Financial Reporting Council of Nigeria PDF

9. Ensures that the crude oil metering facilities are periodically calibrated for production and shipping figures accuracy by sighting and calibration certificates;. 10. Participate randomly in crude oil shipping operations to experience the mode of measuring crude oil volumes in vessels;....

9. Ensures that the crude oil metering facilities are periodically calibrated for production and shipping figures accuracy by sighting and calibration certificates;. 10. Participate randomly in crude oil shipping operations to experience the mode of measuring crude oil volumes in vessels;. 11. Follow-up crude oil production/shipping inventory system of each JVC and the management of storage tank farm;. 12. Establishes periodic reports on oil production, shipping and revenue there from. 2.3.4.16 FINANCIAL REPORTING COUNCIL Background & Establishment of the Financial Reporting Council The Financial Reporting Council of Nigeria [FRCN], formerly the Nigerian Accounting Standards Board (NASB), is an organisationorganization charged with setting accounting standards in Nigeria. The NASB had been established in 1982 as a private sector initiative and was closely associated with the Institute of Chartered Accountants of Nigeria (ICAN). It however became a government agency in 1992 under the supervision of the Federal Ministry of Commerce. The Nigerian Accounting Standards Board Act of 2003 provided the legal framework for its operations with membership from government and other interest groups prominent among which were ICAN and the Association of National Accountants of Nigeria (ANAN). The primary functions as defined in the Act of 19 July 2003 were to develop, publish and update Statements of Accounting Standards to be followed by companies when they prepare their financial statements, and to promote and enforce compliance with the standards. The standards were adapted from guidelines of the International Accounting Standards Board (IASB) which had published many of the earlier standards, but was more involved in enforcement than in updating to the more modern International Financial Reporting Standards (IFRS). Over the years, and with the pursuit of reforms, the provisions of the Act establishing the NASB were considered obsolete and insufficient to reassure investors and other stakeholders that the country’s corporate reporting and governance frameworks were strong. To make the investment environment safe, it was considered necessary to bridge the gap that existed in financial reporting statements and reshape national risk management. Consequently, the Nigeria Accounting Standards Board became a proponent of a new entity to set accounting and auditing standards for Nigeria and other African nations. The new body was to be independent of the two professional associations that were its member – ANAN and ICAN. In May 2011 the Senate passed the Financial Reporting Council of Nigeria Bill, which repealed the Nigerian Accounting Standards Board Act and replaced it with a new set of rules. The support for the bill was to bring Nigeria in alignment with other countries and improve investor confidence through the universally accepted IFRS. It 153 | Page DCP Study Pack was also believed that the move to adopt the IFRS would help attract foreign direct investments to Nigeria. The Financial Reporting Council Bill was signed into law on 20 July 2011. According to the then Minister of Trade and Investment, Olusegun Aganga, “More meaningful and decision enhancing information can now be arrived at from financial statements issued in Nigeria because accounting, actuarial valuation and auditing standards, used in the preparation of these statements, shall be issued and regulated by this Financial Reporting Council. The FRC is a unified independent regulatory body for accounting, auditing, actuarial valuation and corporate governance issues. As such, compliance monitoring in these areas will hence be addressed from the platform of professionalism and legislation”. Membership of the Council includes: Accountant-General of the Federation Auditor-General of the Federation Association of National Accountants of Nigeria Institute of Chartered Accountants of Nigeria Central Bank of Nigeria Chartered Institute of Stockbrokers Chartered Institute of Taxation of Nigeria Corporate Affairs Commission Federal Inland Revenue Service Federal Ministry of Commerce Federal Ministry of Finance Securities and Exchange Commission Nigerian Accounting Association National Pension Commission Nigerian Stock Exchange Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture Nigeria Deposit Insurance Corporation National Insurance Commission Nigerian Institution of Estate Surveyors and Valuers Mandate and Functions of the Financial Reporting Council The general mandate of the FRC is to ensure that financial statements of Public Interest Entities are prepared to reflect a true and fair representation of the business affairs and financial position of the relevant organisationorganization to which they apply, for the benefit of existing and potential investors and the general public. Public Interest Entities was defined in the Act to mean government organizations, 154 | Page DCP Study Pack  quoted and unquoted companies and all other organizations that are required by law to file returns with regulatory authorities and this excludes private companies that routinely file returns only with the Corporate Affairs Commission and the Federal Inland Revenue Service. The functions of the Council, according to Section 8 of the FRC Act, cover the following: a] To develop and publish accounting and financial reporting standards to be observed in the preparation of financial statements of public interest entities in Nigeria;. b] to review, promote and enforce compliance with the accounting and financial reporting standards adopted by it;. c] receive notices of non-compliance with approved standards from preparers, users, third parties or auditors of financial statements;. d] receive copies of annual reports and financial statements of public interest entities from preparers within 60 days of the approval of the board;. e] advise the Federal Government on matters relating to accounting and financial reporting standards;. f] maintain a register of professional accountants and other professionals engaged in the financial reporting process;. g] monitoring compliance with the reporting requirements specified in the adopted code of corporate governance;. h] promote compliance with the adopted standards issued by the International Federation of Accountants and International Accounting Standards Board;. i] monitor and promote education, research and training in the fields of accounting, auditing, financial reporting and corporate governance;. j] conduct practice reviews of registered professional;. k] review financial statements and reports of public interest entities;. l] enforce compliance with the Act and rules of the Council on registered professionals and affected public interest entities;. m] establish such systems, schemes or engage in any relevant activity either alone, or in conjunction with any other organization or agency, whether local or international, for the discharge of its responsibilities;. n] receive copies of all qualified reports together with detailed explanation for such qualifications from auditors of such financial statements within a period of 30 days from the date of such qualification and such reports shall not be announced to the public until all accounting issues relating to the reports are resolved by the Council;. o] to adopt and keep up-to-date accounting and financial reporting standards and ensure consistency between standards issued and the International Financial Reporting Standards;. 155 | Page DCP Study Pack p] specify, in the accounting and financial reporting standards, the minimum requirements for recognition, measurement, presentation and disclosure in annual financial statements or other reports which every public interest entity shall comply with the preparation of financial statements and reports;. q] develop or adopt and keep up-to-date auditing standards issued by the relevant professional bodies and ensure consistency between the standards issued and the auditing standards and pronouncements of International Auditing and Assurance Standards Board; and r] perform such other functions which, in their opinion are necessary or expedient to ensure the efficient performance of the functions of the Council. The FRC exercises its regulatory functions over companies in the manner provided in the following enabling laws and regulations: The FRC Act The Financial Reporting Council of Nigeria Guidelines/Regulations, 2014 6.3 Reporting Requirements All Public Interest Entities are required by the Act to: a] Submit copies of annual reports and accounts with the FRC within 60 days of the approval of its Board. b] Pay annual levies to the FRC. These levies are usually calculated either based on a percentage of the market capitalization of the Company or annual turnover of the Company. A failure to pay the levy as charged will attract a penalty equivalent to 10% of the amount for every month of default. In addition, the CEO of the Company shall be liable to a fine of not more than N500,000 or imprisonment not exceeding 6 months. c] Ensure that the preparation of its financial statements or report is in compliance with accounting and financial reporting standards developed by FRC, failing which a fine of an amount not exceeding N10,000,000 or imprisonment or both will accrue. d] Submit within 30 days, copies of any financial statements or reports filed with any government department or authority with the Council. 2.3.4.17 NATIONAL DRUG LAW ENFORCEMENT AGENCY (NDLEA) History of NDLEA 156 | Page DCP Study Pack  The establishment of the National Drug Law Enforcement Agency (NDLEA) by the promulgation of Decree Number 48 of 1989, now Act of Parliament, was aimed at exterminating illicit drug trafficking and consumption in the Nigerian society. It is a well-known fact that any involvement in drugs, especially their importation, exportation, sale, transfer, purchase, cultivation, manufacture, extraction and possession is universally unacceptable. Vision/Mission OUR VISION – To become the most proactive and leading Drug Law Enforcement Agency on the African Continent and one of the best in the world through the provision of effective and efficient services to Nigerians by cutting off the supply of illicit drugs, reducing the demand for illicit drugs and other substances of abuse, tracing and recovering drug -related proceeds and contributing to the creation and maintenance of an enviable image for the Nation throughout the world. OUR MISSION – The National Drug Law Enforcement Agency shall deploy all resources at its disposal for the total eradication of illicit trafficking in narcotic drugs and psychotropic substances; suppression of demand for illicit drugs and other substances of abuse; recovery of ill-gotten wealth, acquired from proceeds of illicit drug trade, protection, enhancement and maintenance of the image of Nigeria and Nigerians at home and abroad. Structure The NDLEA has a Chairman of Board and a Director General/Secretary to the Board as its key management team Other members of the Board are: (a) a representative of the Nigeria Police Force, not below the rank of an Assistant Inspector-General;. (b) the Director, Military Intelligence;. (c) the Director of Customs and Excise;. (d) the Director, State Security Service;. (e) a representative of the Federal Ministry of Justice not below the rank of Director;. 157 | Page DCP Study Pack  (f) the Director-General, National Intelligence Agency;. (g) a representative each of the Ministries of External Affairs, and Health not below the rank of Director; and (h) three other persons. Functions NDLEA is an organ of Nigerian Government that helps in regulating standards of drugs manufactured or imported to the country. 1. Its function is to arrest and enforce the law on those who traffic or deal in the business of hard drugs. 2. Its function is to register and ensure quality consumable items are produced for Nigeria markets. 3. One of its functionfunctions is to check imported drugs at the port, factories and drug stores or pharmaceutical outfits so as to ascertain fake or genuine drugs. 4. The organ prosecutes any offender in the law court. Powers The Agency shall have power- (a) to cause investigations to be conducted as to whether any person has committed an offence under The Act; and (b) with a view to ascertaining whether any person has been involved in offences under the Act or in the proceeds of any such offences, to cause investigations to be conducted into the properties of any person if it appears to the Agency that that person’s life stylelifestyle and extent of the properties are not justified by his ostensible source of income. 2.3.4.18 CREDIT BUREAUS IN NIGERIA A credit bureau is a company that collects and maintains credit information on individual and business borrowers and sells same to lenders, creditors and consumers in the form of Credit Reports. The information can be obtained from credit providers as well as public sources. Investopedia defines a credit bureau as “an agency that researches and collects individual credit information and sells it for a fee to creditors so they can make a 158 | Page DCP Study Pack decision on granting loans”. They are also sometimes called Credit Reporting Agencies. The primary product of a credit bureau is a Credit Report. The report is a reflection of an obligor’s past loan payment history and typically captures both positive and negative information. The report may include a credit score which is a measure of the obligor’s creditworthiness relative to other subjects in the credit bureau’s database. The credit data has predictive powers that provide foresight into likely future credit behaviourbehavior based on past behavioursbehaviors. The existence of credit bureaus and a strong reporting culture are part of the required financial infrastructure for a credit-driven economy. Not only do they deter borrower abuse of the credit system, but more importantly, they facilitate economic growth by directing lendable funds to consumer and retail/SME segments of the market. This pushes the boundaries for increased consumer goods production and consumption through financially empowered consumers. In Nigeria, there are currently three credit bureaus licensed by the Central Bank of Nigeria. Background and Establishment of Credit Bureaus in Nigeria The existence of a public registry operated by the Central Bank of Nigeria preceded the emergence of private credit bureaus in Nigeria. The CBN’s Credit Risk Management System (CRMS) had been collating credit data from banks with values in excess of N1million. There was however widespread under-reporting as many operators were not submitting accurate and comprehensive information, thereby shielding true exposures from the database of the Central Bank. This invariably led to outputs from the CRMS which could not be completely relied upon by operators for risk assessment. In addition, the minimum threshold meant that many consumer loans below N1million were not being captured in the CRMS. Though credit managers recognisedrecognized the importance of sharing credit information, a reliable and credible platform to do so was not readily available. Invariably, patronage of the CRMS was therefore more for regulatory compliance than meeting the critical business needs of the industry. A gap, therefore, existed for private credit bureau services but there were no champions to lead the way. The challenge of poor credit information sharing and the need for credit managers to significantly improve on collaboration was one of the major triggers in the formation of an industry body, Credit Risk Managers Association [CRIMA] in March, 2000, which later transformed to Risk Managers Association of Nigeria [RIMAN]. During this period, especially between 1999 and 2001, significant interests began to converge from the banks, Central Bank of Nigeria and IFC on the development of critical financial infrastructure such as credit bureaus in the country. The pressure to get a credible alternative to the CBN’s CRMS led CRIMA to liaise with the International Finance Corporation on the need to facilitate the development of private credit bureaus in the country. In 2001, IFC facilitated a two-day seminar to sensitize the industry on credit bureaus, the regulatory framework and how they operate. 159 | Page DCP Study Pack  RIMAN’s advocacy role continued when in 2002, the theme of it’sits annual conference was Credit Bureaus in Nigeria: Opportunities and Challenges. From this conference, two private companies indicated their interests in setting up credit bureaus – CR Services [Credit Bureau], then called Credit Registry, and DataPro. Only Credit Registry however advanced its interest. Soon after, other groups such as Agile Computers, XDS Credit Bureau and a group of banks led by Accenture emerged. Inspite of the benefits of credit bureaus in the economy, especially for the emerging consumer lending market, operators were reluctant to commit to a credit bureau in the absence of a legal framework. In continuation of its advocacy efforts, RIMAN commissioned the drafting of a Bill for an Act on Credit Information Exchange & Credit Reporting in 2006/2007. However, due to cost implications, this bill could not be sponsored by RIMAN and was passed through the Federal Ministry of Justice. Unfortunately, no progress was made by the Ministry. The role of RIMAN was basically to galvanize industry support for a critical credit risk assessment infrastructure. Its active involvement with the processes and participants could not be divorced from the raison d’etre of its formation in the first place. In addition, it was clear from the early years that growth in the consumer lending segment was inevitable, and it needed credit bureaus as a key supporting infrastructure. Though few banks were early adopters, such as Wema Bank and FSB International Bank as far back as 2003, initial buy-in by a majority was a tedious process until the Central Bank requirements for compulsory use of credit bureau reports were published as Guidelines for the Licensing, Operations and Regulation of Credit Bureaux, 2008. This was subsequently revised in November, 2013 as Guidelines for the Licensing, Operations and Regulation of Credit Bureaux and Credit Bureaux Related Transactions. The operations of Credit Bureaus have been further enhanced with the signing into law of The Credit Reporting Act, 2017 by the Acting President in May 2017. This Act essentially gave legal backing to guidelines published by the Central Bank of Nigeria. The objectives of the Act are to: a] facilitate and promote access to credit and enhance risk management in credit transactions. b] promote access to accurate, fair and reliable credit information and to protect the privacy of such information. c] set standards and conditions for the establishment, operations and regulation of credit bureau d] promote fair and competitive credit reporting system. e] promote responsibility in the credit market by encouraging responsible borrowing, avoidance of over-indebtedness and fulfilment of financial obligations by consumers 160 | Page DCP Study Pack  and discouraging reckless credit granting by credit provider and contractual default by consumers and f] facilitate credit information sharing. Roles of Credit Bureaus The functions of credit bureaus from both the Central Bank of Nigeria Guidelines of 2008/revised in 2013 and those in the Credit Reporting Act, 2017 are not dis-similar. Functions under the Central Bank of Nigeria Guidelines According to the Central Bank of Nigeria’s Guidelines for the Licensing, Operations and Regulation of Credit Bureaux Related Transactions 2013, the following are the functions of credit bureaus: a] dissemination of credit information for permissible purposes. b] investigate an application for credit on behalf of any person or entity to whom an application for credit has been made c] furnish non-credit information to users. For the purpose of (a) above, Section 5.1(b) of the guidelines identifies “permissible purpose” as any of the following: i) When a borrower, potential borrower, guarantor or potential guarantor, apply for credit. ii) Reviewing, renewing, restructuring or monitoring of existing credit facilities. iii) Opening of new accounts, (as part of KYC) iv) Prospective or current employment and non-executive director’s verification checks v) Tenancy contracts (for identification and payment ability purposes) vi) Grant or renewal or review of new or existing insurance policies vii) Acceptance of guarantee(s) on behalf of borrowers or potential borrowers viii) Application for credit contracts or other post-paid contracts ix) Debt collection for the recovery of a valid and enforceable debt x) Request by an individual or entity to validate the correctness or otherwise of credit information held by credit bureaus in respect of themselves xi) The provision of Credit Scoring services by a Credit Bureau xii) Other purposes with the written consent from the individual or entity xiii) Where a person is required by an applicable law to provide Credit Information in respect of an identifiable individual or entity. Functions Under the Credit Reporting Act, 2017 Section 3 of the Credit Reporting Act, 2017 goes on to consolidate and expand the functions of credit bureaus as stated below: i) Creating and maintaining a database of credit and credit-related information in accordance with the provisions of the Act;. 161 | Page DCP Study Pack ii) Receiving, collating and compiling credit and credit-related information from Credit Information Providers: Credit Information Users; and such other persons as the Central Bank may prescribe;. iii) Issuing Credit Reports, and providing other services that pertain to permissible purposes;. iv) Investigating, at the request of a Credit Information User, an application for credit on behalf of any person to whom an application for a credit -based transaction has been made;. v) Carrying out such other functions and services that are compatible with the nature of the foregoing activities, provided that the confidentiality of any information which they obtain in the course of carrying out such functions or rendering such services shall be maintained in the manner prescribed under the Act; and vi) Carrying out such other functions and activities as the Central Bank of Nigeria may by regulations prescribe. The Act prohibits credit bureaus from engaging in any other business other than those prescribed in the Act. Furthermore, they are to implement systems and procedures that ensure the completeness, accuracy and credibility of information in the database. Responsibilities and Duties Responsibilities and Duties of Banks and Other Financial Institutions The CBN Guidelines [Section 5.4] identify the following responsibilities of Banks and Other Financial Institutions;. - Maintain data exchange agreements with at least two credit bureaus;. - Obtain Credit Reports from at least two credit bureaus before granting new credit facilities;. - Obtain Credit Reports for quarterly reviews of all existing facilities;. - Ensure regular upload of credit data with credit bureaus it has data exchange agreements with;. - Update changes in data submitted at least once monthly;. - Ensure confidentiality of credit data;. - Use information from credit bureaus for permissible purposes only and - Use Credit Reports as part of credit decision process and not as sole determinant. Responsibilities and Duties of Credit Bureaus The Guideline [Section 5.5] also identified the following responsibilities of Credit Bureaus: - Put in place strict data quality control procedures to ensure quality of data and service continuity;. - Use credit information in its database solely for permissible purposes;. - Ensure Data Providers can upload regularly or at least once monthly;. - Put in place procedures that allow Data Providers, Central Bank of Nigeria, other Credit Bureaus and Data Subjects to correct inaccurate, invalid or incomplete data;. - Notify all users [over the previous three months] of all corrections at no extra cost;. 162 | Page DCP Study Pack - Allow CBN access to credit data managed by it;. - Observe perpetual confidentiality with respect to information on its database;. - Not to transfer data to any party in any form other than to the Central Bank of Nigeria;. - Bind by contractual agreement, all other Data Users and Data Providers not under the regulatory purview of the Central Bank, to their duties and responsibilities;. - Put in place adequate Dispute Resolution processes and allow Data subjects to correct inaccurate data. Reporting Requirements The following are expected from Credit Bureaus in accordance with the provisions of the CBN Guidelines: - Report all Disputes and complaints monthly in a form as prescribed by the CBN. - Submit a Monthly Report of Activities not later than 10 working days after the end of each month. - Submit Audited Financial Statements not later than three months after the end of the year for approval. 2.3.4.19 SELF REGULATING FINANCIAL BODIES IN NIGERIA 2.3.4.19.1 ASSOCIATION OF CHIEF COMPLIANCE OFFICERS OF BANKS IN NIGERIA (ACCOBIN) The ACCOBIN, formerly, Committee of Chief Compliance Officers of Banks in Nigeria (CCCOBIN) is a good example of industry wide collaboration on timely information sharing and an institutional good practice on how to exchange views on measures to promote effective compliance system and it has been a very good experience so far. In Nigeria we have a body called the Association of Chief Compliance officers of Banks in Nigeria (ACCOBIN). It was formed since 2007 when all banks encouraged by the Central Bank of Nigeria, the NFIU and other stakeholders decided to put competition aside and create a level playing field for compliance in the Nigerian banks. A bye- law was written and signed by all the banks. Information is shared freely at monthly meetings between member Chief Compliance Officers (CCOs), Regulators and Law Enforcement Agencies. The meetings are hosted in turns by each bank. Today membership of the body has been made mandatory for all bank Chief Compliance Officers by the Central Bank of Nigeria. Through this body chief compliance officers have succeeded in agreeing on a number of practices and regulations. OurTheir activities largely contributed to the removal of Nigeria from the FATF blacklist in 2006 and recently in 2013 from the grey list in 2013. Nigeria was added back on the Grey List in 2023. Currently this initiative has been borrowed by the regional FATF body for West Africa Region, GIABA, when it established a Regional Compliance Officers’ forum. We believe this will help in improving information flow in the region. The ACCOBIN meeting is attended by over fifteen Regulators, Law Enforcement Agencies and industry experts in addition to all the Chief Compliance Officers of banks in Nigeria and Offshore banks representative offices such as HSBC, Commerz Bank, 163 | Page DCP Study Pack