The Executive Secretary of the Financial Reporting Council of Nigeria (FRC), Mr. Jim Obazee has refuted the claim is some quarters that the National Code of Corporate Governance (NCCG) is responsible for the recession being witnessed in the country. Rather, Obazee said that NCCG has the capacity to build confidence that can assist the Nigerian economy normal recuperative mechanism to engage.
FRC boss made this clarification in his welcome address on the occasion of the 13th annual financial reporting summit and dinner with the theme for the summit was: National Code of Corporate Governance and New Audit Report: A Paradigm Shift that took place in Lagos. He said the Council had been accused from different quarters that the issuance of the NCCG was the cause of, or capable of, creating a recession, impeding the ease of doing business and/or decreasing foreign direct investments.
According to him, in other cases, the FRC had also been informed that the NCCG was in conflict with the FRC Act, 2011 and/or the Companies and Allied Matters Act, CAP C20, LFN 2004; among others. But Obazee responded to some of the accusations, saying the NCCG was not the cause of recession. In addition, he stressed that the NCCG cannot impede the ease of doing business, saying Ease of doing business, in a jurisdiction, is based on some indicator sets.
These indicator sets, according to the World Bank Group, are in the areas of: Starting a Business, Dealing with Construction Permits, Getting Electricity, Registering Property, Getting Credit, Protecting Minority Investors, Paying taxes, trading across Borders, Enforcing Contracts and Resolving Insolvency. He said: Capital, globally, has only two known loyalties: safety and adequate returns. Capital does not owe any loyalty to any governance environment that does not guarantee these two loyalties.
This is because; capital does not focus on the product but on the experience. If we do not arrange our jurisdictional issues by importance, they will automatically arrange themselves by priority. Again, it seems that it is the signals that are talking not the issuance of NCCG. He also insisted that the NCCG will not scare foreign direct investment, rather it enhances it.
According to him, The Nigerian economy would no doubt benefit extensively from the NCCG through its demand for enhanced transparency and accountability in financial reporting (resulting from better disclosures in financial statements) and mandatory corporate codes that speaks to how covenants are taken seriously in Nigeria.
Corporate governance failures have now been proved to be at the very heart of the global financial crisis. This is because the supposed risk management systems in most corporate entities did not work since corporate boards did not live up to their responsibilities and the gatekeepers (financial analysts, rating agencies, prudential regulators, etc) did not draw the investing public and other relevant stakeholders attention to systemic risks.
He also argued that the NCCG is not in conflict with the FRC Act, 2011 as well as with the provisions of the Companies and Allied Matters Act, CAP C 20, LFN, 2004. The contention that the NCCG is inconsistent with extant legislation is misconceived and ill-informed. The nature of corporate governance codes is that they complement corporate law by filling gaps existing in corporate law and practice.
Most jurisdictions adopt the format of a Code instead of an Act of the Legislature because of the relative ease of amendment where necessary to deal with dynamism of the corporate world. Corporate governance is dynamic, he explained.