There's an ongoing issue that if not highlighted in the Business sector of Nigeria, could hamper the economic growth of Nigeria in the long run. The Financial Reporting Council of Nigeria has basically shifted its from its primary focus as a regulator of financial reporting, accounting and auditing with global standards to a tax collector and money making enterprise. I took my time to do this write-up and share here.

As with global standards, the Federal Government set up the Financial Reporting Council of Nigeria in 2011. Established under Act 6, 2011, its mandate is to protect the investor and stakeholder interest, give guidance on issues relating to financial reporting and corporate governance, ensure accuracy and reliability of financial reports and harmonize activities of relevant professional and regulatory bodies. It also has the mandate to promote the highest standard among auditors and other professionals engaged in the financial reporting process.

These among other duties explain the purpose of the FRCN. One thing that the FRCN is clearly not empowered to do is play the role of ‘tax collector’ or levy financial and business entities with impunity. When these things happen, it is expedient that it must be highlighted and issues are set clear.

FRCN has become an exorbitant tax collector, charging registration fees up to N219, 000 per professional and annual dues of N5, 000 each. Unlike the UK, whose financial regulator asks for voluntary levies from regulated entities who pay according to their market capitalization. FRCN is shifting from its primary focus on public interest enterprises to focus on money making. It seeks to extend its universe of compulsory levies to all entities in the private sector.

The expansionist mindset was contested by Eko Hotels and the court ruled that Section 77 of the FRCN Act excluded private companies from the entities subject to regulatory powers of the FRCN.

FRCN has reviewed its penalties up to 5,000%. These penalties are exorbitant, even exceeding the constitutional limits approved by the National Assembly. The agency showed its complete disregard of the law in requiring that penalty must be paid within 14 days, failing which an additional penalty of 0.1% shall accrue daily. This is despite the fact that Section 64 para (1) states that regulated entities are only liable to fines upon conviction by a court of competent jurisdiction.

The UK-FRC, unlike FRCN, works to establish whether or not a financial reporting breach has occurred, the courts are responsible for determining sanctions. The FRCN on its part has chosen to copy some aspects of the UK code but not copy those that will require it to properly engage with the market that it regulates or refer matters that should be addressed or interpreted in court to the courts.

If the FRCN is meant to achieve a unified regulator that will reshape the national risk management system, sanction misbehavior of the management of public interest entities then FRCN has not lived up to its expectations.

In a nation that has been having a running battle with multiple taxation and over-lapping regulatory agencies, FRCN’s impunity is another unwanted burden that can and must be avoided at all cost. If unchecked, the consequences are grave for the economy in the long term. Foreign direct investments could plummet and slow growth of indigenous companies could happen. This surely does not give the full implementation of local content act a boost.

The FRCN should focus on developments of standards, codes and guidelines that will support the fair presentation of financial statements by stewards of business enterprises, provision of guidance, engage stakeholders to encourage compliance with the codes and standards

FRCN leadership should be transparent and should set the tone by publishing its own annual reports from 2011 to 2014 as is required by section 38 of the FRC Act and as it demands from regulated entities. All FRCs across the globe publish their reports on their websites

Since FRCN believes strongly in rotation and “fresh look”, it is past due for its Executive Secretary to step aside having dominated corporate reporting from serving as Technical Director of the defunct Nigerian Accounting Standards Boards, through to its CEO to Executive Secretary of FRCN for over 10 years.

The national assembly should urgently establish a committee to review the activities of the FRCN, its governance systems, recent pronouncements and planned enactments are in line with the Act establishing the FRCN. It will also be necessary for the national assembly to review the FRC Act itself to determine whether the powers being exercised by FRCN are appropriate.

Seun & Mods, please a front page will do this issue a lot of good. kindly use your good offices to help

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