BY LEKAN SOTE
After making brilliant predictions, economists then spoil everything with the caveat, “ceteris paribus,” or all things being equal. It’s their way of admitting that they are not God, and, like other mortals, are fallible. Economists even poke fun at themselves with the observation that when 10 economists form a committee, they’ll likely come up with 11 opinions.
This is proof that nothing is ever really sure in economics. At best, everything is a subject of speculation. Accountants and financial experts, professional cousins of economists, even invoke the principle of force majeure, otherwise known as “Act of God,” when their pretentious permutations unravel. You can see that economics is based on assumptions. Even financial statements, pontifical as they may be, are entirely based on assumptions, described as generally accepted accounting principles, or GAAP.
GAAP are standard of the details, complexities, and legalities of business and corporate accounting. They are used as foundations for the comprehensive set of accounting principles and practices by the Financial Accounting Standards Board, something informally referred to as FASB.
“THE NONSENSE POLICY OF INTRODUCING A CASH CRUNCH IN NIGERIA’S ECONOMIC SYSTEM BY THE PRETEXT THATTHE CENTRAL BANK OF NIGERIA WANTS TO HELP THE INDEPENDENT NATIONAL ELECTORAL COMMISSION PREEMPT VOTE BUYING BY POLITICIANS IS UNBELIEVABLE”
For instance, an accountant, manager or even the Board of Directors could choose the method it likes, to recognise depreciation of fixed assets, depending on the level of mischief they intend to cause or the level of tax they want to avoid. If a company wants to pay fewer taxes in a financial year, it could adopt the sum-of-the-years-digit depreciation method which recognises higher depreciation in early years.
The straight-line method, where amounts depreciated are equal and the same each year, would result in higher taxes. Also, you could account for the consumption of raw materials by First-InFirst-Out, or FIFO basis, or Last-In-FirstOut, LIFO.
FIFO assumes that the first inventory of raw materials to be bought was taken out of the Raw Materials Store before items were bought later. LIFO assumes that recently purchased raw materials went out first. With either method, it does not matter which stock was the first to be consumed.
But the Gross Profit, the difference between revenue and cost of goods sold, is affected by the method adopted in recognising raw materials stock that was consumed. Like the depreciation method, the method used to determine the age of the Raw Materials that was recognised, affects the tax liability.
If you choose LIFO, which may likely be a more expensive stock, the Gross Profit will be lower and so the tax liability will be lower. But the beauty of it all is that whatever method of fixed asset depreciation or use of raw materials recognition method is used, it is professionally accepted, recognised, legitimate and justified.
You can, however, see how selfish, preposterous assumptions of fallible human beings can form the most fundamental bedrock of human society. So whenever those assumptions fail, everything comes crashing down. The near collapse of Nigeria’s economic system, fuelled by the unavailability of petrol, electricity and physical cash, demonstrates that it was faith, propped up with firm logistics support, that formed the basis of any economic system.
The nonsense policy of introducing a cash crunch in Nigeria’s economic system by the pretext that the Central Bank of Nigeria wants to help the Independent National Electoral Commission pre-empt vote buying by politicians is unbelievable. The World Bank has expressed concern about the timing and short period granted by the CBN for the transition from the old, to the new notes, though it observed that “periodic currency redesigns and demonetisation of older notes are normal.” It is a dumb-ass argument, and downright insensitive, of anyone to think that they could prevent, reduce or control vote buying by restricting the flow of cash within the Nigerian economic system.
Presidential candidates can call Managing Directors of banks to bring any amount of cash to them in GhanaMust-Go bags, bullion vans or wheelbarrows. The policy to restrict cash in Nigeria right now is a matter of the law (or regulation) being an ass.
And talking about the law, it is interesting that the Supreme Court of Nigeria imposed an interim injunction on the Federal Government, through the CBN (whose myopia caused the problem) and commercial banks. The injunction bars the Federal Government “from trespassing or determining or ending, on Friday, February 10, 2023, the time frame with which the now old versions of the N200, N500, and N1000 denominations of the Naira may no longer be legal tender, pending the hearing and determination of the notice… on February 15th.”
Attorney Abdul-Hakeem Mustapha had argued that the (insane) policy led to an “excruciating situation that is almost leading to anarchy in the land.” Unfortunately, some desperate (if justifiably irate) Nigerians have destroyed Automated Teller Machine devices in anger.
As expected of him, the Minister of Justice and Attorney General of the Federation, the imperious Abubakar Malami, reputed to be a member of a cabal within the Buhari Administration, has challenged the injunction.
He, however, goes into the usual hollow mode of “Government shall obey the court orders,” a pretense at operating the country within the girders of the concept of the rule of law, the invisible frameworks that prevents a country from descending into disharmony and chaos.
The idea of the rule of law may have led former American President, Barack Obama, to suggest to African countries to try and build strong institutions instead of allowing strong men to run their countries (with strong arms, whims, and caprices). And it makes a lot of sense. See how generally accepted accounting principles, for instance, have become anchors that moor the theory, practice, and ethics of the accounting profession throughout the world.
It’s the same way that the Nigeria Inter-bank Settlement System, owned by CBN and all licensed commercial banks, enables customers to digitally send money among themselves and to other beneficiaries. It specifically handles interbank payments by removing the bottleneck that accompanied the old system of approaching the traditional bankers’ clearing house that used to meet to reconcile payments between banks once every week.
Many however, wonder if things that are simple administrative matters should have degenerated to the extent that Nigeria’s Council of State would have had to instruct the CBN to either intensify the printing of new Naira notes or re-circulate the old notes in the meantime, to reduce the hardships.
Members of the Council of State, which include the President, Vice President, former Heads of State, Presidents and Chief Justices of Nigeria, Secretary to the Government of the Federation, all State Governors, and yet others, are the equivalent of Nigeria’s City Fathers.
Is it true that the CBN could not release the new N500 and N1000 Naira notes into circulation because the Nigerian Security Printing and Minting Company did not have enough quantities of printing papers? If so, the CBN Governor should have been asked to go, for setting an unrealistic deadline for the withdrawal of the old notes.
Also, the NSP&MC Managing Director should have been fired for failure to advise CBN of its limitations. Someone is suggesting that both incompetents are about to admit that the new notes cannot be printed in Nigeria, and are now looking to print abroad, though the CBN has denied that insinuation. This absolutely disingenuous currency policy of the CBN has eroded the confidence of Nigerians in the invincibility of the banking system which had hitherto been held in place by the faith of citizens.
