This article was first published in the September 2017 Africa edition of Accounting and Business magazine.

Nigeria’s downturn of last year would have been hard to avoid. Africa’s most populous nation relies on oil for around 95% of its export earnings and close to 75% of government revenues. So a big hit to national prosperity was inevitable when the global price of oil collapsed from more than US$100 a barrel in late 2014 to a low of under US$30 at the start of 2016. But economists fear that government policy – including an attempt to keep the nation’s currency, the naira, high – may have exacerbated the situation, contributing to the country’s first full-year contraction in growth for over 20 years.

Last year’s setback is part of a longer-term problem. Nigeria is bursting with economic potential. Yet it has so far failed to become the engine of African growth that many economists believe it should be. The country boasts one of the largest pools of young workers anywhere in the world, a demographic asset that is increasingly rare as the global population ages, and it has an enviable stock of natural resources, with an abundance of arable land and the largest oil endowment in Africa.

There is a strong consensus among economists and accountants about the policies needed to turn this situation around. ‘Accountants can play a role in tackling some of the major problems that hold back the Nigerian economy, including the weakness and complexity of the tax system and problems with the integrity of public institutions,’ says Okey Umeano, a senior member of the ACCA community in Nigeria. ‘The country could certainly become a more dynamic economy that offers greater opportunity to professionals of all kinds, including accountants.’

The election of Muhammad Buhari as president two years ago raised hopes that some of the barriers to growth could be lifted. His election was itself seen as a promising sign that Nigerian democracy is maturing; it marked the first democratic defeat of an incumbent Nigerian president standing for re-election. And as a one-time major general in the Nigerian army, Buhari seemed well placed to tackle civil unrest, which has been a serious drag on the economy over recent years.

Violence in the Niger delta, a key oil-producing region, has caused serious disruptions to oil output. Three of the northern provinces have been plagued by an insurrection by Boko Haram, an Islamist movement, which the Global Terrorism Index ranked as the world’s deadliest terror group in 2015. Buhari has sought to improve the military response by moving the top brass closer to the region, rather than seeking to deal with the unrest from the comfort of the capital city.

While there is not much that accountants can contribute to the military endeavour, they do have contributions to make on issues of public integrity and taxation.

The problem of corruption is especially deep rooted in Nigeria. And it has been a drag on economic growth for several reasons. ‘Corruption starves the state of the resources to develop infrastructure and talent,’ says John Ashbourne, Africa analyst at Capital Economics. Around a third of government oil revenues never reach the state’s coffers, according to an estimate cited in the Economist.

Government contracts are often awarded as a result of the bribery of officials, with the contractors either not completing the work or executing it poorly. ‘The ultimate outcome is that many infrastructure projects are not built, making it costlier for firms to produce and get their goods to the market, and education is equally underfunded,’ says Afolabi Olowookere, head of economic research at Nigeria’s Securities and Exchange Commission. Corruption can also undermine the willingness of the public to pay taxes, since there is a lack of confidence in the ability of government to use funds properly.

Corruption on an epic scale

The scale of the issue to be addressed is formidable. Global Financial Integrity, a US-based thinktank, estimates that more than US$157bn left the country illicitly between 2003 and 2012. Corruption is ubiquitous: even the health and medical services, considered the least corrupt state institutions, are considered very corrupt by 41% of Nigerians, according to Transparency International. The organisation scores Nigeria just 27 out of a maximum 100 for the integrity of its institutions.

Olowookere gives the Buhari government credit for prosecuting officials for graft, but believes it could go further. ‘Along with punishing the guilty, it is important to make it harder to embezzle money in the first place,’ he says. ‘This can best be achieved through the adoption of greater transparency initiatives to help make government more accountable.’

A recent study from the International Federation of Accountants (IFAC) outlines the key role that accountants can play in this process. IFAC CEO Fayez Choudhury argues that accountants are vital in detecting and reducing corruption. ‘Accountants are a crucial part of strong national governance architectures that confront corruption, in partnership with good government and strong businesses,’ he says. ‘Professional ethics, education and oversight – at the core of the global accountancy profession – are key to our positive impact in tackling corruption.’

Accountants can also play a central role in promoting reform of Nigeria’s overly complicated system of taxation and business regulation. The labyrinthine tax code imposes hefty additional costs on companies. Umeano says: ‘Businesses pay several layers of taxes levied by different agencies of government, which hurts small businesses most.’

He gives the example of a small bakery in Abuja, Nigeria’s capital, having to pay roughly five types of tax, including a levy on each of its vehicles, a property tax on its premises, an environmental tax, corporate tax and VAT. ‘Along with all of this, when the vehicles go into another state, they are sometimes stopped and that state’s vehicle taxes levied on them again. This has been a killer for small businesses, and it is hoped that there would be reforms in this area.’ While this sort of complexity creates work for accountants, it also limits the growth of businesses and therefore ultimately limits professional opportunities.

Added to the administrative burden is a low level of tax collection. Because relatively little revenue is collected, the state remains reliant on oil income. There have been efforts to overhaul the tax system. Tunde Fowler, the official who led the revamping of the Lagos tax authority, was appointed as chairman of the Federal Inland Revenue Service in August 2015 to do the same at the national level. It is still too early to say how successful he will be.

Finally, accountants believe that Nigerian businesses are constrained by a profusion of red tape. Officials often request payment for not enforcing rules, which means that businesses do not always operate on a level playing field. This too contributes to Nigeria’s overreliance on oil revenues, rather than more dependable tax income from citizens and businesses.

‘Nigeria is a classic example of the resource curse,’ says William Jackson, senior emerging markets economist at Capital Economics. ‘Oil is also highly capital-intensive, so it is a poor source of employment, with only a small number of well-paid workers.’

Addressing these issues could help unleash the natural dynamism of the Nigerian population. ‘Until the recent slowdown there was a burst of entrepreneurship in Nigeria,’ says Jackson. ‘New business opportunities have been generated by the high penetration of smartphones and social media.’

The country grew by 7% for much of the decade to 2014. ‘If Nigeria can manage this with major structural problems, such as corruption, you wonder how well it could do if it addressed some of these issues.’ A sustainably high growth rate could also help Nigeria retain more of its home-grown talent. ‘I would estimate that up to 1 in 10 of the most talented graduates end up migrating out of the country,’ says Olowookere. ‘While this can generate remittances, it is nothing compared to the wealth these talents could produce if deployed at home.’

Olowookere says the current administration is taking steps to engage the young and address the unemployment problem, but even more is needed if Nigeria is finally to fulfil its economic potential.

Christopher Fitzgerald and Fernando Florez, journalists