Why SEC, CBN, other public interest entities must disclose reports yearly

LIKE other public interest entities, the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) are expected to disclose annual reports to underline trust, transparency, and accountability.

But a check at the SEC website showed that it has not published its annual reports since 2015, and the CBN website since 2018, raising concerns of integrity in their financial management.

The annual reports are the core of transparency and accountability surrounding the activities of public interest entities, a financial analyst, David Adonri, said.

“The CBN and SEC are regulators in their industry. They require that companies they regulate disclose their financial activities from time to time, and impose sanctions when such disclosures are not followed. So, if they demand such a level of transparency, but they themselves are no longer transparent, then it is a call for concern,” Adonri said.

A development economist, Kelvin Emmanuel, had also expressed concern during an appearance on Channels Television in June 2023 that the CBN had since 2019 stopped disclosing its audited financial statements to the Senate in line with Section 51 of the CBN Act 2007, and had consequently stopped gazetting the published financial statements in line with Section 53 of the CBN Act.

What the law says

The law is not silent as regards the publication of annual reports by public interest entities, a legal expert, Rose Adima, told The ICIR.

“It is not news that for accountability sake, public interest entities are duty-bound to publish financial reports. Such publications, however, depend on the entity and the law that governs the activities of such entities,” Adima explained.

FRC, its Act, and role

The Financial Reporting Council (FRC) of Nigeria is a federal government agency responsible for, among other things, developing and publishing accounting and financial reporting standards to be observed in preparing financial statements of public entities in Nigeria, and for related matters.

Under Section 77 of the Financial Reporting Council of Nigeria Act, 2011 (Act No. 6), public interest entities “means Governments, Government Organisations, quoted and unquoted companies, and all other Organisations which 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 (CAC) and the Federal Inland Revenue Service (FIRS).”

Adima, the principal partner at Rose Adinma & Associates, posited, “In line with the above, therefore, it could be said that government organisations may include the CAC, CBN, FIRS, and SEC.

“All public interest entities are mandated by virtue of the law establishing them to publish their financial statements.”

What CBN Act says

Section 50 (1) of the Central Bank of Nigeria Act (2007) provides thus:

“The Bank shall, within two months after the close of each financial year, transmit to the National Assembly and the President a copy of its annual accounts certified by the Auditor.

(2) A Report required to be submitted to the National Assembly and the President shall be published by the Bank in such manner as the Governor may Direct.

(3) The Board shall ensure that accounts submitted pursuant to this Section shall as soon as possible be published in the Gazette.

(4) The Bank shall as soon as practicable after the last day of each month make up and publish a return of its assets and liabilities as at the close of business on that day, or if that day is a holiday, as at the close of business on the last day preceding business day.

(5) A copy of the return referred to in sub–section (4) of this Section shall be forwarded to the President and shall be published in the Gazette.”

Section 48 of the Central Bank of Nigeria Act (2007), says the Bank’s financial year shall begin on January 1 and end on December 31.

What ISA Act says

The SEC, being an establishment of the Federal Government, is also expected to file an annual report, Adima maintained.

This is in line with Section 27 of the Investment and Securities Act (2007), which provides that “The Commission, shall not later than three months after the end of each year, submit to the Minister and the National Assembly a report on the activities and administration of the Commission during the immediately preceding year, and shall include in such reports audited accounts of the Commission and the report of the Auditor on the accounts.”

According to her, from the two provisions above, therefore, it was crystal clear that the publication of reports is part of the obligations bestowed upon government agencies, and that there are punishments for defaulters.

Section 57 of the Financial Reporting Council of Nigeria Act, 2011 (Act No. 6) states that “where any public interest entity is required to prepare any financial statement or report under any enactment, it shall ensure that the financial statements or reports are in compliance with the accounting and financial reporting standards developed by the Council under this Act,” she noted.

Effect of non-compliance

Adima also cited Section 65 (1) of the Financial Reporting Council of Nigeria Act, 2011 (Act No. 6), which provides thus:

“Where the Council reaches a final decision under section 57 to the effect that a public interest entity has failed to comply with any of its decisions under this Act, and with such other financial reporting, accounting, auditing, and financial reporting standards as may be specified under the relevant enactments, the Council shall serve a notice on the entity for an immediate restatement of its financial statements.

(2) Where a notice is served on a public interest entity under sub-section (1) of this Section, it shall, within 60 days of the service of the notice, restate its financial statements and resubmit same to the Council and to the relevant government department or authority.

(3) Any public interest entity which fails to comply with the notice referred to in sub-section (2) of this section commits an offence and shall on conviction be liable to a fine not exceeding N10,000,000.00 and be required to restate the said financial statements within 30 days thereafter, and the Council shall require such entity to disclose same in the following year’s financial statements.”

The lawyer explained that by the provision, “it is compulsory for all government organisations that fall under the public interest entities to publish their reports on financial statements and make them available to the public whose tax payments are used to fund their activities as domesticated in the Freedom of Information Act (2011).”

CBN declines comment

The apex bank did not respond to The ICIR questions on why it has not been making its annual reports public since 2018, as its director of corporate communications, Isa Abdulmumin, did not respond to messages sent via WhatsApp.

How SEC and FRC responded

The SEC head of corporate communication, Efe Ebelo, had in March 2020 told this reporter that a board was to meet to approve the commission’s annual reports.

Asked now why SEC has still not made the reports public, Ebelo said, “The board has approved all the reports from 2015 to 2021,” but declined to explain why the reports remained have not been made public.

When also reached for inquiry, the deputy director of policy, planning, research, and statistics at the FRC, Felix Azubuike, responded, “We confirm to you that the Council is in receipt of the Annual Reports and Financial Statements of Securities and Exchange Commission and Central Bank of Nigeria up to the year ending 2021.

“The Council has, in line with her statutory powers carried out regulatory reviews of the FS [financial statements].”

But Azubuike did not respond to a follow-up question about whether FRC was not supposed to have received 2022 annual reports from CBN and SEC and what sanctions were meted out to the regulators, even though he promised to revert.

A look at CBN’s financial status as of December 2017

A draft copy of the CBN Annual Report for the year ended December 31, 2017, signed by its suspended governor Godwin Emefiele, and former deputy governor, economic policy directorate, Okwu Nnanna, revealed that the apex bank posted a negative net interest (expense)/ income of N659.254 billion in 2017 after N1.344 trillion interest expenses were deducted from N685.608 billion interest income.

Net operating income dropped to N418.427 billion in 2017 from N660.350 billion in 2016 after the deduction of loan impairment charges from the total operating income of N788.736.

The bank also posted negative total operating expense of N327.643 billion in 2017 and N548.884 billion in 2016, respectively.

A further look at the report showed that net income before tax dropped to N109.170 billion from N125.360 billion, and after-tax deduction, the net income for the year dropped to N107.397 billion in 2017 from N124.470 billion in 2016.

Its total assets stood at N29.588 trillion, from N21.914 trillion, total liabilities at N28.769 trillion from N21.219 trillion, and total equity at N819.222 billion from N695.104 billion in the review year.

SEC financial status as of the 2014 year-end

For the year ended December 31, 2014, SEC posted a total comprehensive loss of N73.541 million after other comprehensive income/loss of N269.024 million was deducted from the surplus of N195.483 million.

Total income rose to N9.280 billion in 2014 from N8.965 billion in 2013, and total assets to N34.196 billion from N34.402 billion, while total liabilities stood at N2.033 billion from N2.166 billion.

Global perspective and standard

The publishing of annual reports does not relate to the CBN or SEC or any government ministry or agency alone; it is a standard globally known and recognised practice, a development economist, Kazeem Bello, said.

It is a practice that all public sector entities must ensure they take accountability serious, and financial report rendering is mandatory, he said.

Publishing of annual report is a standard globally known and recognized, says Bello
Bello: Publishing of annual reports is a standard globally known and recognised

According to Bello, the fact that the laws require this as a minimum standard shows why it must be honoured.

He wondered why Nigeria lacked simple adherence to the laid-down rule.

“We lack the taste for accountability and financial reporting responsibilities in Nigeria. In most countries where things are well structured, the volume of work carried out by professional auditors, lawyers and accountants are in the ratio of average 65 per cent for governments and the public sector, and 35 per cent or lower for the private sector,” said Bello, who is the chief executive officer/principal partner, Afrique Capital and Equity Funds Limited.



    He pointed out that public service or sector anywhere, regardless of the type of government, either transparent democracy, autocracy, or even dictatorship to some extent, is primarily established on holding and managing that sector in trust for the people and the country.

    He said, “The key point is that when you hold any position or asset in trust, the issue relating to accountability, prudent management, rendering of service reports and financials are completely non-negotiable.

    “The constitution may not specifically mention accountability and financial reporting, but the fact that it has implied or referenced the issue of trust holding is adequately sufficient to compel and, I restate, force all public entities, governments, and institutions to render the records in accountability and comprehensive financial reporting. Unfortunately, in Nigeria, the problem actually centres on the disobedience and flagrant abuse of the rule of law.”

    He emphasised the need to change the narratives as part of the larger effort to improve the quality of services rendered by our public sector groups, generate economic activities and income, improve citizen trusts in governance, and reduce the incidence of public officers corruption.

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