In December 2022, Nigeria’s government, in partnership with the Central Bank of Nigeria (CBN), and in connivance with the National Assembly, decided to securitise its ways and means drawdowns, a move that contravened the CBN Act’s borrowing limits. Amidst this, the government’s dependence on ways and means advances to finance budget deficits since 2015, culminating in substantial borrowings and the CBN’s warning of its unsustainability, underscores the criticality of exploring alternative funding sources like increased taxation or expenditure cuts.
The intertwined trio of Ways and Means Advances, fiscal responsibility, and government audit reporting compliance underpin Nigeria’s pursuit of financial accountability and transparency. These components serve as essential pillars showcasing the government’s commitment to transparency, accountability, and responsiveness to the Nigerian populace.
Ways and Means Advances, while essential during budgetary shortfalls, necessitate transparent usage, clear borrowing information, and repayment strategies to foster public trust and informed decision-making. The Fiscal Responsibility Act (FRA) sets the tone for prudent financial management, ensuring adherence to financial guidelines, debt management, and transparent budgeting. This adherence guarantees that public resources are managed responsibly, maintaining a high standard of financial practices. Government audit reporting compliance facilitates external scrutiny of financial transactions, ensuring transparency and accuracy while shedding light on any financial irregularities or misappropriations.
This holistic combination encourages public engagement, instils trust between the government and its people, strengthens the social contract, and motivates citizens to actively participate in nation-building endeavours. In essence, the harmonisation of Ways and Means Advances, fiscal responsibility, and government audit reporting compliance establishes a robust accountability framework. This framework fosters transparency, external oversight, public engagement, and trust-building, compelling Nigerian governments to exhibit accountability and responsible financial management while upholding the judicious utilisation of public funds.
State of the States: Evaluating Financial Responsibility Across Nigeria
To comprehend the landscape of financial responsibility throughout Nigeria, a detailed analysis of the financial practices across various states is imperative. The Institute of Chartered Accountants of Nigeria (ICAN) recently released its Accountability Index, rating states’ compliance with audit rules. These rankings serve as a barometer of the states’ commitment to financial management and accountability practices.
“The rankings suggest an overall trend of improving compliance with the constitutional requirement to audit state and LG accounts since the introduction of the ICAN Accountability Index,” stated Dr. Innocent Okwuosa, the 59th president of ICAN. He emphasised that while significant strides had been made, substantial variations still existed among states, emphasising the ongoing need for consistent compliance and bolstering accountability practices nationwide.
States like Jigawa, Bauchi, Gombe, Edo, and Niger showcased consistent improvement in their rankings, reflecting sustained dedication to auditing practices. The states rated as “excellent”—Ekiti, Lagos, and Osun—displayed exceptional compliance, submitting high-quality audit reports promptly and effectively implementing audit recommendations. These states’ proactive measures in adhering to audit regulations bear testament to their commitment to transparent governance practices, setting a commendable example for others.
Dr. Okwuosa highlighted the relevance of the ICAN Accountability Index in promoting consistent compliance with audit reporting requirements mandated by the 1999 Nigerian constitution. He emphasised the need to amplify awareness of the index among citizens to foster a culture of demanding accountability from public sector governance. Moreover, ICAN’s endeavour involves collaborating with various organisations and stakeholders, including the World Bank, the Mo Ibrahim Foundation, and the Centre for the Study of the Economies of Africa, to conduct performance rankings by states across indicators of economic growth, education, healthcare, and infrastructure. This holistic approach aims to provide a comprehensive assessment of governance and performance in Nigeria.
Dr. Okwuosa emphasised the need for continuous improvement in Nigeria’s Public Financial Management systems, regular accountability assessments, legislative and regulatory reforms, capacity building, ethical conduct, public awareness, and collaborations with diverse stakeholders. This robust approach by ICAN underscores the multi-dimensional efforts required to fortify accountability, transparency, and good governance across Nigeria’s diverse landscape. The varying compliance levels revealed through the ICAN Accountability Index highlight the progress made and underscore the areas requiring further attention, setting the stage for more stringent adherence to accountable governance practices throughout the nation.
“True and Fair Except…” – Addressing Financial Exceptions and Rectifications (The Lagos State example)
The principle of presenting financial statements as “true and fair” is a cornerstone of transparent governance.
The Audit Certificate for the financial statements of the Lagos State Government for the year ended 31st December 2022, underlined the commitment to adhering to International Public Sector Accounting Standards (IPSAS) Accrual-based Accounting. The Accountant General’s responsibilities, governed by various laws and acts, emphasise the importance of ensuring the absence of material misstatements in the financial statements. Simultaneously, the Auditor General’s independent opinion reflects the meticulousness of the audit process conducted in line with international and statutory standards.
The Opinion section of the audit report stated that, in the auditor’s judgement, the financial statements provided a true and fair view of the State’s financial performance, cash flow, and financial position as of the specified date. However, a special opinion was provided concerning the State’s handling of the Year 2021 performance-based grant received from the Federal Government under the World Bank-assisted States Fiscal Transparency, Accountability, and Sustainability Programme for Results (SFTAS P for R).
Adewuyi, the Ag. State Auditor-General, offered this opinion on March 20, 2023, highlighting the adherence to standards while acknowledging the exceptions and providing a transparent assessment of the State’s financial landscape. This acknowledgement of exceptions within the audit report reflected a commitment to transparency and the ongoing effort to rectify financial irregularities, setting the stage for improved accountability and governance practices.
The Response of the Legislature to Public Accounts: Lagos State Assembly’s Oversight Efforts
The Lagos State House of Assembly has taken proactive steps towards reinforcing financial accountability by initiating a comprehensive review of the 2022 Auditor General’s Report concerning the state’s Ministries, Departments, and Agencies (MDAs). In 2023, this endeavour, spearheaded by Hon. Kehinde Olaide Joseph, Chairman of the Public Accounts Committee (State), aimed to leverage the Assembly’s statutory oversight to prevent financial mismanagement within the state.
At a recent gathering held at the Assembly complex, Hon. Joseph highlighted the significance of scrutinising the Auditor-General’s Report in tandem with the quest for increased efficiency and the adoption of best practices by the Public Accounts Committee (State).
“The Assembly is dedicated to commencing thorough discussions and evaluations of the audited report of the State Auditor-General on the Accounts of the Lagos State Government for the year ending 2022.
The outlined key areas of focus during this review process include summoning the heads of implicated MDAs to address the issues highlighted in the Auditor-General’s Report, scrutinising the completion, accuracy, and reliability of financial transactions, ensuring compliance with financial regulations, and legislation, and accounting standards, assessing financial performance and positioning across different sectors, validating revenue and budget performance, reconciling financial records with the MDAs’ Oracle system, and evaluating project management and control systems.
Emphasising the weight of this responsibility, Hon. Joseph stressed that conducting this exercise is essential for the state’s progress and upholding integrity in governance. “This initiative is not intended as a witch-hunt against any MDA but as a means to fortify the committee’s statutory oversight to deter financial mismanagement in the state,” stated Hon. Joseph.
Ultimately, the outcomes of this review are expected to facilitate enhanced resource management for the state, ensuring a more transparent and accountable financial system.
Simultaneous Submission of Public Accounts with Budgets: Fostering Transparency and Accountability
The call for amending Nigeria’s audit law to synchronise the presentation of annual accounts with the budgetary process stems from a critical concern: the Federal Government’s conspicuous failure to audit its accounts for the past four years, starting in 2019. This glaring absence of audited accounts has raised significant alarms, highlighting a systemic issue within the country’s financial governance and accountability mechanisms.
Muhammadu Zakari, former President of the Institute of Chartered Accountants of Nigeria (ICAN), has amplified this concern, citing it as a pivotal reason behind the urgency for legislative reform. The absence of audited accounts for four consecutive years signifies a substantial gap in transparency and oversight in the management of public funds. It also underscores the necessity for a fundamental overhaul of existing legislation to reinforce accountability within the government’s financial practices.
This substantial lacuna in auditing the Federal Government’s accounts has prompted Zakari’s advocacy for a crucial amendment to Nigeria’s long-standing audit law of 1956. His proposition entails aligning the presentation of audited annual accounts before the National Assembly, similar to the legislative approval process for the annual budget. This proposed amendment aims to infuse a higher level of accountability into the financial governance structure by ensuring that audited accounts receive the same attention and scrutiny as budgetary allocations.
The absence of audited accounts not only raises questions about financial transparency but also highlights the critical need for legislative amendments to enforce a more rigorous and timely auditing process. Zakari’s advocacy, underscored at the recent audit reporting training for journalists in Lagos, underscores the pressing necessity to fortify the country’s financial accountability mechanisms through legislative reforms.
What True Accountability Engenders
A presentation, “Promoting Transparency in Governance Through Audit Reports,” delivered by Bolanle Onawumi at the recent Audit Reporting training for journalists in Lagos on October 26, 2023, encapsulates the foundational pillars crucial for fostering accountability and transparency within governance structures. It illuminates the intricate web of corporate governance practices, financial reporting frameworks, and the critical role of audit reports in maintaining accountability.
When the government upholds transparency, takes responsibility for its actions, and remains answerable for its financial decisions, it generates an environment ripe for trust and development. A culture of accountability within the governance framework lays the foundation for societal advancement and economic prosperity. By embracing transparency and responsibility, governments can ensure that financial decisions are made with prudence and that the allocation of public funds is optimised for the benefit of society at large.
Whether following the OECD’s structured process or the Nigerian Corporate Governance Code’s emphasis on ethical values, these practices serve as guideposts for responsible decision-making and efficient performance monitoring. By assessing financial statements, audits bolster confidence in the accuracy of reported figures, ensuring accountability in the management of resources.
Nigeria’s financial governance requires not just executive commitment but also robust legislative frameworks that demand timely and accurate audits. Aligning the presentation of annual accounts with the budgetary process, as advocated by professionals like Muhammadu Zakari, signifies a crucial step toward a more accountable and transparent governance structure.
The convergence of robust audit reports, adherence to established frameworks, and the infusion of fundamental governance principles lay the groundwork for a society and economy that thrive on trust and accountability. By fostering a culture where transparency and responsibility in governance are paramount, Nigeria can chart a path towards sustainable progress and prosperity for its people, as articulated in Onawumi’s insightful presentation.
Expanding Financial Responsibility: Embracing ESG Accountability
The Financial Reporting Council of Nigeria (FRC), in partnership with various stakeholders, has made significant strides in integrating environmental, social, and governance (ESG) accountability into Nigeria’s financial landscape. The adoption of the International Sustainability Standards Board’s (ISSB) Sustainability Reporting Standards, IFRS S1 and S2, marks a transformative leap in bolstering Nigeria’s commitment to holistic responsibility encompassing economic, social, and environmental spheres.
The FRC’s announcement of its intent to adopt IFRS S1 and S2, made on November 8, 2022, during the ongoing COP 27, signifies a proactive move towards embracing global sustainability reporting standards. The decision, made in collaboration with the Federal Ministry of Finance and other regulatory bodies, underscores Nigeria’s active participation in developing high-quality global standards through extensive consultations with local stakeholders and the submission of feedback on consultation papers and exposure drafts.
The launch of IFRS S1 and S2 on June 26, 2023, reaffirmed Nigeria’s commitment to responsible and sustainable business practices. This launch positions Nigeria as an attractive destination for sustainable investments, aligning with global trends that emphasise the need for countries to prioritise climate action and sustainable development.
This strategic move is expected to enhance corporate reporting practices, unlock capital formation, and align Nigerian companies with international sustainability reporting standards. These codes, under the leadership of distinguished Technical Working Groups (TWGs), aim to enhance public accountability, transparency, and ethical behaviours within public sector entities and nonprofit organisations, ensuring responsible resource management and service delivery.
In essence, Nigeria’s efforts to adopt and implement sustainability reporting standards alongside the development of comprehensive governance codes illustrate a concerted push towards holistic responsibility. The country’s commitment to ESG accountability underscores its aspiration to intertwine economic prosperity with social progress and environmental stewardship, positioning Nigeria as a key player in the global sustainability landscape.
Toward Enhanced Financial Responsibility
The path to bolstering financial responsibility in Nigeria demands a two-fold approach: rectifying current issues and embracing proactive measures. Initiatives such as the comprehensive study encompassing all the states (ICAN assessment of states’ audits), aimed at identifying and rectifying exceptions in financial reporting, are pivotal. Strengthening legislative responses and advocating for the simultaneous submission of public accounts with budgets serve as fundamental pillars in reinforcing accountability within governance. Central to this journey is the cultivation of a culture steeped in accountability.
By nurturing a society that holds the government accountable for its financial decisions and actions, Nigeria can pave the way for enhanced transparency and prudence in the management of public funds. For now, the opaqueness is thickening. The CBN has just suspended its monetary policy committee (MPC) meeting for the second time since Yemi Cardoso assumed office as the acting Central Bank Governor. The suspension of the MPC meeting raises concerns about attempts to bolster the nation’s currency, which has plunged about 42 per cent in 2023, further fuelling inflation. But it lends itself to the even bigger issue of CBN’s commitment to transparency and accountability.
Expanding financial responsibility into the realm of environmental, social, and governance (ESG) accountability is a critical extension. Nigeria’s commitment to holistic responsibility, encapsulating economic, social, and environmental well-being, is embodied in the adoption of Sustainability Reporting Standards. This step underscores Nigeria’s aspiration for responsible and sustainable business practices.
By diligently adopting these measures, Nigeria can navigate toward a future marked by heightened financial responsibility. These endeavours are not mere actions but catalysts for socioeconomic progress, aimed at ensuring the judicious use of public funds. In charting this course towards enhanced financial responsibility, Nigeria lays the foundation for a prosperous future built upon accountability, transparency, and sustainable governance.
The journey continues, guided by these strategic measures, to foster a nation that thrives on responsible financial stewardship for the collective betterment of its people and society.
- This news analysis is an outcome of an Audit Reporting Capacity Development programme facilitated by FrontFoot Media Initiative under the auspices of the Wole Soyinka Centre for Investigative Journalism and the sponsorship of the MacArthur Foundation
