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Hafsat Ibrahim Bomai; International Accounting

The Role of Accounting in National Development with Reference to Nigeria

Table of Content
1.0 Introduction 2
2.0 Accountability and National Development.........3
3.0 Managing the National Revenue through Accounting.........5
4.0 Accounting and Accounting Infrastructure..5
5.0 Accessing Level of Accountability and Accounting7
6.0 Model of Accounting Infrastructure7
7.0 World Bank Assessments of Accounting Levels and Infrastructure of Nigeria, 2004
and 2011.9
8.0 Conclusion....10
9.0 References11
Table of Figures
Figure 1 Model of Accounting Infrastructure..8
CBN Central Bank of Nigeria
SEC Security and Exchange Commission
A&A Accounting and Auditing
NNPC Nigeria National Petroleum Corporation

Hafsat Ibrahim Bomai; International Accounting
1.0 Introduction
Recently, Nigeria experienced a situation which has been the pattern since
independence according to the New York Times (2014), a usual disappearance of its oil
revenue. The erstwhile Central Bank of Nigeria governor Mallam Sanusi Lamido Sanusi
raised an issue of a certain amount of missing public revenue amounting to $10 billion
dollars after a series of initial figures that were refuted, acknowledged and admitted. In
other to unearth the real situation, the Auditor General of the federation working in
liaison with the Accountant General and Coordinating Minster of the Economy, Mrs
Okonjo Iwueala were instructed by the Senate committee on finance and oil revenue to
employ the services of a foreign accounting/audit firm to carry out a forensic audit of the
accounts of the countrys oil corporation. The selected company, being
PriceWaterHouseCoopers (PwC) a forensic auditor was tasked with the comprehensive
audit of the books of the Nigerian National Petroleum Corporation (NNPC) (Vanguard,
2014). This incident underscores the role of accounting and accountability in the
development of a developing country like Nigeria and indeed any country in the world.
If the government cannot account for the national revenue, then corruption will be
endemic and the result will be underdevelopment or even lack of development or
retrogression from the current level.
Every developing country in the world has the economic problem of how to accelerate
its development within a short period of time. This economic growth is necessary to
enable it come to the developed level where it is able to guarantee it citizens the type of
life available in the developed part of the world where its citizens would run to in search
of greener pastures. A developing country will strive to do the following in other to attain
that level of development:
1. Make available service and basic needs such as education, housing and
transport, public health and employment available for the economy to begin to
2. Encourage capital formation, production and industrial development in
government and private sectors.
Hafsat Ibrahim Bomai; International Accounting
2.0 Accountability and National Development
Accounting is an activity that measures the profitability/or viability of a venture in an
economic system. According to Microsoft Encarta Reference Library 2004, accounting
is the art of identifying, measuring, recording, and communicating economic information
about an organization or other entity, in order to permit informed judgments by users of
the information. This is a systematic collection, summarization, analysis and reporting
of data in a form that is suitable and can be understood by prospective users.
Accounting is evident in financial activities such as budgeting and budgetary control,
taxation, cost management accounting, financial management, auditing and quantitative
Development requires a projection into the future and this makes it necessary for public
officers and employees in the private sector to recognize the need to keep and evaluate
records to know the financial position of an organisation at each moment. Records show
the state of affairs and evaluation in form of accounting to determine whether progress
is made or not. Accounting has been instrumental in economic planning, capital
formation, accountability, taxation and social purposes. Businesses depend on
information provided through accounting to make investment decisions for running the
business. Potential investors whether in developed or developing nations require the
services of accountants or financial analyst to provide professional advice based on
sound accounting principles before embarking on investments. So also do the
government counterparts in areas of planning and development. For budget
implementation to be feasible and successful the government has to employ sound
accounting principles which are why every government organization employs
accountants and in Nigeria like most countries of the world, a dedicated office, such as
the office of the accountant general of Nigeria is created to handle accounting
activities for government activities.
National budgets follow prescribed formulas and implementation will require that
officials or employees of the government are trained in the accounting profession. The
role of an accountant in public expenditure and government accounting is important for
national development.
Hafsat Ibrahim Bomai; International Accounting
Omolehinwa (2012) examined what he refers to as accounting for peoples money, a
concept he used to capture the national revenue accruing to the country meant for
national development in an inaugural lecture. According to him Public accountability
has been a serious issue in Nigeria as has been expressed by individuals and national
figures such as Abisoye (1994) who chaired a panel on the NNPC who stated that:
NNPC does not respect its own budgets. NNPC does not
respect its own plans The unwritten code in NNPC
styles of management... would appear to be everyone to
himself and God for us all make hay while the sun
shines and loot all the lootables.
Okigbo (1994) who investigated the activities of the Central Bank of Nigeria between
1988 and 1994 found that a culture of impunity and corruption was the order of the day,
which is why the apex bank could record $12.4 billion diverted in special accounts other
than paid into the stipulated accounts for keeping our national revenue and spent by the
Omolehinwa (2012) calculated the oil export earnings from 1971 to 2010 and got a
figure of $755 billion but the level of development does not tally with this huge revenue.
The lack of accountability in Nigeria is reflected in the several ratings and indexes such
as Transparency International, UN Human Development Index, and Corruption Index
amongst others. Brimah (2013) observed that Nigeria ranks in the bottom 10 in basically
every rating showing the level of chaos and lack of improvement in our national life.

3.0 Managing the National Revenue through Accounting
The government collects tax, rents and all other forms of revenue through the federal
agencies and parastatals using every legitimate means and these monies should be
remitted into appropriate government accounts for use for the benefit of all citizens.
These include funds in the federation account, loans acquired, independent revenue
from ministries and parastatals, proceeds from privatization and concession, trust funds
Hafsat Ibrahim Bomai; International Accounting
etc. The money collected should be taken from government account through authorized
and legal channels by any person usually government officials.
An essential aspect of public sector accounting is corporate reporting in the
management of public funds. High-quality corporate reporting is important to improving
transparency, facilitating the mobilization of domestic and international investment,
creating a sound investment environment and fostering investor confidence, thus
promoting financial stability. A strong and internationally comparable reporting system
facilitates international flows of financial resources while at the same time helping to
reduce corruption and mismanagement of resources. It also strengthens international
competitiveness of enterprises in attracting external financing and taking advantage of
international market opportunities.
In the wake of various financial crises continued efforts are being made towards
improving the quality of corporate reporting as an important part of measures towards
strengthening the international financial architecture. In this regard the implementation
and application of internationally recognized standards, codes and good practices in the
area of corporate reporting has been strongly encouraged as a reflection of the
increasing pace of globalization and international economic integration. However, the
effective adoption and implementation of such standards and codes remains a
challenge for many developing countries and economies in transition as they lack some
of the critical elements of corporate reporting infrastructure from weaknesses in their
legal and regulatory frameworks, to lack of human capacity and relevant support
institutions. In the face of these challenges there is a need for a coherent approach to
building capacity in this area, as well as for tools to measure and benchmark progress
and identify priorities for further actions. In Nigeria the adoption of International
Financial Reporting Standards (IFRS) for the private sector and International Public
Sector Accounting Standards (IPSA) is still ongoing with many challenges in
4.0 Accounting and Accounting Infrastructure
Hafsat Ibrahim Bomai; International Accounting
Building an accountancy infrastructure is a complex process because it is part of an
economys legal and regulatory system. It needs to be attuned to the interests of many
stakeholders and the availability of financial, educational and human resources.
Capacity building helps reinforce proper legal frameworks and institutional
arrangements. It is concerned with developing and upgrading certain skills,
competencies and performance. It is also about enhancing the capacity of individuals,
groups or institutions that are to carry out corporate reporting, for it is reporting and
transparency that often drive improvements.
Good-quality financial infrastructures are essential to the development of emerging
economies as is enhanced physical infrastructure, such as improved roads and
railways, cables for communications and secure pipelines for water and electricity. The
development of robust governance and effective financial reporting in emerging
economies is analogous to that of this physical infrastructure. If the resources invested
in putting the plumbing in place cannot be accounted for, then what will stop the roads
going nowhere, the energy disappearing, and the communications breaking down? For
those investing in private businesses in these economies, the necessary corporate
reporting plumbing is vital for ensuring an acceptably high level of assurance.
Accountability is at the heart of capacity building, and this is certainly the case in
Nigeria. A strong accountancy profession in the country is essential to economic
development and also economic confidence, both in the public and the private sectors.
Capacity building is also about building sustainable and ethical businesses that work in
the public interest. In the current global economic climate, that is no mean feat; but it is
an achievement for which we should be aiming.
Iyoha and Oyerinde (2010) argued that Nigeria has made progress in instituting
legislative powers and controls over public funds in the 1999 constitution but the level of
accountability remains abysmal. A recent evidence is the accusations and counter
accusations referenced in the introduction about missing revenue of about $10.8 billion
dollars as adjusted and clarified by the Minister, Okonjo Iweala (Komolafe et al, 2014).
Iyoha and Oyerinde (2010) argued further that laws and regulation to ensure
accountability are in place which can be seen in the public institutions such as
Hafsat Ibrahim Bomai; International Accounting
Economic and Financial Crimes Commission (EFCC) and Independent Corrupt
Practices and other Related Offences Commission (ICPC) but that the lack of robust
accounting infrastructure and vibrant accounting profession is the problem of Nigeria.
Accounting, accounting framework and public expenditure are linked and accounting
serves a dual role by providing information and auditing the same information. Financial
statements provide information about economic transactions and auditing acts as a
check to verify that the information is accurate so that accountability is assured and
corruption is detected.

5.0 Accessing Level of Accountability and Accounting
World Bank stated in 1994 that countries that want to fight corruption and improve the
level of accountability and systems should:
Have implemented an effective and integrated financial management information
Have a professional base of accountants.
Adopt and apply internationally acceptable accounting standards.
Empower a strong legal framework for supporting accounting practice.
What can be drawn from the above listed requirements is that accountability and
management of public expenditure cannot be done without a sound accounting system.
Therefore a culture of strong accounting infrastructure is necessary for the entire public
service organizations are desirable for positive developments. A weak accounting and
auditing infrastructure leads behaviors which will not support accountability.
6.0 Model of Accounting Infrastructure
Iyoha and Oyerinde (2010) proposed a model of accounting infrastructure as the basis
for achieving accountability in management of public expenditure. They started that
accounting infrastructure affects the management of public expenditure through
accounting practice and budget implementation including budget implementation. The
Hafsat Ibrahim Bomai; International Accounting
model states that accounting practice and accountability have effects on each other and
also is a determining factor on the ability of an organization to prepare and implement
budget. Consequently, how successful or unsuccessful the budget
implementation/performance is has direct effect on management of public expenditure.

Figure 1: Model of Accounting Infrastructure Source (Iyoha and Oyerinde - 2010)
Therefore, the level of accounting infrastructure is important when accessing the level of
accountability in management of public expenditure. Assessing Nigerias position as
regards accounting and accountability, the World Bank recommendation highlights the
following to be benchmarked. The professional base of accountants in quantity and
quality terms which is needed to provide the human resources necessary to manage
public expenditure. Secondly, the adoption and implementation of internationally
accepted accounting standards in financial management as regards public expenditure.
Thirdly, the existence of integrated financial information system which provides relevant
Hafsat Ibrahim Bomai; International Accounting
information for government organizations and citizens consumption provides timely and
effective budget information to the citizens and important agents of government that
needs such.
7.0 World Bank Assessments of Accounting Levels and Infrastructure of Nigeria,
2004 and 2011
According to World Bank assessments in 2004 and 2011, Nigeria has a weak
accounting infrastructure as contained in the Observance of Standards and Codes
(ROSC). In their words, Nigeria is plagued with institutional weaknesses in regulation,
compliance and enforcement of standards and rules. The specific areas noted in the
report include: incomplete budget information, unreliable accounting system, incomplete
data to support proper financial management, obsolete/inadequate legal framework for
accounting and auditing, ineffective internal audit system, ineffective supreme audit
institutions, non-compliance with international public sector accounting standards
(IPSASs) and other information presentation standards (Iyoha and Oyerinde, 2010).

The Government of Nigeria requested the World Bank in 2010 to conduct a second
ROSC A&A review. This ROSC A&A review was conducted to assess the status of
implementation of the 2004 ROSC A&A Country Action Plan and identify ways to
strengthen the institutional framework underpinning accounting and auditing practices
and improve financial reporting in Nigeria. The ROSC exercise was conducted through
a participatory process involving key stakeholders and led by the country authorities.
The report finds that there has been limited implementation of the 2004 Country Action
Plan and limited improvement in financial reporting practices in Nigeria. Nigerian
authorities have successfully implemented only 6 of 14 action plans emanating from the
2004 review leaving significant areas yet to be addressed. A number of banks
exploiting loopholes in Nigerian accounting and auditing standards, weak capacity of the
regulatory bodies and weak enforcement, employed creative accounting to boost their
balance sheets These weaknesses in financial reporting, auditing and accounting
contributed to Nigerias banking sector crisis. Given the magnitude of the costs of the
crisis (between N1.5 - N2 trillion) government is focused on improving A&A. Since 2009
Hafsat Ibrahim Bomai; International Accounting
the CBN, SEC and other bodies have taken considerable steps to improve financial
reporting and disclosure standards.

The most important areas for further progress include the adoption of IFRS and
promulgation of the Financial Reporting Council (FRC) bill. Government has announced
the adoption of IFRS from January 1, 2012, for public listed entities and significant
public interest entities. The FRC Bill has recently been passed by the National
Assembly and is awaiting the assent of the President. There is greater awareness by
investors, directors, managers, and auditors to improve compliance with financial
reporting requirements by publicly traded companies largely through the efforts of
various regulatory agencies. Monitoring and enforcement mechanisms of accounting
and auditing standards and codes have improved (although international audit
standards have not been implemented); errant companies and auditors have been
sanctioned. The progress is an indication of Governments commitment to improving the
quality of financial reporting, a key contributor to enhancing investor confidence and
economic growth.

8.0 Conclusion
From the analysis it can be clearly seen that accounting plays a prominent role in
national development. If the government cannot account for the resources and revenue
generated, then the kind of events which happened in the country early in the year 2014
where government employees and organizations could not account for huge amount of
money meant for development will continue to repeat itself. Also, from World Bank
assessments on accounting and auditing in 2004 and 2011, Nigeria has not made much
progress in putting together the institutional framework needed to ensure accountability
through accounting and auditing. The period between the two assessments is 7 years
and it is expected that by 2018 when the next assessment is carried out Nigeria must
have improved significantly as evidenced in commitment of the government such as the
adoption of IFRS and IPSAS for the countrys accounting system and management.

Hafsat Ibrahim Bomai; International Accounting
The New York Times. 2014. The New York Times. [ONLINE] Available at:
missing.html?_r=0. [Accessed 04 August 2014].
Vanguard (2014). The $20 Billion that would not go away - Vanguard News. 2014. The
$20 Billion that would not go away - Vanguard News. [ONLINE] Available at: [Accessed 04 August 2014].
Microsoft Encarta Reference Library 2004
Omolehinwa, E, O (2012). ACCOUNTING FOR PEOPLES MONEY.An Inaugural
Lecture Delivered at the University of Lagos Main Auditorium on Wednesday, 8th
February, 2012
Okigbo, P. (1994) The Abuse of Public Trust Newswatch, October 24 32-33.
Iyoha, F. O., & Oyerinde, D. (2010). Accounting infrastructure and accountability in the
management of public expenditure in developing countries: A focus on Nigeria. Critical
Perspectives on Accounting, 21(5), 361-373.