FG must build public confidence in cash-less system

The President, Institute of Chartered Accountants of Nigeria, Mr. Chidi Ajaegbu, says many companies have yet to comply with the International Financial Reporting Standards because the system requires more disclosures and it’s expensive. He also emphasises the need for the Federal Government to build public confidence in the cash-less policy, in this interview with OYETUNJI ABIOYE

Why is Nigeria’s economic model not working?

We have probably the best human resources you can ever dream of. Nigeria has very qualified professionals across the globe: United States, United Kingdom and even Asia. They work so well that they are technically recognised because of the value they add to the systems in those jurisdictions. The question is not about the economic model. Our model can not be essentially different from the conventional economic models we have around the world. It is not also about whether we know the right thing to do. And our question is not about policies. It is not about whether we have the right resources. Our problem is the human element in implementing these policies. It is the structure we have, which I keep saying, is distorted. We need to amend and reposition our structure towards achieving excellence. I keep saying that it is the structure we have in place; the attitudunal mindset of our people, the syndrome of ‘what is in it for me?’; ‘It is not my local government or state’. People lack ownership in the Nigerian project. These are the key issues we need to look at.

Last year, media reports indicated that ICAN did not comply with the International Financial Reporting Standards, which has been adopted by the Financial Reporting Council of Nigeria. Why haven’t you complied?

Those issues have been dealt with. Don’t forget that the Chief Executive Officer of the FRC, Mr. Jim Obazee, is a fellow of this institute. ICAN has two representatives on the Board of FRC. FRC migrated from the Nigerian Accounting Standards Board and ICAN played a great role in the process. All these issues have been dealt with and you can pick up a copy of our financial reports for 2013 to confirm that there are no issues. We have transited to the IFRS. We actually started talking about the IFRS in 2009 when most people did not even know what it was. As a regulator, we should lead the way and we had actually been talking about it. We have a faculty that deals with the IFRS and we offer certification to our members for proficiency in the IFRS.

Several companies have yet to comply with the requirements of the IFRS. What are the problems?

It is an expensive venture and it requires a lot of transparent disclosures. It demands a lot more disclosures than you are expected to show in your accounts before now. So, it is difficult for most of the companies to transit from various standards they are using to the IFRS. But the key thing is that most public-interest companies and quoted companies have actually complied. Rough estimates show that they represent about 70 to 80 per cent of the total number of companies in Nigeria. That is quite a significant proportion. I am happy about the progress we have made and we will keep on driving it until we are able to achieve 100 per cent compliance. In any case, it is good you have a financial account that can be read in London and Europe; and why I am not mentioning the United States is because it has yet to adopt the IFRS. The US is still having one or two issues in terms of convergence with their own standards. The target is for all known economies to use the IFRS in the preparation of their financial statements. But the IFRS is not the end because in South Africa today, it is mandatory for all quoted companies to do what they called Integrated Financial Reporting. In other words, you go a bit further than what you have in the IFRS; it is mandatory. And for you to appreciate what that involves, I will refer you to Vodacom. If you look at its financial statement, you will be able to appreciate the difference between adopting the IFRS and adopting the Integrated Financial Reporting; it is much more massive and involving. And that is the way the world is going today. I think some time down the line in the future, Nigeria will be talking about the Integrated Financial Reporting.

The FRC is not comfortable with ICAN being referred to as a regulator. How will this be resolved?

It has been resolved; I have my FRC number. Of course also the issue of subscriptions are also being resolved. We have some measures of accommodation within the two bodies. Like I said, it is like disagreement within the family and it has been taken care of and everybody is living happily thereafter.

Electronic fraud is on the increase across the country. Some of your members (accountants) are involved in these frauds. How are you tackling the problem?

Do you know of any member of this institute who was involved in any fraud? The rules are very clear if you have any one. We have zero tolerance for infractions. But they need to be reported first. It is not possible for us to latch on newspaper stories to activate our processes. All you need to do is to write a letter and swear an oath, alleging that a member of this institute has committed a professional irregularity; send it to the Registrar/CEO of the institute who will then send it to the chairman of our investigating panel. All these will happen within five working days. If the panel finds out that such a member has a case to answer, the case will be referred to the Accountants Tribunal. It will litigate and come to judgement as to whether the individual member is culpable. If he/she is culpable, the necessary sanctions will be met to such an erring member. Our tribunal is equivalent to the High Court. Our decisions can only be challenged in a Court of Appeal. We have a very robust and incisive disciplinary process. If you go to our website or get a copy of our financial statements, you will see ongoing investigations there.

On electronic fraud, it is a global challenge. Even in the United States, they get thousands of attempted hacking into their system every day. So, it is not a Nigerian problem alone. And I think the necessary thing is that most of our banks, having survived to this point, have the necessary things in place to deal with electronic fraud. This does not stop e-fraud from happening. As far as they are able to hack into your e-mails, phones, ATMs, they will of course try the banks. It is now left with owners of the platforms to protect their necessary details. But I know that those responsible are taking the challenge very seriously because if we are striving to become a 24-hour economy, then we must have the necessary controls in place to build people’s confidence in the cash-less policy we are driving. And part of this is making sure people believe that their liquid assets and details are secure. It is the key to the 24-hour economy we are driving towards.

What they do in other jurisdictions is that when they notice any perceived infraction, they descend on it heavily. And I think this is one of the things we need to adopt here in Nigeria. We should let people know that you can do every other thing but we can’t let you mess around with our cash-less system. It is going to go a long way to help our economy.

Next week, the cash-less policy will be rolled out nationwide. What are the pitfalls the CBN needs to watch out for?

The CBN has implemented the cash-less policy in states that have high volume of liquidity and it has worked. They are only going to states that have lesser liquidity. Once you take out Lagos, Abuja and some parts of the East like Aba and Onitsha, you have taken care of the major places of high liquidity in the system. I don’t foresee any problem. They have dealt with the challenges in the areas of high liquidity; they going to places of lesser liquidity, I foresee a seamless transactions.