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PROJECT TOPIC AND MATERIAL ON THE ROLE OF ACCOUNTING IN THE CONTROL OF PUBLIC EXPENDITURE IN NIGERIA (A CASE STUDY OF CENTRAL BANK OF NIGERIA CBN)
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In most developing countries including Nigeria, government participation in economic activity is usually significant. One of the ways through which government has intervened in Nigerian economy is through the establishment of public enterprises and statutory bodies operating services of an economic or social character on behalf of the government.
Since the colonial era, especially after independence in 1960, Nigerian public enterprises have witnessed a steady growth unit recently. Its Olisa (1988:133) pet it. Beginning as a trickle in the period between this era of the second world war and Nigeria attainment of independence the creation of public corporations had risen to flood level since independence and his maintained a steady growth. The rational behind the establishment of public enterprises in Nigeria are many. Some of the reason include: generating revenue, they would add to available rational capital for the support of development and welfare programme, making to be controlled by a few individual, it possible for important profitable enterprises to be controlled by a few individual or group, organization certain critical activities national survival and economic stability and providing employment opportunities (Ademolukun 1983). However, after a long period of growing, starts intervention in the Nigerian economy through public enterprises, the and of 1980’s onwards had witnessed a reversed which has sometimes been dramatic in public opinion and therefore public policy.
This has been brought by the persistent losses which state enterprises that have been running over fears. Consequently, there has been a willingness to look at alternative policy strategies for the achievement of economic development. At the forefront of these strategies is the minimization privatization of public enterprises.
In Nigeria, public enterprises are engaged in a while spectrum of economic activities including agriculture, mining, construction, manufacturing, commerce and services. The classification of public enterprises in Nigeria, had been made according to varieties of criteria by different authorities. The public service review commission (1975:101) classified public sector int.
Regulatory of service body
Commercial ad industrial enterprises
Being a mixed economy, individuals also own and operate private enterprises. A firm classified as private enterprises when it is founded and managed by an individual and Ora group of individual. These firms are expected to be registered in the local government within which they operate.
The rationale for the establishment of private enterprises are numerous just like establishment of public enterprises. T hey include amongst other. Provision of employment opportunities. Generating income for the owner of the enterprises. Government interest in profit growth of the enterprises which determine the tax liabilities of the firms, improve the performance of the public sector through competition. Moreover, the general public is concerned with the contribution which makes towards social upliftment which is exhibited to the environment in which the business is loaded and its willingness to contribute to the development of the environment.
The activities of the public enterprises have been on the increase in resent times which necessitated the introduction of the accounting practice to check and monitor the financial activities of these enterprises. In this book, titled principles of accounting, by Bimage (1985) accounting is defined as a process by which data relating to the economic activities of an organization are measured, recorded and communicated to interested parties for analysis and interpretation.
The earliest method of accounting records were kept in physical quantities. These records came from the Eastern (early) civilization which involved in the countries around the Mediterranean sea such as Mesopotamia, Egypt, Crete, Italy etc. money was recorded as soon as money took the place of barter as a medium of exchange and unit of accounting practice has been closely related to the economic development of the country. If the business organization grows in size and complexity, management and outsiders became more clearly differentiate from the outside groups which include owners of the firm (stock holder) creditors, government employer and the general public.
The differentiation necessitated the need to have accounting department in the enterprises to give accurate financial of the management and to satisfy the outside demands or the general public who are already interested on whether the enterprises in growing or not.
The role of accounting in public enterprises in Nigeria is primarily to ensure accurate accountability in these sector and present the time and fair financial position of the enterprises. The role is of utmost importance in any organization. An organization can only grow or profit when the resources are well managed and effective observed over expenditure. These resource can only be well managed if accounting department of the organization give an accurate financial information to know how ,much the enterprises having. It is only when this is done that the firm allocate its resources and knows what is to be done.
The role of accounting seems to be more pronounced in the public enterprises. In recent time there are cases of misappropriation of funds in the public enterprises and improper accountability. These factors have led to a lot of public enterprises going into oblivon. If the government has reorganized the role of accounting, all these febles should not have arisen. No enterprises can move forward without having a well organized financial departments to give accurate financial; information about the firm.
This is because if improper accounting records are not minimized or where possible eradicated these is bound to be cases of public enterprises failure. Consequently, staff of such enterprises will forced out of their job. This will result to economic and social; activities in the society.
1.2 HISTORICAL DEVELOPMENT OF CBN (A PUBLIC COMPANY)
The formation of CBN started gradually in the early 1950’s but gathered momentum by the middle and towards the decade. Precisely CBN was established in 1958. Among the factors that led to the formation for an apese financial institution in the early “50s” were the dissatisfaction and short coming to the west African currently board. The WACB established in 1912 was playing the role for an apese monetary institution in the British West Africa especially in areas of the country.
The issue of West Africa Currency exchanging this with the existing currencies, investment of reserve mainly in London and the repatriation of existing currencies. However, because of the anomalies and short coming of the WACB especially as if could not perform the monetary management, Nigeria nationalist continued to amount pressure on the colonial administration for the establishment of a central Bank that should have all pioneers of a central bank, and not just a glorified currency exchange house.
In 1952 at the floor of federal house of Assembly (First sitting) Lagos-Chief Anthony Enahoro Summoned up courage and mored a private member motion calling for the establishment of central Bank for the purpose of rapid economic development in all its phases.
However, as result of the composition of he house then and lack of awareness of the importance of central bank on the part of some Nigeria members the bill failed. Even though the motion was not successful, it stirred the hornet comb. It gingered the colonial office in London Administration appointed Mr. Fisher, a Senior staff of Bank of England, to inquire into the desirability and practicability of establishing a Central Bank of Nigeria as an instrument for promoting the economic development of the country.
Fishers in his report as an agents of colonialism and on orthodox bank stated that central Bank cannot be established in a financial environment where all factors that make a central Bank perform are not existent.
In the same year, while fisher was submitting his report to another independent term of financial expects were in Nigeria from world Bank (international Bank for reconstruction and development) with a mission like that of fisher at examining the desirability and practicability of establishing a central bank of Nigeria.
The world Bank mission were more objective in their report and less inclined to perpetual economic dependence. They really agreed with the recommendation of fisher on the instability of the financial environment as a result of weak money and market instruments but they were quick to add, that the continued political and economic advancement of Nigeria is bound to lead to the establishment of a central bank. To postponed the day when functions of currency issue and the management of foreign assets are performed in Nigeria will also postponed the day when trained Nigeria will be able to perform these functions responsible by themselves.
In 1957, even though Nigeria had not totally got her indigence, but she gained the antonomy of self internal rule. The nationalists did not wash time in commissioning another financial expert from Bank of England J.B Loyness to advise then as:
i. The establishment of a federal institution to perform appropriate central banking functions.
ii. The introduction of Nigerian currency and the administration of such as currency so as to presence in external value and its acceptability within the country.
iii. The relationship of the federal institution to the federal and regional government, to government institutions, to the commercial Bank and to the public and
iv. The role of such an institution in the development of a local
money and capital market. The report of JB Loyness led to establishment of the central Bank of Nigeria (CBN) by the Central bank of Nigeria ordinance of 17th March, 1959, The bank officially commenced business on 1st July, 1959.
OWNERSHIP AND CONTROL OF CBN
The 1959 Central bank ordinance of Nigeria established the CBN with an authorized capital of $1.5 million (123m) which was fully paid up by the federal government of Nigeria. The Bank was 100 percent a public company, and there was no provision in the ordinance of 1958 establishing the bank and subsequent amendments there of required the bank to maintain a general reserve fund from profit arising from its operation the rate of the reserve and was dictated by the prevailing economic condition at that point in time.