod. However, to get the Naira breakeven sales we divide thefixed cost value by the contribution margin ratio calculated as:Contribution Margin Ratio (CMR) = (s – v) / sWhere s, and v are as defined earlier.So, using the example, we have:CMR = (280-180)/280 = 0.357BEP (Naira) = 45,000 / 0.357 = N126,000 (Same as before).• Multi – Products Break-Even Point – TheoreticalConsiderationsIf a company sells multiple products, its breakeven analysisbecomes more complex. This is probably the basic reason whymulti-products analysis was excused out of the existing modelunder the underlying assumptions. The reason for this apparentcomplexity is that the different products making up the salesmixwill have different selling prices, different variable costs anddifferent contribution margins. Consequently, the breakeven pointwill depend on the mix in which the various products are sold. Itis, however, important to know the exact contributions of eachof the products to the overall breakeven point because changesin sales mix can cause interesting variations in profits. A shiftin sales mix from high margin items to low margin itemscan cause profits to decrease even though total sales mayincrease. Conversely, a shift in sales mix from low margin itemsto high margin items can cause reverse effect, i.e. total profitsmay increase even though total sales decrease. This exactly iswhat the existing solution methods to multi-products breakevenanalysis have not been able to achieve. Management will bemore effectively informed if they are given correct data relating toTHE NIGERIAN ACCOUNTANT October/December, 201226

Technicalthe contributions of each of the products in the mix to the overallbreakeven point. The importance of this requirement cannot beoveremphasised given the fact that businesses now operate in acomplex business environment where only those that can mustera variety of products at high competitive prices are capable ofweathering the storm. In the opinion of Werkmeister (2008), theonly way this has been attempted in the past is to approach themulti-products breakeven analysis from the angle of a singleproduct by using a one-dimensional driver for the multiproductcase. This position is no different from that of Omolehinwa(2008:57) which uses the weighted contribution per unit (CPU)and the weighted contribution margin ratio (CMR) to apportionthe joint products breakeven point to the individual products in thesales mix. The problem with these methods is that they tend tohang their belief on the erroneous assumption that each productin the mix should share from the joint products breakeven valueaccording to the weight of the contribution margin ratio of theproduct. No, this should not be the case. Ordinarily, a productwith a high CMR will naturally have a low breakeven pointwhile the reverse is the case for those with low CMR. Thisposition does not have to change simply because we are dealingwith joint or multiple products. The simple interpretation of this isthat those products with low CMR in the sales-mix contributedmore to the joint-products breakeven point and should, therefore,have larger share of the breakeven point value than those withhigh CMR but this sharing should be done using a reverseproportional measurement.Model DevelopmentWe shall start the model development by taking a cursorylook at what presently obtains. Ordinarily, to calculate the normalbreak-even point all that is required are:(a) The separation of fixed and variable costs fromestimated total costs;(b) The estimate of the total output capacity;(c) The variable cost per unit;(d) The selling price per unit; and(e) The total estimated fixed costs.This means that you can determine the single product breakevenpoint in units or in Naira sales using either:b 1= f/c (1) for break-even qty.b 2= pf/c (2) for break-even salesWhere:b 1= Break even-point in unitsb 2= Break-even point in Naira Salesf = Total Fixed costsc = p - v = Contribution per unitp = Unit Selling Pricev = Unit Variable costOr, break-even point can equally be determined using theCost, Volume, Profit (CVP) charts (Drury, 2003; Horngren, 2007;Lucy, 1999). But for now this can only happen for a single productor overall firm’s joint products breakeven point. Until now it isonly possible to find a single joint or multiple products breakevenpoint; the problem of finding the break-even point for theindividual product members of the joint group becomes anotherchallenge which the existing model has been unable to meet.A recent mathematical experiment by the author of this paperoffered a solution to this age long problem using a ReversedContribution Margin Ratio (RCMR) approach blended with aperfected algebraic interpolation formula.The reversed Contribution Margin Ratio is a figure derivedfrom an attempt to fashion out a joint products breakeven pointsharing ratio between the individual products making up the groupusing the inverse value of each product’s normal ContributionMargin Ratio (CMR).The new model works by first analysing the budgetedoperations data into:(a) Total Budgeted Sales (Turnover Estimate);(b) Total Budgeted profit;(c) Total Fixed Costs;(d) Contribution per product per unit (this can be easilyderived by subtracting the unit variable cost per productfrom the unit selling price: p – v as defined earlier); and(e) Contribution Margin Ratio – using the total sales perproduct to divide the total contribution per product line(Omolehinwa, 1991).With the above data ready, we can now proceed to makethe attendant theoretical assumptions and derive the newmathematical model as follows:Let c = total contributionw =original Contribution Margin Ratio (CMR)i.e. w = contribution / salesd = proportional CMRe = reverse valuey = Reversed Contribution Margin Ratio (RCMR)such that:d t= 100 ( w t/ ∑ⁿ t = 1 w ) (3)e t= 100 – d t(4)y t= 100 ( e t/ ∑ⁿ t = 1 e ) (5)where:c = contribution per productn = number of productst = n th productCarrying our assumptions further,Let b = Joint products BEP in Naira Saless = Total sales (all products)f = Total fixed costsSuch that:b = fs/c (6)b pt= (y tb)/100 (7)Where:b pt=individual break-even sales for the t productRESEARCH METHODSThis paper is based on a normative study conducted to addvalue to an existing knowledge area. This involved an initialextensive review of related literature in the area of breakevenanalysis and CVP chart construction. To test the theoreticalTHE NIGERIAN ACCOUNTANT October/December, 201227

TechnicalTable 1:Decent Bakers’ Weekly Economic/Operational Budget Data – February 2012ProductDoughCostShareOtherIngredientsLabourCostTotalVariableCostUnitSellingPriceCont.perUnitProjectedSales perWeek NA Big Loaf – Ord 35 25 20 80 140 60 980,000B Big Loaf – SF 35 27 20 82 140 58 420,000C Big Loaf - Fty 35 37 25 97 160 63 480,000D Med Loaf – Hn 25 40 25 90 160 70 320,000E Small Loaf 18 13 10 41 60 19 480,000F Round balls 10 8 7 25 30 5 300,000Source: Extracted from Company’s Production & Financial Recordsframework, the production, finance and marketing operationsof a Bakery, which is a subsidiary of an industrial giant based inShagamu, Ogun State, was used as a case study from where datafor analysis were obtained for a week. The analysed data weresubjected to a statistical test using product moment correlationcoefficient to prove the internal and external validity of the modeldeveloped.CASE EVIDENCE – THE PROOF OF THE PUDDINGFor convenience, we shall refer to this bakery simply as DecentBakers. The company produces 6 types of bread in commercialquantity. These are:(a) Big loaf – Ordinary (Big Loaf – Ord)(b) Big loaf – Sugar free (Big Loaf – SF)(c) Big loaf – Fruity (Big Loaf – Fty)(d) Medium Loaf – Honey (Med Loaf – Hn)(e) Small Loaf – Ordinary (Small Loaf)(f) Round ballsThe ingredients for the bread making which form majority ofthe variable costs include: Flour, Margarine, Sugar, Fruits, Water,Printed-Polythene/Cellophane covers, labels, yeast, salt and otherminor ingredients. The production process starts with the mixingof the flour with primary baking ingredients such as water, saltand yeast; this is followed by kneading and milling after whichthe milled dough is apportioned to the various product groupsfrom where their differences are created through the addition ofproduct-specific ingredients. The economic analysis of the jointproducts is summarised in Table 1.The weekly fixed costs analysis for Decent Bakers is asfollows:Ni. Electricity/Gas (Usage Cost/week) 154,750ii. Bakery Depreciation/Sales Shop Rent/week 72,250iii. Salaries & Other Administrative Costs 162,500iv. Sanitation & Water Expenses/week 12,500TOTAL WEEKLY FIXED EXPENSES 402,000We shall analyse the above data with a view to presenting:i. The over-all break-even point in Naira sales for DecentBakers for the week;ii. The individual products breakeven point –(a) In Naira salesTable 2:Computation Format for Reversed Contribution Margin Ratio (RCMR)Product Sales VariableCostsContributionCMR(w)PCMR(d)RV(e)RCMR(y)A 980,000 560,000 420,000 42.86 19.86 80.14 16.028B 420,000 246,000 174,000 41.43 19.20 80.80 16.160C 480,000 291,000 189,000 39.37 18.25 81.75 16.350D 320,000 180,000 140,000 43.75 20.28 79.72 15.944E 480,000 328,000 152,000 31.67 14.68 85.32 17.064F 300,000 250,000 50,000 16.67 7.73 92.27 18.454Total (∑) 2,980,000 1,855,000 1,125,000 215.75 100.0 500.0 100.0Source: Derived from Company Financial RecordsTHE NIGERIAN ACCOUNTANT October/December, 201228

TechnicalTable 3:Computation of Individual Product’s Breakeven Pointsy Value Joint BEP Product BEP Product USP BEP in units(g) (h) (i) (j) (k)Product (derived) (derived) (gh/100) (given) (i/j)A 16.028 1,064,853.33 170,674.69 140 1,220B 16.16 1,064,853.33 172,080.30 140 1,230C 16.35 1,064,853.33 174,103.52 160 1,089D 15.944 1,064,853.33 169,780.21 160 1,062E 17.064 1,064,853.33 181,706.57 60 3,029F 18.454 1,064,853.33 196,508.03 30 6,551Source: Research Data Analysis 2012(b) In Units; andiii. The over-all margin of safety and the individual productsmargin of safety.AnalysisThe required direction for processing this information is to do anextended analysis of the given data in a tabular format using theformulae earlier derived as in Table 2. The primary procedure is:Step 1 – Compute the overall contribution for the firm.Step 2 – Compute the contribution per product line.Step 3 – Compute the Contribution Margin Ratio (CMR).Step 4 – Compute the proportional CMR using the formulaas per equation (3).Step 5 – Compute the Reverse Value (RV) of the CMR usingequation (4).Step 6 – Compute the Reversed Contribution Margin Ratio(RCMR) using equation (5) formula.Step 7 – Compute the joint products breakeven point inNaira sales using equation (6) formula.Step 8 – Apportion the joint products breakeven point inNaira sales computed in step 7 to the individualproduct line using the formula in equation (7).Step 9 – Divide the value computed in step 8 by the productunit selling price (USP) to get the breakeven pointin quantity of products.Note: All the nine steps above can easily be presented withthe use of a table as when doing a statistical analysis. Table 2captured all the calculations from step 1 to step 6. Steps 7 to 9are presented on Table 3 above.Having obtained the values of y as in Table 3, we now calculatethe joint products break-even sale in Naira as follows:b = (402,000 x 2,980,000) / 1,125,000= 1,064,853.33 in Naira salesTo apportion this figure to the joint products on individualproducts basis, we use the value of y from Table 3 as shown.Margin of Safety on BEP AnalysisOne of the most effective methods of carrying out a sensitivityanalysis on a projected economic activity such as the one underconsideration is to measure the margin of safety for each productline. Omolehinwa (2008:56) defines the margin of safety (MOS)as the distance between the breakeven point and the budgetedachievable capacity. Horngren (2007) posited that MOS may berepresented in Naira of sales, units of sales or in percentage of thebudgeted output. In other words, the margin of safety measuresthe extent to which a product’s comfort zone can be stretchedbefore the budgeted estimate is exhausted. The products’ marginsof safety are presented in Table 4 below.Comparative TestsThough, the knowledge of the margin of safety onTable 4:each product is a useful sensitivity guide, we are moreinterested on how the individual product’s breakevenComputation of Margin of Safetypoint relates to the overall budgeted sales figure. ThisProduct Sales BEP MOS % of MOScan be done by dividing each product’s breakeven pointin Naira sales by the total budgeted sales as shown inTable 5.Joint 2,980,000 1,064,854 1,915,146 64.27% Please note that the joint ratio of 35.73% (in column 5)A 980,000 170,675 809,325 82.58% is also equal to the summation of the individual products’B 420,000 172,080 247,920 59.03% ratios. The percentages represent the proportion of theC 480,000 174,104 305,896 63.73% individual product’s contribution to the overall companyD 320,000 169,780 150,220 46.94% breakeven point. We can easily note that product FE 480,000 181,707 298,293 64.14% (Round balls) which has the lowest contribution marginF 300,000 196,508 103,492 34.5% ratio now has the highest proportional contribution to theoverall company breakeven point.Source: Research Data Analysis 2012Testing further, we compare the original products CMRTHE NIGERIAN ACCOUNTANT 29October/December, 2012

TechnicalTable 5:Computation of Ratio of Product BEP to Total SalesProduct Sales BEP % of BEP % of BEP/Total Sales( 1 ) ( 2 ) ( 3 ) ( 4 ) ( 5 )Joint 2,980,000 1,064,854 35.73% 35.73%A 980,000 170,675 17.42% 5.73%B 420,000 172,080 40.97% 5.77%C 480,000 174,104 36.27% 5.84%D 320,000 169,780 53.06% 5.70%E 480,000 181,707 37.86% 6.10%F 300,000 196,508 65.5% 6.59%Table 6:MULTIPLE VARIABLES REGRESSION ANALYSISProduct BEP/Sales Ratio Product CMR Reversed CMRA 5.73 42.86 16.028B 5.77 41.83 16.16C 5.84 39.37 16.35D 5.70 43.75 15.944E 6.10 31.67 17.064F 6.59 16.67 18.454Regression Line > Y = 3.23971 – 0.01484x 1+ 0.19499x 2R 2 = 0.99996045Joint Correlation Coefficient = 0.999980225TEST OF SIGNIFICANCE OF R 2Calculated F (two-tailed test) = 12642.02837025Calculated F (one-tailed test) = 25284.0567405Table 7:CORRELATION COEFFICIENT ANALYSIS(BEP Ratio and Product CMR)Product BEP/Sales Ratio Product CMR Reversed CMRA 5.73 42.86 16.028B 5.77 41.83 16.16C 5.84 39.37 16.35D 5.70 43.75 15.944E 6.10 31.67 17.064F 6.59 16.67 18.454The Coefficient of Correlation of BEP/Sales Ratio on Product CMR is:-1.00; while the Coefficient of Correlation of BEP/Sales Ratio on ReversedCMR is: 1.00.with the percentages derived above on onehand and the RCMR on the other hand usingthe product moment coefficient correlation andthe multiple regression analysis as shown inTable 6.The first coefficient indicates that there isa Perfect Negative correlation between theindividual product’s breakeven point ratiosand the normal Contribution Margin Ratios ofthe individual product; in the same way thatthe second coefficient indicates that there isa Perfect Positive correlation between theindividual product’s breakeven point ratios andthe Reversed Contribution Margin Ratios of theindividual products. Since the two relationshipsare perfect, there is no need for further ‘t’statistical confirmation of significance.DiscussionsThe tabulation in Table 3 shows the individualproduct break-even point both in Naira sales aswell as in quantity. We observed that no informationis given about how the fixed costs relate to theindividual products. However, given the relationshipthat we have been able to establish, it is easy topro-rate the fixed costs using the computed breakevenpoints.One may want to ask here, why use the reverseCMR approach?To answer this question, we shall first of all lookat how break-even point is determined ordinarily. Itis evident from the solutions given to many casesof single product CVP analysis that the slimmerthe contribution margin, the higher the breakevenpoint and vice versa. This simply means thatyou require larger volume of activity to be able torecover total cost when your product’s contributionmargin is slim than when it is within comfortablelevel. Many high competitive products are notedfor having slim contribution margin owing to thefear of pricing one’s products out of the market. Butproducts in a monopolistic or oligopolistic market(from experience) usually carry high contributionmargin.Relating the above analogy to the use of thereverse CMR in computing individual product’sBEP in a multi-product setting points to the fact thatthose products with lower contribution marginmust have contributed more to the derived jointbreak-even position for the company than thosethat have higher margins (Moore, 1998; Morse &Zimmerman, 1997; Solomon, 2001). As a result, theeffect of the contribution margin for each product willbe inversely proportional to the over-all (joint) breakevenpoint in relation to the original ContributionMargin Ratio. Owing to the fact that this positionhas never been considered in the past it becamealmost impossible to ascertain individual product’sbreak-even point using a computed joint or multi-THE NIGERIAN ACCOUNTANT 30October/December, 2012

TechnicalTable 8:Sensitivity Data ExtractPRODUCT % MOS Proportional CMR Product Price (N)A (Big Loaf – Ord) 82.58% 19.86% 140B (Big Loaf – SF) 59.03% 19.2% 140C (Big Loaf – Fty) 63.73% 18.25% 160D (Med Loaf – Hn) 46.94% 20.28% 160E (Small Loaf) 64.14% 14.68% 60F (Round Balls) 34.5% 7.73% 30Source: Extracted from Tables 1, 2, 3, and 4products break-even point.Looking at the statistical test of significance of the breakevenpoints computed using the model, it will seem obvious that aperfect solution to the joint products breakeven analysis has beenfound. With a perfectly negative correlation co-efficient of -1, itis evident that the computed break-even point relate perfectlyto the individual products BEP using the joint BEP figure as abase. From a test of multi-variable regression analysis usingthe computed individual product’s breakeven to sales ratio asthe dependent variable and the CMR and the RCMR as theindependent variables, it is evident from the coefficient of multipledetermination (R 2 ) of 0.99996045 and the significantly high Fratio that the CMR and the RCMR are two sides of the same coin(Hillier & Lieberman, 2007). That being the case, there is no gainsaying the fact that RCMR is the true key to the determination ofindividual product’s breakeven point in a multi-product breakevenanalysis scenario. To buttress this further, we shall discuss thesensitivity analysis by taking a look at Table 8 below:From Table 8, it is visible that product A has the highest marginof safety. This means that from the weekly budget point of view,it has wider latitude to make more sales and consequently morecontributions after attaining its low breakeven point. Though, themargin of safety is a good sensitivity tool, it is, however, only usefulwhen there is a budget foisted on wide and elaborate capacityutilisation. The proportional CMR is more forth coming with bettercontrol information than the margin of safety. For instance, whileproduct A has the highest margin of safety, product D on theother hand has the highest proportional CMR; meaning that itcontributes more to the overall profit than any other product in thesales mix. In the same vein, product C has a higher unit price thanproduct A but product A has a higher proportional CMR; meaningthat selling more of product A than C will lead to higher profits butwith lower overall sales total. Conversely, selling more of productC than A will lead to higher turnover but with lower profits. Thisuseful sensitivity information is the true essence of this wholemulti-products breakeven analysis exercise.CONCLUSION/RECOMMENDATIONHaving perused through many analytical considerations ofthe break-even concept, it is pertinent that a modern and morescientific approach be adopted in unknotting thorny issuesfound in simple theories that apparently appear to be previouslyunsolvable. The Reversed Contribution Margin Ratio (RCMR)approach introduced and adopted in this paper is a milestone inresolving one of such logjam in break-even analysis. With thismethod, the assumption of “only one single products line” nolonger holds and should therefore, be expunged from the breakevenanalysis assumptions.REFERENCES1. “Contribution Margin and Basics of CVP Analysis…”,(n.d), Retrieved February 18, 2012 from http://www.accountingformanagement.com/cost_volume_profit_analysis.htm.2. “Disadvantages and Advantages of BreakevenAnalysis”, (n.d), Retrieved February 18, 2012 from http://mathsolver.hubpages.com/hub/Breakeven-analysis.3. Drury, C. (2003), MANAGEMENT AND COSTACCOUNTING, London: Thomson Learning Books.4. Gutierrez, P.H. and N.L. Dalsted (2008), “Break-EvenMethod of Investment Analysis”, Retrieved February 17, 2012from http://www.ext.colostate.edu/pubs/farmmgt/03759.html.5. Horngren, C.T. (2007), COST ACCOUNTING – AManagerial Emphasis, 17 th Edition Englewood Cliffs: PrenticeHall International.6. Hillier, F.S. and G.J. Lieberman (2007), INTRODUCTIONTO OPERATIONS RESEARCH, 7 th Edition, New Delhi: TataMcGraw-Hill.7. Lucey, T. (1999), MANAGEMENT ACCOUNTING, (3 RDedn), London: ELST.8. Moore, T. (1998), THE ANATOMY OF DECISIONS,Florida, USA: Brace College Publishers.9. Morse, D.C. and Zimmerman, J.L. (1997), MANAGERIALACCOUNTING, Boston MA, Irwin McGraw Hill.10. Omolehinwa, A. (2008), WORK-OUT MANAGEMENTACCOUNTING, 5 th Edition, Ikeja, Lagos: Cleo International.11. Omolehinwa, O.E. (1991), COPING WITH COSTACCOUNTING, Lagos: Dun Mark Publishers.12. Samuelson, P.A. (1980), ECONOMICS, Tokyo: McGrawHill.13. Solomon, P. (2001), INFORMATION FOR DECISIONMAKING, Jangpura, India: Vikas Publishing House.14. Werkmeister, C. (n.d), “Multi-Product Break-EvenAnalysis”, Retrieved February 18, 2012 from http://controwiki.de/index.php?title=Multi-product_break-even-analysis.* Professor Enyi lectures Accounting at Babcock BusinessSchool, Babcock University, Ilishan-Remo, Ogun State.THE NIGERIAN ACCOUNTANT 31October/December, 2012

News/EventsOtunba Femi Deru, 2 nd Deputy Vice President, ICAN receiving theaward from Rotimi Shodimu, Registrar, UNILAG while Soji Odukoya,Deputy Registrar, Admin., ICAN watches in admirationICAN Bags UNILAG AwardThe Institute of Chartered Accountants of Nigeria (ICAN)added another feather to its cap on Friday, November16, 2012 when it joined the league of eminent recipients ofaward to major donors/partners and the formal launching ofthe University of Lagos (UNILAG) Donors Forum.The event which took place at the Multipurpose HallA&B at UNILAG, was organised under the distinguishedChairmanship of Deacon (Dr.) Gamaliel Onosode, Pro-Chancellor and Chairman of Council, UNILAG, to celebratethe 50 th Anniversary of the Ivory Tower which has contributedimmensely to capacity building in Nigeria and to making LagosState the Centre of Excellence.Listed under the Bronze category, ICAN was awardedalongside others like Zenith Bank, Unilever Plc, LagosChamber of Commerce and Industry, etc, in recognition of theInstitute’s positive contribution and commitment to promotingscholarship and academic excellence in the University. Theaward was received on behalf of the Institute by Otunba FemiDeru, 2 nd Deputy Vice President and Soji Odukoya, DeputyRegistrar, Administration.AppointedMr. Jim Obazee, the Chief Executive Officer, FinancialReporting Council of Nigeria, has been elected as theChairman of the 29 th session of the United Nations Conferenceon Trade and Development inter-governmental working groupof experts on International Standards of Accounting andReporting. This was the first time a Nigerian would be elected tochair the group of experts on this subject for the United Nations.UNCTAD-ISAR is a specialised inter-governmental forumbased on consensus building and voluntary cooperation amongparticipating countries. Every year, UNCTAD hosts the groupof experts from over 50 countries on topical global agendaon financial reporting and corporate governance and otherissues of common concern to member states besides informalexchange of experiences and best practices. Within the year,they also host sessions on issues of urgent global importancethat bear on institutional reforms and financial reporting.Established in 1964, UNCTAD promotes the developmentfriendlyintegration of developing countries into the worldeconomy.THE NIGERIAN ACCOUNTANT 55October/December, 2012

DevelopmentInterest Rate DeregulationIn Financial Savings MobilisationIn Nigeria (1970 – 2007)By CHRISTOPHER EHINOMEN and ADEPOJU ADELEKEThe study analyses the influence of deregulated interest rate on the mobilisation of financial savings in Nigeria, over a periodbetween 1970 and 2007. Theoretically, the classical school of thought believes that to mobilise savings, interest rate must be high;while the neo–classical school of thought by their loan able fund theory opined that people save less when the interest rate is high.However, Keynesian liquidity preference theory of interest rate made savings a function of income and investment a negative functionof interest rate. The model specification of the study was essentially an extension of the work of Ajakaiye and Odusola (1995). Thereal deposit rate of interest followed the traditional method (nominal deposit rate minus inflation rate). The result showed that growthrate of real GDP has a significant negative impact on savings ratio. Specifically, a 1% point increase in growth rate of real incomereduces savings ratio by 0.08%. And real rate of interest has a significant impact on savings ratio. The conclusion that emerged fromthe study was that interest rate deregulation will only mobilise savings if appropriate macroeconomic policies, such as low or moderateinflation, a sound banking system that would induce domestic savers confidence in the banking sector among others, are ensured.Keywords: Interest rate, Savings, Credit, Investment and Macroeconomic policies.Domestic savings are needed to maintain capital stockand to decrease a country’s dependence on foreigncapital and foreign ownership of domestic assets. Thisis because very often foreign loans and aid easily dryup when foreign interest are not adequately pursued by thebenefiting country. Adequate domestic saving is also essentialif intergenerational equity is to be maintained. In a developingcountry like Nigeria, with a growing population, more domesticsavings is required to make sure that capital stock grows inproportion with the increasing population.As Alao (2010) asserted, under interest rate regulation(1960 – 1985) the preferential interest rates were based on theassumption that the market rate, if universally applied, wouldexclude some of the priority sectors. Interest rates were, therefore,adjusted periodically with ‘Visible hands’ to promote increase inthe level of investment in the different sectors of the economy.Therefore, before financial liberalisation in 1987, interest rateas financial sector policy tool was controlled. However, as partof the package for financial sector reform, interest rates werederegulated, allowing for competition among banks, believing thatit will positively induce the level of interest payments on deposits,which have a substantial influence on the willingness to save,stimulating investment and growth.Nevertheless, the extent to which interest rates can influencesavings have become a subject of debate and the resultis inconclusive. Since the financial reforms of 1987 whichemphasised interest rates deregulation, the success of the reformhinges on whether market agents respond positively to interestrate deregulation. This paper therefore, analyses the influence ofderegulated interest rate on the mobilisation of financial savingsin Nigeria.The structure of the paper is as follows: Section II focuses oninterest rates policies in Nigeria during the period 1970 – 2007.Section III develops the theoretical framework and reviewsrelevant literature for the study. Section IV contains the empiricalresults of the study. In Section V, the paper concludes withsummary and policy implications of the study.INTEREST RATE POLICY IN NIGERIAPre SAP Period (Regulated)The level and structure of interest rates were administrativelydetermined by the Central Bank of Nigeria prior to the StructuralAdjustment Programme (SAP) of 1986. Both deposit and lendingTHE NIGERIAN ACCOUNTANT 60October/December, 2012

DevelopmentTHEORETICAL FRAMEWORK ANDREVIEW OF RELEVANT LITERATUREAs earlier mentioned, the debate on interest rates as thedeterminant of savings has remained inconclusive. However,the theoretical framework for the analysis of the correlationbetween the interest rates and savings, income, consumptionand investment are based on a number of schools of thoughts.It was assumed by the classical theorists pioneered by J.M.Keynes that households can do only two things with their incomes:consume or save them. Savings, therefore, is that remaining part ofincome after consumption is satisfied. Furthermore, it is generallyagreed that the forces of supply and demand determine the priceof factors of production in the market system. Thus savings remainthe major source of credit while investments constitute the maindemand for credit. Thus, at equilibrium, savings and investmentsare equated; that is savings equal investments.The classical school also believes that savings are generallyinvested as a result of interest rate mechanism. That, highinterest rate stimulates savings positively such that to mobilisesavings, interest rate must be high. The classical school is alsoof the opinion that investment is constrained by non-availability ofinvestible funds and not price of capital. They finally assumed fromall the above that people as rational beings would be motivated tosave more when interest rate is high than when it is low; therebymaking more funds to be available for investment purposes.The Neo-classical theorists including D.N. Dwivedi criticisedthe classical school on the assumption that no any otherfactor(s) come to play on the income of the household and thatwhatsoever is saved is automatically invested. They believedthat the intersection of the supply schedule for loan-able fundfor investment purposes will determine the rate of interest andpeople will desire to hoard when the rate of interest is low. It wasconsidered reasonable by them, since the cost of hoarding islowest when interest rate is low.The neo-classical school of thought also propounded the loanablefund theory which states that people save less when theinterest rate is high than when it is low due to the fact that theirfuture payment can be met by a small amount of savings wheninterest rate is high than when it is low and as such doubted theassumed high interest elasticity.Keynesian liquidity preference theory of interest rate madesavings a function of income and investment a negative functionof interest rate. This implied that the higher the rate of interest, thelower the investment. However, Keynes (substitution effect andincome effect theories) believed that consumption is influencedby interest rate and wealth. In line with this, two propositionswere made:(i) Consumption is a positive function of income, that is,the more income a household has at its disposal, themore it is likely to consume, except for a few richmisers. Suggesting that rich people typically consumemore than poor people do.(ii) High-income households consume a smaller proportionof their income and as such are likely to save higherpercentage of their income.The question then arises whether savings rises when interestrate increases or does savings fall because there is less need forfuture income. The results of this still remain ambiguous in theliterature. While few studies have found strong positive effectsof interest rate on savings other studies suggest that the effectsare small and in some cases, negligible.The most prominent theory of savings behaviour in theliterature is the life cycle theory of consumption and savings.This theory views individuals as choosing a lifetime stream ofconsumption and saving in a way that the present value of theirconsumption equals the present value of their lifetime earningsand inheritance. The life cycle hypothesis views savings asresulting from individuals desire to provide for consumption in oldage. This theory is useful in analysing the consequences of policychanges as it will impact on a given age cohort. It may affect thewealth of the household by changing the stream of future earningsor they may affect the rate at which households discount futureconsumption. An increase in discount rate for example, will changethe propensity to consume out of wealth and reduce the presentvalue of future earnings. This latter effect referred to as the humanwealth effect will reduce a household consumption and increasesavings (Summers, 1981)Summers (1982) also, indicated that savings are veryresponsive to changes in real terms after tax rates of return.He, therefore, concluded from his studies based on two differentmodels, using different sets of assumptions that interest rateseffect on savings is substantial and statistically significant too.Mckinnon (1973) and Shaw (1973) have also shown that lowinterest rates below market equilibrium levels will increasedemand for, investment but actual investment will decreasebecause insufficient savings will be generated to finance theinvestment.Elumelu (2002) alluded to the belief that interest rates, likeother prices, perform a rationing function by allocating limitedsupply of credit among the many competing demands on it. Thus,it is an important instrument for monetary management. Adofu,Abula and Audu (2010) opined that interest rate play a significantrole in enhancing economic activities and as such, monetaryauthorities should ensure appropriate determination of interestrate level that would break the double-edge effect of interest rateon savers and local investors.In Nigeria, there were evidences that interest rate hassignificant effect on financial savings especially time andsavings deposit, while the structure of deposit was determinedby differentials in deposit rates (Ndekwu, 1991). He also showedthat interest rates deregulation in Nigeria has a positive impacton financial savings during the period 1984 – 1988, usingmonthly data. There is also evidence that deregulated interestrate resulting in real return on deposits has a significant effecton financial savings. In Ghana, during the period 1976 and1980, negative real interest rates resulted in decline of financialsavings in real terms. In Malaysia on the other hand, a steadypolicy of positive inflation-adjusted interest rates led to growth inreal terms and savings deposits. Deregulation of interest rate inTurkey in 1981 resulted in a substantial increase in real termsand savings deposits in real terms. However, other studies wereon the interplay between changes in organised money marketrates of interest and the volume of savings through financialintermediaries, which resulted to negative relationships. On thebasis of the above, Gupta (1970) regressed household savingsagainst five measures of real rates of interest. He concluded thatTHE NIGERIAN ACCOUNTANT 62October/December, 2012

Developmenthigh real rates of interest decreased savings.Ajayi (1978) conducted a study in Nigeria and concluded thatsavings deposit rates in deregulated regime, are not importantin explaining the demand for savings deposit.Reinhart and Ostry (1995) in their study assumed that whenhouseholds maximise utility, or welfare, subject to constraints,the interest rate sensitivity of households savings depend onhow readily and easily households are prepared to trade offbetween future consumption and current consumption. Theypostulated in the study that in the poorest countries, subsistenceconsiderations are likely to be a significant factor determiningconsumption behaviour. Given that to save, households must firstachieve a subsistence consumption level. Interest rates sensitivityof private savings will be close to zero for countries where alarge percentage of the population live at a near subsistenceconsumption levels. This model called subsistence model predictsa nonlinear relationship between savings behaviour and level ofdevelopment, with the most significant changes occurring whencountries move from low-income to middle-income and highincomestatus. The study offered two main predictions aboutsavings behaviour:(i) Saving rates should increase with level of real incomeat the initial stage of development, particularly ascountries move from low-income to middle-incomestatus; and(ii) Savings should become more responsive to changes inreal interest rate as countries rise to high-incomestatus.MODEL SPECIFICATION AND EMPIRICAL RESULTSModel SpecificationGiven the above theoretical formulation, the following modelis developed to address the issue of the relevance interest ratesderegulation to savings, the model is based on the followingsavings mobilisation.DS/Y = f ( g, r, sf/Y, Xr ) ........................................... (1)Where:DS/Y = the ratio of gross domestic savings to incomeg = growth rate of real GDPr = real deposit rate of interestsf/Y = rate of foreign savings to GDPXr = exchange rate.This model specification is essentially an extension of thework of Ajakaiye and Odusola (1995). Here, real deposit rateof interest follows the traditional method (nominal deposit rateminus inflation rate).Based on the hypothesis that savings is a function of permanentincome or wealth the growth rate of real GDP is used as proxy forwealth and included in the determinants to enable us know theeffect of income on savings. Annual GDP figures were obtainedfrom the CBN Statistical Bulletin and Consumer Price Index wasused for deflating the variable to get the real gross domesticproduct. The estimate was run in first difference form. Amongthe factors that are mentioned in literature as complimentaryto domestic savings are foreign savings (Abe et al 1977), whilePapanek (1973) suggested it could be a substitute. The needto clarify the relationship between the variables using Nigeriandata informed the inclusion of foreign savings in the model. Thereal rate of interest which is measured by the difference betweennominal interest rate and inflation rate is included to test theMckinnon and Shaw hypothesis that the establishment of higherinterest rate would lead to increase savings. The hypothesisis important and the disagreement over the influence in thedeveloping countries necessitated its inclusion as a determinantin the savings functionDeregulation of interest rate constitutes a structural shift inthe economy during the period of financial reform. The modeltherefore, makes use of a dummy variable to measure the shiftof financial savings over time.The slope-dummy term constructed is as follow:DV = 1, for the period of interest rate deregulation0, for the period of interest rate controlThe final model used in the study is specified as follows:dS/Y = b 0+ b 1g + b 2r + b 3sf/Y + b 4Xr + DV U t........... (2)where:DV = dummy variableBy a priori expectations b land b 2are positive while b 3andb 4are ambiguous. The change in the dummy variable is alsoexpected to be positive since the interest rate deregulationis expected to attract savings as postulated by the financialliberalisation proponents.Empirical ResultsThe first diagnostic regression result, suggests the presenceof serial auto-correlation as typified by a low Durbin-WatsonStatistic. To correct this, the model was run using Cochrane-Orcuttprocedure. The final result is as follow:ds/y = 0.932 – 0.089 + 0.096sf 0001 + O.OOlr(6.584*) (-4.4*) (2.222**) (-0.0196) (-0.0196)(2.282**) – 0.001 DV + 0.935 AR(1)R 2 = 0937: D.W = 1.653Most of the variables are above their critical values at 5%. Thehigh level of R 2 also confirmed the effectiveness of the methodused. The following conclusion can be drawn concerning thestatistical significance of the explanatory variables.The growth rate of real GDP has a significant negative impacton savings ratio. Specifically, a one percentage point increasein growth rate of real income reduces savings ratio by 0.08percent. This tend to suggest that income sensitivity of savingswill be close to zero in countries where a large share of thepopulation lives at or near subsistence consumption (Ostry andReinhart, 1995). In other words, subsistence consideration is asignificant factor in determining consumption/savings behaviour.As income increases households must first achieve a subsistenceconsumption level before they think of saving even when realinterest rates are positive. Exchange rate displays a negative sign,which is statistically insignificant and conforms with the theoryTHE NIGERIAN ACCOUNTANT 63October/December, 2012

Developmentthat speculative activities when exchange rateis unstable, diverts resources away from thefinancial market to saving in hard currencies.Real rate of interest has a significantimpact on savings ratio. The coefficient ispositive and significant at 5 percent. This isconsistent with studies by Mckinnon and Shawhypothesis that private saving is significantlyand positively interest elastic in developingcountries. This contrasts with the findings ofAjakaiye & Odusola (1995) that real depositrate maintains a negative relationship withfinancial savings ratio. One reason for thedifferent result may be the ‘prevalence ofnegative real rate of interest’ during theperiod under consideration for the Ajakaiye& Odusola study. While their period of studywas quarterly data for, 1980-1993 data for thisstudy however was based on a longer period,1970-2007, using annual data. The fact thatannual series may not explicitly show thedynamics of the developments in the financial system during theperiod may also account for the differences in results. Other policyissues which affects the responsiveness of private savings to realdeposit rate is the relationship between government deficits andcurrent account of the balance of payment. Changes in publicsavings (increases or decreases in budget deficit or surplus) mayhave impacted significantly on domestic rates of return. The resultshows that foreign saving serves as a complement to domesticfinancial savings and is statistically established at 5 per cent level.The dummy variable showed an insignificant negativerelationship with savings ratio. The interest rate deregulation didnot contribute much to the level of savings in the economy. Thereason for this level of insignificance may be due to the volatilityof interest rates during the period of deregulation, which mighthave impacted negatively on savings and the high rate of inflationand as such discouraged savings. The level of uncertainty and thelack of confidence in the formal financial institutions, particularlyin times of distress, could also impact negatively on savingsmobilisation. Such that no matter how high and attractive theinterest rates may be households will prefer to invest on realassets rather than on financial assets.SUMMARY AND CONCLUSIONThis paper addresses the issue of the relevance of interestrate deregulation to savings in Nigeria. A single equation modelwas specified to test the interest elasticity of savings and othervariables. The exercise showed a positive relationship betweenreal interest rate and savings ratio but a negative correlationwith the dummy variable that was used as proxy for the period ofinterest rate deregulation.The main conclusion that emerges from this analysis is thatinterest rate deregulation will only achieve its role of savingsmobilisation if appropriate macroeconomic policies are put inplace. For example, attaining real positive interest rate is difficultwhen inflation is high. In addition to macroeconomic stability,a sound banking system is important. The need for effectiveprudential supervision of financial institutions to prevent crisis that‘ The need foreffective prudentialsupervision offinancial institutionsto prevent crisisthat erodes publicconfidence in thebanking sector isimperative if domesticsavers are to beattracted‘erodes public confidence in the bankingsector is imperative if domestic savers areto be attracted.REFERENCES1. Adofu, I.; M. Abula; and S.I. Audu(2010), An Assessment of the Effects ofInterest Rate Deregulation in EnhancingAgricultural Productivity in Nigeria.Current Research Journal of EconomicsTheory 2(2): 82 – 86, ISSN: 2042 – 485X,(C) Maxwell Scientific Organisation.2. Ajayi, S.I. (1978), Money in aDeveloping Economy: A PortfolioApproach to Money SupplyDetermination in Nigeria, IbadanUniversity Press.3. Alao, R.O. (2010), InterestRates Determination in Nigeria: AnEconometric X-RAY, InternationalResearch Journal of Finance and Economics, ISSN 1450 – 2887,Issue 47, http://www.eurojournals.com/finance.htm4. Central Bank of Nigeria, Monetary, Credit, ForeignTrade and Exchange Policy Guidelines for 1999 Fiscal Year(Monetary Policy Circular).5. Elumelu, Tony (2002), Interest and Exchange RateManagement in Nigeria: A Macroeconomics Implication, Aspeech delivered at the Inaugural lecture of the Alumnus GuestLecture Series of the Department of Economics, Ambrose AlliUniversity, Ekpoma on June 24.6. Gupta, K.L., (1970), Personal Savings in DevelopingNations: Further Evidence, Economic Record 46, June, Pages243-249.7. Mckinnon, R.I. (1970), Money and Capital in EconomicDevelopment, Washington D.C., The Brooking Institute.8. Ndekwu, E.C. (1991), Interest Rates, Bank Deposits andGrowth of the Nigerian Economy, NISER Monograph, Series4, Ibadan, NISER.9. Onyido, B.C. (1997), Interest Rates Policies in ECOWASCountries: A Comparative Analysis, Bullion of Central Bank ofNigeria, Vol. 21, No. 4, Oct./ Dec.10. Ojo, M.O. (1997), A Review and Appraisal of theMonetary and Other Financial Policies in the FederalGovernment Budget, Bullion of CBN, Vol. 21, Jan./March.11. Reinhart and Ostry (1995), Savings and Real InterestRate in Developing Countries, Finance and Development, IMFand World Bank Quarterly Report, Oct./Dec.12. Research Department (1998): Central Bank of NigeriaBriefs, 1998 Series, June.13. Mehran and Laurens, Interest Rates: An Approachto Liberalisation, Finance and Development, IMF and WorldBank Quarterly Report.14. Shaws, E.S. (1973), Financial Deepening in EconomicDevelopment, New York, Oxford University Press.* Dr. Chris Ehinomen and Dr. Adepoju Adeleke areLecturers in the Department of Economics and BusinessStudies, Redeemers University, Mowe, Ogun State.THE NIGERIAN ACCOUNTANT 64October/December, 2012

News/EventsFIRS Is Doing a Great Job— ICAN PresidentThe 48 th President of ICAN, Mr Doyin Owolabi haddescribed the Federal Inland Revenue Service(FIRS) as an organisation doing a great job thatwould go a long way in showing the whole worldthat Nigeria is a serious country.Owolabi said the in Abuja when he paid acourtesy visit to the office of the Chairman of FIRS.According to him, FIRS had made Nigeria to realisethat it could not depend solely on oil and externalrevenue alone as a means of survival. He alsothanked FIRS for partnering with ICAN in movingthe nation forward.Responding, the acting Chairman of FIRS Mr.O.C. Chuke described ICAN’s visit to the office asa privilege and congratulated ICAN President onhis election as the 48 th President of The Institute.He promised that FIRS would continue to worktogether with ICAN to take Nigeria to greater heights by buildingenduring institutions.I Solicit Support of ICAN, Says AGFThe Accountant-General of the Federation, Mr Niyi Otunla, FCA,has called on The Institute of Chartered Accountants of Nigeria(ICAN) for support in order to make the work in his office easier.Otunla made this call while receiving the 48 th ICAN President,Mr Doyin Owolabi and his entourage in his office in Abuja. Hethanked ICAN for the support it had been offering in the area ofprovision of qualified personnel to his office.In his reaction, the ICAN President intimated to Mr Otunla thewhistle-blower Bill which The Institute was planning to sponsor oncorruption. He also solicited the support of the Accountant-Generalon it. While thanking him for his support to ICAN members in hisoffice, Owolabi implored him to continue assisting the membersby sponsoring them to ICAN programmes and events.ICAN President, Doyin Owolabi (left) with Accountant-Generalof the Federation, Mr Niyi OtunlaICAN President, Doyin Owolabi presenting souvenir to Acting Chairman, FederalInland Revenue Service (FIRS), Mr O.C. ChukeI Will Sell ICAN’s Whistle-BlowerCampaign Against Corruption— Gov. FayemiEkiti State Governor, Dr Kayode Fayemi has commended thedecision of The Institute of Chartered Accountants of Nigeria(ICAN) to sponsor a Whistle-Blower Bill against corruption,promising to sell it to the National Assembly.Fayemi gave this assurance in his office while receiving the48 th ICAN President, Mr Doyin Owolabi who paid him a courtesyvisit. He said that ICAN’s decision to sponsor such Bill was a stepin the right direction, adding that professionals like CharteredAccountants and others were expected to be at the forefront ofthe struggle against corruption.“Our country needs this. Chartered Accountants are not surfacepeople, they give attention to details and there is no way anybody,organisation or government can do without them. The whistleblowercampaign is the right step and I will sell it.”“I live by example. When I took over as Ekiti State Governor, Ideclared my assets openly. So, I don’t see a reason why a publicoffice holder should be afraid to do so openly if he doesn’t havea hidden agenda. The word ‘declare’ itself means doing thingsopenly to let people know,” the governor expatiated.Speaking further, he commended ICAN for turning out goodproducts and promised that the tie between The Institute andEkiti state will continue to wax stronger. He also declared thatrecruiting over 50 Chartered Accountants into the service of thestate was not a mistake but a deliberate action to ensure probityand accountability.Earlier, Owolabi had told the governor that he was on afour-day tour of Ado-Ekiti District of the Institute to have firsthandinformation about the challenges facing ICAN members indischarging their responsibilities to the users of their services.He commended Governor Fayemi for the good works he wasdoing in the state and encouraged him to continue for the benefitof the people of the state. He also applauded him for employingTHE NIGERIAN ACCOUNTANT 52October/December, 2012

News/EventsEkiti State governor, Dr. Kayode Fayemi, welcoming the 48th ICAN President,Doyin Owolabi to his office in Ado-Ekitimany ICAN members in the state as well as complying with thefederal government directive that every government establishmentshould separate Finance and Administration departments fromeach other. He assured the governor of ICAN’s support since hisgovernment was working in the same direction with ICAN on zerotolerance for corruption and accountability.ICAN Is the Most PowerfulProfessional Body in Nigeria— Afe BabalolaThe Legal Luminary andfounder of Afe BabalolaUniversity, Ado-Ekiti (ABUAD),Chief Afe Babalola (SAN) hasdescribed The Institute ofChartered Accountants of Nigeria(ICAN), as the most powerfulprofessional body in Nigeria.Babalola made this assertionwhile receiving the 48 th Presidentof ICAN, Mr Doyin Owolabi whohad paid him a courtesy visit in hisoffice at the University campus inAdo-Ekiti. He maintained thatICAN had come of age withthe production of qualitativeChartered Accountants whocould compete favourably withothers from any part of the world. He said that the relationshipbetween ICAN and the University had been cordial in the lastthree years it opened for business, adding that the authority ofthe Institution would not relent in ensuring the sustenance of therelationship.Owolabi described ABUAD as one of thebest Universities in Africa, considering thequality of education given to their students.He buttressed his point with the excellentperformance of some students of the school atthe ICAN examinations. According to him, threestudents of the school won various awards fromICAN for excellent performance.The Vice Chancellor of Ekiti State University,Ado-Ekiti, Professor Oladipo Aina, commendedICAN members in the employ of the Institutionfor contributing positively to its growth anddevelopment.He said that though the University wasestablished 30 years ago, plans were inthe pipeline to transform it to a world-classInstitution. He expressed appreciation toICAN for its support to the development ofthe University through donation of variousmaterials for academic purposes, promisingthat the University would not disappoint ICAN.We Shall Not CompromiseStandards Says Auditor-GeneralThe Auditor-General for the Federation, Mr. Samuel Ukura, FCA,has said that his office would not compromise the professionalstandards of accounting and auditing under any circumstances.Ukura declared this in his office in Abuja while hosting the 48 thPresident of ICAN, Mr Doyin Owolabi, who had been there topay him a courtesy visit. While expressing satisfaction in being amember of the Institute, Ukura declared that about 183 members ofICAN are working with himin his office. He howeverpromised to continue toencourage his staff who aremembers of the Institute toattend ICAN programmesto develop themselves.He called on ICAN to feelfree to discuss with hisoffice whenever in need ofpersonnel in the areas ofPerformance Audit.The ICAN Presidenthad earlier told the Auditor-General that he was inhis office to share ideason how to foster betterrelationship between the twoorganisations. He thankedthe Auditor-General for theconfidence reposed in ICAN and its members through massemployment of the members. He asked the Auditor-General tomake use of opportunities abound in ICAN as far as training andre-training of his staff was concerned.Founder, Afe Babalola University, Ado-Ekiti, Chief Afe Babalola (SAN),welcoming ICAN President, Doyin Owolabi to his officeTHE NIGERIAN ACCOUNTANT October/December, 201253

News/Eventsleft in Enugu State which is under-staffed.” He also commendedthe performance of ICAN members in the state civil service, sayingthat ICAN members in government service make the state proudthrough the way they discharge their duties.In an address delivered earlier, the ICAN President, Mr. DoyinOwolabi, said that apart from seeking interaction with members toknow about their welfare and challenges, the essence of his visitto the State was to assess how members had been supportingthe state government in line with the public interest mandate ofthe accountancy profession.The President applauded the transformation agenda of theState government which he said had not only improved civility ofthe citizen but had also engendered infrastructural transformation.He expressed the Institute’s willingness to partner with theState government in the area of capacity building through TheInstitute’s Student’s Special Project (SSP). He also expressedappreciation to the governor for providing a plot of land to ICANEnugu District Society to facilitate the building of a Secretariat.Aregbesola Tasks ICAN onInvolvement of AccountantsIn FraudsThe Governor of Osun State, Mr. Rauf Aregbesola, haschallenged The Institute of Chartered Accountants of Nigeria(ICAN) to tackle the involvement of some professional accountantsin some celebrated unethical conducts which are quite worrisome.This call was contained in a speech he delivered while hostingthe 48 th President of ICAN, Mr. Adedoyin Owolabi who was ontour of Osun State District Society of ICAN.The Governor who noted incidents of poor corporategovernance and deliberate fraudulent practices such as thereported oil subsidy scandal, police pension misappropriation,said, effort was needed from professionals like the charteredaccountants to correct these anomalies.His words, ‘I am hereby challenging your noble Institute tolook into this urgently with a view to coming up with propositionsmeant to ensure a robust and meaningful financial framework andmonitoring mechanism of same. The masses are looking up toyou and of course you cannot afford to let us down’.While thanking the governor for engaging charteredaccountants in his cabinet as Commissioner for Finance andCommerce as well as Special Advisers, the ICAN Presidentadvised him to deliver the dividends of democracy to the peopleof the state efficiently and at minimal cost. He therefore assuredhim that The Institute would not lower its standard in terms ofservice delivery.SIAO Is a Bridge Between Smalland Big Firms — OwolabiThe 48 th ICAN President, Doyin Owolabi has described SIAOPartners, a firm of Chartered Accountants, as a bridge betweensmall and big firms. He stated this at The Institute’s Secretariat,Victoria Island, Lagos, while playing host to the firm’s five-mandelegate led by its Principal Partner, Pastor Ituah Ighodalo, duringa courtesy visit.He said, “SIAO has come of age and I am proud to identifywith you being a strong representative of my generation in theprofession. In view of your composition, a convergence of solepractices to form more robust and stronger practice, you arelike a bridge between the big and the small firms”. He said tohis visitors: “You have simply carried out IFAC’s policy whichencourages the merger of weak smaller firms to form strong andvibrant practice and discourages the acquisition of these smallfirms by the big ones”.Responding, Pastor Ighodalo said, “this is the very first officialvisit of SIAO to ICAN and we are here to congratulate DoyinOwolabi on his investiture as the 48 th President of our Institute”.Further he said, “we are also here to introduce SIAO to TheInstitute, discuss issues that are germane to ICAN and Nigeria,proffer suggestions and lend full support to The Institute in everyarea we can”. He noted that the discrimination against local firmsand preference for foreign ones had reached the roof top evenat the Federal level. This he said was adverse to the growth oflocal firms and therefore urged The Institute to call for unbiasedtreatment and fair competition to engender growth of local firms.He also advised that ICAN should make more comments andcontribution to the national budget.ICAN Membership Is NotDiscriminatory, Says Doyin OwolabiThe 48 th President of the Institute, Mr Doyin Owolabi,has tried to disabuse the students of the Departmentof Management Accounting, Ladoke Akintola University ofTechnology, Ogbomosho, of the erroneous belief that ICANexamination is difficult and meant for certain categories of people.He did this during an interactive session organised by membersof ICAN Ogbomosho/Oyo & District Society during his tour of theDistrict. He said: “Membership of ICAN is open to all categoriesof people regardless of their race, ethnic and socio-economicbackground as long as such individuals are able to prove beyondreasonable doubt that he/she are worthy of the certificate.”Owolabi also encouraged the students to take advantage ofICAN Scholarship Scheme and embrace a flourishing career inthe Accountancy Profession.In a related development, the President also disclosed thatthe relationship between ICAN and ANAN was cordial. Hemade this statement when he paid a courtesy visit to the ActingVice-Chancellor of Ladoke Akintola University of Technology(LAUTECH), Ogbomosho, Professor Adeniyi SulaimonGbadegesin, who was represented by the Provost of College ofHealth Sciences, Professor Ayoade Adesokan.Owolabi recalled that two years ago, when Association ofNational Accountants of Nigeria (ANAN) applied for membershipof the International Federation of Accountants (IFAC), theumbrella body for all Accountancy Bodies around the world,ICAN sponsored and mentored the Association in line with theIFAC guidelines. He said; “ICAN is now playing the role of a bigbrother to ANAN and as a result, the relationship between thetwo bodies has been cordial”.The ICAN President also used the opportunity to urge theLAUTECH management to take advantage of the variousTHE NIGERIAN ACCOUNTANT October/December, 201258

News/Eventsprogrammes of The Institute such as the Mandatory ContinuingProfessional Education (MCPE), Annual Accountants’ Conference,Intensive Course on International Financial Reporting Standards(IFRS) to improve staff capacity on a regular basis in order to keepthem abreast of the current trends in the Accountancy Profession.Emulate ICAN, Don Advises OtherProfessional BodiesThe Vice Chancellor of Ajayi Crowther University, Oyo,Professor Timothy Kolawole Jaiyeoba, has urged otherprofessional bodies in Nigeria to emulate The Institute ofChartered Accountants of Nigeria (ICAN). He made this statementwhen the 48 th President of ICAN Mr. Adedoyin Idowu Owolabi paidhim a courtesy visit in his office.He posited that ICAN as a trail blazer should be emulatedby all other professional bodies as far as good service deliveryis concerned. He added that professionals trained by ICAN aremost useful to the society.In his response, the ICAN President reiterated that it wasa culture of The Institute for any sitting ICAN President to visitDistrict societies as a way of getting feedback from membersas well as their employers. He announced that ICAN had madeprovision for a grant of N500,000 for any of its members whowished to pursue a PhD programme in order to encouragemembers to attain academic excellence as well as add value totheir employers.He also stated that The Institute had a scholarship schemefor the benefit of students and graduates of Institutions of higherlearning in Nigeria whose Accountancy Programme is accreditedby ICAN. He therefore urged members and students to takeadvantage of these unique opportunities.Accounting Students Must Registerfor ICAN Examination beforeGraduation — YABATECH RectorDr. Harrieth Akubuiro, Deputy Rector, Administration, YabaCollege of Technology (YABATECH), Yaba, Lagos, has saidthat the management of the school will ensure that all accountancystudents in the institution register with The Institute of CharteredAccountants of Nigeria (ICAN) and sit for its examinations beforegraduation.The Deputy Rector who represented her boss, Dr. KudiratLadipo, gave this assurance while receiving the 48 th Presidentof ICAN, Mr. Doyin Owolabi in her office. She said, “being thefirst higher institution in Nigeria, YABATECH and ICAN, theforemost Accountancy professional body in Nigeria, have a longstanding relationship”. She promised to ensure that students inthe Accountancy department pass ICAN examinations beforegraduation.Earlier, the ICAN President had observed that majority ofYABATECH Accountancy students were no longer registeringfor ICAN student membership nor sitting for its examinations.He said YABATECH student used to be in the fore front inICAN membership and many were even prize winners at theexaminations.“You need to review this stand in order to regain your pride ofplace in the Accountancy profession because students in mostprivate Universities have taken over and they are even qualifyingas ICAN members before graduating or during their youth serviceyear,” the ICAN President charged.Utilise Your Excess CapacityPositively, ICAN Boss Urges StudentThe 48 th President of the Institute of Chartered Accountantsof Nigeria, Mr. Doyin Owolabi, has urged Nigerian Studentsto put their excess capacities to good use by engaging in usefuland developmental programmes instead of engaging in socialvices like cultism, drug abuse, lesbianism, homosexualism, etc.Owolabi gave the advice during an interactive session withstudents of the Department of Accounting & Finance, AjayiCrowther University, Oyo. He also told them that the Council ofThe Institute had put in place a scholarship scheme for the benefitof students and graduates of Institutions of higher learning inNigeria whose Accountancy Programme was accredited by ICAN.He therefore urged Nigerian students and graduates to takeadvantage of these unique opportunities. He said that the ICANScholarship scheme is open to both students & graduates ofAccounting and non-accounting programmes. The Scholarshipscheme entails free ICAN Examination fees and free readingmaterials.ICAN Members Are WorthyAmbassadors of AccountancyProfessionThe Deputy Provost of the Federal College of Education(Special), Oyo, Mr. Durojaiye Akinyemi has said that membersof The Institute of Chartered Accountants of Nigeria (ICAN) areworthy ambassadors of the accountancy profession.Speaking on behalf of the Provost, Mr Emmanuel OlufemiAdeniyi, Akinyemi stated this when the 48 th President of TheInstitute of Chartered Accountants of Nigeria (ICAN), Mr. DoyinOwolabi, paid a courtesy visit to the College on Tuesday,September 11, 2012.He said that the College was lucky to have a number of ICANmembers on its payroll, adding that all the ICAN members on theirpayroll had exhibited honesty, trustworthiness and confidentialityin discharging their duties. He therefore gave kudos to ICAN forproducing credible professionals.GraduationDr Olugbenga Coker, the Chairman of the United KingdomDistrict of ICAN, completed his PhD at Kings College, Londonand had his graduation ceremony at the Barbican Centre, Londonon Wednesday, 24 th October 2012. With the support from ICAN,through a research grant, his research was extended to covera Nigerian NGO, with his thesis entitled “Accountability in Non-Governmental Organisation: Theory and Practice”.THE NIGERIAN ACCOUNTANT 59October/December, 2012

INSTRUCTIONSTO AUTHORSAuthors seeking to have their articles published in TheNigerian Accountant are advised to adopt the followingguidelines:1. Article must be well researched on contemporary issuesin the field of Accounting, Audit, Investigations and ForensicAccounting; Taxation and Fiscal Policy Management;Consultancy and Information Communication Technology;Insolvency and Corporate Re-Engineering; Public FinanceManagement and Corporate Finance Management;Banking; Insurance; Manufacturing; Capital Market;Finance; etc.2. All articles should be typed on standard A4 paper andmust not exceed twenty pages in 12 points font and doublespaced.3. The title page should include the title and author’scontact information (no other page should include author’sinformation).4. The second page should include the title and an abstractof not more than 150 words.5. The paper must be properly referenced. The AmericanPsychological Association style is preferable in the followingformat:a) In the text: Author’s name and year of worke.g. Lucey (1997) or (Lucey, 1997) at the end ofsentence. Page numbers must be included for directquotations, e.g. (Lucey, 1997, p.8).b) List of references: arranged in alphabetical order inthe author-date format, e.g.Book ReferenceLucey, T. (1997), Management InformationSystems (8 th ed.), London: Letts Educational.Journal Article ReferenceWainer, H. (1997), Improving Tabular Displays:With NAEP Tables as Examples andInspirations, Journal of Educational andBehavioural Statistics, 22, 1-30.Internet ReferenceBaker, F.M. & May, A.J. (2007), SurveyResearch in Accounting.Unpublished manuscript retrievedJanuary, 2008 fromhttp://www.maybaker.org/journals/webref.htmlTwo Hard copies of the paper saved in Microsoft Wordshould be sent to the editor while the Soft copy should beforwarded to:corporateaffairs@ican.org.ngdaajigbotosho@ican.org.ng ordayoajigbotosho@yahoo.com.ADVERTISEMENTRATESColour=N=Outside Back Cover (OBC) 150,000.00Inside Front Cover (IFC) 120,000.00Inside Back Cover (IBC) 110,000.00Full Page (ROP) 100,000.00Centre Spread 200,000.00Bottom Strip 50,000.00Black & White=N=Full Page (ROP) 80,000.00⅔ Page 60,000.00½ Page 50,000.00⅓ Page 40,000.00¼ Page 30,000.00Bottom Strip 20,000.00Advertisement is accepted provided it meets therequired standards:1. Advertisement must be prepaid.2. Art work to be provided by advertisers inelectronic format: pdf or jpg.3. Art work may be sent by email (as attachmentto: oguobadia@ican.org.ng) or submitted ina CD.4. Art work to be submitted two weeks toproduction week.For further details, please contact:Corporate Affairs DepartmentThe Institute of Chartered Accountants of NigeriaPc. 16, Idowu Taylor Street, Victoria Island, LagosTel: +234-1-7648895, 07098115163Website: www.ican-ngr.org

DevelopmentCOVERRevenue Assuranceat State Level:A Panacea for Reducingthe Cost of GovernanceByKABIR TAHIR HAMIDEvery government, be it federal,state or local government,is established with a view toproviding social services thatwould improve the generalwell-being of its citizenry. For everygovernment, therefore, to achieve itsobjectives, it is required to adopt measureswhich would ensure effective revenuegeneration,as well as, judicious utilisationof resources at its disposal.The Nigerian public service used tohave a cherished history of committed,dedicated and valuable service, until afew decades ago, when reckless misrulecreated a spiraling decline and systemicand institutional decomposition. Theservice came to be characterised by lackof professionalism, excessive partisanship,endemic corruption, slowness andinefficiency, and crass selfishness andgreed (Hamid, 2008).The tenets of public service, whichinclude honesty, integrity, loyalty, probity,accountability, transparency, impartiality,discipline, commitment, diligence, expertiseand competence, among others, have notonly been violated by public officials butalso eroded by political office holders.Thus, paving way for the enrichment of thefew, who are in power and authority, and inturn, the impoverishment of the majority ofthe citizens who are subjected to poverty,squalor, insecurity and violence. All greatnations of the world did not attain theirenviable status without good governance,revenue assurance and moral uprightnessby both their leaders and followers.Public governance may be definedas use of political authority to promoteand enhance societal values – economicas well as non-economic – that aresought by individuals and groups. It is theprocesses whereby values in society, atdifferent levels, are realised. On the otherhand, Revenue Assurance (RA), is aboutimproving revenues and cash flows andeliminating leakages, excesses, abusesand fraud, as well as, minimising operatingcost. Thus, RA in public governance ismeant to reduce the excessive share ofthe budget being allocated to personneland overhead costs; reduce the cost ofgovernance in general; improve resourcemanagement by curtailing wastefulexpenditure and increasing the level ofproductivity and efficiency, and ensurebudget discipline (adherence to limits).There is a wide consensus that goodgovernance must lead to broad-basedinclusive economic growth and socialdevelopment. It must enable the state,the civil society and the private sector toenhance the well-being of a large segmentof the population.A number of studies have exposedmany areas of wastage and fund leakagein the public budget, at all levels ofgovernment in Nigeria in the last 12 yearsof democracy (Adeolu and Evans, 2007;Hamid, 2007; Nurudeen and Usman, 2010;Hamid, 2011; Kalama, Etebu, Charlesand John, 2012; and Nzeshi, 2012). Infact, it has become evident that the muchdreadedcorruption in the public serviceexemplified by the looting of public fundsstarts with the budget. It is an open secretthat senior civil servants are some of therichest persons in Nigeria today eventhough their stupendous wealth cannotbe equated with their legitimate wages(Nzeshi, 2012).It is common that audit reports in Nigeria,at all levels, reveal flagrant disregardfor rules and procedures, overthrow offinancial discipline, accountability, probityand transparency, which the treasurieswere set-up to establish and protect.These abuses/breaches range from variedduplication of contracts, over-valuation ofcontracts, fictitious payments of contracts,non certification of payment vouchers bythe internal auditor, among others. Otherfrauds in treasury activities may includeover payment to existing staff, paymentof salaries and allowances to dead orTHE NIGERIAN ACCOUNTANT 32October/December, 2012

DevelopmentCOVERretired staff and ghost workers. Theseare clear manifestations of the collapse ofstandard policy and practices in treasurydepartments, and hence the inability of mostgovernments to achieve their objectives.Standard treasury management policy andpractice is, therefore, particularly essentialin governance in Nigeria, with a view tobeing proactive in preventing persistentlack of efficiency and effectiveness thatcharacterise financial activities in the publicsector, resulting in fraud (Hamid, 2011).In Nigeria, costs associated with therunning of government have increaseddramatically over the years such thatan increasingly higher proportion ofpublic revenue is used to support andimplement the primary functions ofgovernment (Adeolu and Evans, 2007).Rising government expenditure has,therefore, not translated to meaningfuldevelopment as Nigeria still ranks amongworld’s poorest countries.In recent years, everyone in and out ofgovernment in Nigeria seems to agree onthe need to cut the cost of governance,by eliminating areas of wastage in thebudget and the unexplored opportunitiesof entrenching prudence. Many Nigerianswant governments across the three tiers toreduce the cost of governance so that moreresources could be channeled towardsdevelopment projects that impact positivelyon the quality of lives of the citizenry. Butthe call for cutting the cost of governancebecame more pronounced during theprotests that greeted the removal of fuelsubsidy on January 1.Structurally, the paper is organisedinto five sections. In the second section,an attempt is made to conceptualisegovernance, and point to the differingnotions of what it entails and the differencesbetween good and bad governance.Section three contains a conceptualisationof revenue assurance, explaining thediffering notions of what it entails, its typesand its different attributes. Section fourexplains cost of governance and revenueassurance at state level using quantitativedata of 9 years from 2002 to 2010 andsection five concludes with a recap ofissues that involve reducing the cost ofgovernance at state level in Nigeria forrevenue assurance.THE CONCEPT OF GOVERNANCEGovernance is seen as the mannerin which power is exercised in themanagement of a country’s economicand social resources for development.It is the use of political authority andexercise of control over a society, andthe management of its resources forsocio-economic development. This entailsthat governance has to do with soundmanagement of public resources of whichpublic fund is a crucial component.Good governance, therefore, is preoccupiedwith how to achieve a highstandard of living for its populace byemploying every strategy within theconstitutional provision. It is in this veinthat Section 16 (1) of the 1999 Constitutionstates that, “the state shall, within thecontext of the ideals and objectivesfor which provisions are made in theconstitution: (a) harness the resourcesof nation and promote national prosperityand an efficient, dynamic and self-relianteconomy; (b) control national economy insuch a manner as to secure the maximumwelfare, freedom and happiness of everycitizen on the basis of social justice andequality of status and opportunity; and (c)that suitable and adequate shelter, suitableand adequate food, reasonable nationalminimum living wage, old age care andpensions, and unemployment, sick benefitsand welfare of the disabled are providedfor all citizens.” From this discourse, itis clear that the essence of governanceis the socio-economic development of astate and the improvement of the generalwell-being of the citizenry.Cost of GovernancePublic expenditure refers to theexpenses which government incurs inthe performance of its operations. Withincreasing state activities, it may be easyto judge what portion of public expenditurecan be ascribed to the maintenance ofgovernment itself and what portion to thebenefit of the society and the economyas a whole.Government expenditure is broadlydivided into two (2) main categories,namely recurrent expenditure and capitalexpenditure. Recurrent expenditure isthe type of expenditure that happensrepeatedly on daily, weekly or evenmonthly basis. This includes for examplepayment of pensions and salaries,administrative overheads, maintenance ofofficial vehicles, payment of electricity andtelephone bills, water rate and insurancepremiums, etc. Capital expenditure onthe other hand refers to expenditure oncapital projects. This includes constructionof houses, roads, schools and hospitals,human capital development (expenditureson education and health), purchase ofofficial vehicles, construction of boreholesand electrification projects, etc.Public finance literature is in consensusthat cost of governance is associatedwith recurrent expenditure, which is theexpenditure ascribed to the maintenanceof government itself and not for the benefitof the society and the economy as awhole. Some scholars argue that increasein government expenditure on socioeconomicand physical infrastructuresencourages economic growth. For example,government expenditure on health andeducation raises the productivity of labourand increase the growth of national output.Similarly, expenditure on infrastructuresuch as roads, communications, power,etc, reduces production costs, increasesprivate sector investment and profitabilityof firms, thus fostering economic growth(Nurudeen and Usman, 2010).A point of consideration is to consider howthe State governments’ budget is dividedstrictly between recurrent and capitalexpenditures. Where a rising proportionof government budget, at whatever level,is used to support the administrativestructure of government, poverty is boundto be pervasive as economic growth slowsdown or even stagnates (Adeolu andEvans, 2007). What this implies is thatmaintaining government administrativestructures comes at gargantuan costs tothe economy, as available funds are barelysufficient to finance projects in vital sectorsof the economy. Enormous administrativeexpenditure is not only used to financean unusually large, inefficient and corruptcivil service personnel, but also a largerthan optimal executive cabinet, and anineffective legislature.However, citizens would perceivegovernment as a burden when its recurrentexpenditure is repeatedly higher than itscapital expenditure, which should impactpositively on the economy, especiallyin the areas of employment generation,investment and other activities that inducegrowth.THE CONCEPT OF REVENUEASSURANCERevenue Assurance (RA) is a disciplinethat has existed for over 20 years. It is aTHE NIGERIAN ACCOUNTANT 33October/December, 2012

DevelopmentCOVERconcept that was previously applicableto telecommunications industry, but itspractice has gradually spread to a numberof industries and organisations.Revenue Assurance (RA) may bedefined as the process within anorganisation of ensuring that all possiblerevenue is collected accurately and in atimely manner, identifying where revenuegets lost, and minimising such losses byeliminating revenue leakage and loweringoverhead costs whilst managing fraud toan acceptable level. RA is, therefore, aboutimproving revenues and cash flows andeliminating leakages, excesses, abusesand fraud as well as minimising operatingcost.Revenue assurance is used to describea service performed to identify operationalunderperformance relating to operatingcost and collection of revenue. RA canalso be described as a service associatedwith identifying, correcting and preventingerrors which might cost organisationsenormous financial resources due toineffective cost control, unnecessaryexpenses, revenue leakages and fraud,excesses and abuses, financial improprietyand extravaganzas in the discharge ofresponsibilities. RA can also be used toensure compliance with regulations andinternal policies, though it cannot replaceeffective implementation of businesscontrols. In order for RA to be effective,a business organisation needs to ensurethat they have in place good corporategovernance practices. RA can be used inpublic governance to eliminate overlap,duplication and redundancies which leadTable 1:State Government’s Finances (2002-2010) (Naira Billion)STATE GOVT. FINANCES2002 2003 2004 2005 2006 2007 2008 2009 2010 1/A Total Revenue Plus Grants 669.83 855.01 1,113.96 1,419.66 1,543.80 2,065.40 2,943.80 2,590.70 2,739.40Share of Federation Account 2/ 388.30 535.18 777.21 921.00 1,016.10 1,109.30 1,709.20 978.38 1.353.7Share of Excess Oil Revenue – – – – 154.70 258.90 354.10 376.80 329.00Share of Augmentation – – – – – – – 272.80 162.90Exchange Gain – – – – – – – 58.90 14.80Share of VAT 52.63 65.89 96.20 87.45 110.60 144.40 198.10 229.30 275.60Internally Generated Revenue 89.61 118.76 134.20 122.74 125.20 305.70 441.10 461.20 420.50Grants and Others 129.72 134.18 104.35 137.45 125.30 209.40 179.00 188.00 140.40Share of Stabilisation Fund 9.57 1.00 2.00 10.78 11.90 37.70 53.40 29.70 42.50State Allocation – – – 140.24 – – – – –B Total Expenditure 724.55 921.16 1,125.06 1,478.60 1,586.80 2,116.10 3,021.60 2,777.00 2,871.40Recurrent Expenditure 424.20 545.31 556.81 789.13 894.30 1,217.40 1,505.60 1,426.10 1,437.00Capital Expenditure 283.48 324.02 412.93 514.73 584.00 854.80 1,455.70 1,284.20 1,339.00Extra-Budgetary Expenditure 16.87 51.83 155.32 174.74 108.50 43.90 60.30 66.70 95.40C Current Balance 3/ 245.6 309.69 557.13 630.51 649.40 848.00 1,429.20 1,164.60 1,302.40D Overall Balance 3/ -54.72 -66.15 -11.10 -58.94 -43.00 -50.70 -86.80 -186.20 -132.10E Financing 54.74 66.17 11.12 58.96 43.00 50.70 86.80 186.20 132.10External Loans 15.9 14.68 – – – 5.90 38.30 8.00 24.80Internal Loans 32.45 71.03 4.4 22.56 27.00 25.70 60.20 162.30 225.80Operating Cash Balance 5.09 13.01 – 33.26 16.10 19.10 -11.70 16.00 -118.50Other Funds 1.3 -32.55 6.72 3.14 16.10 19.10 -11.70 – –Note: 1/ Provisional2/ Gross Statutory Allocation3/ Positive (+) sign connotes surplus while (-) sign connotes deficitSources: State Governments’ Ministries of Finance & Office of Accountant-General of the Federation’s Report (2002-2010)Central Bank of Nigeria Annual Report and Statement of Accounts (2002-2010)THE NIGERIAN ACCOUNTANT 34October/December, 2012

DevelopmentCOVERto inefficiencies and wastage.Revenue Assurance is the work effortto ensure that processes, practices, andprocedures maximise revenues; it isend-to-end, crossing all departmentalboundaries; it involves completeness,accuracy and timeliness of data;ensures revenue maximisation and fraudcontainment. RA services may be providedinternally by an organisation through itsrevenue assurance units and internalaudit or externally by accounting firms,management consultants and softwarehouses.Figure II:Recurrent Expenditure (RE) (2002-2010) in Billion NairaDimension/Types of RevenueAssuranceRA can take any of the followingdimensions, namely Reactive, Active orProactive.1. Reactive Revenue Assurance:Reactive Revenue Assurance is used tojust detect the existing revenue leakageafter it occurred.2. Active Revenue Assurance:Active Revenue Assurance addressesproblems as they occur. This approach isdesigned to initiate corrective responsesprior to incurring any losses. The actualbusiness process is monitored in real-time.Discovering problems in real-time helpsin correcting the leakage before it causesdamage and impacts the customer.3. Proactive Revenue Assurance:Proactive Revenue Assurance acts inanticipation. Controls and other measuresare implemented in order to preventproblems from occurring in advance.Source: Developed by the Author from Table 1Source: Developed by the Author from Table 1The methods described above arecomplementary. As a first step, it isimportant to detect and fix the actualrevenue leakage in an organisation. Afterfinding the reasons for that, active orproactive RA should be implemented toprevent damage or as an ultimate goal toprevent the occurring of leakage.Core Elements of RARevenue assurance work should havethree core elements, namely:1. All revenue assurance activities– large and small – should always beFigure I:Internally Generated Revenue (IGR)(2002-2010) in Billion Nairaevaluated, prioritised and carried out withfinancial benefit as the prime target.2. In order to deliver tangible results,there is a need for a comprehensivetoolbox of methods and solutions – builton hands-on experience and replicationof best practices to control activity costs.3. In many cases, operators benefitfrom engaging an external partner toboost the outcome of revenue assurance.An external partner cannot only deliverleakage detection and monitoring solutionsbut also share insights and generalexpertise on how to solve problems.Furthermore, a true partner supports theoperator and understands its businessenvironment.COST OF GOVERNACE ANDREVENUE ASSURANCE INNIGERIAN STATESTable 1 shows the State Government’sfinances (in Billion Naira) from 2002-2010.The table shows that the States had thehighest Total Revenue of N2,943.80 billionin 2008, followed by 2010 and 2009 withN2,739.40 billion and N2,590.70 billion,respectively while the lowest amount oftotal revenue in the years under reviewwas in 2002 with N669.83 billion.Table 1 and Figure I show the trendon IGR at State level from 2002-2010,with the highest IGR of N461.20 billionin 2009 and the lowest IGR of N89.61billion in 2002. The Revenue AssuranceTHE NIGERIAN ACCOUNTANT 35October/December, 2012

DevelopmentCOVERTable 2:Summary of State Governments’ and FCT Finances(State-by-State, 2010 1/) Naira BillionS/N STATE Total Revenue IGR Personnel Overhead Capital Extra- Total& Other Cost Cost Expenditure Budgetary ExpenditureReceiptsExpenditure1 Abia 53.50 9.90 5.20 0.30 21.80 1.98 63.002 Adamawa 63.20 4.20 11.70 19.30 30.10 2.96 69.103 Akwa Ibom 211.60 12.10 17.90 4.10 160.80 0.96 189.404 Anambra 63.30 4.80 3.70 5.00 30.70 0.69 51.105 Bauchi 80.40 2.30 8.10 14.30 37.40 2.00 77.206 Bayelsa 132.10 3.90 21.50 12.00 35.00 17.00 127.607 Benue 54.30 8.30 14.90 8.40 25.20 3.76 59.308 Borno 48.50 2.10 13.10 8.00 23.90 0.23 51.909 Cross River 45.60 7.10 12.30 8.90 23.70 3.00 56.3010 Delta 179.80 15.60 19.10 16.70 51.30 8.54 173.3011 Ebonyi 35.10 2.10 7.10 3.30 27.70 3.27 44.9012 Edo 63.70 12.40 17.10 17.90 24.40 2.80 72.4013 Ekiti 38.60 2.70 11.40 2.30 18.90 0.39 58.2014 Enugu 41.60 4.10 10.70 6.40 17.60 0.94 39.2015 Gombe 50.70 9.50 7.40 14.40 24.50 1.53 59.9016 Imo 53.10 5.20 6.80 11.30 3.20 5.66 50.1017 Jigawa 54.70 2.40 1.70 5.50 48.10 1.66 65.3018 Kaduna 60.50 9.30 12.10 13.70 27.20 2.97 67.5019 Kano 45.80 12.20 65.40 20.70 12.60 1.05 103.0020 Katsina 51.40 3.20 16.70 5.00 29.40 1.53 26.4021 Kebbi 43.40 3.80 4.50 5.20 36.40 3.23 63.8022 Kogi 45.30 3.30 9.20 3.00 21.20 1.65 41.6023 Kwara 52.20 11.30 6.10 12.40 24.90 0.34 56.6024 Lagos 242.30 147.10 32.70 37.20 157.40 7.60 261.1025 Nassarawa 36.10 2.40 5.70 12.80 10.90 1.28 53.3026 Niger 53.50 3.10 18.00 5.80 6.20 4.54 35.7027 Ogun 53.10 11.20 13.20 9.50 8.50 0.37 33.5028 Ondo 69.60 3.80 14.30 27.20 17.50 1.10 62.8029 Osun 42.50 5.40 14.30 27.00 12.60 0.84 59.7030 Oyo 62.20 11.90 11.20 5.50 26.40 3.07 55.1031 Plateau 43.40 3.60 12.30 14.70 24.70 2.09 65.1032 Rivers 269.50 58.50 36.50 14.10 227.00 1.08 292.8033 Sokoto 49.10 3.10 18.00 5.80 6.20 0.31 31.4034 Taraba 47.20 3.30 10.60 4.90 26.10 0.14 52.0035 Yobe 40.00 1.80 8.50 3.70 20.50 0.08 41.0036 Zamfara 70.20 2.90 14.80 1.60 10.30 2.12 69.0037 FCT 62.30 10.30 11.20 3.80 28.80 1.97 62.00Total 2,709.40 420.20 525.00 391.70 1,339.10 94.73 2,841.60Note: 1/ Provisional2/ Gross Statutory Allocation3/ Positive (+) sign connotes surplus while (-) sign connotes deficitSources: State Governments’ and FCT Accountants-General Reports (2010)Central Bank of Nigeria Annual Report & Statement of Accounts (2010, Pp.239 & 240)THE NIGERIAN ACCOUNTANT 37October/December, 2012

DevelopmentCOVERTo better understand the issue of cost ofgovernance and revenue assurance at Statelevel, Figures V, VI and VII were developed fromTable 2 using 2010 data on state-by-state basis.On personnel and overhead expenses in2010, Kano, Lagos and Rivers are top on the list,while Abia, Jigawa and Anambra had the lowest.Figure V shows great variations from State-to-State, implying differences in the level of costcontrol and revenue assurance in the States.IGR picture in 2010 shows that except Lagosand Rivers which had significant IGR of N147.10billion and 58.50 billion, respectively, all the resthad an insignificant IGR of between N15.60billion to N1.80 billion.Figure VI shows great variations from Stateto-Statein terms of IGR, implying differencesin the level of revenue assurance in the States.Kano State which had the highest personnel andoverhead cost in 2010, generated a meager IGRof N2.20 billion making it the fifth on the list.Surprisingly, Figure VII reveals that mostof the States with higher extra-budgetaryexpenditure had lower IGR and higher personneland overhead expenses. These question the costminimisation strategies and revenue assurancemechanisms in the States.CONCLUSIONThe question of efficiency in governanceis about ensuring that each amount of publicfunds is spent judiciously. In other words, everynaira of public funds must be spent in a waythat collective, not private welfare of citizens ismaximised. In the absence of strong politicalinstitutions, the reduced cost of governance couldonly come if a benevolent set of public officers isin power. Since this is highly unlikely, we needto place institutional constraints on public officeholders and technocrats in a way that minimisesthe extraction of rent from the state. This is thebetter path to follow if the cost of governance isto be drastically reduced in Nigeria.Thus, no matter the quantum of financialresources in the hands of the government, thedesired objectives may not be achieved if thecost of governance is not reduced to ensurerevenue assurance in Nigeria. This is necessaryfor controlling costs and achieving the overallobjectives of governance. No institution of thesize of even the smallest public organisationcan prosper without effective cost control,minimisations of expenses, blockage of revenueleakages and control of fraud, excesses, andabuses, financial impropriety, extravaganzas inthe discharge of its responsibilities.Over the years, Nigerians have alwaysassociated security vote with governors andnursed the belief that it is prone to abuse asFigure V:Personnel and Overhead Expenses State-by-State(2002-2010) in Billion NairaSource: Developed by the Author from Table 2Figure VI:Internally Generated Revenue (IGR) State-by-State(2002-2010) in Billion NairaSource: Developed by the Author from Table 2Figure VII:Extra-Budgetary Expenditure (EBE) State-by-State(2002-2010) in Billion NairaSource: Developed by the Author from Table 2THE NIGERIAN ACCOUNTANT 38October/December, 2012

DevelopmentCOVERwell as resulting in a duplication of thevotes allocated to the security agenciesin the budget. It is, however, astonishingto find security vote as an item runningthrough all Ministries, Departments andAgencies (MDAs). More surprisingly, asfound by Nzeshi (2012) even agencieswhose primary functions revolves aroundsecurity have security vote allocationsin the budget. There have also beencases of duplicated budgetary provisionsunder various sub-heads to attract moreallocations that would be eventuallysiphoned at the end of the fiscal calendar(Nzeshi, 2012). Similarly, budgets areusually filled with wasteful expenditurefrom which great savings can be made.There were also too many MDAs collectinghuge sums of money through the budgetand delivering little or no tangible services.RECOMMENDATIONS1. There is the need to reduce recurrentexpenditure to sustainable level throughreducing waste, inefficiency, corruptionand duplication in government, as well as,make capital spending more effective.2. There is the need for morecitizens’ participation to ensure prudence,transparency and accountability in thebudgeting process.3. There is the need for merging,restructuring and even repealing theirenabling laws to ensure that non-essentialagencies ceased to exist to prune downwasteful expenditure.4. There is the need to continue theimplementation of the monetisation ofbenefits by ensuring that the practice ofpurchasing fleet of cars for public officerswas discouraged, except ambulances,Black Maria, and Hilux vans. The continuedimplementation of the monetisationprogramme will save resources and cutdown expenditure.5. The number of commissioners inthe States Executive Councils as well asspecial advisers and personal assistantsto the Governors should be streamlinedto optimum. Similarly, none of theseappointed officials should have more thanone official vehicle.6. Regulatory agencies and authoritiesin Nigeria should ensure that all salariesand allowances of civil servants, publicservants including political office holdersconform to due process, constitutionalprovisions and existing financial rulesand regulations. This will no doubt reducefriction and instability within the entiresystem.7. Efforts should also be made to ensurefiscal discipline through effective publicpolicy formulation and implementationaimed at reducing recurrent expenditureand budget deficits.8. One of the major costs ofgovernance, is the larger than optimal sizeof the executive cabinet. It is possible toreduce the cost of governance by ensuringan optimal size of cabinet, where merit andcore competence are the primary reasonsfor appointment to serve in public offices.Revenue Assurance is a combinationof organisational structure, processes,technology and information responsiblefor monitoring the revenue process.Its activities are designed to provideassurance that business processes andsystems are performing as developed, inorder to reduce the risk of revenue leakage,by ensuring that risks have been identifiedand appropriately addressed; promoteoperational efficiency, by analysingprocesses and systems, identifying gapsand design flaws which drive up operatingcosts; and effectively communicatebusiness risks to management, in orderto allow informed decisions and eliminatesurprises.Good governance can only achievethe desired objective if corruption isaddressed and completely eradicatedfrom the society because no programmecan be successfully implemented under acorrupt environment. Revenue leakage isa growing problem in public governance inNigeria. To get the most out of a revenueengagement, it has to be carried out as partof a government performance strategy –and not be just a leak-detection exercise.The task of reducing the cost of governancefor revenue assurance at state level doesnot rest with the executive, legislature andjudiciary alone. It is a task demanding thecollective effort of all stakeholders.REFERENCES1. Adeolu, M.A. and Evans,S.C.O. (2007), Analysis of the Costof Governance and Options for ItsReduction in Nigeria, Nigerian Journalof Economic and Social Studies, Volume49, No. 1, www.covenantuniversity.edu.ng. Retrieved on 14 th April, 2012.2. CBN (2001-2010), Annual Report& Statement of Accounts, www.cenbank.org. Retrieved on 14 th April, 2012.3. Hamid, K.T. (2008), PromotingGood Public Governance andTransparency, A Paper presented at atwo-day Sensitisation Workshop for theCommemoration of the International DayAgainst Corruption, organised by theKano State Public Complaints and AnticorruptionDirectorate, held on Wednesday31 st December 2008 (6 th Muharram, 1430A.H.) at the Murtala Muhammad Library,Ahmed Bello Way, Kano (Unpublished).4. Hamid, K.T. (2011), StandardTreasury Management Policy andPractice: The Starting Point of FraudPrevention, A Paper presented at aSeminar for Senior Local GovernmentOfficials of Jigawa State on the theme“Emerging Issues in Local GovernmentAuditing and Treasury Management”, heldat Dutse, Jigawa State, from 25 th to 27 thOctober (Unpublished).5. Hamid, K.T. (2011), The Roleof Financial Control in the Socio-Economic Development of Nigeria, APaper presented at the Induction Trainingof the Associate Members of the Institute ofFinance and Control of Nigeria (IFCN), withthe theme “Bridging the knowledge-Gapin the Practice of Finance and Control inNigeria in the 21st Century”, held at Lagos,on Saturday 9th July (Unpublished).6. Kalama, J.; Etebu, C.E.; Charles,A.M.; and John, S.M. (2012), Legislator’sJumbo Pay, Cost of Governance and theState of Education in Nigeria: Issues andContradictions, ISSN 2240-0524 Journalof Educational and Social Research, Vol. 2(4), January 2012, Pp.73-77. www.mcser.org/images/stories/JESR...Issues/JESR.../john-kalama.pdf. Retrieved on 14 th April,2012.7. Nurudeen, A. and Usman, A.(2010), Government Expenditure andEconomic Growth in Nigeria, 1970-2008:A Disaggregated Analysis, Business andEconomics Journal, Volume 2010: BEJ-4,Pp.1-11, astonjournals.com/manuscripts/Vol2010/BEJ-4_Vol2010.pdfSimilar.Retrieved on 14 th April, 2012.8. Nzeshi, O. (2012), Budget 2012:Paradox of Cutting Cost of Governance,www.proshareng.com/news/16495 –Cached. Retrieved on 14 th April, 2012.* Dr. Kabir Tahir Hamid, a Lecturer inthe Department of Accounting, BayeroUniversity, Kano, delivered this paper atthe 7 th Northern Districts AccountantsConference at Kano in April 2012.THE NIGERIAN ACCOUNTANT 39October/December, 2012

Technicalclaims to greatness will be a mere vision that hopefully will notescalate to a nightmare.In Lagos State, we recognise that the only way to developis to build enduring institutions. This is why the economic thrustof our Government has been one of infrastructure developmentand renewal to drive economic growth as the critical strategy topoverty alleviation. This in fact is our raison d’être. The reasonfor our existence.In other words, we are convinced that the road out of povertywill require us to develop the economy of Lagos and the compassof development directs us towards the renewal of criticalinfrastructure as the path we must tread.We have moved a step further and re-focused our energieson the vigorous pursuit of a developmental agenda distilled fromour ten-point agenda, that we call PATH; an acronym for the 4key sectors of Power, Agriculture, Transportation and Housing.We firmly believe that investment in these key areas will driveeconomic growth, provide jobs and propel us on that path toprosperity and poverty eradication.This is why not less than 60% of our annual budget has beencommitted to capital expenditure for the last 3 (three) and halfyears that has literally turned Lagos State into a big constructionyard where roads, bridges, rail, jetties, drainages, schools,hospitals, power plants, waterworks and waste water facilities,to name a few are being built.The result has been a massive creation of jobs, an active valuechain of supply, a wider and growing income tax net that continuesto support the finances of the State and makes us about 70%self-dependent on our internally generated revenue.In Lagos State, budgeting is very serious business and Ipersonally chair almost all sessions leading to the planning anddelivery of every budget. Even if I do not always agree with mymuch respected Hon. Commissioner for Economic Planning &Budget, Mr. Ben Akabueze and his solid team, I have learnt toact on his sensible advice on almost all matters that relate toeconomic planning and budget.We hold quarterly budget review meetings to monitor ourbudget performance and implementation and this is why since2007 we have achieved a consistent minimum of 70% budgetperformance and implementation to date. We are not given toself-adulation but we are probably the only State in Nigeria thatwill survive if oil revenues suddenly fall to dangerous levels.The message therefore is that any talk of reform orinfrastructural renewal will amount to vision without action unlessthere is budgetary discipline and implementation. I use thoseexamples only to demonstrate what we must replicate nationallyif we are to indeed grow into a lion of Africa; what we must do andhow seriously we must take the budgetary provisions containedin every annual appropriation law that the legislature passes bothat the State and the Federal level.And to take us to heart of the matter I have a few questions.Can we truly develop infrastructure and build enduringinstitutions with a budget that has over 70% recurrent item andbarely 30% capital provision in the face of our clearly deficientinfrastructure?Are we simply going to miss another momentous opportunityfor greatness at such an opportune time in world politics?Can we transform without the rule and the fragrant abusesof the Constitution especially Section 162 that deals with themanagement of the Federation Account?Can there be proper accounting and transparency in themanagement of this all important Federation Account whichbelongs to the Federation Government, 36 State Governmentsand all the Local Governments, if the accounting lines of theAccountant of the Federal Government remain blurred because hepurports to act as the Accountant-General of the entire Federationinstead of the Accountant-General of the Federal Government?On what lawful basis does the Federal Government maintainan “Excess Crude Account” that is not known to the Constitutionor supported by any law if we are truly operating a constitutionaldemocracy?Can National Assembly without question pass an executivesponsored bill to create a Sovereign Wealth Fund to be financedfrom the Federation Account when the Constitution does notsupport it?Ladies and gentlemen, these factual and legal anomaliesraise profound issues about compliance with the rule of law inour democracy and without any doubt, stand at the gatewayto inhibit our march towards building enduring institutions andconsequently, our progress towards prosperity.If anybody is in any doubt, one only needs to look at the riskmanagement issues to understand why many projects are eitheruncompleted or suffering from financing failure and budgetarynon-performance.In a federation where the Federal Government is entitledto 52% of the revenues under the existing revenue allocationformula, it is easy to extrapolate and understand that everybudgetary failure or non-performance approximate to about 52%failure or non-performance in the national economy.Is it therefore any wonder that our infrastructure is not renewingquickly enough or that our economy is witnessing macro growthwithout micro impact by way of jobs and prosperity?So many questions. But more of them for you and this is thecrux of my message to you today. Is ICAN unaware of theseaccounting anomalies or are you agonising about them withoutproffering solutions to remedy them? Are you unthinkablymaintaining a conspiratorial silence or are you reluctant to speakthe truth to authority?How can ICAN continue to maintain its revered and critical rolein national development when the Nigerian National PetroleumCorporation (NNPC) defiantly violates the Constitution by failingto remit all petroleum income to the Federation Account, andorganisations like yours stand by and say or do nothing?What, for instance, is ICAN doing about the state of theeconomy? Are you sitting around twiddling your toes when yearon year Nigeria is recording such poor performance levels of thebudget, or are you doing something about it as a body?For many laymen, the image of the auditor is the most graphicimage of an accountant that they have, much in the same waythat people see only those who dress up and go to court aslawyers. But how seriously are you taking your auditing role wheregovernment is concerned? As a body, are you questioning andexamining government fiscal policies?Was your input sought for the 2013 budget proposal? Was itoffered? Will you continue to leave issues of national developmentto Labour Unions like PENGASSAN and NUPENG, who reactonly to oil industry issues and wages?The cashless policy, the introduction of the N5000 note – areTHE NIGERIAN ACCOUNTANT 23October/December, 2012

Technicalyou speaking as a body to these and other fundamental issueswith the potential for far reaching effects on our economy?I believe the time for self-examination about your role inbuilding enduring institutions for national development is now.The challenge of leadership that can engender sustainabledevelopment and transparency in governance can be met andovercome when organisations like yours, take their role muchmore seriously.This is the essence of representative democracy. We havemoved from a nascent to a participatory democracy, in whichindividuals and corporate citizens alike play a much more activerole in governance.This is also part of the enduring institutions we must build inorder to prosper as a nation and ICAN ought to see itself as aSpecial Interest Group with a key role to play in our democracyand our development. You have the clout to invite key governmentpersonnel, at all levels, be it federal, state or local government,to explain their policies; to explain what they are doing and why.And you must use that clout.This is a wake-up call for you to play a more proactive role. Thepassage of the Freedom of Information Act has made it easier foryou to perform the civic duty of the watchdog of our fiscal policiesand practices on behalf of the people. I dare say we will not getthe best out of our representatives unless you engage as a bodyand provide solutions to the problems that arise.This is a role that the Lagos Chamber of Commerce andthe Manufacturers Association of Nigeria, to name but two, areperforming creditable in Lagos State. They engage with me fromtime to time and this keeps us on our toes.In this regard also, the global financial crisis has helped. Ithas altered the environments in which governments operate andmade them much more open.In addition, the explosion of new information and communicationtechnologies, including social media has encouraged the rapid,global diffusion of ideas and practices that has stimulated citizensinto demanding higher standards of governance, transparencyand accountability in the public sector.Nigeria has not been left out of this revolution. But clearlythere is a compelling need to foster a national commitment tofiscal discipline so that we can begin to build sustainable andenduring institutions. To do this, we must challenge our leadersand institutions like ICAN must be in the vanguard of that move.THE INSTITUTE OFCHARTERED ACCOUNTANTSOF NIGERIA(Established by Act of Parliament No. 15 of 1965)CONCLUSIONI acknowledge that I have probably asked more questions thanprovided answers. But I do hope that these questions will provokein us a desire to entrench constitutional democracy anchored onthe rule of law.A desire championed by ICAN, to establish transparent fiscalpolicies and disciplined practices that will serve as the guide tobridge our infrastructural deficit, and bring us closer to buildingenduring institutions for national development.Ladies and Gentlemen, a desire championed by you. I thankyou all for your attention.* Babatunde Raji Fashola, SAN, Governor of LagosState delivered this paper at the 42 nd Annual Accountants’Conference of ICAN held at the International ConferenceCentre, Abuja.THE NIGERIAN ACCOUNTANT 24October/December, 2012

ConferenceBUILDING ENDURING INSTITUTIONS,A NATIONAL PRIORITY – ICANAt the close of the colourful 42 ndAnnual Accountants Conferencein Abuja in October, it was clearto all participants what Nigeriashould focus on in the years ahead –building enduring institutions that will putpaid to the whims and caprices of insensitiveleaders and keep all and sundry within theboundaries of the rule of law.The lead paper “Building EnduringInstitutions for National Development”presented by Professor Pat Utomi, left noone in doubt that weak institutions abound inNigeria and the situation leaves the countryat the mercy of strong men who dominate.The effect of such dominance, accordingto Utomi, is weakened rule of law andaggravated uncertainties. Utomi explains that while institutionshave and follow rules, strong men have friends and follow whims:The result of the former is calculable probability of outcomes whileuncertainty is the necessary consequence of the latter.Furthermore, according to him, uncertainty makes decisionmakingproblematic and often results in either the avoidanceof economic engagement or the high cost of hedging againstundesired outcomes. These high transaction costs, he says,translate to an economy lacking in competitiveness. The Professorof Political Economics expatiates further that more troubling is highuncertainty which results in poor economic performance that cancreate a class of people who are so left out that they feel they havenothing to lose. He says that, with the belief that such people haveno stake in the social order, they naturally turn to conduct that moreor less usher in anarchy.The reason for Nigeria’s weak institutions is not far-fetched.Utomi says that rather than evolving, many of the country’s so-calledinstitutions in Nigeria have been decreed into existence, adding thatthey are “thus disconnected from the contest and context of conductand so end up not achieving the goals of moderating conduct”. Heposits that institutions matter a lot, hence his concentration on howPresidentDoyin Owolabi;Gov. KayodeFayemi; ICAGPresident,Angela Pesah;ICAN VP, KabirMohammed;and Mrs.Winnie Akpani,MD/CEONorthWestPetroleumICAN President, Doyin Owolabi (right) welcomingGovernors Rochas Okorocha, Ibrahim Dankwamboand Babatunde Fashola to the Conferencestrong institutions are founded by societies,disclosing that many of the institutions theBritish bequeathed to India have continuedto survive while many of those left to Nigeriahave floundered. He enjoins the country tofocus more on how to establish and sustainenduring institutions, adding that all mustunderstand its primacy of place in the questfor human progress.He says that if institutions are to evolveto aid nation-building, it is imperativefor professional bodies and businessassociations to act strongly and in concert.Making reference to the rulings by JusticeCharles Brandeis in the area of helpingto strengthen US institutions and thedoggedness of late Chief Gani Fawehinmi incontributing much to institution-building in Nigeria, Utomi challengeseveryone to stand up and be counted. Pointedly, he says: “I believethat bodies like ICAN and the Nigerian Bar Association should bothlitigate issues until institutions that protect citizens and open thespace for healthy growth in society emerge.”The critical areas for institutions to be built or invigorated,ICAN President welcoming the Central Bank Governor, MallamSanusi Lamido Sanusi to the Conference HallICAN President,Doyin Owolabi,presenting asouvenir to the LeadPaper Presenter,Prof. Pat Utomi atthe Conferencewhile ConferenceChairman, Mr TayoPhilips (right) andPast PresidentKolawole Bajomowatch in admirationTHE NIGERIAN ACCOUNTANT 9October/December, 2012

ConferenceANAN President, Hajia Maryam Ibrahim (left) led a team ofANAN top echelon to the ICAN Annual Conferenceaccording to him, are Education, Law andOrder, Financial Markets, Communicationand Land Reform.Participants agree unanimously on theneed to build enduring institutions thatcan help develop the Nigerian nation. Theconference particularly notes that the problemof slow pace of development, corruption,political, economic and social uncertaintyis largely a result of the absence of stronginstitutions that clearly define the boundaries ofacceptable behaviour and provide for effectivesanctions against those who step outsidethese institutional boundaries, irrespective oftheir social and economic status.Participants also agree that the politicalleadership has not shown sufficient degreeof vision, self-sacrifice, self-restraint andpolitical will in directing the affairs of thenation. According to them, this has led to poorgovernance, which has contributed to theproblem of weak institutions and the attendantconsequences of underdevelopment. Theybelieve that all stakeholders must focus onbuilding strong enduring institutions andregard such as a national priority if the nationis to reverse the trend of underdevelopment.Participants are also of the opinion thatNigerians are suffering under the weight ofhuge infrastructure deficit since the portfolioof physical infrastructure serving the countrywere put in place more than four decadesago. Therefore, they call for concertedefforts by governments to ensure that capitalexpenditures are emphasized in the annualbudgets.Also, Chartered Accountants arecalled upon to play a more active role inpublic governance advocacy and politicalengagement as a way of stamping theirprofessional mark on the political space.They are also enjoined to develop capacityfor generating credible and reliable financialreports that present a true and fair view of theChairman, Conference Committee, Mr TayoPhillips; ICAN President, Mr Doyin Owolabi andICAN’s 2nd Deputy Vice President, Otunba FemiDeru at the welcome programme at the airportElekole of Ikole Ekiti, HRH Oba AjibadeAdewunmi Fasiku and his Olori exchangingpleasantries with an ICAN Council member,Mallam Tijjani Musa Isa at the gala niteGovernor Ibikunle Amosun, Senator KolaBajomo and Governor Ibrahim DankwamboICAN VP, Kabir Mohammed (left); ICANPresident, Doyin Owolabi; Winner of thestar prize, Kia Cerato car, Emmanuel Onoja;Conference Director, Sola Oyetayo; anddonor of the star prize, Mrs Winifred AkpaniICAN Registrar, Mr Toyin Adepate (left); andDirector, Admin & HR, Mr Kayode Aberesults of the performance entity.Financial markets in which investorshave confidence are also identified asthe foundation for strong economiesand accelerated development. Though,a whistle-blower’s protection Bill/Act isdesired to tackle corruption, accountantsand other stakeholders are enjoinedto fully explore the available legalinstruments for managing the incidenceof corruption. One of such legislation isthe Freedom of Information Act by whichrelevant information about the activitiesof those entrusted with public assets canbe obtained.The conference was held betweenOctober 15 and 19, 2012 at theInternational Conference Centre andAbuja Sheraton Hotels and Towers, Abujaand was declared open by the Presidentof the Federal Republic of Nigeria, Dr.Goodluck Jonathan, represented by theTHE NIGERIAN ACCOUNTANT 10October/December, 2012

ConferenceMike Suarez in a handshake with Mrs. SeyiWilliams while Chief Herbert Agbebiyi watchesAccountant-General of the Federation, Mr. JonahOgunniyi Otunla, FCA. It was attended by 3,950participants comprising Chartered Accountantsand other professionals from all walks of life fromNigeria, Ghana, Guinea Bissau, Benin Republic,Sierra Leone, South Africa, Gambia, UnitedKingdom and the United States of America.Declaring the conference open, the President,Dr. Goodluck Jonathan, noted the Institute’sstrategic contributions to the country’s capacitybuildingefforts. He expressed appreciationfor ICAN’s support in building capacity for thenation’s Federal Treasury Academy through atwining arrangement with the Chartered Instituteof Public Finance and Accountancy (CIPFA) ofthe United Kingdom.He confirmed that Nigeria is facing enormous developmentchallenges imposed by limitations of human and natural resources,political, economic and corporate governance issues. He saidthat the situation is worsened by weak institutional arrangements,abandonment of development planning, inadequate performancebenchmarks for public officers and unwillingness of manystakeholders to think and act patriotically. He added that it is theaim of the government to re-institutionalise development planningand place greater premium on capital allocation in annual budgets.In his welcome address, the ICAN President, Mr. Doyin Owolabideclared that regrettably, Nigeria’s 52 year old history pointed toa yawning gap in institutional development as institutions of stateare remembered, not by their statutory mandate and quantum ofservice delivery but by the exploits of their transient leaders. Helamented that in the face of a string of weak institutions, the countryDoyin Owolabi (right) being presented the cup hewon after the jogging competition by Tayo PhilipsConference Director Sola Oyetayo, ICAN PresidentDoyin Owolabi in handshake with Soare VernonPAFA CEO, Vickson Ncube (left); PAFA ExecutiveSecretary, ICAN VP, Kabir Mohammed; President DoyinOwolabi; Past President, Major-General SebastianOwuama; and ICAN’s 2nd DVP, Otunba Femi Deruof economic development anddemocratic process that is consistent with good governance. Thetask of building such strong institutions must start today for thebenefit of tomorrow,” he added.Declaring the conference close, Gombe State governor, AlhajiIbrahim Dankwabo expressed appreciation to those who took timeout to attend the conference. He also commended the Institute forputting the conference in place, advising that those at the helms ofaffairs should endeavour to make use of the various suggestionsmade at the conference, for the benefit of the nation’s development.Apart from paper presentations, workshops and plenarysessions, there was a gala nite on Thursday during which veteranjuju musician, King Sunny Ade, treated the participants to his latesttunes. There was also an open raffle draw in which a memberand Chairman of Lokoja District & Society, Mr. Emmanuel Onoja(MB No: 016461) won a brand new Kia Cerato car. The raffleICAN President, Doyin Owolabi and Past PresidentOlutoyin Olakunri in a group photograph with members ofthe Society of Women Accountants in Nigeria (SWAN)still parades strong politicalleaders, saying such deficit is arecipe for anti-development. Hestated further that the actionsand inactions of institutions canaffect growth and developmentthrough a variety of waysincluding their effects oninvestments, functioning ofmarkets competition, socioeconomicpolicies, rule of law,security, business environment,etc.On the way forward, theICAN President declared thatthe realisation of the Nigeriandream is bound to the degreeof premium placed on thebuilding of strong and enduringinstitutions which can define,regulate and enforce complianceto acceptable practices for thecommon good. “The nationrequires strong institutionsthat will make developmentand regulatory environmentconducive to effective operationdraw was part of the packagesof the conference. Other prizeslike LCD television, gas cookers,laptops, fridges, were also won atvarious times in the course of theconference.There were also sportingactivities such as jogging andfootball as well as other activitiesincluding excursions, exhibitionsand District Societies competitionduring which the Society ofWomen Accountants of Nigeria(SWAN) emerged as the bestdressed, the largest contingentand the best performing group.THE NIGERIAN ACCOUNTANT 11October/December, 2012

ConferenceTHE INSTITUTE OF CHARTERED ACCOUNTANTS OF NIGERIACommuniquéof the 42 nd Annual Accountants’ Conferencefor Corporate and Public Accountability” was discussedPREAMBLEby former Vice President for Africa, World Bank, Mrs ObiageliThe 42 nd Annual Accountants’ Conference of The Institute ofEzekwesili; Mr. Femi Falana, SAN; Senator Ahmed LawanChartered Accountants of Nigeria (ICAN) took place between the(represented by Senator Ayo Akinyelure, FCA); and Deputy15 th and 19 th of October, 2012 at the International ConferenceGovernor (FSS), CBN, Dr. Kingsley Moghalu.Centre, Abuja, Nigeria. The theme of the conference was“Building Enduring Institutions for National Development”. • Workshop 3 – “Doing Business in Nigeria: Fiscal,Legislative and Judicial Challenges” was discussed byThe international conference was declared open on TuesdayMr. Wole Obayomi of KPMG (represented by Mr. Wale Ajayi);16 th of October, 2012 by the President of the Federal Republic ofManaging Partner, Kenna & Associates, Mr. Fabian Ajogwu; andNigeria, His Excellency, Dr. Goodluck Ebele Jonathan, GCFR,World Bank Country Director for Nigeria, Marie-Francois Mariewhowas ably represented by the Accountant-General of theNelly.Federation, Mr. Jonah Ogunniyi Otunla, FCA.• Workshop 4 – “Financial Reporting and Value Creationin the Public Sector: Issues, Challenges and Prospects”PARTICIPATIONwas discussed by Gombe State Governor, Alhaji IbrahimA total number of 4,050 (of which 3800 were fee-paying) Dankwambo, FCA; Accountant General of Kwara State, Alhaji T.delegates drawn from Africa, Europe and America attended the A. Abdulkareem, FCA; Permanent Secretary, Lagos State Ministryconference. It is instructive to mention that five serving State of Finance, Mrs. Josephine Oluseyi Williams, FCA; and CIPFAExecutive Governors – Dr. Kayode Fayemi (Ekiti), Alhaji Ibrahim Council Member, Mr. Mike Suarez.Dankwambo, FCA, OON (Gombe), Chief Rochas Okorocha(Imo), Mr. Babatunde Raji Fashola, SAN (Lagos) and SenatorIbikunle Amosun, FCA (Ogun) – graced the occasion with their OBSERVATIONS AND RECOMMENDATIONSphysical presence.(a) The conference noted that the problems of the nation’sGoodwill messages were delivered by the Executive Governors uninspiring pace of development, endemic corruption, political,of Imo and Ogun States; Vickson Ncube, CEO of Pan-African economic and social uncertainties, are largely attributableFederation of Accountants (PAFA); as well as the President of to the absence of strong institutions that can clearly defineANAN, Hajia Maryam Ibrahim, FCNA. The Executive Governor and effectively sanction those who step outside acceptableof Ekiti State, who was the Special Guest of Honour at the Gala behavioural boundaries, irrespective of their social and economicNite, also delivered a goodwill message.status.(b) The conference observed, regrettably, that the politicalleadership has historically not shown sufficient degree of vision,TECHNICAL SESSIONSpersonal sacrifice and political will in directing the affairs of theThe conference theme was considered in a lead paper entitled nation. The resultant poor governance, exacerbated by the“Building Enduring Institutions for National Development” problem of weak institutions, manifests clearly in the unacceptabledelivered by Professor Pat Utomi. The following two plenary and level of national underdevelopment in the midst of plenty. Thefour workshop sessions were also held:participants called for a paradigm shift from mere celebration of• Plenary Session 1 – “Governance and Sustainable transient achievements of individual leaders to the building ofDevelopment: Addressing the Leadership Challenge” enduring institutions for sustained development.delivered by Lagos State Governor, Mr. Babatunde Raji Fashola, (c) The conference strongly believed that the spate of poorSAN.or failed public institutions have created a situation in which a• Plenary Session 2 – “Building Trust in Financial significant proportion of the Nigerian people feel left out andReport: Meeting Stakeholders’ Expectations” delivered by the are resorting to illegal means to meet their basic social needs.Executive Director, Institute of Chartered Accountants in England This situation, if not urgently checked, may ultimately lead to aand Wales (ICAEW), Mr. Vernon Soare.breakdown of law and order which will impair productive economic• Workshop 1 – “Entrepreneurship: Empowering activities and, by extension, economic development.the Nigerian Youth for Global Economic Challenge” was (d) Accordingly, the conference agreed that the task of buildingdiscussed by the Director, Enterprise Development Centre, enduring institutions should be a national priority, if the nation isPan African University, Mr. Peter Bamkole and Chairman/Chief to urgently reverse the current trend of underdevelopment. TheExecutive Officer, Vigeo Holdings Ltd., Mr. Victor Gbolade conference urged Nigerians, as a people, to move away fromOsibodu, MFR.their present state of attitudinal individualism and become more• Workshop 2 – “Whistle-Blowing: Setting a Framework nationalistic in thoughts and actions in order to achieve the desiredTHE NIGERIAN ACCOUNTANT 12October/December, 2012

Conferencestate of national rebirth.(e) It was noted with dismay that the nation was currentlysuffering from decaying physical infrastructure built over fortyyears ago with little or no maintenance. The conference urgedthe government to urgently address this issue by drasticallyreducing the cost of governance, placing more emphasis oncapital expenditure and maintenance expenses in the annualbudgets and medium term plans. Except this is strategically done,corporate entities in Nigeria will remain uncompetitive as theircosts of doing business will remain prohibitive and investmentunfriendly.(f) The conference recommended that chartered accountantsshould begin to play a more active role in public governanceas a way of contributing to the political landscape. They urgedThe Institute to regularly engage all relevant stakeholders inadvocating for good governance, principled leadership, institutionbuildingand fiscal discipline.(g) While stressing the need for Fiscal Federalism, theconference agreed that one way to ensure rapid development ofthe country is the deliberate devolution of powers and resourcesfrom the Federal to the lower tiers of government which are closerto the people and can thus respond more appropriately. Theconference further stressed the need for widespread consultationswith stakeholders on public policy initiatives by all tiers ofgovernment in order to engender inclusiveness in developmentstrategy. Ownership of initiative is crucial to its success.(h) Markets and economies function properly whenparticipants have trust in the financial statements that driveactivities and decisions in the capital markets. The conferenceurged Chartered Accountants to continue to develop theirprofessional capacity for generating credible and reliablefinancial reports that present a true and fair view of the resultsof the performance of reporting entities. Financial markets inwhich investors have confidence are the foundation for strongeconomies and accelerated development.(i) The conference agreed that while there is need for awhistle-blower’s protection Act, it noted that chartered accountantsand other stakeholders have not fully explored the available legalinstruments (for instance, the Freedom of Information, FoI, Act,2011) for managing the incidence of corruption. Accordingly,the conference urged all professionals including charteredaccountants, to familiarise themselves with the provisions ofthe FoI Act with a view to making persons in fiduciary positionsaccountable for their actions or inactions.(j) To set the tone for the desired national rebirth, theconference urged The Institute to continue to ensure that itholds its members to the highest level of professional standardsand integrity and apply the strictest disciplinary measuresand sanctions to its members who act in any manner that isinconsistent with the ideals of the profession as provided in TheInstitute`s enabling Act.(k) While the plan by ICAN to sponsor a whistle-blower’sprotection Act is desirable, the conference agreed that, whistleblowingwill not happen just because a law protecting whistleblowershas been enacted. There is need to put in place theright kind of incentives that will encourage whistle-blowing. Sincewhistle-blowing comes with a lot of personal and financial risks,the incentives must be considerably higher than the risks forthe system to work. Thus, The Institute was advised to set up aWhistle-Blower Trust Fund.(l) The conference traced the problem of huge, but largelyunexploited, opportunities for doing business in Nigeria to:High transaction costs;Poor state of infrastructure;Large informal sector and age-old dominance of oil sector;Growing state of insecurity;Absence of systems for enforcing property rights;Unstable fiscal policies and high degree of uncertainty;• Difficulty and prolonged procedures for registrationof business;Absence of information;Weak judicial remedies and obsolete laws; and• Lack of adequate incentives for beginners from thegovernment.The conference therefore urged the government toexpeditiously develop and implement a road map for addressingthese challenges. To develop the right framework and solutions,the conference urged the government to engage the private sectorplayers as the virility of the economy is a guaranteed recipe forpolitical stability.(m) The conference further recommends that the followingactions, if properly sequenced, can reinforce one another andalso improve the cost of doing business in Nigeria:• Acceleration of the on-going privatisation process inthe country;Entrenchment of fiscal consistency and discipline;Infrastructure upgrade;Tax incentive schemes;Institutional and legal reforms; and• Taking advantage of alternative dispute resolutionchannels such as the Multidoor court system inLagos State.(n) The conference noted the prime role of the public sector increating an enabling environment for the private sector to thriveand create value. Accordingly, the services provided by PublicSector agencies must make economic sense and be value-drivenirrespective of the traits of their leadership. To achieve this, theconference recommends that Public Sector financial managementsystems must provide reliable information to decision-makersfor good governance and accountability. It is in this respect thatparticipants welcomed the move by the government to adoptInternational Public Sector Accounting Standards (IPSAS) as abasis for financial reporting in the Public Sector. To ensure that thegoal is achieved, the conference urged the government to createthe enabling legislative framework required for the adoption ofIPSAS for the public sector and employ professionals to drive theprocess.CONCLUSIONThe conference commended the Council of The Institute forthe choice of theme and sub-themes, the selection of eruditeresource persons and the overall planning and execution ofthe proceedings. The conference urged the Council to makeavailable to the government and other relevant stakeholders thiscommuniqué and the conference proceedings and persuade therelevant authorities for the adoption of these recommendationsin decision-making in the quest for national development.ADEDOYIN IDOWU OWOLABI,BSc (Econs), MILR, MNIM, FCA48 th President.THE NIGERIAN ACCOUNTANT 13October/December, 2012

Opinionselected representatives are watching their backs.Engerman and Sokoloff (2002) postulate that historicalconditions, often largely due to agricultural neglect in the colonialera, could induce economic inequality and institutional structures.And they are very right if you bring Nigeria into focus.SECTION A: POLITICAL STABILITYPolitical stability actually belongs to democracy and thepractice of social justice and rule of law. Military coups andpolitical coup by civilian and the economic monster calledcorruption breeds and encourages instability in the polity. Indeed,instability is an aberration to true democracy. Military rule is thena worse phenomenon in any polity.Stability actually implies a predictable political environment,which in turn guarantees security of lives and properties andattracts investment, both internally and from outside. Theresulting virtuous circle of poverty reduction, job creation, orwhat the economists call full employment, increased staterevenues and investment in welfare and education and othersocial infrastructure are the accompanying benefits to all in suchstable society.Democracy: A Conceptual UnderstandingConceptually, democracy was derived from the Greek word‘Demos’ meaning people and ‘Kratos’ implying rule or power.It really refers to government or rule by the people or masses.According to George Orwell (cited in Mahajan 2008: 793),democracy does not have an agreed definition. Thus any attemptto provide one therefore is often resisted from all sides. However,some people see democracy as the government of the people bythe people and for the people. This is however an understateddefinition of democracy. Democracy could be defined as a highflownname for something that does not truly exist. What is alsotrue is that political stability requires democratic governance.Political StabilityUsman (2000) defines political stability like the type ofdemocracy we have envisioned and provided for in our country’sconstitution to imply the continuation of the exercise of power forthe common good and benefit of all by those freely elected by thepeople of that country for specific periods with definite mandateswhich generally tend to conform with the Fundamental Objectivesand Directive Principles of State Policy which is clearly defined inchapter II of the Nigerian Constitution of 1999. Thus, the openingsections of this chapter make this very explicit, providing that:13. It shall be the duty and responsibility of all organsof government, and of all authorities and persons exercisinglegislative, executive or judicial powers, to conform to, observeand apply the provisions of this chapter of the Constitution.14(i) The Federal Republic of Nigeria shall be a state basedon the principles of democracy and social justice(2) If is hereby accordingly declared that –(a) Sovereignty belongs to the people of Nigeria fromwhom government through this Constitution derives(b)all its powers and authorityThe security and welfare of the people shall be theprimary purpose of government.Therefore, the political stability of our democracy or evenany other in the world does not mean the stability of the powerof any civilian elected to rule forever or in any way they want. Ifthe elected set of government becomes over stabilised beyondthe specified period they may want to elongate their stay tothird term or even longer terms. We saw this attempt duringthe Obasanjo latter outing. Such unrest can cause instabilityand unrest. There can only be genuine political stability ordemocracy if those freely elected rule in accordance with thefundamental objectives and Directive Principles of state policyboth in words and actions which can truly ensure the security oflives, property and welfare of the people and also make themthe primary purpose of governance. Again this really dependson if there is true election through the ballot box. This can onlybe true if our elected leaders do not turn out to be looters of ournational treasury or our rulers do not become robbers at the endand impoverish the electorate. What we see generally does notsound encouraging at all. Some elected representatives areopportunists whether in the Judiciary, Legislative or even theExecutive arm of our public governance.Armah & Amaoh (2011) see political stability as a reflectionof good governance. It represents legislative strength as well asthe ruling government’s popularity as well as, its ability to carryout the delivery of the dividend of democracy or its declaredelectioneering promises and programs and its ability to stay inoffice.Political InstabilityConventional political scientists have defined instabilityprimarily in terms of either (1) discontinuity of system, or (2) thefrequency of ‘unstable’ events. A third and rather different viewof the concept of instability is that of the political journalists. The‘journalistic’ approach does not operate upon the basis of a formaldefinition of instability at all but it nonetheless incorporates twovery useful notions which more rigorous political analyst wouldperhaps do well to take into account. The first of these is anemphasis on relatively short term political situation or tenureship.While the ‘discontinuity’ and ‘frequency’ schools examine lengthytime periods of up to several decades. Infact, Africa is full of“Leaders” who turn political offices into empires and kingdomsor dynasties. Ask Gadaffi, Mubarak, Gnassingbe Eyadema ofTogo, Mubutu Sese Seko, etc.Determinants of Political StabilityThere are commonly stated determinants of political stabilitybut I want to point out that these factors viz; price stability,higher education and technical qualifications of the population,increasing factors of production, technological modernity, exportpromotion, etc, only are features but may not be directly relatedto political stability alone. But political stability in the long runultimately ensures a relative price stability, improves educationaland qualification status of the people, increases factorsproductivity, enables technology transfer, promotes exports.These variables are some of the factors for economic growth aswell. Moreover, long term political stability involving uninterruptedstable and series of elected governments provides a congenialatmosphere for evolution and deepening of democracy. Similarlywe need democratic order (another factor) for political stabilityto be achieved and then democratic political order in turn, canensure political stability.Fagbadebo (2007) identifies several factors that have beenTHE NIGERIAN ACCOUNTANT 42October/December, 2012

Opinionassociated with this dysfunctional condition of the African stateand the third world countries in particular. Kesselman et al.(1996), blame this on these principal factors:Scarce resources;Weak legitimacy; and• Patron-client or what is commonly known in Nigeria as“godfather” politics.•Aizenman and Marion [1991] added stablemacroeconomic policies. This is because investors andentrepreneurs arguably care more about the stability ofa country’s economic policies than the stability of theregime itself.•Similarly, free and fair elections constitute one of the mostimportant ingredients of democratic governance. Theyassure political participation of the citizens in the politicalsystem and the determination of the national leadership.Generally, the outcome of elections and the extent towhich they add value to democratic governance andpolitical stability are inextricably intertwined with the typeof electoral system each country has adopted.Consequently, elections are important to a democraticgovernance process in more ways than one:Elections help establish a representative government;• Relatively free and fair elections bestow legitimacy andcredibility on the government;• Relatively free and fair elections assist the process ofinstitutionalising orderly succession of governments;• Relatively free and fair elections compel electedrepresentatives to be accountable to voters.Call for Political RestructuringToo many mixed voices are calling for political restructuring.Some do not really know what it is or what it entails. There is noneed for the call of restructuring or so called disintegration. Thereare several advantages in our current big one Nigeria rather thanthe atomistic polities being canvassed by some selfish Nigerians.They are only self-serving. However, there is need to:i. Sit down to negotiate.ii. Sit to talk.iii. Examine resource sharing or control.iv. Consider one term of 6-7 years in office.v. Restructuring and strengthening democratic and socialinstitutions and infrastructure.However, I support the convening of sovereign nationalconference to trash out several besetting national issues. Ifpolitical restructuring in the form some unguided people areclamouring starts, there will be no end for agitation until tribeswill agitate for either a state or political independence.assassinations.Measures of Political StabilityWe shall cover only the popular measures.1. Socio Political Instability (SPI) IndexThe first instability measure index is the Alesina and Perotti’s(1996: 1207-1208) socio political instability (SPI) index, whichmeasures the average political instability by country during the1960-1982 period. Using principal component analysis, theyconstructed their index from:• Data on a nation’s number of politically-motivated• The number of people killed in domestic mass violence(as a percentage of the nation’s total population).• The number of successful and attempted coups, bythe military; and•A categorical variable for whether the nation is ademocracy or a dictatorship. Because the index usesdeep disruptions –— such as military coups and political assassinations— simple electoral change, even if this is frequent andsharp, does not count as unstable; however violentchange, even if it is infrequent, does. Since they weighthe index with a categorical indicator of democracy, theirindex is not purely one of political instability in its intuitivesense. But at least is a common index employed bypractitioners, researchers, researchers and analysts.IMD’s World Competitiveness Yearbook (WCY)A second measure of political instability comes from IMD’sWorld Competitiveness Yearbook (WCY). Since 1999, the WCYreported how several thousand executives around the worldranked political instability country-by-country, with the surveyedexecutives asked to rate on a scale of 0-10 several statements.Panacea to the Pandemic of Political InstabilityPolitical instability is a common phenomenon in severaldeveloping countries like Nigeria. However our political stabilitycan be addressed by ensuring the following:1. Convening a sovereign national conference. You canname it differently if you choose to.2. Call of restructuring of governance and resource sharingor control in a guided sense.3. Good electoral system.4. Security of lives and property.5. Creating a substantial investment and attractiveenvironment.Low quality elections may even become a political liability todemocratisation itself. The quality of an election in any countryconstitutes one of the determinants for deepening democraticgovernance and ensuring political stability. Although elections doplay a critical role for the sustainability of democratic governancein the first instance, democracy on its own alone cannot andshould not be reduced purely to elections alone.Various other political processes play an equally important rolefor democracy to exist and be sustained. They include:Respect for human rights,Citizen participation,Constitutionalism,Rule of law,Separation of powers, checks and balances,• Equal distribution of the national wealth.Strengthening our Political Stability Through theBallot Box: What to DoSome of the salient areas to pay attention to in order toimprove electoral quality to ensure or enhance a genuinedeepening of democratic governance in Nigeria and guaranteepolitical stability include:i. Ensuring that the legal frameworks are right and proper.THE NIGERIAN ACCOUNTANT 43October/December, 2012

Opinionii.iii.iv.Ensuring proper conduct of election by political partiesand electoral commission, and the supporters at preelection,polling day and post-election phases are wellinformed or educated.Addressing the cost of elections. For now it is tooexpensive.Evaluating the degree of citizen participation in electionsand sharing strategies for increasing public educationand interest in elections.v. Promoting a culture of constructive management ofelection disputes for purposes of maintaining politicalstability and peace; and strong institutions of police,legal and other social services.vi. Ensuring sound social infrastructure.vii. Ensuring sound physical infrastructure.viii. Ensuring rule of law and timely dispensation of justiceincluding cases arising from elections.ix. Ensuring full employment for the employable.x. Ensuring security of life and property.xi. Ensuring continuous flow of foreign investors/investments.xii. Respect of human dignity.xiii. Human rights and civic societies presence.xiv. Food security.xv. Education and training institutions are current.xvi. Transportation infrastructure.xvii. Water and waste systems.xviii. Democratic governance should entail empowermentand political participation of the citizens to influenceand shape the policy making process at both federaland local levels of the political system.xix.Ensuring promotion of Political Culture: Political culturehas both direct and indirect bearing and permutationon political and economic governance processes andas such has influenced to a considerable degree,instability or stability of the political systems in anycountry. Political culture is conceived as a conceptthat denotes a broad array of norms, values, beliefs,attitudes and traditions that shape systems, institutionsand processes of governance.Policy initiatives and actions of key agents in any politicalsystem at any particular time can justifiably be traced in part, tothe nature of the political culture prevailing in a given polity. Thisexplains why Jackson and Jackson (1997) poignantly observethat “political culture is one of the most powerful influencesthat shape a political system. It creates norms – beliefs abouthow people should behave – and these norms influence socialbehaviour”. Heywood (1997) corroborates the above observationby arguing that political culture, which he also terms ‘politics inthe mind’ is crucial for democratic governance and stability giventhat it builds societal perceptions and expectations regarding therunning of national affairs (i.e. governance) by governments.He further argues that popular beliefs, symbols and valuesstructure, both the peoples’ “attitudes to the political process,and, crucially, their view of the regime in which they live, mostparticularly, whether or not they regard their regime as rightfulor legitimate is an important factor. Legitimacy is thus the keyto political stability and it is nothing less than the source of aregime’s survival and success”.Ensuring Suitable Democracy in Nigeria and in theAfrican ContinentAccording to Ake as cited in Matlosa (2003), the democracysuitable for Africa has to assume the following characteristics:• A democracy in which people have some real decisionmakingpower over and above the formal consentof electoral choice (powerful legislature, democratic localgovernment, etc.).•A social democracy that places emphasis on concretepolitical, social and economic rights as opposed toemphasis on political rights by liberalists.• A democracy that puts as much emphasis on collectiverights as it does on individual rights.•A democracy of incorporation and power sharing whichensures as much, participation inclusivity andrepresentatively as possible (1996: 132).Challenges of Good Democratic CultureAccording to Mandaza (2000), for instance, “the perceptionis widespread that Africa is not a good business address,thanks to political instability and weak governance all over thecontinent. Two prominent schools of thoughts in the debate oninstability-governance nexus are (a) institutional functionalismand (b) structuralism. The former explains instability and politicalviolence by focusing primarily, if not exclusively, on the interfacebetween the level of institutionalisation of the state and the degreeof political participation by the citizenry. The former gives prideof place to the structural configuration of society and constantcontestation over (i) state power (ii) resource distribution and (iii)social stratification based on identity and ideology.Consequences of the Absence of Political Stability• Political instability is thought to affect economic growthnegatively in several ways; firstly, it disrupts marketactivities and labour relations, which has a direct adverseeffect on productivity and reduces growth because it affectsinvestment negatively.• Barro (1991) finds that measure of political unrest, suchas number of assassinations and the occurrence of violentrevolutions and military coups significantly affect theaverage growth level in cross section regressions on alarge sample of countries.• The flawed elections like the 2007 in Nigeria, withevidences of voting fraud, rigged elections, politicalviolence, INEC manipulated by the presidency.• Increased conflicts like the Niger Delta experiencebecause of the use of oil revenues, the unpleasantexperiences of the locals that face seriousenvironmental degradation, frequent kidnapping offoreign oil workers.• Overblown Nigeria’s diversity, where three main ethnicgroups make up about 66% of the population that do nothonestly and genuinely work together or give room forethnic minority. There is also a strong religious dividebetween Christians and Muslims.• Crime and corruption, not only in government butgenerally Nigeria is associated with crime, i.e. the 419scam, adverse effect on investors.• Regional issues, Nigeria forms part of the “triangle ofTHE NIGERIAN ACCOUNTANT 44October/December, 2012

Opinioninstability”, sharing borders with countries like Cameroon,it has continuous spill over’s of refugees and guerrillafighters over its borders.What Causes Political Instability?Alesina and Perotti’s (1996) find that severe economicinequality is the primary determinant of political instability. Otherfactors contribute to instability, such as ethnic and religiousstrife, Demirgüç-Kunt, and Maksimovic (2006). These arealso noticeable phenomena in Nigeria. They have been givenundue weight and attention for several decades instead ofmonocracy and pursuit of Nigeria dream or United Nigeria andthe phenomenon of oneness and true sense of belongings.Symptoms Indicating the Need for GuidedRestructuring• New skills and capabilities are needed to meet current orexpected operational requirements.• Accountability for results are not clearly communicatedand measurable resulting in subjective and biasedperformance appraisals.• Infected population figure due to undue emphasis onethnic size for the purpose of resource sharing ordistribution• Parts of the organisation are significantly over or understaffed.• Organisational communications are inconsistent,fragmented and inefficient.• Technology and/or innovation are creating changes inworkflow and production processes.• Significant staffing increases or decreases arecontemplated.Personnel retention and turnover is a significant problem.Workforce productivity is stagnant or deteriorating.• Morale is deteriorating.SECTION B: ECONOMIC GROWTHLet us begin by looking at the concept of economic growth.What is Economic Growth?Economic growth measures the contribution of economicactivities to the achievement of higher states of human welfare.It is argued that an economic activity is a purposive activity.Therefore economic activity can only be identified and its resultsmeasured if there is a prior identification of the underlying purposeof that activity.No single common and an all-round acceptable method ofquantifying such a function that has yet been demonstratedwhich has appeared both feasible and defensible. It is perhaps inimplicit recognition of this dilemma that Kuznets has suggested atwo-pronged approach of the definition of growth: “For purposesof measurement, economic growth of a nation may be definedas a sustained increase in its population and product per capita”.Factors Limiting Economic Growth in NigeriaThe level of economic growth in Nigeria is still a far cry fromdeveloped economies due to legitimate concerns about thefollowing:• Information Market Failures – The state or nationaleconomy will grow and benefit to the extent that thepublic sector can actually improve the flow of informationin a cost-effective manner.• Spill Over – Self-interested buyers and sellers tend tofail to take into account the spill over effects that result inlarger costs or benefits for the country.• Sunk Investment – If public infrastructure or privateresources are left idle or destroyed, an area misses outon the economic potential of its sunken investment.• Social Impacts – Improvements in the well-being ofspecific people and places may be particularly importantfor low-income, low-skilled residents who are less likelyto move from declining areas to growing ones.• Political Pressure – Serious concerns about the stateof a region’s economy will lead to public-sector economicdevelopment efforts, good or bad.Wide-spread corruption.Neglect of the agricultural sector.Macroeconomic policy swing.• Debt overhang.(a) General Economic Growth StrategiesFederal, State, and Local governments, along with theirprivate-sector partners, use a wide range of economic growthstrategies to influence growth. I should think Nigeria shouldborrow a leaf from a combination of these. Examples include:• Programs that help local businesses adopt newproduction technologies and techniques, increase theskills of their workers;Find sources of financial capital;Improve their energy efficiency;Navigate the maze of government regulations;Identify appropriate locations for production facilities; and• Capitalise on new sales opportunities.As an economic growth strategy, the public sector can:Improve services and infrastructure in distressed areas;• Cleans up and redevelops polluted, abandonedindustrial sites; and• Encourage Foreign Direct Investments (FDIs).(b) Adoption of Strategic Public Sectors EconomicStrategies of GrowthWe quickly highlight here those public sectors economicgrowth strategies which Nigeria can either improve upon, developor expand.• Create More Enterprise Zones: I am sure you know fewof these zones in Nigeria like the Calabar zone. Enterprise zoneshelp to facilitate economic growth. Thus Businesses that locateor operate in enterprise zones can take advantage of severalincentives. These incentives include property taxes, incometaxes, and sales taxes, and may also receive tax credits for jobcreation and investments. The governments usually employtargets enterprise zones for improvements in infrastructureand public services, including, for example, police and fireprotection. Most often the zone strategy is designed to make aneconomically distressed area attractive to businesses in searchof new locations. We need more of these in Nigeria.• High Tech Development: Many states and somecommunities have invested public resources in efforts to fosterTHE NIGERIAN ACCOUNTANT 45October/December, 2012

Opinionhigh technology development. In general, these efforts tendto focus on innovative, capital-intensive, research-orientedindustries that employ highly skilled workers and pay highly.Government assistances are needed in this respect. Suchindustries can contribute massively to a national economy’sstrength and vitality much more than the atomistic SMES.However, too often, the “high tech” concept is usually illdefined.Thus economic development efforts tend to focus onthe latest fads such as: biotechnology, nanotechnology, andinformation technology, while ignoring the high tech elementsof our traditional industries. Any public-sector initiatives aimedat high tech development must be rooted in a careful analysisof the economy in the first instance. Nigeria should fashion andencourage technologies that address local problems and makeuse of local raw materials and other input. This help to stimulateeconomic activities and development in such areas.• Public Subsidies for Training Programmes: Workers’training can improve the productivity of local businesses. Trainingprogrammes that impart new, transferable skills to residents ofa country are likely to leave the newly trained workers in betterstanding to secure jobs even if the businesses for which theywere trained downsize or close. We need to invest massively inhuman capital development.• Adoption of Selective Tax Incentives: Governments atthe three tiers should focus much of their attention on the leversthey control directly, especially taxes. This will enhance economicdevelopment if these are done genuinely and consistently. Publicsectoractors all over the world use targeted tax incentives forall types of economic development, from business recruitmentto retention and expansion to industry-wide development.Researchers have shown that taxes have only a limited impacton business location (Rubin and Zorn, 1985).But empirical evidence does indicate that taxes do matter toan extent, especially when businesses weigh several potentiallocations within a favoured region – sites within a metropolitanarea, for example, or sites in close-by states (Bartik, 1991).• Massive Government Investments on Public Servicesand Infrastructure: Public services and infrastructure influencebusiness growth and location. Businesses and workers usepublic services and infrastructure and such, public expendituresresults in tax income. Research has shown that public investmentin education and infrastructure is positively related to localbusiness activity and growth, although it is difficult to determineif those public investments actually drove the growth or were,in fact, driven by it (Bartik, 1991). Businesses benefit from thepublic sector’s provision of education and training, transportationinfrastructure, water and waste systems, and police and fireservices, for example. Public services and infrastructure alsocontribute to a country’s quality of life, which stands out as anincreasingly important factor in the economic vibrancy of metroareas (Florida, 2002).Other Potential Drivers of Growth• Encourage and Promote Imports and Export Base:Potential drivers of economic growth have a lot to do withexport base and import substitution. Outside sales(exports) bring dollars into the country and drive otherlocal economic activity in the country. Dollars leak out ofa region when local households and businesses buy“imports” made elsewhere. Many Nigerians are so crazyof foreign-made goods. Imports affect adversely localproduction of similar goods and services. Tax heavily butgradually affects imports that are killing the local industries.While this approach is useful as a theoretical concept,this simplistic economic base concept is howeverincomplete. If export sales and import substitution werethe only sources of growth, the world economy would notgrow without export sales to other countries.• Encourage Active Local Productivity: Growth comesfrom expanding the production possibilities frontier (PF).This (PF) implies what can be produced with a given levelof labour, materials and equipment.•Encourage Specialisation and Active Trade andCommerce: Nigeria should concentrate on her mostefficient economic activities especially the diverseagricultural products. Nigeria should drive this hard toearn the needed huge income from those activities. Theycan then use that income to import goods and servicesthat are the specialties of other countries.•Place and Space. The implications of geography affectthe spatial distribution of economic activity as businessesbalance access to consumer markets and productioninputs (for example, labour and materials) against costsfor land and transportation.•Human Capital and Innovation. The skills, knowledge,and ideas that people bring to the workplace can driveproductivity improvements and economic growth.(c) The Northeast-Midwest Institute ReportThe report of Northeast-Midwest Institute suggested thefollowing strategies to boost economic growth. I think we canborrow a leaf in this direction as well.• Massive Encouragement of the Inflow of FinancialCapital and Increased Private Investment – this shouldbe made in response to existing market demand oremerging opportunities that tend to create new jobs andwhich in turn can increase local income, leading to greaterlocal demand for goods and services, and which againleads to more private-sector investment and continuesthe cycle of growth.• Encourage Entrepreneurialism: Risk-takingentrepreneurs are needed to take the ideas, labour,equipment, and materials and turn them into businessactivity.• Encourage and Selectively Adopt Clusters orAgglomeration: Businesses may cluster to takeadvantage of access to buyers of inputs into theproduction process, including skilled workers, specialisedsupplier firms, production technologies, and naturalresources. This should be targeted at the SMEs subsectorof the economy.• Product Life Cycles: A country’s growth can be affectedby the “life cycle” of a product as it moves from the start-upphase to standardised, or mass, production.Economic development increases a country’s economy’scapacity to create wealth for local residents. Developmentdepends upon the deployment of a country’s building blocks –labour, financial capital, facilities and equipment, know-how, land,THE NIGERIAN ACCOUNTANT 46October/December, 2012

Opinionother physical resources, and public and private infrastructure.Nigeria Can Adopt Some of the Nine GuidingPrinciples for Public-Sector Economic Growth• Market forces are the dominant drivers of any country’seconomy. This should be encouraged.• Public-sector economic development efforts must focuson factors internal to the workings of the country economyand under the influence of public policy at any given levelof government, be that local, state, or federal.• Adopt sensible economic development policy which mustbe built upon the strengths of the national economy.• Engage in economic development that yields real netimpacts on growth or in the short term, the potential forgrowth. For economic development initiatives, keyquestions regarding impact include:(1) Do the gains from public-sector action for onelocation outweigh the negative effects on otherlocations;(2) Do the overall benefits exceed the initiative’s costs;(3) Do the benefits of economic development actionexceed the benefits that could have been realisedhad the naira and resources been directed toother purposes;(4) Would the development and growth have takenplace without any public-sector involvement?• The Nigerian public sector should pursue economicdevelopment policies that result in broad benefits forresidents and businesses in the region, especially benefitsthat will continue to have a positive impact.• Public-sector economic development efforts in Nigeriashould pay attention to the needs of lagging or distressedareas and of groups at the lowest rungs of the economicladder.• Public policy should recognise the nature of economicdevelopment and advance strategies that addresschallenges and opportunities throughout the economy.• An economy will benefit from the production of goodsand services that depend upon capital-intensiveprocesses and skilled workers, incorporate high levelsof locally added value, and reap strong profits.• Economic development efforts should address thedevelopment potential of places, as well as the needsof people in that place.PREFERRED APPROACHES TO PUBLIC-SECTORECONOMIC GROWTHThe public sector should take the following approaches toeconomic development:• Carefully and objectively analyse the structure of theeconomies in order to identify comparative advantages,critical industries and occupations, internal linkages,and emerging prospects for development and growth.• Make sensible investments in the public infrastructureas a way to spur the economic development and growth.•Invest in public education and skills training to better thelives of residents and improve the skills and knowledgethat those residents bring to their jobs.When• Minimise firm-specific tax holidays and public subsidies.selecting locations, businesses must first considercritical production factors, including labour quality, costs,and availability; transportation costs and modes; accessto markets for their goods and services; and access tosupplier firms. That being the case, tax incentives foreconomic development in most cases work best wherethey are least justified by swinging decisions from onesite to another within the same region.• Pay attention to industries and businesses that contributeto the economic base by selling their goods and servicesoutside the local government area or state or country.•Pursue economic development strategies that boostthe productivity of key local government area or stateindustries.• Improve the quality of life in the different states in orderto keep and attract people.•Focus and encourage economic development onindustries, occupations, and businesses that providehigh-quality, good-paying jobs. Exceptions may makesense when the goal is to open up employmentopportunities for low-skilled residents.• Look for ways to encourage higher payment and collectionof tax revenue by local industries and businesses.• Exercise great caution before expending public moneyas financial capital for private ventures.•Strive for a strong return on investment from anypublic-sector economic development initiative,programme, or action.CONCLUSIONThe public sector has both a strong interest and legitimate roleto play in economic growth efforts aimed at increasing a nationaleconomy’s capacity to create wealth for citizens. Governmentnormally spurs development and economic growth which comesthrough attraction of national and foreign capital inflow androbust public-private sectors investments in public infrastructure,provision of public goods and services, and targeted assistanceto industries, businesses, and workers. Public-sector economicgrowth works best when initiatives are built upon each localgovernment area or state potential and strengths to improve thelong-run outlook for national economic growth.Public-sector economic growth policy must recognise theobvious: principally that it is the organised private sector, andmarket forces that actually drive the national economy. Thefederal government should therefore pursue economic growthpolicies that yield broad benefits for the people and businessesin the country. Efforts should address national issues andopportunities and economic development policies should focusand recognise the importance of businesses and industries thatdepend upon capital-intensive processes that make use of skilledworkers, and incorporate high levels of locally added value orlocal content.* Prof. (Prince) Famous I.O. Izedonmi, Director, Universityof Benin Consultancy Unit and former Head, Department ofAccounting, University of Benin, presented this Paper atThe Institute of Chartered Accountants of Nigeria (ICAN)Eastern Districts Conference at Yenagoa, Bayelsa Statein July 2012.THE NIGERIAN ACCOUNTANT 47October/December, 2012

Legal MattersDISCIPLINARY PROCEDURE OF THE INSTITUTESection 11(3) of the Institute of Chartered Accountantsof Nigeria Act (hereinafter referred to as ‘The Act’)established the Accountants’ Investigating Panel andit has the duty of:(a) Conducting a preliminary investigation into any casewhere it is alleged that a member has misbehaved inhis capacity as an accountant, or should for any otherreason be the subject of proceedings before theTribunal; and(b)Deciding whether the case should be referred to theTribunal.PROCESSES ADOPTED BY THE INVESTIGATINGPANEL ARE AS FOLLOWS:► Where a complaint is received by the Institute alleginga case of professional misconduct against a memberof the Institute, such complaint shall be referred tothe Investigating Panel for necessary action.► Where there is a media report alleging professionalmisconduct on the part of a member, the Panel shallrequest for a formal complaint from the Complainantby way of a sworn affidavit.► A member against whom a complaint has beenmade shall be requested by the Investigating Panelto present his defence or reaction to the complaintor allegation within fourteen (14) days of receipt ofthe request to do so.► If a member fails to respond within the specified time,a reminder shall be sent requesting him to send hisdefence / reaction within seven (7) days.► If the member does respond, the matter shall beinvestigated by the Panel applying all the rules ofnatural justice, equity and good conscience in orderto ensure that justice is not only seen to be done,but that justice is actually done in the circumstanceof the case.► The Panel at the conclusion of the case has the dutyof referring the matter to the Tribunal if it finds thecase referable to the Tribunal, or terminates the caseif it lacks merit in the circumstances.►►►►►The activities of the Tribunal ensure that memberscomply strictly with the Rules of Professional Conductfor members as Stipulated by the Institute of CharteredAccountants of Nigeria and the InternationalFederation of Accountants.The Chartered Accountants (Disciplinary Tribunal andAssessors) Rules made pursuant to the Act providesthat the Tribunal may hear and determine a case inthe absence of any party.The Tribunal is independent of Council as it isrecognised under section 316 of the 1999Constitution of the Federal republic of Nigeria as adomestic Tribunal known to Law.The powers of the Accountants’ Disciplinary Tribunalare equivalent to that of the High Court in thatappeals from the Tribunal lie to the Court of Appeal.This in other words means that the Institute’s Tribunalis a superior Court of Record.An appeal against the Judgement of the Tribunal,properly brought, shall operate as a stay against thejudgement of the Tribunal pending the outcome ofthe decision of the Court of Appeal and the SupremeCourt on further appeal thereto.CASES PENDING BEFORE THE INSTITUTE’STRIBUNAL, INVESTIGATING PANEL AND OTHERINVESTIGATING COMMITTEES► DISCIPLINARY TRIBUNALThere are twelve (12) cases of alleged professionalmisconduct currently pending at various stages of hearingbefore the Accountants’ Disciplinary Tribunal.► INVESTIGATING PANELThe Panel is currently considering forty five (45) cases.► STUDENTS’ INVESTIGATING COMMITTEEPresently, the Students’ Investigating Committee isconsidering five (5) cases referred to it.PROCESSES ADOPTED AT THE DISCIPLINARYTRIBUNAL► The Accountants’ Disciplinary Tribunal was createdby Section 11(1) of the Act and it is charged with theduty of considering and determining any case referredto it by the Panel and any other case of which theTribunal has cognizance of under the Act.► AAT INVESTIGATING COMMITTEEThe Association of Accounting Technicians InvestigatingCommittee is considering two (2) cases of alleged professionalmisconduct.* This information is from the Legal Department of theInstitute to create awareness.THE NIGERIAN ACCOUNTANT 48October/December, 2012

TechnicalBuilding Enduring Institutions forNational DevelopmentBy PATRICK OKEDINACHI UTOMIWhat Africa Needs are Strong Institutions NotStrong Men.— President Barack Obamain Accra on his maiden visit to Africa as PresidentThere is a monstrous relationship between thegovernment and the citizen whereby the governmentis more powerful than the citizen…— Rev. Fr. Anthony Adewale(Prof. of Philosophy and Theology Dominican Institutein The Guardian of September 9, 2012)In many ways the foregoing quotes capture the trouble withour efforts to build a nation that resembles the potentialof our country. They capture one dilemma that has insome ways defined what I have tried to do as citizen, asacademic and as one anxious to see the spirit of enterpriseignited in many so that the wealth we all create will push backthe advance of poverty and the anarchy that can be attendedon that.The point of these two quotes is to show that in the absenceof institutions, strong men dominate and the effect of theirdominance is weakened rule of law and elevated uncertaintylevels. Institutions have and follow rules, strong men havefriends and follow whims. The outcome from one is calculableprobability of outcomes; from the other uncertainty. Uncertaintymakes decision making problematic and often results in eitherthe avoidance of economic engagement or the high cost ofhedging against undesired outcomes. These high transactioncosts translate to uncompetitiveness for the economy.Even more troubling high uncertainty which results in pooreconomic performance can create a class of people who are soleft out they feel they have nothing to lose. With no stake in thesocial order they turned to conduct that more or less usher inanarchy, what Robert Kaplan quotes a Sierra Leonean Ministerin The Coming Anarchy as dubbling ‘the revenge of the poor’.My primary concern today recognises that institutions matterand concentrates on more problematic matter of how societiesfound strong institutions. Bearing in mind that many of theinstitutions the British bequeathed to India continue to survivebut many of those left to Nigeria have floundered, what mustconcern us is how enduring institution emerge.HOW AND WHY IS NIGERIA OF TODAY DIFFERENTFROM THAT OF THE 1960s? From the Judiciary toUniversities and the Public ServicePermit me to begin with a word of thanksgiving for the giftof being here and commendation of the Institute of CharteredAccountants of Nigeria for its choice of topic.In many ways, since I have been reading about, writingon, and researching the place of institutions in economicperformance, and Nation building in general, it is easy toassume that all agree on or understand its primacy of place inquest for human progress. I believe though that scholars andthinkers are moving towards consensus on the importanceof institutions for human advance. In recent years there havebeen several good books reinforcing the point of how importantinstitutions are for progress. They include Daron Acemogliuand James Robinson’s Why Nations Fail; Neil Ferguson’sCivilisation – The West and the Rest; Raghuram Rajan and LuigiZingales’ Saving Capitalism from the Capitalists; Hernando DeSoto’s The Mystery of Capital; and the ground breaking bookby the Nobel Laureate Douglas North; Institutions, InstitutionalChange and Economic Performance. These books generallyargue as my 1998 book Managing Uncertainty does for thecontext of firm or micro performance as my 2006 book WhyNations Are Poor at the macro level, the state of institutions.I have, of course, generally tried to avoid the trap of uncausalanalysis by offering a Growth Drivers Framework consistingof six interdependent variables – Policy choices; Institutions;Human capital; Entrepreneurship; Culture (value system); andLeadership. I have often tried to bring institutions and culturewhich is shaped by leadership, into a more central locationin my analysis, differing here with De Soto who focuses oninstitutions and thinks less of values as a factor in makingTHE NIGERIAN ACCOUNTANT 18October/December, 2012

Technicaleconomic progress happen.What really are institutions andhow come Neil Ferguson turns tothem to explain how China, whichwas more advanced than Europe 350years ago, suddenly stagnated for300 years? Essentially, institutions arerules, boundaries to conduct, whichmake it easier to anticipate behaviour.Over time they become settled habitsof a community, as the old institutionaleconomics school point out. When costsare placed on conduct outside agreedrange of behaviour and the rule of lawensure that they are followed, it is easierto anticipate transaction engagement.Where boundaries and consequencesfor conduct outside those boundariesare unclear, for example in the countryof the big man, might tends to be rightrather than the rules. Outcomes aremore difficult to predict. So how dothese very important institutionscome about?The example of the evolution of theforeign exchange market in Nigeriaillustrates well this process of the pursuitof narrow self interest being ultimatelyordered by this unseen hand, reason. Many young peoplemay find this strange because they do not know of the importlicense and FX allocation era; but until 1980s I served both onthe council of the Manufacturers Association of Nigeria and theLagos Chamber of Commerce.The two-tier foreign exchange market tried to find a marketmechanism to reduce the allocation method fraught with muchcorruption. But the Abacha take over resulted in new pushfor legitimacy and the 1994 budget review. Abacha rejectedFx liberalisation and promised priority allocation to MainManufacturers who were over the moon with excitements.Soon allocations went not to the intended manufacturers but tomiddlemen, long before year end. Manufacturers went from joyto crying foul. There was eventually a return to a level playingground in market mechanisms. The evolution of a foreignexchange market as institution for ensuring more transparentaccess based on price thus brought us to the more stablemarket of today. Manufacturers, traders all go to this marketand are pleased.Douglass North indeed argues that institutions are notdecreed into existence, they evolve. Many of our so calledinstitutions have been decreed into being. They are thusdisconnected from the contest and context of conduct and soend up not achieving the goals of moderating conduct. So weannounce priority allocation but in reality it does not happenand we talk about weak institutions.In the book, Managing Uncertainty I suggest that BusinessAssociations and Professional bodies in working to sequesterthe predatory conduct of public officials, the point Fr. Adewalenotes, it plays a critical role in the emergence of institutions.‘In the absence ofinstitutions, strongmen dominateand the effect oftheir dominance isweakened rule oflaw and elevateduncertainty levels.Institutions have andfollow rules, strongmen have friends andfollow whims.‘This is particularly why it is mostpleasing to me that it is a professionalbody like ICAN that has requested thislecture subject.FINANCIAL SECTOR INSTITUTIONBUILDING EXPERIENCEFew sectors continue to challengethe potential of progress in Nigeriaas the financial services sector.Entrepreneurs depend much on thissector’s intermediation to creativelydestroy today’s valuable, advancingsociety northwards on the value vectors.Absences of representational systemsthat make assets fungible leave assetsof the poor as dead capital, denyingthem the opportunity to finance ideas,as De Soto notes.Already burdened by the failureto crack the mystery of capital, theentrepreneur then comes up againsta financial system in which he isperpetually a victim, unless he was a‘big man’ . He borrows, does businesssay with a government agency thatrefuses to pay him because one bigman does not care, or because theperson who decided on the project he was working on hadleft office. With no moral hazard on his part, his inability tomanage the obligation gets him criminalised and humiliated.If he survives the process, he would probably never dare to dobusiness again no matter what John Maxwell says about failingforward. Therein lies the reality of why new ventures are few.In the remarkable discussion Saving Capitalism from theCapitalists, Rajan and Zingales show how the United States isa pre-eminent economy because the rules allow the small guyaccess enough for his idea which would never see financingeven in Europe to overthrow today’s dominant player. RajanZingales give credit for this to judgments by US SupremeCourt judge, Charles Brandeis. I am also fascinated to seeAmerican companies go into chapter eleven bankruptcy andexit quickly, to see Donald Trump who has lost everythingcompare himself with the beggar on the streets of New Yorkwhere he once commanded a fortune and then to return tobillionaires alley in a few years. These things are unlikely inour environment except to those with power as their patrons.It then all adds up to poverty and failure to realise potentialof the country. Before I conclude with what I think should bean imperative for professional bodies to accelerate institutionbuilding, I would like to offer a personal testimony on thischallenge for nation building.PLAYING BUSINESS ANGELAbout twenty years ago, I encountered Stephen R. Coveyand was much influenced by his writing. As a result, I sat toreflect on self and to write a personal mission statement. Iconclude then that personal financial fortune was not a majorTHE NIGERIAN ACCOUNTANT 19October/December, 2012

Technicalinterest but that spreading the spirit of enterprise by findingand supporting young entrepreneurial talent would advancethe cause a more affluent and just society. I have since spenta good part of the last two decades teaching entrepreneurship,mentoring young entrepreneurs and playing Business Angel. Abook from a few years ago ‘Business Angel as a Missionary’documents my role in startups from companies like Linkserveand Business Day to encouraging old school mate engineersto run road maintenance outfits. A second volume focusesmore on the ones that were spectacular failures and lessonsfrom them.A distinguished former member of this body, the late ObaOlashore encouraged me years ago to ensure my mission didnot become too risky for those dependent on me by investingin something that would provide assured income every year. Ashe was about to found a bank, I decided it was the right anchor.I became pioneer shareholder of Lead Merchant Bank. A fewyears later, mergers were decreed. In the politics of the rushto merge, Lead Merchant Bank failed to make the wedding.All I had invested to assure school fees for life just vanished.Complaining to one Deputy Governor of CBN, I was told whyworry, you are also in one group that made the marriageceremony. Another couple of years later it was nationalisedand again everything was supposed to be over even whereyou question the decisions. Meanwhile in a venture supportinganother entrepreneur, I had borrowed from friends at homeand abroad for most of the nearly one hundred million thatwas going into constructing an outlet for the venture. Herecomes a new Governor whose stateagency is lessor of the land. He haltsall activity, even with nothing wronglegally. After many calls, he assuresme all would be sorted in two weeks.Nearly one year later all is still stalled.The point of all of this is I have seenagain and again how the citizen isvictim and how altogether the obtusepower asymmetry between citizenand state kills the spirit of enterpriseand keeps the economy recursive andunderperforming potential. Who willbell the cat?I have noted earlier the point aboutRajan Zingales that the US strengthwas largely the product of rulings byJustice Charles Brandeis. How can wefind activist judges responding to civilsociety pressures so that institutionsmay emerge that will make tomorrowbetter? As a persistent litigant ChiefGani Fawehinmi contributed muchto institution building. I believe thatbodies like ICAN and the Nigerian BarAssociation should both litigate issuesuntil institutions that protect citizensand open the space for healthy growthin society emerge.As we search for the Justice‘We lost our best in acrucial building era inbrain drain becauseof weak institutionsthat allow the state todespoil the citizen. Wecannot go on like this.Those who fear to fightback must realise thathistory will hold them toaccount. To fail to buildinstitutions that supportgrowth and stability isto betray the mission ofthis generation.‘Brandeis of the Nigerian Judiciary who will build hope forfuture generations to thrive in venturing because of stronginstitutions it is pertinent to make the point about howinstitutional weaknesses in the finance sector has kept Nigeriain the recursive mode and can be directly linked to the currentstate of high unemployment in the country.Just to make the point about how long I have been makingthis point and how it is neither about me nor any particularstrong man in authority today, visiting the system with whimsthat assures we will lose one decade of progress, let me point toan Oped piece I wrote in The Guardian in 1984 titled “ChasingShadows at Chase”. It was about Government and ChaseMerchant Bank. With time my views were fully vindicated, it wasfound to be a wild goose chase but lives had been damaged,careers broken and foreign investors shaken enough to say asRichard Branson is said to have said recently: Never again inNigeria. It is the duty I feel about seeing it happen again andagain that has made me prepared to take the current disruptionof the financial system into a state of a war of attrition. Thisreally is what you as professional bodies should be up to if weare to build institutions to raise the quality of life of Nigerians.I still recall not so long ago when the ideas of formerBritish Chancellor of the Exchequer Norman Lamont ledthe Confederation of British Industry (CBI) calling for hisresignation. The cry was Norman Lamont must go. By June1991 British PM John Major fired Lamont. But here we hearNBA call for people in Central Bank to go. But nothing happensand the next generation prepares for a future in which peopleare afraid to lend or borrow or to investbecause without moral hazard theyare criminalised and their investmentsarbitrarily usurped.I have and will repeat a call forinternational consulting firms to behired to review decisions of our recentbank reforms for logic of the choicesmade. Even though National Assemblyprobes have already showed they werepervasion of justice.To illustrate the point further,staying with financial services sectoras example. In the mid 1970’s, lackof rigor in decision making resulted inmisunderstanding of a piece of policyadvice offered the then cabinet ministeron bank board structure and resulted inthe nationalisation of the banking sector.Even though no one can argue againstthe fact that one of its consequenceswas the growth of Nigerian humancapital in banking, it no doubt resultedin much deterioration of values in thesystem that privatisation would berequired later to rescue the system.Since government, which means noone, owned the banks the games playedto be appointed to executive positionsand the instability so created were soTHE NIGERIAN ACCOUNTANT 20October/December, 2012

Technicaldebiletive of development goals, a case of the tragedy of thecommons writ large, that you would believe no one would everdo that again. Strong institutions, with institutional memory,what the Germans call Weltaschanung, would not. Strong menhave strong whims and whims generate uncertainty and hightransaction costs.Henro Boyo in a well presented discussion of the CBN andinflation in The Guardian of October 4, 2012 makes this pointof the long term damage introduced by a CBN run on whims.What is even more bothersome Is that those who have come tomanage banks as caretakers with no long term commitment ofownership and whose agency function are not superintendedby owners, use the positions to abuse and to abuse on behalfof those who sent them. As they service their friends and thosewho sent them and fight the perceived enemies of those forwhom they serve as surrogates they further fracture the systemand set up the environment for the next systemic crisis.Ironically, they themselves are often the victims on thenext round. But theirs is a mindset of momentary advantagewhich dulls effort at building institutions to make the playingfield level and removed from what I called the ‘predatory actsof public officials’ in my 1998 book “Managing Uncertainty”.I was therefore not surprised when about this time last yearat the Wharton Africa conference a leading Goldman SachsExecutive noted that a strange outcome of banking reforms inNigeria was that the banks were at about half what their valueshould be using known methods of analysis.If we are to save ourselves these rounds of despair theninterested parties, as Douglas North argues in that seminalbook, Institutions, Institutional Change and EconomicPerformance, should engage in contestations that will ultimatelyresult in institutions that set boundaries to the conduct of all.It is as such I had suggested during the systemic failings ofthe banking industry in the 1990s when I was not associatedwith the industry that bankers should get together and take aclear strong position. But that those not in detention then, sawit as not their problem. A few of them would later be victimsin the last four years. It is as such that I have urged people inbanks forcibly seized in this round to establish locus standi byrefusing to accept claims from usurping managers and contesteverything, no matter the inconvenience, in a state whichFather Adewale points out so well, intimidates and oppressesthe one that should have power over it, the citizen. If wecontinue to roll over and play dead, the authority figures willcontinue to act in ways that heighten uncertainty and sabotageeconomic progress.In my view, if we are to build institutions, businessassociations, and citizens should become freedom fighterswithout guns for issues that will produce better context forhuman engagement. In some ways, my views on a pattern ofresistance is reinforced by what I hear every time I meet thegreat statesman, First Republic Minister, Maitama Sule, DamMasani Kano. He usually says “Pat whenever I think of you, Ithink of Ghandi and of Mou. You must never give up. Nigerianeeds you.” I will then joke that I would rather Ghandis’ painfulself sacrifice and resistance than Mou’s “I have blood to waste”.I wish to reiterate that these things matter because theconsequence linkages are self evident. Where people feel theyare victims of injustice, it is hard to find peace. Where there isno peace, progress is improbable. A just society is desirableand made likely by institutions that mete out consequences ina manner blind to who is involved. Where this injustice involvesproperty rights, they make the likelihood of investments andeconomic intercourse, in general, low. If it is so obvious whydo enough of us not care enough to sacrifice to change currentconditions. One clear way to go is to create conditions to giveyou as individuals or associations the locus standi to causereview of rules which frame new boundaries. This is particularlyimportant as the Nigerian Judiciary has often hidden behindthe locus standi doctrine.To conclude, let me make the point that poor institutionshave hampered progress in much more than the financialsector. An example or two from the very important infrastructurearea will suffice.I was in Kualar Lumpur, Malaysia, the day the city’s metrolineof a similar design as that which Gov. Lateef Jakande hadcontracted for Lagos was commissioned. That of Lagos wasaborted by the Buhari administration at enormous costs bothin actual payments of penalties and the opportunity cost of nothaving that facility in place. But more painful for me was thatthe Kualar Lumpur one was built by Taylor Woodrow a companythat nearly went bankrupt because of failure to pay bills as duein Nigeria. The problem of notoriety in meeting our obligationsin this sector is such that one of the biggest infrastructure firmsin the world PB is reluctant to touch Nigeria because of unpaidbills from work with NEPA of old. In another big firm in the US,a Nigerian rising star lost his job because a top executive bitterfrom experience in Nigeria from decades earlier found he hadinterested colleagues in looking at opportunities in Nigeria. Howcan we make progress with such a track record?If China stagnated after much progress under the MingDynasty 300 or so years ago, and Argentina dropped frombeing at par with the United states in the 1990s becauseof failure of its institutions to continue to evolve, the kind offailings that have given us this recursive economy after wisepolicy changes, weak institutions, must be combated for thelove of the next generation. One outcome formed already isthe factor of a generation that left town. We lost our best in acrucial building era in brain drain because of weak institutionsthat allow the state to despoil the citizen. We cannot go onlike this. Those who fear to fight back must realise that historywill hold them to account and that in the sense of the FranzFanon rebuke, every generation must discover its mission andeither fulfill it or betray. To fail to build institutions that supportgrowth and stability is to betray the mission of this generation.Mr. chairman, ladies and gentlemen, if institutions are toevolve to aid nation building business Associations, actingstrongly are imperatives of now.Among the critical areas for institutions to be built orinvigorated are in Education, Law and Order, Financial Markets,Communication and Land Reform. I do hope that this will berallying call that can save our country and thank you for yourkind attention.* Professor Patrick Utomi, senior faculty of the LagosBusiness School presented this Paper at the 42 nd AnnualAccountants’ Conference held in Abuja.THE NIGERIAN ACCOUNTANT 21October/December, 2012

Conference42 nd Annual Accountants’ Conference of theInstitute of Chartered Accountants of NigeriaReport of the ProceedingsGeneral Proceedings and Activities1. The 42 nd Annual Accountants’ Conference took placebetween the 15 th and 19 th of October 2012.2. The conference was declared opened on Tuesday the16 th of October 2012 by the President of the Federal Republic ofNigeria, his Excellency Dr Goodluck Ebele Jonathan, GCFR, whowas represented by the Accountant General of the FederationMr. Jonah Ogunniyi Otunla.3. Despite fears entertained by members of the organisingcommittee about a likely drop in attendance as a result of thesecurity situation in the country and fear of air travel accassionedby the ill-fated Dana Air crash in June 2012, attendance at thisyear’s conference recorded an increase over last year. As at 18 thOctober 2012, there are a total of 3950 delegates out of which3709 are fee-paying delegates, compared to 3482 fee-payingdelegates, for the same period in 2011.4. Invited guests, and delegates attended the openingceremony of the conference from the United Kingdom, Mali,Ghana, Togo, Republic of Benin and Cote d’Ivoire. Also inattendance were the governors of Osun State, His ExcellencySenator Ibikunle Amosun (FCA); the governor of Gombe State,His Excellency Governor Ibrahim Dankwambo; and the governorof Lagos State, His Excellency Governor Babatunde Raji Fasola(SAN). Also in attendance was the president of the Association ofNational Accountants of Nigeria (ANAN), Hajia Mariam Ibrahim.5. The President of the Federal Republic of Nigeria in hisgoodwill message recognised the immense role of ICAN indeveloping a high-level manpower base for the nation in the areasof accountancy, finance, taxation and treasury management. Heespecially noted the role of ICAN in the training of accountantsin the Treasury Academy and acknowledged the role of ICAN inmidwifing the now defunct Nigerian Accounting Standards Board(NASB), which has morphed into the Financial Reporting Council(FRC).6. President Goodluck Jonathan made the point that thedevelopment of the nation is a direct result of the actions takenby every Nigerian and that it will take continuity, commitment andconsistency on the part of the people and government to movethe country in the direction it needs to go in other to deliver on theexpectations and aspirations of Nigerians. The President directedthe attention of the conference to the focus of his administrationon reforms and improvements in the power sector, agriculture,infrastructure development such as road rehabilitation andconstruction of railroads and airports. The intelligence gatheringcapacity of the security agencies he explained is being improvedas a basis for addressing the growing concerns of insecurity.The president noted also that his administration is committedto the continuous improvement of the budgetary allocation infavour of capital expenditure and the efficient and transparentimplementation of budgets. The focus of the administrationwill remain the creation of an enabling environment to ensureinvolvement of the private sector in sustainable development ofNigeria.7. In his welcome address, the 48 th President of the Instituteof Chartered Accountants of Nigeria, Mr Adedoyin Idowu Owolabi(FCA) explained that the theme of the conference “BuildingEnduring Institutions for National Development”, wasspecifically chosen to underscore the inextricable relationshipbetween strong state institutions, the pace of nationaldevelopment, and the role of ICAN in the process of development.Development of a nation occur when institutional arrangementsfor the deployment of inputs, wealth creation and distribution arewell established and operated by skilled managers in accordancewith best practices. He regretted the fact that Nigeria’s 52-yearhistory point to a yawning gap in institutional development asinstitutions of state are remembered, not by their statutorymandate and quantum of service delivery but by the exploitsof their transient leaders. The nation has historically paradeda string of weak institutions but strong political leaders, withconsequent underdevelopment. The only way forward is to startnow in effecting a reversal of the trends in the incidence of weakinstitutions in Nigeria.8. He brought the attention of the conference to the plan bythe Institute to sponsor a Whistle-blower’s Protection Bill at theNational Assembly as part of ICAN’s contribution to promote bestpractice in corporate governance and rid the society of corruptand sharp practices.9. In their goodwill messages, the governors in attendanceall congratulated the Institute for the conference arrangementTHE NIGERIAN ACCOUNTANT 4October/December, 2012

Conferenceand especially the foresight in choosing a theme that focuseson institutions and national development. Governor Amosunencouraged accountants to be more visible and make themselvesreadily available for service and advocacy that will move thenation towards its desired goal of sustainable development. Headvocated for the use of accountants in more strategic roles inthe private and especially the public sector, since their expertiseaffords them the opportunity to add significant value in whateverarea of responsibility they are asked to function in. GovernorDankwambo was also of the same view, when he admonishedmembers of ICAN to be more proactive agents of change bybeing involved in politics, policy formulation and implementationfor nation building.10. Hajia Maryam Ibrahim, president of ANAN in hergoodwill message congratulated ICAN on the organisation ofthe annual conference and expressed her joy that the invitationextended to ANAN marks a new and positive beginning in therelationship between ANAN and ICAN. She advocated for asituation where ICAN and ANAN will have a common voice onissues relating to accountancy, financial reporting, the economyand national development. She proposed a unified accountantssummit involving ICAN, ANAN and other relevant stakeholdersto deliberate and share ideas on nation building. She calledfor more efforts to be put in place to ensure that the activitiesof the Financial Reporting Council (FRC) are enhanced by animmediate constitution of the board of the council. She agreedwith ICAN that strong institutions are the bedrock of sustainablenational development and expressed the view that one wayto build sustainable institutions is by achieving leadershiptransformation, noting that accountants have a key role to playin this regard.11. Prior to the opening ceremony, there were pre-conferencecocktail and religious activities that were well attended. Therewas also the district societies competition at which SWANemerged the winner in all categories, and again winning thelargest contingent award. Other activities and events were sports,novelty football match, excursions and the President’s party.12. The conference theme was developed around a leadpaper titled “Building Enduring Institutions for NationalDevelopment”, 2 plenary sessions, and 4 workshops, all ofwhich were well received and attended by the delegatesTechnical Papers and Workshop Proceedings13. THE LEAD PAPER, “Building Enduring Institutionsfor National Development”, was presented by Professor PatUtomi, senior faculty of the Lagos Business School and two-timepresidential candidate and an expert in the field of comparativedevelopment economics and competition, amongst other areasof expertise.14. In his paper, Prof. Utomi posited that man is essentiallyan animal without institutions that set the boundaries of properbehaviour in society, with appropriate sanctions for those whostep outside these boundaries. Without strong and functioninginstitutions, we will never translate the potentials of Nigeria intoreality.15. Quoting extensively from various authorities, he argues inhis paper that there is a clearly established causal link betweeneconomic performance and strong institutions. He contendsthat Nigeria has made its citizens poor and the nation veryuncompetitive because of the absence of institutional frameworksand structures that will ensure national development. As a resultof this poor state of affairs, transactions costs are very high withattendant erosion of corporate and personal profitability, whileat the same time discouraging inflow of foreign investmentsordinarily consistent with the levels of opportunities in the country.Corruption which is perceived by many as the main problem ofNigeria he believes has developed and taken deep root becauseof the absence of institutions to check its entrenchment in ournational culture.16. Prof Utomi asserted that there are even more profoundconsequences for the absence of institutions in Nigeria. Asa result of the poor state of affairs occasioned by a lack ofinstitutions, people, especially youths, feel very left out and aregravitating to a state of mind where they feel they have nothing toloose. In such a state of affairs in his view, anarchy will prevail.17. According to Professor Utomi, the benefits to be derivedfrom strong institutions include the expansion of prosperity andimprovement in the competitiveness of Nigeria. However, hebelieves that the failure of Nigeria to build enduring institutionsis because successive governments have tried to decreethe existence of institutions, which he argues is sociallyimpossible. In his view there are six interrelated and mutuallyreinforcing variables that are necessary for national sustainabledevelopment. These are, appropriate policy choices, humancapital, entrepreneurship, culture, leadership and institutions.Professional bodies like ICAN, he argues, are critical to theformation of institutions that will form the catalyst of our sustainednational development.18. PLENARY PAPER 1:“Governance and Sustainable Development: Addressingthe Leadership Challenges”In the first plenary session chaired by Mr Emmanuel ItoyaIjewere, a Past President of the Institute, His ExcellencyGovernor Raji Fashola presented the Paper on Governanceand Sustainable Development: Addressing the LeadershipChallenges. This Paper was discussed by the representative ofthe governor of Niger State, His Excellency Mu’azu BabangidaAliyu, and Professor Bola A. Akinterinwa, Director-General,Nigerian Institute of International Affairs.19. In his presentation, Governor Fashola made the pointthat Nigeria is suffering under the weight of huge infrastructuredeficit since the portfolio of physical infrastructure serving thecountry today were put in place more than 4 decades ago withlittle maintenance since then. He argues that a reversal of thistrend can only be made possible with concerted efforts on the partof government and a rebalancing of the budgetary coefficient infavour of capital expenditure. In his view, the budget is an articleTHE NIGERIAN ACCOUNTANT 5October/December, 2012

Conferenceof faith that defines the direction in which the government wantsto move its development agenda.20. Nigeria he believes is in urgent need of leadershiptransformation as a basis for building strong institutions anddriving our aspiration for sustainable development. He statedthat ICAN as an institution has a preeminent and strategic roleto play as a result of its origins and makings in leading thevanguard of reinventing the path we thread as a nation towardsgreatness. On the issue of the on-going oil subsidy scandal, hechallenged members of ICAN to get involved and deploy theirforensic accounting and auditing skills in unravelling the over N2trillion naira losses.21. Governor Fashola charged ICAN and its members to viewthe institute as a Systemically Important Group, and thus takea lead in shaping policy and advocating for good governanceand accountability. ICAN should hold the government of Nigeriaaccountable for its actions.22. The discussants all agreed that good governance andtransformational leadership will make a significant changetowards realising our quest for building enduring institutionsand achieving national rebirth. Professor Bola A. Akinterinwa,while agreeing substantially with the need for building stronginstitutions, argues that weak institutions is an accidental result ofa more fundamental originating cause of our national problem. Hesuggested that the real problem with Nigeria, which is systemic, isthe fact that we are intrinsically individualistic, what he describedas attitudinal individualism, and until we become more Nigeriacentricin our thoughts and actions, change may not occur asdesired.23. His Excellency Governor Rochas Okorocha of ImoState, a guest of the Institute, contributed to the proceedingsby addressing the issue of underdevelopment in Nigeria. Hesuggested that the problem with Nigeria is one of poor leadership,which has persistently demonstrated a lack of vision in directingthe affairs of the nation. In his view, the government of Nigeria isover-centralised with too much power and resources controlled bythe federal government. He suggested devolution of power to thelower tiers of government, down to the level of the communitieswould significantly accelerate the pace of development in Nigeria.He argues for the domestication of democracy to reflect thenuances of the Nigerian culture and value system as a wayto enshrine an enduring and development oriented brand ofdemocracy. Visionary leadership he believes is everything andNigerian leaders must be willing to make personal sacrifices anddevelop the political will to move the nation forward.24. PLENARY PAPER 2:“Building Trust in Financial Report: MeetingStakeholders Expectations”Vernon Soare, the Executive Director of the Institute ofChartered Accountants in England and Wales, presented themain paper for the second plenary session. The Governor of theCentral Bank of Nigeria (CBN) Alhaji Sanusi Lamido Sanusi alsomade a brief presentation. Following this, the issues raised by MrSoare and the Governor of the CBN were actively discussed bya panel of discussants which included; Sir S.N. Nwosu, NationalCoordinator, Independent Shareholders Association of Nigeria(ISAN) and Mr. Haruna Jalo Waziri who represented Mr. OscarOnyema, Director General/CEO of the Nigerian Stock Exchange.Mr. Ayodeji Oni of Walmer Consulting and a Past Presidentof the Institute chaired the session.25. In his paper, Mr. Soare stated that markets andeconomies function properly when participants have trust inthe financial statements that drive activities and decisions incapital markets. Africa and indeed Nigeria can accelerate itsdevelopment when it develops its capacity for generating financialreports that present a true and fair view of the results of theperformance of the reporting entity. He further stated that the coreingredients underpinning strong economies are, strong regulatoryframeworks, processes and financial reporting frameworks, sincethese are the elements that build investor confidence and drivesustainable national development.26. He noted that strong regulatory architectures arefacilitated by the activities of strong professional bodies likeICAN and appropriate legislations. Processes involve oversightand appropriate disciplinary actions for those who contravenelaid down procedures. One measure of good financial reportingpractice is the avoidance of complexities in financial reports.27. He argued that there is a lot we can learn from therecent and on-going global banking and financial crisis. In hisview, the key ingredient that was lacking was trust in the systembecause of the demonstrated lack of integrity, transparency andaccountability, on the part of the key players. This situation wasalso exacerbated by the high degree of opacity and complexityin financial statements, especially in the treatment of financialinstruments. Once trust is lost, it is difficult to regain.28. Mr Soare further argued that the drivers of organisationalintegrity are leadership, strategy, policy, information and culture.He pointed out that our role as auditors is critical to creatingtrust in the financial system. He concluded from a partial quotefrom HRH the Prince of Wales who identified the role of theprofessional accountant as going beyond presenting facts andfigures, but rather the integrity to provide meaningful and timelyinformation needed for financial decision making and impartialityof business advice29. The CBN Governor Alhaji Lamido Sanusi reiteratedthe fact that the critical factor in functioning markets is trustand integrity. He stated that the Nigerian banking and financialcrisis is due to the fact that investors lost trust and confidence inbanks and the system due to the demonstrated lack of integrity,transparency and good corporate governance on the part ofbank directors and managers. He stated that the CBN has putin place systems and procedures for ensuring that banks do notcontravene market rules and report financials that do not reflecttheir performance realities and risk positions.30. In his concluding remarks, he agreed with the Presidentof the Institute on the need for ICAN and the CBN to dialogueTHE NIGERIAN ACCOUNTANT 6October/December, 2012

Conferenceregularly so as to clarify the reason behind the decisions takenby the CBN as a regulator. A recent example is the case of theintroduction of the N5000 note denomination.31. In his reaction and discussion of the submission of MrSoare and the CBN Governor, Sir S.N. Nwosu of ISAN agreedthat trust is key to the functioning of markets. He asserted thatnot minding the recent local and global capital market meltdown,capitalism as a market model is fundamentally sound. However,for capitalism to work, trust and confidence needs to be rebuiltinto the system. He stated that regulators must be above reproachand must deal with all players equitably and in good faith. ICANmembers must be above board in their dealings and avoid conflictof interest.32. Mr. Haruna Jalo Waziri of the NSE who represented MrOscar Onyema, Director General/CEO Nigerian Stock Exchangeexpressed the view that the NSE was actively putting in placeprocesses to ensure that reports presented by listed companiesmeet the minimum acceptable standards prescribed by regulationand best practice.33. WORKSHOP 1:“Entrepreneurship: Empowering the Nigerian Youths”Past President Chief (Mrs.) O.O. Olakunrin, OFR, chairedthe workshop. The two disccussants who presented papersand responded to questions from the audience were Mr PeterBamkole, Director of the Enterprise Development Centre of thePan African University and Mr Victor Gbolade Osibodu, MFR,Chairman and CEO Vigeo Holdings Limited.At the end of the workshop a number of key informationemerged:• Despite the apparent state of underdevelopment andinfrastructure challenges in Nigeria, huge opportunitiesexist for prosperity for those who know how to turnproblems into opportunities.• It is in the mist of challenges that business opportunitiesemerge which are geared towards solving thoseproblems.•Nigeria has a fast growing and youthful population inthe face of rising unemployment. The focus shouldtherefore shift towards entrepreneurship.• Education curriculum across all levels should begin toemphasise entrepreneurship so that youths areempowered to take their destiny in their own hands.•Funds should be setup to ease the access of goodideas to appropriate funding.• Successful entrepreneurs should be willing to mentoraspiring and young entrepreneurs.34. WORKSHOP 2:“Whistle Blowing: Setting a Framework for Corporateand Public Accountability”Major-General Sebastian Owuama (rtd.), Past Presidentchaired a panel of erudite discussants comprising Mr. FemiFalana, SAN, a renowned legal practitioner and civil rightsactivists; Mrs. Obiageli Ezekwesili, former Vice President forAfrica, World Bank; Dr Kingsley Moghalu, Deputy Governor(FSS) Central Bank of Nigeria; and Senator (Dr.) Patrick AyoAkinyelure, FCA.In her presentation, Mrs Ezekwesili articulated the view thatthe process of proposing a whistleblowing bill (WBB) must bepreceded by a careful diagnostics evaluation of the scope andimpact of such a bill. She demonstrated clearly to the audiencethat members of the institute have perhaps not fully explored thelegal tools available to assist members in achieving the objectivesthat the WBB is meant to achieve, namely the exposing of fraudand the reduction of corruption. One of such tools is the Freedomof Information Act (FIA).Mr Femi Falana acknowledged that ICAN was perhaps themost progressive professional body by initiating the bold moveof proposing such a bill, but challenged ICAN and its membersto clean-up its house as it were by ensuring that it exposes anddisciplines its members who have acted in contravention ofthe tenets of the profession. He argued that laws alone are notenough to rid the country of corruption if there is no moral willon the part of professionals to expose or whistleblow when theybecome aware of corruption and fraudulent practices. He statedthat he was willing to provide free legal support to the instituteand its members if there is a clear case of corruption and fraudto be exposed.Dr Moghalu was in agreement with the other discussants andadvised that ICAN should consult widely to ensure that the outputof its proposed WBB is robust enough to achieve its intendedobjectives. He gave the examples of the collapse of Enron andWorldCom in the United States as examples of the result ofwhistleblowing. He suggested however that whistleblowing willnot happen just because a law protecting whistle blowers is inplace, except the right kind of incentives are also put in place toencourage whistleblowing. Whistleblowing comes with a lot ofpersonal and financial risk and the incentive for whistleblowingmust be considerably higher than the risk for the system towork. He informed his audience that the CBN has in place awhistleblowing guideline that it regularly updates. He concludedhis presentation by stating that the CBN would give ICAN all thesupport it requires in ensuring that the bill is put in place.Senator (Dr) Patrick Ayo Akinyelure, FCA, was in agreementwith his co-panellist and suggested that everyone must beprepared to blow the whistle no matter the cost if the nation isto reduce the incidence of corruption.35. WORKSHOP 3:“Doing Business in Nigeria: Fiscal, Legislative andJudicial challengesUnder the chairmanship of Mr. Emmanuel Ijewere, a panel ofdiscussants comprising Ms Marie Francoise Marie-Nelly of theWorld Bank; Mr Fabian Ajogwu, SAN; and Wale Ajayi, PartnerKPMG Tax came to the following conclusions about doingbusiness in Nigeria:• While huge opportunities for doing business exists inNigeria, the opportunities are not being fully exploitedTHE NIGERIAN ACCOUNTANT 7October/December, 2012

Conferencedue to a number of reasons which includes higheconomic sense.transaction costs, poor state of infrastructure, lowlevel of human capital, large informal sector and •concentration on the mono-product oil sector, growingstate of insecurity, and the absence of effective andefficient systems for enforcing property rights.•• Other factors which makes doing business in Nigeriadifficult includes unstable fiscal policies and highdegree of uncertainty, difficult and prolonged •procedures for registration of business, absence ofinformation, weak judicial remedies and obsolete laws.The panellists collectively recommended the following actions •to improve the ease of doing business in Nigeria:• Acceleration of the on-going privatisation process in thecountry.•• Taking advantage of alternative dispute resolutionchannels such as the Multidoor court system in LagosState and the Federal Capital Territory, Abuja. •• Institutional and legal reforms.•• Entrenchment of fiscal consistency and discipline.• Infrastructure upgrade.• Tax incentive schemes.36. WORKSHOP 4:•“Financial Reporting and Value Creation in the PublicSector: Issues Challenges and Prospects”Past President Herbert Agbebiyi chaired this workshop withthe following panellist:• Mike Suarez (Executive Director, Finance andResources, CIPFA);• Alhaji Ibrahim Hassan Dankwambo (Governor ofGombe State);• Josephine Oluseyi Williams, FCA (PermanentSecretary, Ministry of Finance and Council Member); and• Alhaji T.A. Abdulkareem, FCA (Accountant-General,Kwara State).At the end of the workshop, the following points emerged fromthe presentations and the discussion of the panellists:• CIPFA is working with ICAN and has cherished ICANas a highly valued partner in improving public sectorreporting in Africa.• The public sector is crucial to creating an enablingenvironment and condition in which private sector canthrive/create value.• Public services must be of value and must makePublic sector financial management systems mustprovide information to decision makers for goodgovernance and accountability.Accrual accounting and budgeting is very crucial foraccountability.High integrity and ethical values are necessaryingredients in public sector financial managementsystems.Focus must be on delivering right services efficientlyand economically.Public Financial Management must be coordinatedbetween government, accounting bodies and internalorganisation.Outcomes must be reported including notes on jobscreated, new enterprises and specific projects.There are significant challenges in public sectoraccrual accounting, for example in the areas ofaccounting for infrastructure reporting on budgetaryperformance. This situation is made more difficult bythe voluminous and complex nature of public sectorfinancial reports and the absence of universallyadopted standards.Enabling legislative framework is required for theadoption of IPSAS for the public sector.Conclusion37. The communiqué from this conference, which wouldinclude the recommendations of the Institute, as approved byCouncil will be based on the summary of this report and will bereleased by the President and Council of the Institute in duecourse. A draft communiqué will however, be read after thepresentation of this report.On behalf of all the members of the Rapporteur Group, Ithank you for listening and hope you have found your attendanceand participation at this conference informative, educative andworthwhile.Kayode Omoregie (MBA, FCA)Rapporteur-GeneralTHE NIGERIAN ACCOUNTANT 8October/December, 2012

DevelopmentHow Professional Accountants in Business CanIntegrate Governance Into Their Organisations’Drivers of Sustainable SuccessByVINCENT TOPHOFFThe ultimate objective of governance is to ensure the creationof sustainable organisational success and stakeholdervalue; these are the core elements of every organisationthat strives to be competitive and sustainable over the long term.Governance in an organisation should, therefore, be about morethan a compliance exercise designed with the sole purpose ofsatisfying regulatory requirements. Instead, good governanceaffects the entire organisational cycle of strategic planning,resource utilisation, value creation, accountability, and assurance.Such a holistic approach ensures that governance is not “bolton” but “built in” — integrated into all aspects of an organisation.Integrating Governance for Sustainable Success, a new reportfrom the Professional Accountants in Business (PAIB) Committeeof the International Federation of Accountants (IFAC), analyses,through illustrative case studies, how professional accountants incommerce, industry, financial services, education, and the publicand not-for-profit sectors support their organisations in integratinggovernance into the key drivers of sustainable organisationalsuccess.The report uses the key drivers of sustainable organisationalDrivers of Sustainable Organisational Successsuccess, previously identified in Competent and Versatile: HowProfessional Accountants in Business Drive SustainableOrganisational Success, as the building blocks for integratinggovernance in all aspects of an organisation. The report alsoincludes illustrative case studies from around the world to providean analysis of how professional accountants in business supporttheir organisations in integrating governance into these drivers.Since professional accountants in business are typicallyinvolved in the planning, implementation, execution, evaluation,and improvement of governance in their organisations, they arecritical to integrating governance throughout an organisation.In addition, many professional accountants in business have aresponsibility to provide objective and accurate information andanalyses to support all of these activities, and may have overallresponsibility in governance areas, such as external businessreporting. This puts professional accountants in an excellentposition to ensure integration of governance throughout anorganisation — into its very DNA.About the PAIB CommitteeThe PAIB Committee serves IFAC member bodies andprofessional accountants worldwide who work in commerce,industry, financial services, education, and the public andthe not-for-profit sectors. Its aim is to promote and contributeto the value of professional accountants in business byincreasing awareness of the important roles professionalaccountants play, supporting member bodies in enhancingthe competence of their members, and facilitating thecommunication and sharing of good practices and ideas.The report is available on the PAIB section of the IFACwebsite at www.ifac.org/paib.Source: Competent and Versatile: How Professional Accountants inBusiness Drive Sustainable Organisational Success (IFAC 2011).About IFACIFAC is the global organisation for the accountancyprofession dedicated to serving the public interest bystrengthening the profession and contributing to thedevelopment of strong international economies. IFAC iscomprised of 167 members and associates in 127 countriesand jurisdictions, representing approximately 2.5 millionaccountants in public practice, education, governmentservice, industry, and commerce.* Mr. Vincent Tophoff is Senior Technical Manager,IFAC.THE NIGERIAN ACCOUNTANT 40October/December, 2012

InterviewMrs. WINIFRED AKPANI isa woman of many parts.She’s a Mathematician,Computer Scientist, CharteredAccountant, Oil Magnate, Business Woman,Social Worker, Philanthropist, Founder andManaging Director/Chief Executive Officerof Northwest Petroleum & Gas CompanyLtd. She holds a Bachelors degree inMathematics with Second Class Honours(Upper Division) from the University ofBenin, Edo State, and a Post GraduateDiploma in Computer Science from theUniversity of Lagos. She is a Fellow of boththe Institute of Chartered Accountants ofNigeria (FCA) and the Institute of Directors.At the just concluded 42 nd AnnualAccountants Conference of the Institute ofChartered Accountants of Nigeria (ICAN),in Abuja, she donated the star prize of abrand new Kia Cerato car, which was wonby a member of ICAN, at an open raffledraw. In this encounter with The NigerianAccountant team of MUYIWA DARE,OLASUNKANMI OLOKETUYI and RUTHIDUMUEKWU, Mrs. Akpani bares her mindon why she donated the car to her Institute.She also spoke about her business interestsand hopes for a better Nigeria. Excerpts:Nigerians Must ElectThe Right Leaders– Winifred Akpani,MD/CEO of Northwest Petroleum & Gas Company Ltd.AkpaniMadam, you had a background inMathematics and a Post GraduateDiploma in Computer Science. How didyou get into the Accountancy professionand why?When I left University, I was quite young.I had a first degree in Mathematics because I loved figures a lot.So, all I wanted was to be a Mathematician. But when I left school,I suddenly realised that Mathematics would not pay the kind ofbills I thought I would have and I applied to study Engineering.When I considered the number of years since I had to do the PGD,it was like having to start all over. I thought about a profession Iwould enjoy and I knew that ultimately, my aspiration was to bea business woman because of my background with my parents.I got involved in my parent’s business as a 10 year old child asmy father’s unofficial auditor.At the time I graduated, accounting was very attractive. SomeFirms were recruiting from the University, so when the opportunitycame I took it and I trained first with Oni Lasebikan & Co. (nowErnst & Young).Your professional experience started with Oni Lasebikan& Co. (now Ernst and Young) in 1987 and later with ArthurAndersen & Co. (now KPMG Professional Services). Whatwas it like in those days?Well, it was fun. It was like being in school though as a workerbecause you were earning some money and getting a lot ofexperience. It was very professional and I believe we all aspiredto become qualified Accountants in record time. But then it wasquite exciting as we went to different sectors of the economy.We went into Banking, Oil & Gas and you know at that time, weonly had NITEL so there wasn’t much in Telecommunications butwe were made to move around. However, it was also not easybecause one had to go to work in the day and go to school atnight. Since I didn’t study Accounting, I had to write Foundation,Professional Examination (PE) 1 and 2 before qualifying as aChartered Accountant. It was good, very professional.Between 1992 and 1997, you rose from the level of aFinancial Controller in Flame Petroleum & Gas Company Ltd.to Executive Director within five years, What was the magic?It wasn’t magic. It was a start-up Company. We had peoplecoming from the Oil & Gas industry and I was coming from ArthurAndersen as a Chartered Accountant. I had a big advantage;an Accountant sees the big picture. When you work withprofessionals, you see the whole Company and young as I was,I was highly respected.Whenever my advice was ignored, recourse was always had tothem on the long run. Don’t forget that growing up as a child, I wasvery much involved in what my parents were doing. So I believeTHE NIGERIAN ACCOUNTANT 50October/December, 2012

Interviewthat was what the then Management were looking at; they werelooking at the business acumen and not just what I was doing asa Financial Controller. I got involved; I looked into what Marketingwas doing, what Operation was doing and it was quite inevitablethat I would rise even though it was a start-up Company.Now, you are the Founder and Managing Director/ChiefExecutive Officer of Northwest Petroleum & Gas CompanyLtd. How has it been in the Oil & Gas Industry and what doyou have to say about the various allegations in the industrysuch as bunkering, subsidy scam, etc, affecting the industry?Well, it’s a trend cutting across Nigeria. When we talk aboutthe Oil Companies, we only emphasise the bad side; nobodytalks about the liberalisation that has occurred over the years.Nobody remembers how we only had international companiesin the Downstream Sector for so long. Government in the pastfew years did quite a lot to bring in Nigerians and they are outto achieve positive results. You know, we have an Industry withNigerians participating and benefitting immensely; you cannotbelieve the number of job opportunities that are created directlyand indirectly. Frankly, despite the bad occurrences, I believewe can bring about positive change because we do really needthat change. But the good thing is that Government is tackling ithead long and by the time the sanitisation is over, I believe thatNigeria will be much better off.Looking at your career movement from professionalpractice to Oil & Gas, what challenges did you face and howdid you overcome those challenges?That is an interesting question because when I left practice tostart-ups, people laughed at me. I was going into a business ofpeople who were perceived as not quite educated. They believedanybody can be in business but cannot fathom how one wouldleave all the education and professional qualifications, to go intobuying and selling. But then what people should know is that thebiggest companies in the world were not necessarily set up bypeople who had the best qualifications. Theeducation and qualifications help to put youon the fast-track. I tell you, these peoplecan lecture in the best Business Schoolsbecause they have great experience. WhatI have done is that this company was set upfrom scratch and I don’t get tired of tellingthe story. Imagine a company started byselling two drums (400 litres) of dieselnow trading millions of litres of petroleumproducts per day in just over ten years!Apart from Oil & Gas, your otherbusiness interests also include Travel &Tours as well as Banking. How are youable to combine these responsibilitiessuccessfully?We did not set up all the companies;we only have interests in them. We setup only the Travel & Tours Company andwe have people managing them. Whenyou have good managers, you have noreason to worry.As a Chartered Accountant, what advice do you have foraspiring Chartered Accountants and your colleagues?My first advice to my colleagues would be that they respect theprofession. They should not compromise their professionalism.This is of utmost importance. Accountants should not forgetthe issue of integrity and no matter what, integrity cannot bepurchased. It is what moves you to great success because whenpeople notice it, they call you. They may not call initially butwill do so eventually. That is why you need to do a lot of thingsdifferently and that gets you going. So, I’m appealing passionatelyto Chartered Accountants to maintain this.You donated a KIA Cerato saloon car to the Institutetowards the success of the 42 nd Annual AccountantsConference. What informed this gesture and what do youhave to say to other well meaning Chartered Accountantsin this regard?As a matter of fact, The Institute made a request that we shouldassist by donating a car for the raffle draw, and as a Companywe felt that it is part of our Corporate Social Responsibility and sowe did. If we had any inkling it would be so interesting, we wouldhave done more. It is not that people cannot afford a car but itwas fun to acquire it absolutely free through a fair raffle draw. Itwas quite interesting! We felt honoured to support The Instituteas it added glamour to the whole event.You were at the Conference Gala Nite where the car waspresented. How did you see the event?It was fantastic seeing Chartered Accountants in their gorgeousattires so relaxed and dancing to King Sunny Ade’s music.As a Chartered Accountant and Business woman, whatis your assessment of the economic situation of Nigeria andwhat is the way forward?The economic situation has been below expectation givenour abundance in human and natural resources. However, withthe Country’s great potentials, I verystrongly believe that things will getbetter when we all decide to do ourown bit rather than continue to blameGovernment and Governance. Yes,Government is key but the peoplehave to see Nigeria as a collectiveresponsibility and that there is nowhereelse to call ‘home’. Everything shouldnot be left to government alone. Wemust start by electing the right leadersand giving them utmost support in orderto hold them accountable.AkpaniFinally, you are a very busyexecutive, how do you relax?I can’t say that I have a particularway of relaxing but I do a lot of thingsthat I regard as relaxation such aschurch related activities and socialservices to the needy. Though somepeople regard this as work, I take it asrelaxation.THE NIGERIAN ACCOUNTANT 51October/December, 2012

Designed by BEP Graphix, Lagos. Printed by Academy Press Ltd.