Accounting for Business Accounting for Business Operations in Nigeria:Operations in Nigeria:

Opportunities & Opportunities & ChallengesChallenges

Olugbenga Coker PhD FCCA FCAOlugbenga Coker PhD FCCA FCA

Introduction - The Nigeria Introduction - The Nigeria Business EnvironmentBusiness Environment

High Rate of Unemployment Dependence on Oil Revenue Dependence on ImportsHuge Infrastructure deficit Security Concerns Corruption Strong Local Financial Institutions

The aim of BusinessThe aim of BusinessProfitability; wealth maximisation

Profit = Revenue - Cost (Operating, other)

Other cost- ◦Cost of Compliance◦Taxation◦Internal Control

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Compliance- Relevant Compliance- Relevant legislationslegislations• Companies and Allied Matters Act • The Foreign Exchange Act 1995

– Allows repatriation of profit, dividends, capital, etc

• The Nigerian Investment Promotion Commission Act 1995

– Established the NIPC to co-ordinate, promote and facilitate domestic and foreign investments into Nigeria except

– guarantees that ‘no enterprise shall be nationalized ‘

– Allows 100% ownership– investment listed under the ‘Negative ‘ lists– covered by the Nigerian Cabotage Acts

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Investment OpportunitiesInvestment Opportunities Infrastructure

Power – Generation, Transmission & Distribution Transportation – Rail, Air, Road

Agriculture & Agro Allied Services

Telecommunication Health Care Services Banking & Financial services Tourism/Hospitality Education Waste Management & Treatment

Mineral Mining Manufacturing

Pharmaceuticals, Textiles & Garments, Automobiles,

Oil & Gas (up-and down-stream operations) 5

The regulatory The regulatory environmentenvironment

Incorporate local subsidiary or branch- Register with the Corporate Affairs Commission

Obtain business permit from NIPC◦-14 days/24Hrs

Obtain Certificate of Capital Importation for repatriation purposes

If manufacturing or exporting - obtain SONCAP certification for products(Standards Organization of Nigeria Conformity Assessment

Programme)

The regulatory The regulatory environmentenvironment

File Annual Accounts with the CACNigeria has adopted the IFRS-

◦Comparability, consolidation, monitoring

Exemption for SMEs:◦Turnover < £2m or assets < £0.8m◦Foreign companies don’t qualify

Availability of professional support◦>40,000 chartered accountants (ICAN)◦Reasonable cost of compliance

Taxation Taxation Enforced by the 3 tiers of Government- Federal, State, and Local governments.

Collectible by the Federal Government ◦Companies income tax; ◦Withholding tax on companies; ◦Petroleum Profit Tax; ◦VAT ; Education tax◦Personal Income Tax- Non residents

Collectible by State Governments: ◦Pay-As-You-Earn (PAYE) – Residents◦Road taxes; Business premises registration 8

Taxation Taxation ◦Companies Tax - 30%◦Low VAT regime – 5%◦Investment in Infrastructure – may qualify for investment allowance

◦Capital Allowance for Specific activities

◦Enforcement- Tax Clearance Certificates

◦Access to good professional advice

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Internal ControlsInternal ControlsProtecting your Assets

◦Security of Capital◦Profitability

Internal ControlsInternal ControlsWhat is IC?

Policies & Procedures Designed by Management to:

Safeguard the assetsEnsure reliability of financial information

Ensure compliance Promote efficient and effective operations.

Internal ControlsInternal ControlsWhy Internal Control is particularly important?◦The nature of the business◦the social, cultural and legal environment.

◦Challenges & limitations

Designing Internal Control Designing Internal Control SystemsSystems

Do a Risk Assessment Identify areas of greatest risk

Susceptibility to fraud & error Information system failure, staff practices Changes in regulations

Design: Cost proportional to riskEstablish the Control Environment ◦Set the tone-Values; attitude; ethics◦Communication, leading by example

Specify Control ActivitiesMonitor and Review

Internal Control Internal Control ActivitiesActivities

Preventive & detective Delegation of authority and responsibility Separation of duties-transaction lifespan Record keeping- Cashbook, sales, inventory, fixed assets, payroll

Purchase authorisation-Account payable- Revenue, accounts receivable, banking Personnel policies and procedures Security- Physical & Technical Reconciliation- bank; cash-count; stock

Internal Control Internal Control Issues for Smaller Entities

Owner sets the control environment Values, diligence, presence

Controls may be informal and carried out by a few persons

The benefit of a control activity should be more than the cost

A code of conduct communicated informally or (preferably) written Use of company assets; record-keeping;

complying with laws; giving and receiving gifts

QuestionsQuestions