How to sanitise Nigeria’s accounting, financial systems, by Soname
Akinola Soname, a chartered accountant and financial management expert, is the Managing Director of Financial Spectrum Limited. A former Senior Consultant with Pricewaterhouse Management Consultants, Soname has passion for accountability in accounting and financial systems and was a major player in the development of a software, initiated and developed during the past administration of Olusegun Obasanjo, to enthrone a regime of transparency in the country’s economy.
In this interview with Business Editor, ADE OGIDAN, he proffers the leeway for sanitised accounting and financial systems, which the current administration can leverage on, to stamp out corruption in the nation’s public sector. Excerpts.
How would you describe the background issues that brought about the current situations in the nation’s accounting and financial systems?
At the advent of the President Jonathan’s administration in mid-2010, there were a lot of expectations from the public regarding how the country’s economy and its financial affairs would be effectively managed. However, although the President’s political will to tackle corruption was untried and untested, and despite a rather shaky start, a clear direction was eventually established. It was apparent that a laissez-faire stance to governance was adopted and there was free-wheeling opportunism at play, especially as far as financial control and governance were concerned.
What do you mean by this?
Let me explain with the example of the former Governor of Central Bank, now the Emir of Kano, who alleged that 25 per cent of the nation’s GDP was being used to service and maintain the National Assembly (NASS). Put in its proper perspective, it meant that approximately 500 people were consuming the GDP of the equivalent of 40 million Nigerians, assuming a population of 160 million. This was clearly not sustainable bearing in mind the dwindling fortunes of the nation as a result of the declining oil prices, coupled with a relatively undiversified economic and revenue base.
Furthermore, accountability was lacking as a result of the notable absence of basic accounting fundamentals such as an efficient and effective accounting systems within the nation’s Ministries, Departments and Agencies (MDAs). As a result, there were disputes regarding revenue generation, income measurement and remittances to the Central Bank of Nigeria. This precipitated the crisis that led to the suspension/removal, in February 2014, of Mallam Sanusi Lamido Sanusi.
But has the nation really established the capacity to cope with the proper administration of the accounting system?
No, because in terms of capacity, there were less than 20 chartered accountants in the entire Ministry of Finance at Abuja at a period, and this had obvious consequences which pointed to the need for capacity building and expansion in the areas of manpower and accounting infrastructure.
In addition, there exists a yearly frustrating ritual of budgeting, budget defence, approval and the usual face-off with the members of the national assembly, who need to be incentivised in order to provide passage for the proposals forwarded by the MDAs.
It should be reiterated that these cited anomalies permeate all levels of government, including both states and local governments. Uncompleted projects, over-bloated costing for projects, unauthorised purchases/payments, fictitious claims and allowances and other asset-wasting practices were rampant rather than being the exceptions. To crown it all, even the Federal Government’s budget contained more recurrent expenditure items than capital budget spending.
This would invariably lead to stifled economic growth without commensurate sustainable development.
Were there really attempts in the past to address these anomalies?
Of course, yes. For instance, between 2001 and 2002, the then President, Olusegun Obasanjo approved, commissioned and paid for a public sector accounting software development project which sought to have a streamlined set of accounting routines, procedures and systems in all MDAs in the country.
The software –Standardised Government Accounting Marshall (SGA Marshall), was also to be adopted by governments at the states and local government levels.
The envisaged advantages included Increased accuracy in accounting records/transactions, information and better decision-making; increased transparency and accountability in the use of resources especially cash; improved financial control on government’s revenue sources and bases; and a strengthened basis for future financial planning /strategy and reporting, leading to an enhanced economic planning capacity, capability, effectiveness and outcomes.
Although the design and development stages of the project were promptly and satisfactorily completed, the governments at both federal and states levels developed cold feet after the training aspects of the implementation phase. This was in 2004/2005, shortly after which the alleged scheming for a supposed third term began in 2006. This scuttled the effort to push the project through to the field implementation phases.
Subsequent attempts made at implementation as pilots programmes at the Federal Ministry of Finance and those of a few states including Ogun, Imo, Ekiti, Ondo and Bayelsa were cleverly frustrated after discovering the potency and financial impropriety- deterrent potentials.
In 2005, another write-up was again addressed to President Olusegun Obasanjo, on the need to establish a National Accounting Commission/Bureau/Agency (NAC) to oversee the implementation of the above software and also achieve improved purchasing/procurement practices.
He directed the then Minister of Finance, Dr. Ngozi Okonjo-Iweala to take action. No progress was achieved in reviving the project because the political will and commitment were lacking. The resulting breakdown is the brazen financial impropriety we all witness today and which would get worse if left unaddressed frontally.
Again, In 2007, on the invitation of the Chairman of the House Committee on Public Accounts, Hon. Adeyemi Oluwole, the need was stressed for drafting a Public Finance Management Bill which could be passed into a law after due process. It was suggested that it could be modelled after that of South Africa which was enacted in 1999, after incorporating the peculiarities and idiosyncracies of the Nigerian state.
A committee comprising economists, accountants, seasoned civil servants and administrators and lawyers versed in legal drafting should be put together to develop the bill document.
The main advantages would include a streamlined platform on which financial planning and control could be based at all levels of government; a document/manual would exist which contains the financial operations and regulation aspects of government business; provision of guidelines on the roles, duties and responsibilities of each arm of government in order to reduce conflict based on misunderstandings and overlaps of functions; and a basis on which rewards and sanctions could be hinged for specific performance and violations, non-compliance and flagrant abuse of the provisions as the case may be.
In June 2010, a meeting was held with the then Speaker of the House of Assembly, ‘Dimeji Bankole, who expressed surprise that Nigeria was still operating a financial management and control system bequeathed to us by the British since 1958. This obviously could not contain world’s best practices in public financial management in the new millennium. The Speaker, however did nothing despite a promise to look into the issues and possibly sponsor the bill in-house.
What, in your own view, could be the side effects of this policy implementation inertia?
A possible side effect is that Nigeria could be more vulnerable to financial and economic contagion from other regions of the world. Our nation’s accounting and financial systems need to be revamped in order to correctly ascertain the position at any point in time. For example, one wonders why figures never tally between those presented by the Nigerian National Petroleum Corporation, CBN, Federal Ministry of Finance, Customs, Federal Inland Revenue Service and other revenue generating agencies.
So far, what has become of the accounting software initiated and developed during the past Obasanjo’s administration?
Over the past 10 years, enhancements have continually been built into the abandoned Federal Government owned software, thereby transforming it into a robust Enterprise Resource Planning (ERP) and control software for government MDAs. The software has also been web-enabled such that monitoring of financial transactions from anywhere could be undertaken by authorised personnel, such as chief executives and other agents/officers located remotely for that purpose.
The software – (SGA Marshall), fully conforms to the latest International Public Sector Accounting Standards (IPSAS) of financial statement preparation and reporting. At various periods, there had been several presentations, demonstrations and evaluation sessions on the software, even in the presence of International Monetary Fund and World Bank consultants.
However, rather than ensuring that progress was made on the project, the former Minister of Finance subsequently directed that an audit be undertaken on the financial transactions of the proposed organisation- National Accounting Commission (NAC) —a non-existent organisation.
It is important to bring into focus the effect of conducting government business without proper accounting. For example, were any monies missing indeed as alleged by the erstwhile CBN governor?. If so, how much? It is indeed embarrassing for a nation state, such as Nigeria, not to get its accounting and finance routines right, which are part of the fundamentals on which economic indices like inflation rate, exchange rate, poverty levels and others are based and on which planning is hinged.
What would you now prescribe to the present administration on the the nation’s accounting system?
The key recommendation is that the new administration should not waste more resources on probing organisations and executives. Rather, efforts should be directed at developing and implementing fraud deterrent policies, programmes, systems and procedures for governmental operations and business. To achieve this, the key steps include ensuring that a committee be established to prepare a modern Public Finance Management Bill for Nigeria. The law should include sanctions for violations and other operational misdemeanours; another committee should streamline existing accounting and finance guidelines as a manual for accounting staff of MDAs. The advantage is that there is uniformity and staff deployment and redeployment would not lead to efficiency issues. The latter committee should look at the possibility of implementing the SGA Marshall throughout the MDAs since it is a Federal Government property, which would require billions of naira to redevelop from scratch today.
Also, the Auditor-General’s office should be strengthened and given more powers including recommending withdrawal or delay of warrants from the Ministry of Finance. The Auditor General’s office should have a more effective liaison with the anti corruption agencies such as the EFCC and ICPC.
Another committee should revisit the Oransaye report on the streamlining of the operations of the various parastatals. The justification for the existence and continuous funding of many of these remain unclear. This would reduce wastages in expenditure on both capital and recurrent items.
Again, the possibility of establishing a National Accounting Commission, agency or bureau should be considered. Its duty should include training of staff for accounting routines; federal governments project valuations and monitoring; and general financial surveillance of operations of revenue generating agencies of government. The head should report to the Presidency.
If possible, the states should be persuaded to replicate some of these provisions for which rewards could be available for compliance. Such rewards or incentives could include quick (eligible) guarantees for foreign third-party transactions or projects, release of intervention funds such as ecological or disaster funds, among others.
A committee should also be inaugurated to look into the remuneration of members of the national assembly and those of the executive arms of government, whose total take-home emoluments have no parallel in any democratic country of the world. The present remuneration levels are rather ridiculous and unsustainable in a country where the minimum wage is N18,000 per month.
Inauguration of financial and economic crimes tribunal in which speedy trials would be held for suspects and such matters dispensed with within three months of arraignment of offender is of urgent and paramount necessity now.