business in africa pays: accounting for business operations in nigeria. dr olugbenga coker
DESCRIPTION
Dr Olugbenga Coker talks to the audience of Business in Africa Pays: Nigeria about protecting your Nigerian business interests through effective accounting. You can listen to the audio recording of this presentation on our website here: http://businessinafricapays.com/accounting-for-business-operations-in-nigeria/ Or visit our homepage: http://www.businessinafricapays.comTRANSCRIPT
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Accounting for Business Accounting for Business Operations in Nigeria:Operations in Nigeria:
Opportunities & Opportunities & ChallengesChallenges
Olugbenga Coker PhD FCCA FCAOlugbenga Coker PhD FCCA FCA
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Introduction - The Nigeria Introduction - The Nigeria Business EnvironmentBusiness Environment
High Rate of Unemployment Dependence on Oil Revenue Dependence on ImportsHuge Infrastructure deficit Security Concerns Corruption Strong Local Financial Institutions
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The aim of BusinessThe aim of BusinessProfitability; wealth maximisation
Profit = Revenue - Cost (Operating, other)
Other cost- ◦Cost of Compliance◦Taxation◦Internal Control
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Compliance- Relevant Compliance- Relevant legislationslegislations• Companies and Allied Matters Act • The Foreign Exchange Act 1995
– Allows repatriation of profit, dividends, capital, etc
• The Nigerian Investment Promotion Commission Act 1995
– Established the NIPC to co-ordinate, promote and facilitate domestic and foreign investments into Nigeria except
– guarantees that ‘no enterprise shall be nationalized ‘
– Allows 100% ownership– investment listed under the ‘Negative ‘ lists– covered by the Nigerian Cabotage Acts
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Investment OpportunitiesInvestment Opportunities Infrastructure
Power – Generation, Transmission & Distribution Transportation – Rail, Air, Road
Agriculture & Agro Allied Services
Telecommunication Health Care Services Banking & Financial services Tourism/Hospitality Education Waste Management & Treatment
Mineral Mining Manufacturing
Pharmaceuticals, Textiles & Garments, Automobiles,
Oil & Gas (up-and down-stream operations) 5
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The regulatory The regulatory environmentenvironment
Incorporate local subsidiary or branch- Register with the Corporate Affairs Commission
Obtain business permit from NIPC◦-14 days/24Hrs
Obtain Certificate of Capital Importation for repatriation purposes
If manufacturing or exporting - obtain SONCAP certification for products(Standards Organization of Nigeria Conformity Assessment
Programme)
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The regulatory The regulatory environmentenvironment
File Annual Accounts with the CACNigeria has adopted the IFRS-
◦Comparability, consolidation, monitoring
Exemption for SMEs:◦Turnover < £2m or assets < £0.8m◦Foreign companies don’t qualify
Availability of professional support◦>40,000 chartered accountants (ICAN)◦Reasonable cost of compliance
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Taxation Taxation Enforced by the 3 tiers of Government- Federal, State, and Local governments.
Collectible by the Federal Government ◦Companies income tax; ◦Withholding tax on companies; ◦Petroleum Profit Tax; ◦VAT ; Education tax◦Personal Income Tax- Non residents
Collectible by State Governments: ◦Pay-As-You-Earn (PAYE) – Residents◦Road taxes; Business premises registration 8
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Taxation Taxation ◦Companies Tax - 30%◦Low VAT regime – 5%◦Investment in Infrastructure – may qualify for investment allowance
◦Capital Allowance for Specific activities
◦Enforcement- Tax Clearance Certificates
◦Access to good professional advice
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Internal ControlsInternal ControlsProtecting your Assets
◦Security of Capital◦Profitability
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Internal ControlsInternal ControlsWhat is IC?
Policies & Procedures Designed by Management to:
Safeguard the assetsEnsure reliability of financial information
Ensure compliance Promote efficient and effective operations.
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Internal ControlsInternal ControlsWhy Internal Control is particularly important?◦The nature of the business◦the social, cultural and legal environment.
◦Challenges & limitations
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Designing Internal Control Designing Internal Control SystemsSystems
Do a Risk Assessment Identify areas of greatest risk
Susceptibility to fraud & error Information system failure, staff practices Changes in regulations
Design: Cost proportional to riskEstablish the Control Environment ◦Set the tone-Values; attitude; ethics◦Communication, leading by example
Specify Control ActivitiesMonitor and Review
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Internal Control Internal Control ActivitiesActivities
Preventive & detective Delegation of authority and responsibility Separation of duties-transaction lifespan Record keeping- Cashbook, sales, inventory, fixed assets, payroll
Purchase authorisation-Account payable- Revenue, accounts receivable, banking Personnel policies and procedures Security- Physical & Technical Reconciliation- bank; cash-count; stock
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Internal Control Internal Control Issues for Smaller Entities
Owner sets the control environment Values, diligence, presence
Controls may be informal and carried out by a few persons
The benefit of a control activity should be more than the cost
A code of conduct communicated informally or (preferably) written Use of company assets; record-keeping;
complying with laws; giving and receiving gifts
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