As discussed above, there is no uniform set of risk and compliance standards applicable to all Nigerian companies. By legislation passed in 2011, the National Assembly created the FRCN. The functions of the FRCN include:
- developing and publishing accounting and financial reporting standards to be observed in the preparation of financial statements of public interest entities;
- reviewing, promoting and enforcing compliance with the adopted accounting and financial reporting standards;
- receiving notices of non-compliance with approved standards;
- receiving copies of annual reports and financial statements of public interest entities from preparers;
- advising the federal government on matters relating to accounting and financial reporting standards;
- maintaining a register of professional accountants and other professionals engaged in the financial reporting process;
- monitoring compliance with the reporting requirements specified in the adopted code of corporate governance;
- promoting compliance with the adopted standards issued by the International Federation of Accountants and the International Accounting Standards Board;
- monitoring and promoting education, research and training in the fields of accounting, auditing, financial reporting and corporate governance;
- conducting practice reviews of registered professionals;
- reviewing financial statements and reports of public interest entities;
- enforcing compliance with the legislation and the rules of the FRCN on registered professionals and the affected public interest entities;
- receiving, in advance of publication, copies of all qualified reports, together with detailed explanations for such qualifications, from auditors of the financial statements, along with the power to prevent publication of the financial statements until all accounting issues relating to the reports are resolved by the FRCN;
- adopting and keeping up-to-date accounting and financial reporting standards, and ensuring consistency between standards issued and the International Financial Reporting Standards (IFRS);
- specifying, in the accounting and financial reporting standards, the minimum requirements for recognition, measurement, presentation and disclosure in annual financial statements, group annual financial statements, or other financial reports by all public interest entities, in the preparation of financial statements and reports; and
- developing or adopting and keeping up-to-date auditing standards issued by relevant professional bodies and ensuring consistency between the standards issued and the auditing standards and pronouncements of the International Auditing and Assurance Standards Board.
The granting of such wide functions and powers on such a body, not unexpectedly, created tensions between the FRCN and audit professionals, the Institute of Chartered Accountants of Nigeria, the Association of National Accountants of Nigeria, public companies, large private companies, public interest entities (defined in legislation as ‘governments, government organisations, quoted and unquoted companies and all other organisations that are required by law to file returns with regulatory authorities and this excludes private companies that routinely file returns only with the CAC and the Federal Inland Revenue Service’), and numerous other bodies.
In addition to these tensions, there was also widespread dissatisfaction with the provisions in the legislation that enabled the FRCN to impose levies on registered professionals (and publicly quoted companies) based on market capitalisation, and on public interest entities based on turnover.
In January 2017, after discussions between the FRCN, auditors and directors of banks that the FRCN intended to suspend or remove from office, and a former governor of Nigeria’s central bank in 2014-2016, the executive secretary of the FRCN was dismissed. A new executive secretary was appointed along with a new chairman. The three Corporate Governance Codes for the private, public and not-for-profit sectors issued in October 2016 were suspended. In January 2018, a committee was established to review the suspended codes and to develop and recommend revised codes.
A new draft Code was published on 15 June 2018. Unlike the codes suspended in 2016 the new draft does not purport to apply to not-for-profit entities and private companies generally. Instead, the new draft Code seeks to regulate the following entities:
- public companies (whether listed or not);
- private companies that are holding companies of public companies or other regulated entities;
- concession and/or privatised companies; and
- Regulated Private Companies (RPCs) - private companies that file returns to any regulatory authority, other than the Federal Inland Revenue Service and the CAC.
This Code remains a draft and a working tool. The issue as to what is the lawful extent of the powers of the FRCN remains unaddressed.
In the interim, the various other regulatory bodies have retained a certain level of freedom to impose their own guidelines. These tend to be strongly influenced by international standards. Common to virtually all bodies is a requirement for a compliance officer to be appointed and for there to be a risk management committee.
The general nature of the main standards and guidelines regarding risk and compliance management processes can be seen in the regulations issued by Nigeria’s central bank in respect of banks and other financial institutions, which is the most regulated sector in Nigeria. Nigeria’s central bank regularly issues regulations and guidelines that set standards which undertakings regulated by it must follow. These include updating qualification requirements of chief compliance officers and specifying standards required for risk management procedures.
The guidelines that come from Nigeria’s central bank are largely influenced by international agreements and independent advisory bodies such as the Financial Action Task Force. Currently, Nigeria’s central bank guidelines require banks and other financial institutions to adhere to the following directions:
- There must be a chief compliance officer (CCO). Initially, it was required that there be a compliance officer for each branch, but this was relaxed to allow one to serve clusters of branches.
- The CCO must report directly to the board, must have the status of at least a general manager, and posses a minimum education requirement and training in an international standard.
- There must also be a risk management committee.
With regard to the finance industry, there are different standards that banks may use in their risk management procedures. These are based on international standards and there is an implication that, with pre-approval from Nigeria’s central bank, there is flexibility in acceptable standards.
There are different risk management standards prescribed by Nigeria’s central bank for different kinds of transactions and actions, such as accepting new customers, providing credit services for individuals and providing credit services for companies. Additionally, Nigeria’s central bank issues extensive manuals detailing procedures required for compliance with legislation, and every financial institution is required to have a comprehensive anti-money laundering/combating financial terrorism (AML/CFT) compliance programme to guide its compliance efforts and to ensure the diligent implementation of Nigeria’s central bank manual.
In recent times, the Nigeria’s central bank has issued consultative circulars relating to draft guidelines on new areas of financial activity, such as ‘mobile money’. (This is described by the central bank as ‘any mobile money payment and solution in Nigeria’. Examples include electronic wallets and the like, and payment platforms provided by non-banking entities, such as financial technology companies.)
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