The lack of professionalism in Nigeria’s accounting industry was criticised by Folorunso Ajayi, a financial specialist from the UK and the CEO of Accountants At First Horizon Limited. Having worked as a chartered accountant for 20 years, Ajayi noted that in the UK, the government and organised business groups oversee the bidding process, thus accountants are not required to submit bids for services. This approach, however, is very different in Nigeria. Due to lax laws, Ajayi further emphasised that there are no fines for businesses in Nigeria who neglect to file their taxes.
According to him, banks and other stakeholders would gain from bringing Nigeria’s accounting industry into line with international norms, especially by requiring stricter compliance with Tax returns. He underlined the importance of honest and open accounting methods, as demonstrated in the UK, where strict rules govern account filing and Pension plan delivery. Nigeria’s accounting system functions very differently from systems in other industrialised economies, such as the United Kingdom. In order to obtain contracts from clients in the public and commercial sectors, Nigerian accountants frequently have to participate in a bidding procedure.
Nigeria has a far weaker regulatory framework.
Businesses compete for contracts through this procedure by submitting bids that list their services; this frequently results in a highly competitive market where price undercutting is frequent. In contrast, accountants are typically exempt from bidding for jobs in nations such as the UK. Rather, the government and organised business associations start the bidding process for accounting services, and businesses are legally required to meet strict filing and reporting obligations, like filing tax reports and making pension contributions.
Also, the regulatory environment in both nations is one obvious distinction. Financial Regulation is strict in the UK, where regulatory agencies like Her Majesty’s Revenue and Customs (HMRC) make sure that all companies, regardless of size, file tax filings, submit accounts to Companies House, and abide by pension laws. A Culture of accountability and openness is promoted by the instant repercussions for noncompliance. Nigeria, on the other hand, has a far weaker regulatory framework and imposes few penalties on businesses that neglect to file their tax returns or accounts.
Due to lenient enforcement, firm avoid paying taxes without consequences.
In recent years, the tax compliance rate of Nigeria has been below 10%, according to the Federal Inland Revenue Service (FIRS). Because of the lenient enforcement, businesses are now able to avoid paying taxes without facing serious repercussions. Nigeria’s accounting system’s lack of appropriate professionalisation has also had an impact on enterprises. In Nigeria, a large number of SMEs struggle to obtain bank financing because they don’t keep accurate accounting records or file annual returns.
More so, in order to determine creditworthiness, financial institutions frequently need audited financial statements; nevertheless, many companies choose not to submit these records in the absence of appropriate legislation. Banks are therefore hesitant to lend money to these companies, which restricts both their ability to grow and the overall progress of the economy. Nigeria could carry out a number of important reforms to address these problems. The government should first increase regulatory enforcement by giving FIRS the authority to implement harsher sanctions for financial reporting and tax return noncompliance. Secondly, Nigeria might implement a streamlined tax filing system for small enterprises, similarly to the self-assessment tax system in the UK, which would facilitate regulatory compliance.
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Enhancing the ability of the nation’s accounting associations, like the Institute of Chartered Accountants of Nigeria (ICAN), to instruct accountants in international best practices and foster a professional culture is also necessary. Additionally, the implementation of digital systems for account submission and tax return filing would lessen the bottlenecks that firms currently have in the manual procedure. The accounting system in Nigeria would continue to impede Investment and economic progress in the absence of appropriate professionalisation and a more robust regulatory framework. Modernising the industry and using international best practices will guarantee openness, enhance tax collection, and facilitate enterprises’ access to capital.