As part of the efforts towards strengthening the Nigerian financial landscape, the Nigerian government and its agencies have in the last year embarked on extensive legal reforms which include the recently published Code of Corporate Governance for Public Companies 2011. In a further development, the Nigerian Accounting Standards Board (NASB) is seeking the passage of the Financial Reporting Council of Nigeria Bill 2008 which is pending before the Nigerian National Assembly. The Bill seeks, among other things, to repeal the Nigerian Accounting Standards Board Act 2003.
The Nigerian Companies and Allied Matters Act (CAMA) 2004 recognised the NASB long before it became fully operational. Pursuant to Section 335 of CAMA, companies are to comply with the accounting standards issued by the NASB from time to time, provided such standards are not in conflict with CAMA.
The Bill seeks to establish a Financial Reporting Council (the Council) which will be responsible for ensuring the accuracy and reliability of companies' financial disclosures and harmonising regulatory and professional bodies responsible for corporate governance and financial reporting. Although the Securities and Exchange Commission (SEC) has severally echoed that company statements must give a true and fair view of the affairs of the company in line with the provisions of CAMA, the Bill when passed into law will empower the Council to monitor and ensure the accuracy, veracity and fairness of accounting and financial reports of public quoted companies.
It is pertinent to note here that the Council will be the first regulator in Nigeria to oversee corporate reporting and actuarial practice, and to inspect and monitor accounting and auditing standards. CAMA merely provides for financial disclosures to the members in general meeting, debenture-holders and the regulator, the Corporate and Affairs Commission. Save for penalties for non-compliance, there is no provision in CAMA for monitoring and enforcement of financial disclosures. Also, the SEC's 2011 Code of Corporate Governance suggests that CAMA's provisions would be fully enforceable, but does not require strict compliance. It merely encourages companies to adopt its provisions where applicable. Thus, the Bill when passed would enable the Council to undertake responsibilities which are not available to other regulators.
Once in operation, the Council is expected to act through its directorates such as directorates of accounting standards for the private sector, accounting standards for the public sector, auditing practices standards, actuarial standards, inspection and monitoring, valuation standards and corporate governance. The Council's committee on corporate governance will issue a Code of Corporate Governance and guidelines, and lead the Council's work on corporate governance. However, given that the SEC has only recently issued a Code of Corporate Governance in Nigeria, it is hoped that the Council will limit its functions to refining and interpreting the provisions of the Code. Once the Bill is passed, the Council should embark on projects aimed at harmonising the various Codes of Corporate Governance in operation. The Council may be best placed to monitor the operation of the Code of Corporate Governance for Public Companies and its implementation in listed companies. Where uncertainties exist in the interpretation of any part of the Code, the Council should consider issuing clarifications.
In conclusion, immediate passage of the Bill is advocated to promote high-quality corporate governance and reporting which would ultimately foster investment in Nigeria.