student journal 2013

ICAN Students’ Journal, October / December, 2013 1

ICAN Students’ Journal, October / December, 20132


Vol.17, No. 4October / December, 2013

ICAN Students’ Journal(ISSN: 1119 - 9636) is publishedquarterly by the Institute ofChartered Accountants of Nigeria,Plot 16, Professional CentreLayout, Idowu Taylor Street,Victoria Ialand, P.O. Box 1580,Lagos. Tel: 7642294, 7642295,Fax: 2610304E-mail: [email protected]@ican.org.ng;ICAN Website: www.ican-ngr.org

The views expressed by correspondents or contributors in thisjournal are not necessarily those of the Institute. The Institutereserves the right to refuse, cancel, amend or suspend anadvertisement or insertion and no liability can be accepted forloss arising from non-publication or late publication of anyadvertisement or insertion. All articles are subject to editing.

Correspondence should be addressed to:The Corporate Affairs Department, ICAN

P.O. Box 1580, Lagos.

Designed by Linix Services Limited, LagosTel: 0802 301 6590, 0816 059 8576

EDITORClaudia Binitie

ASSISTANT EDITORMuyiwa Dare

STAFF WRITERKofoworola Hakeem

ADVERTSOrhue Gobadia

EditorialStaff

NEWS 4

COVER 11

THE EXAMINER 17

• ICAN Registrar Solicits Partnership With The “Big Four”

• ICAN-USA Hosts 5th Convention

• ICAN Has Proved Its National Outlook, Says VC

• ICAN To Sign Mutual Cooperation Agreement WithTertiary Institutions

• ICAN/Daily Independent Strengthens Media Relationship

• “No Accounting Body Is Equal To ICAN In Nigeria”

• Being Chartered Is The Ultimate As Accountant, Says Emir

• ICAN Members Are Doing Well In This State - Kebbi Gov.

• 43rd Annual Accountants Conference

• Evaluation Of Pension Fund Administration In Nigeria

P ension is an important aspect in the life of any civil servant either in theprivate or public sector, because apensioner’s survival after retirementrevolves around his pension scheme.

So, a pension scheme is an important plan,procedures and legal processes of setting asidefunds to meet the social obligation whichemployers owe their employees on retirement orin case of death and disability.

In our cover article entitled “Evaluation ofPension Fund Administration in Nigeria”, theauthor reviewed the concept of pension scheme,the essence and features of pension scheme, typesof pension plan, comparism of the defined benefitand the contributory pension plans and theevaluation of pension fund administration inNigeria.

The author also discovered that the contributorypension scheme is relatively new to a lot peopleand this calls for enlightenment. He thereforedelved into the need for more publicenlightenment campaigns on the merits of thenew contributory pension scheme with a viewto enhancing compliance by both employers andemployees in the country.

Also in this edition is the report about the just-concluded 43rd Annual Accountants Conferenceof the Institute. The glamour, glitz andrazzmatazz of the Conference was fully capturedas reported in the story.

This edition is filled with interesting news storiesand educating materials for your readingpleasure. Your comments on the articles, storiesand other materials in this edition are welcome.Please write to: [email protected] [email protected]

ICAN Students’ Journal, October / December, 20134 ICAN Students’ Journal, October / December, 20134

ICAN Registrar Solicits Partnership With The “Big Four”

T he ICAN Registrar/Chief Executive, Mr. Rotimi Omotoso hassignified the intention of the Institute to partner with the bigfour accounting and auditing firms in the country, to move the

foremost professional institute to the next level.

Omotoso stated this during his familiarization visits to the big fourfirms, which he kick-started with a courtesy call on the TransitionalLeader/ Managing Partner of Akintola Williams Delloitte, Mr.Tawanda Gumbo.

In his address at the meeting, Mr. Omotoso said he was at the firmon both familiarisation visit to open channels of interactions withkey stakeholders on areas of service delivery to members, efficiencyand corporate expectations.

In their response, Mr. Gumbo and other partners of the firm raisedsome critical issues in the areas where the Institute’s benchmarkshould be up-scaled in order to enable members’ professional servicedelivery capabilities be at par with their foreign counterparts acrossthe globe. They also suggested ways of improving the Institute’sprofessional examination processes while volunteering to activelycontribute to the intellectual upliftment of Members’ ContinuingProfessional Education (MCPE) programme being run by the Institute.Mr. Omotoso assured Mr. Gumbo and his team that all the issuesraised during the courtesy visit will receive adequate attention fromthe Council and the Secretariat appropriately.

ICAN-USA Hosts 5th Convention .....Swears In FirstFemale Chairman

ICAN Has Proved Its National Outlook, Says VC

T he Vice Chancellor of the Usman Dan Fodio University, Sokoto,Professor R. A. Bello has lauded the Institute of CharteredAccountants of Nigeria (ICAN), for proving that it has no tribal

sentiment in its membership, leadership and management.

The Vice Chancellor who was represented by Professor A.A. Bagudostated this in his office while receiving the 49th ICAN President,Alhaji Kabir Mohammed, who paid courtesy visit to the Institution.He said that he was happy that a northerner is now the President ofICAN, adding that this will go a long way in changing the orientationof many northerners that ICAN has tribal sentiment for a section ofthe country.

investiture of the first female Chairman, Mrs. Tawakalitu AdeyinkaYusuf, since its inception in 2008.

In his speech at the occasion, the 49th President of the Institute,Alhaji Kabir Mohammed commended the organisers, especially onthe Continuing Professional Education (CPE) entitled “MembershipDevelopment and Benefits” that borders on knowledge and capacitybuilding renewal of members in doing business in emergingeconomies like Nigeria, anti-money laundering initiatives, retirementplanning etc.

The ICAN President also expressed satisfaction with the trainingwhich he said was in line with the International Federation ofAccountants (IFAC) requirements and serves to further equip andrenew the professional skills of members. This he posited, will assistmembers as they strive to cope with the challenges posed by theglobalisation of the profession and business processes occasionedby improvement in Information Technology. He urged members ofthe District to strive towards specialisation, as the market place nowdesires specialists rather than general skilled professionals.

“In the last ten years, the Institute commenced a new phase of itscapacity building initiatives in line with the demands of the marketplace. This new phase involves the Institute encouraging its membersto specialize in various aspects of the profession such as auditingand investigations, assurance, forensic accounting, insolvencypractice, corporate re-engineering, tax, stock broking, informationtechnology, corporate finance, oil and gas, etc. Indeed, researchfindings indicate that the global market no longer requires generalaccountants. Greater premium is now placed on specialized skills.This is the secret of the success story of the Big 4 firms globally”Mohammed said.

Also, an induction ceremony was conducted as part of the conventionactivities, for people who had passed the qualifying examinations ofthe Institute but had not been inducted into the membership of ICANbefore their relocation to the United States. In his admission address,the 49th President charged the inductees to always observe anddefend the ideals of the profession which are founded on honesty,integrity, transparency and technical excellence.

T he United States of America (USA) District Society of the Instituteof Chartered Accountant of Nigeria (ICAN), held its 5th AnnualConvention in Chicago, USA recently. The three-day

Convention tagged “A celebration of Excellence” culminated in the

ICAN President, Alhaji Kabir Mohammed (left) and his Vice, Mr Chidi Ajaegbu decoratingthe newly elected ICAN-USA Chairperson, Mrs T. A. Yusuf with insignia of office

ICAN Students’ Journal, October / December, 2013 5ICAN Students’ Journal, October / December, 2013 5

ICAN To Sign Mutual Cooperation Agreement WithTertiary Institutions

In keeping with its mandate to produce world-class charteredaccountants and continually enhance their ethical standards andtechnical competence, The Institute of Chartered Accountants of

Nigeria (ICAN) is entering into a Mutual Cooperation Agreementwith Tertiary Institutions (MCATI). The MCATI will be based on theInstitute’s new Professional Examinations syllabus which is beingreviewed in line with international best practices and is expected totake effect from November 2014 professional examinations.

Under the arrangement, accounting programmes of the partneringinstitutions from entry level to graduation will be jointly moderatedby ICAN and its partners. On graduation, candidates will be grantedappropriate exemptions and will be eligible to sit the Institute’sprofessional examinations. The candidates shall also undergo a thirty-

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“For quite long, it was believed that a certain section of the countryhas monopolised ICAN and that the other ones cannot easily becomemembers or even become the President of the professional body.But with what I see now, I believe ICAN has a wide spread ofmembership across the nation and even worldwide and any tribecan become its President. This has a proof now”.

“I can also see that the Institute is working hard now to register itspresence in this part of the country. ICAN is a household name inNigeria and as such, if one is an Accountant, the peak is becomingchartered and become an ICAN member. We will also encourageour students to write and pass ICAN examinations to becomeprofessionals in accountancy,” he stated.

In his response, the ICAN President explained that contrary to people’sbelief that ICAN was a southern affair, it was not so. He added thatits examinations are not as difficult to pass as people insinuate. Hestressed further that ICAN does not determine the number ofcandidates they must pass at any given diet, adding that what thestudents need is to study hard and be focussed.

ICAN President, Alhaji Kabir Mohammed (left) being welcomed by Prof. A.A. Bagudo toUsman Dan Fodio University, Sokoto during his courtesy visit to the Institution

six month period of attachment and pass the qualifying examinationsof the Institute before being inducted as full members.

This new arrangement was part of the deliberation of the GoverningCouncil of the Institute at its August 2013 meeting. According to the49th President and Chairman of Council of the Institute, Alhaji KabirA. Mohammed, mni, FCA, “when the programme is fully embracedby tertiary institutions, the Institute would have found a solution tothe challenge of inadequate preparation of candidates for the ICANexaminations” The President explained further that “the mutualcooperation agreement with the tertiary institutions is one of theproactive measures by ICAN to ensure that individuals seeking tobecome chartered accountants acquire the knowledge, professionalskills and competence required to protect the public interest in arapidly changing business environment.”

By this new arrangement, the ICAN Council is modifying the termsof all earlier agreements between the Institute and various Universitieswhich came into force in 2010 under the Integrated BSc Accountingprogramme. Consequently, the next admission of students for 2014/2015 academic year will be based on the MCATI which willincorporate the new Professional Examinations Syllabus.

A s a way of strengthening the media relationship between theInstitute of Chartered Accountants of Nigeria (ICAN) and theIndependent Newspapers Limited, a delegation from the

company, led by its Chief Marketing Officer, Dr. Victor Ogwezzypaid a courtesy visit to the Registrar/Chief Executive of the InstituteMr. Rotimi Omotoso, in Lagos recently.

In his address, Ogwezzy congratulated Omotoso on his recentappointment and assumption of duty at the Institute’s Secretariat,wishing him a successful tenure of office. He intimated the Registraron the latest addition to its daily publication known as the MasterClass.

According to him, the publication is a weekly professionalcurriculum-based pullout that is intended to serve as home study

ICAN/Daily Independent Strengthens Media Relationship

Mr. Rotimi Omotoso: Registrar/Chief Excecutive ICAN


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“No Accounting Body Is Equal to ICANIn Nigeria”

T he Commissioner for Land and PhysicalPlanning in Kano State, Alhaji MuhammedNabi Yahaya has declared that there is no

professional accounting body that can match theInstitute of Chartered Accountants of Nigeria(ICAN) in the country today. He also describedICAN as a reputable Institute in which anybodywho knows his onions must repose confidencebecause of the mode of its professional trainingand exposure to the latest methods of accountingpractice.

The Commissioner who was represented by thePermanent Secretary in the Ministry, Alhaji GarbaMusa, stated this in Kano while receiving the 49thPresident of ICAN, Alhaji Kabir Mohammed, whopaid him courtesy visit in his office.

He said: “We have known ICAN since we werechildren and the integrity it is known for is stillintact. Take for example, has anybody heard ofany leakage of its examinations? Maybe that iswhy some people believe the examination is toodifficult to pass. It is not. You just need to beserious and not expecting any manner fromheaven in their examination”.

In his remark, the ICAN President explained thathe was on the tour of the state for two reasons.According to him, it is statutory for him to visit as

resources for intending students of associated professional bodiesthat are subscribed to the publication. He therefore solicited thecooperation and support of the Institute for the regular supply ofprofessional materials for this publication on weekly basis. Also, amember of the team requested the Institute to grant the media outfitits approval for partnership on any of its special project wheneverthe need arises.

In his response, the Registrar/Chief Executive thanked team. On theteam’s request, he sought clarifications on whether there are financialcommitments attached to these requests. He said he acknowledgedthe impact of subscribing to the request on the marketing of the ICANbrand at this period. He also imagined the attendant benefits accruableto the Institute and its membership in this regard.

In her contribution to the discussion, the Director, CorporateCommunication and Marketing of the Institute, Mrs. Claudia Binitie

many district societies of the Institute as possible during his tenure,to see how members are discharging their professionalresponsibilities.

Secondly, he was in the state to talk and encourage the youths toembrace accounting as a career and crown it up with ICANqualification to stand tall wherever they find themselves in future. “Imust be frank, the number of chartered accountants in this part ofthe country is nothing to write home about when we consider itspopulation. We must encourage our youths, children and wards andprepare a level-playing ground for them to leverage with their peersand counterparts anywhere they may find themselves in future,” hedeclared.

In the same vein, the Emir of Kano, Alhaji Ado Bayero also describedICAN as a professional body loved and respected by both the youngand the old. The Emir who was represented by the by the Senior

expressed appreciation to the media outfit for itsobjective reporting of the Institute’s activities aswell as providing the required media coveragefor all its activities.


Being Chartered Is The Ultimate As Accountant, Says Emir

T he Emir of Argungu, Kebbi State, Alhaji Samaila MuhammaduMera has described being chartered as the ultimate for anyperson who studied accountancy in school. The royal father

stated this in his palace while receiving the 49th President of theInstitute of Chartered Accountant of Nigeria (ICAN), Alhaji KabirMohammed who paid him courtesy visit.

According to him, ICAN is the household name, adding that anyaccountant who wants to excel in his chosen career must becomechartered by writing ICAN’s examinations and get qualified. “I don’tthink I need to tell anybody the importance of accountants to thedevelopment of any nation’s economy. There’s no agency, noparastatal, no establishment, no institution etcetera that doesn’t needthe service of an accountant. That is why it is imperative for anyaccountant to also be professionally sound and become chartered soas to be able to rise up to the challenges of his calling,” the Emiremphasized.

The royal father however promised that he would use his position totalk to his youths to embrace accounting and become chartered by

ICAN Members Are Doing Well In This State- Kebbi Gov.

He explained that he was so proud of ICAN members working forthe state because none of them has been caught for any atrocity,attributing the feat to the thorough training and discipline acquiredby all of them. “Your members in this state are really doing well andmaking us to be proud. If it is not so, I would not have told you. Thatis the truth. No one among them has been caught for any sharppractice or any form of atrocity. ICAN should continue to train theirmembers this way. We are all proud of you,” he added.

The governor also disclosed further that he has always been discussingwith the ICAN President on how to improve the study of accountingin the state, even before he became ICAN President, emphasisingthat time has eventually come to implement the strategy.

The ICAN President told the governor that he had visited the state tosee if there are grey areas to be discussed or challenges facing themwhile performing their duties, which he promised to resolve beforeleaving the state. He appealed to the governor to support the StudentSpecial Project (SSP) of the Institute which according to him wastargeted at areas where there is shortage of chartered accountants.

Kebbi State Governor, Alhaji Saidu Dakingari has said thatmembers of the Institute of Chartered Accountants of Nigeria (ICAN) in the employment of the state are doing well and

making the state proud. He disclosed this while receiving the 49thPresident of the Institute, Alhaji Kabir Mohammed who paid himcourtesy visit in his office in Birni-Kebbi.

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Councillor and Waban Kano, Alhaji Abbas Sanusi made the statementat the Emir’s palace where he received the ICAN President who wason courtesy visit to the Emir. He said the ultimate selling points ofICAN are accountability, transparency and rule of law which he saidhad sustained it over the years. He therefore urged the Institute notto rest on its oars to take accounting profession to the next level.

Alhaji Samaila Muhammadu Mera: The Emir of Argungu (Left)

writing ICAN examinations and get qualified. He added that till date,his Emirate produced the largest number of accountants in the state.In his own remark, the ICAN President told the Emir that he was

pleased with the reports he got so far that ICAN members have notbeen found wanting in any aspect of their job and professionalconduct. He therefore urged the Emir to support the ICAN’s initiativeof Students Special Project (SSP), which he said was targeted at areaswhere there is shortage of chartered accountants.

Alhaji Saidu Dakingari: Kebbi State Governor


The conference was held between October 7 and 11, 2013at the International Conference Centre and Abuja SheratonHotels and Towers, Abuja and was declared open by theSenate President, David Mark, who was represented bySenator Ayo Akinsulire, FCA. The conference was attendedby 4,004 participants comprising of Chartered Accountants,and other professionals from various disciplines from Nigeria,Botswana, Ghana, Liberia, Guinea Bissau, Benin Republic,Sierra Leone, South Africa, Gambia, United Kingdom and theUnited States of America.

The lead paper, “Governance and Sustainable Development”presented by the former President of Botswana, Festus Mogae,pointed to certain facts that made his country a success storyin terms of human capital development and good governancethat brought about the expected sustainable development.Mogae explained that Botswana recorded success in steadyeconomic growth, social development and political stabilityin the context of an uninterrupted record of multi-partydemocracy, respect for human rights and the rule of law.

He pointed out further that accountable government,complimented by the prudent management of human capitaland natural resources also contributed to the magic.

According to him, the post independence painful experiencesin the 1960s have thrown some African countries into themost despotic and brutal regimes that violated fundamentalhuman rights and adopted political and economic policiesthat were generally misguided and unsustainable.

The former Botswana President, whose country was rated asthe least corrupt country in Africa, expatiated further thatcorruption, lack of accountability and transparency, absenceof good governance and straight-forwardness became order

43rd Annual Accountants Conference:

of the day and did a lot of damages to any nation’s development andgrowth. Mogae however expressed optimism, saying things are changingfor the better and that new positive trends are happening, such asfree and fair elections under domestic and international observationand supervision, better and transparent ways of utilizing the wealthfrom natural resources for social and economic development.

“There are in some instances economic growth and political andreligious tolerance. Over all, there are concerted efforts by a majorityof governments across the continent to embrace good political andcorporate governance,” he expressed.

He stated that a particular aspect of governance that should begermane to development and growth, is the management of naturalresources, adding that though Africa is blessed with natural resourcessuch as oil, gas, minerals, wildlife and forests, but due to poor

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T here couldn’t have been an auspicious period to hold the 43rdAnnual Accountants Conference of the Institute of CharteredAccountants of Nigeria (ICAN), rather than now when many

Nigerians are lamenting the dearth of sustainable development inthe country despite democratic governance put in place.

Experts and professionals as well as other participants at the justconcluded Conference seem to have agreed that the country needssustainable improvements in the life of the citizens, as a sign of goodgovernance.

Before the theme of this year’s conference “Governance andSustainable Development” was chosen, the socio-political situationin the country was put into consideration, so as to debate in cogentterms what exactly the country Nigeria needs to ensure virile nationaldevelopment.

ICAN Harps On Governance With Sustainable Development

ICAN President delivering his welcome address at the conference.

ICAN President, Alhaji Kabir Mohammed thanking former President of Botswana, Mr. FestusMogae (left), while ICAN Vice President, Mr Chidi Ajaegbu watches


governance, the wealth accruing from the resources does not benefitmillions of the populace.

He posited and advised that strong, efficient and transparentgovernment institutions are fundamental to economic growth andsustainable development, quoting former United Nations Secretary-General, Kofi Anan saying that “good governance is the single mostimportant factor in eradicating poverty and promoting development”.After an exhaustive discussions, brainstorming and deliberations onthe theme and sub-themes through technical sessions, participantsagreed unanimously that sustainable developments should beassociated with governance to make the Nigeria nation.

The conference agreed that growth is a necessary but not sufficientcondition for development, it urged the government to determinethe sectors that are driving the current growth, the nature of theirproduction process (whether capital or labour intensive), as eachhas a different effect on employment. By so doing, appropriate policyinitiatives can be evolved to ensure inclusive growth.

While noting that the nation’s Vision 20:2020 is focused solely ongrowth without reference to other elements of development, the

participants urged the government to focus on human capitaldevelopment, social benefits, more equitable incomedistribution and infrastructural development.

In order to reduce the cost of doing business in Nigeria andenhance the competitiveness of local industries, theparticipants also recommended that government should striveto reduce the lending rate as a strategy to revamp themanufacturing sector which currently stands at 4% of GDPas against the 25% global benchmark.

While lamenting the over dependence on federal allocationby most states of the federation, the conference recommendedthat the federating units should be encouraged to developtheir own economies and become competitive.

To reassure and cater for the needs of the weak and vulnerablewho are feeling neglected, ignored, un-empowered anddisillusioned, the conference participants recommend thatpoliticians should simmer down on political manoeuvre for2015 elections and judiciously spend this time and scarcepublic resources on scrupulous implementation of previouscampaign promises and deliver the dividends of democracyto the people in order to regain and retain their trust.

The participants also posited that since good governance isgermane to the survival and growth of businesses andattraction of Foreign Direct Investments, countries in Africashould strengthen their institutions, shun corruption andembrace good political and corporate governance.

The prime role of the accounting profession in wealth creationand national development was recognized, thereforeparticipants believe that markets and economies function

ICAN President, Alhaji Kabir Mohammed presenting a sovenir to the representative of ICAEW atthe Conference, Mr Stephen Lamdin

L-R: Conference Director, Mazi Nnamdi Okwudigbo; Mrs Joy Onome-olaolu; ICAN PresidentKabir Mohammed and Alhaji Ismaila Zakari

properly when investors have trust in the audited financial statementsthat drive activities and decisions in the market.

They observed that chartered accountants can only retain this leadingedge in corporate governance if they remain on top as champions ofintegrity. The participants therefore recommended more practicaltraining on ethics for members, effective monitoring of theircompliance to the Institute’s Code of Conduct and enforcement ofsanctions for any established breach.

Organisations are also advised to clearly define their values, evolvepolicies that support those values (e.g., supporting whistleblowers),develop a listening culture, ensure appropriate tone at the top,monitor and consistently take corrective actions. It was agreed thatany disciplinary procedures and reward structures introduced, mustreward ethical behaviour, be open and fair.

On sustainable development, the conference participants furtheragreed that corporate entities must operate not only to achieve theirbusiness purposes, but also be compelled to continuously behave ina socially acceptable way. They must also comply with laws andregulations and be answerable for their actions. In other words, the

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nation’s code of corporate governance should include thefundamental principles of leadership, capability, accountability,sustainability and integrity.

The conference also urged the government that since food securityis a fundamental part of national security, it should provide incentivesto drive mechanised farming and massive investment in agriculturalsector, as it holds the key to the country’s industrialisation andemployment generation.

On the role of that SMEs can play in employment generation andeconomic development, participants urged government to frontallytackle the challenges facing the sector like multiple taxation andinfrastructural deficiency.

The participants urged government to seriously and carefully addressthe unintentional fallouts of the on-going reforms in the energy sectorlike loss of jobs and severance benefits, given the immense potentialsof the Nigerian electricity market and the investment opportunities.The conference unanimously agreed that all stakeholders must focuson the building of institutions and regard such as a national priority,if the nation is to reverse the trend of under-development.

Participants are of the opinion that Nigerians are suffering under theweight of huge infrastructure deficit since the portfolio of physicalinfrastructure serving the country were put in place more than fourdecades ago. A call was made for concerted effort by governmentsto ensure that capital expenditures are emphasized in the annualbudgets.

Also, Chartered Accountants are called upon to play a more activerole in public governance advocacy and political engagement as away of stamping their professional mark on the political space. Theyare also enjoined to develop their capacity for generating credibleand reliable financial reports that presents a true and fair view of theresults of the performance entity.

Financial markets in which investors have confidence were alsoidentified as the foundation for strong economies and accelerateddevelopment. Though, a whistle-blower’s protection Bill/Act is desiredto tackle corruption, accountants and other stakeholders are enjoinedto fully explore the available legal instruments for managing theincidence of corruption. One of such legislation is the Freedom ofInformation Act, which could be used to obtain relevant informationabout the activities of those entrusted with public assets.

Declaring the conference open, the Senate President, Senate DavidMark represented by Senator Ayo Akinyelure, FCA, congratulatedthe Institute not only for the success of the conference but also forits immense contributions to human capacity building in the country.He noted that given the acknowledged track record of the Institute,he was certain that ICAN members can compete favourably withtheir counterparts in any part of the world. He therefore urged theInstitute not to rest on its oars as the flagship of professional bodiesin the country.

In his welcome address, the 49th President of the Institute, Alhaji

Kabir Alkali Mohammed, noted that the theme of the conference,“Governance and Sustainable Development”, was specially chosento draw the deserved attention to the nation’s economic paradox ofpoverty in the midst of plenty! In his words, given the resourceendowment of the nation, Nigerians have no business with poverty.

He urged politicians to use the period between elections, toimplement their campaign promises rather than preparing for thenext elections. The dividends of democracy must accrue to the peoplein order to regain and retain their trust.

He finally called on all stakeholders in the Nigerian project to uniteand collectively confront the current economic challenges facingthe nation by evolving initiatives that will not only reduce the costof doing business but also enhance the survival and growth ofeconomic entities. While pledging ICAN’s readiness to provideleadership in this respect, he expressed great hope that Nigeria’seconomy will flourish again.

Declaring the conference close, a Past President of the Institute,Balogun Olabisi Omidiora, expressed appreciation to those who tooktime out to attend the conference. He also commended the Institutefor putting the conference in place, advising that those at the helmsof affairs should endeavour to make use of the various suggestionsmade available from the conference, for the benefit of the nation’sdevelopment.

The sub-themes of the conference include: Growth WithoutDevelopment: Confronting The Paradox; Accounting Profession,Ethics and Wealth Creation; Growing Small and MediumEnterprises: Emerging Business Opportunities; Reform in the EnergySector: Realising The Benefits; Agricultural Development:Optimising the Value Chain; and Mint As Growth Economies: Mythor Reality.

Apart from paper presentations, workshops and plenary sessions,there was a gala nite on Thursday during which the Juju musicextraordinaire, King Sunny Ade was on the band stand with thesupport of DJ Mikky. There was also an open raffle draw in whichtwo members of the Institute won two brand new cars.

The members are the Chairman of Lokoja District & Society, Mr.Emmanuel Onoja (MB No: 016461) who won a brand new Kia Ceratocar and Mr. Hilary Onyenkwere Nwosu (MB No: 017589) who wona Kia Rio car. The raffle draw was part of the packages of theconference. Other prizes like LCD television, gas cookers, laptops,fridges, were also won at various times in the course of theconference.

There were also sporting activities such as jogging, excursions andexhibitions. Other programmes of the conference include DistrictSocieties competition where the Society of Women Accountants ofNigeria (SWAN) emerged as the best dressed district and overallperformance. It also emerged as the largest contingent.


IntroductionPension can be defined as a sum of moneypaid regularly to a person or his next of keen,who no longer works because of age,disability, etc, by the State, his formeremployers or from funds to which he andhis employers have both contributed(Onifade, 2001). According to the seventhedition of the Oxford Advanced Learner’sDictionary of Current English, the wordpension is an amount of money paidregularly by a government or a company tosomeone who is considered to be too oldor ill/sick to work. Alternatively, Pension canalso be defined as periodic payment to onewho retired from work as a result of old ageor disability.

1.1 The Concept and Purpose of PensionSchemeA Pension Scheme is a plan, procedures andlegal processes of setting aside funds to meetthe social obligation which employers owetheir employees on retirement or in case ofdeath and disability. Pension scheme canalso be viewed as a structured method ofproviding economic security to anindividual when he can no longer supporthimself. It gives the beneficiaries theconfidence that the benefits promised arebeing properly arranged and will be paid atthe appropriate time (Onifade, 2001).

The purpose of occupational pensionscheme is to provide employees regular andstable income after their retirement fromservice. It is an arrangement an employeror a group of employers use(s) to providepension (and sometimes other) benefits fortheir employees when they leave or retire.They also provide benefits to the employee’sdependant if the employee dies. Thisscheme is usually funded by contributionsfrom the employer, or from both theemployer and the employee. A goodpension scheme does not only serve as anincentive to employees but helps to attractand retain experienced staff.

1.2 Types of Pension PlanPension Plan can be broadly categorizedinto two basic plans considering the benefitsand the way the Pension Plan is been

financed. These categories include;A) Defined-benefit (DB) Pension PlanB) Defined-Contributory (DC) Pension Plan

Defined-Benefit Pension PlanThe Defined-Benefit Pension Plan provides a“defined-benefit” - a pre-specified annuityeither in absolute currency or as a fraction ofa measure of salary (for example, a definedpercentage of the final salary or an average ofsome past years of salary). The guaranteedpension benefit could be in either real ornominal terms. If real, it is indexed to theinflation rate and if nominal, it is indexed tothe inflation rate (Modigliani and Muralidhar,2004).

Participants, sponsors, or both makecontributions In Defined-Benefit Plans thatcould change over time. The ratio of annuityor benefit to a measure of salary is known asthe “Replacement Rate”. The participants maybe unaware of any relationship betweencontribution and benefits. However, theadministrators of the system and pensionfinance experts know there is a unique “budgetconstraint” that links contributions, returns andbenefits to a given replacement rate. Defined-Benefit plan relies on inter and intragenerational pooling of investment andliability risk, which is called the “socialallocation of risk” (Modigliani and Muralidhar,2004).

The Contributory Pension PlanIn the-Contributory Pension Scheme, both

By James Isaiah Ekele, Dip, B.Sc, MBA, ACA, ACTI

EVALUATION OF PENSION FUND ADMINISTRATION IN NIGERIA

employees and employers make pre-specified contributions. The Plan specifiescontribution either in absolute currency oras a fraction of a measure of salary. TheContributory Pension Plan made itmandatory for both employees andemployers to make contribution to thescheme. The final pension is uncertain (priorto retirement) because it depends entirelyon asset performance of the accumulatedcontributions by the Pension FundAdministrator of the employee’s choice.

It should be noted that under theContributory Pension Scheme, employee isnot under any obligation to be compelledby his/her employer to choose a PensionFund Administrator (PFA) that will managehis/her contributions. The employee canchoose any Pension Fund Administrator(PFA) of his/her choice. Accordingly, twoindividuals with identical contributions butdifferent Pension Fund Administrator (PFA)can receive widely divergent pensions overdifferent time periods subject to theperformance and expertise of the PensionFund Administrator of their choice.

It is worth noting that, in the contributorypension plan, it is possible for contributionsto change over time. This could happenbecause of changes in employment.

1.3 Comparing Defined- Benefit and The-Contribution Pension PlansIn the Defined-benefit plan, employer’s


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bears the investment risk of the plan andincure lower cost for managing the pensionassets but may be susceptible to governmentmanipulation because government cancontrol these assets. On the other hand, the-contributory pension plan enable individualsto tailor their contribution to the risk theywish to bear and allow for a better matchingto their preferences. Individuals participatein all the gains and losses of their plan butincur higher costs in managing their assets.The essential characteristic of defined-benefit plan is that the terminal outcome isdefined whereas in a -contributory pensionplan, the terminal outcome is variable.

The table below summarizes InvestmentCharacteristics of the Defined-Benefit Planand the New Contributory Pension Plans;

pensions and gratuity scales designed forpublic officers by the Udoji Public ServiceReview Commission in 1974. It also becamethe basic pension law from which otherpensions laws in Nigeria emerged. These lawsinclude:• Armed Forces Pensions Act No. 103 of

1979. The Act consolidated all enactmentsdealing with pension benefits and gratuityscales for the Armed Forces.

• Pension Rights of Judges Decree No. 5 of1985.

• Amendment Acts Nos. 51 of 1988; 29 of1991; and 62 of 1991; and

• The New Pension Reform Act 2004(Federal Republic of Nigeria OfficialGazette No. 60 Lagos – 30th June 2004Vol.91)

2.2 Pension Reviews in Nigeria

The Federal Government approved thatthe pension of all retirees on the payrollas at 31st May, 1992 be increased by aflat rate of 45% across the board.

• Upward Review of Pension Benefitseffective from 1st October, 1994 –Circular No B.6321/S.I/X/710 of 20thDecember, 1994.

• In the case of academic members in theuniversities, Decree 11 of 1993stipulates that a person who retires as aProfessor of 15 years in the universityor has been continuously in the serviceof a university in Nigeria up to retiringage shall be entitled to 100% of histerminal annual emolument as pension.

• Harmonisation of pensions Ref.No.6321/S.I/X13/105 of 30th January,1997.

• Review of the Management of PensionSchemes of parastatals and otherOrganisations funded by the FederalGovernment Re. No. PEN. 92138/S.28/195 of 30th January, 1997.

• In the Armed Forces, Service Chiefs,including the Inspector General ofPolice, take 100% of their totalemolument as pension.

• Review of Terminal Benefits for Headsof Service and Permanent Secretarieswho have put in a minimum of twentyyears of pensionable annual emolumentas pension for life. (Circular Ref. No.B.63216/S.I/X/757 of 23rd June, 1998).

• Review of Pension Rates: The reviewapproved 150% increase in pensionrates. For example, a person on apension of N100 per month to move toN250, effective 1st January, 1999. Ref.SWC/S/04/S.8/25.

• Further Review of Pension rates.Additional increase of 30% effective 1stJanuary, 2000.

These reviews are welcome developmentespecially those that brought relief to retireesand pensioners who have invested usefulpart of their lives into serving the nation.This will motivate serving officers to put intheir best and give their loyalty to the serviceof the Nation.

2.3 The Current Contributory PensionScheme & Its Administration in NigeriaThe need for pension reform wasnecessitated by the myriad of problem thatplagued the Defined Benefit arrangement-Pay As You Go (PAYG) in the public sector.

A pension System is regarded as financiallystable if the capital value of the expectedpension payments is equal to the capitalvalue of the revenues to the system fromcontributions.

2.0 PENSION SCHEME IN NIGERIA

2.1 Pension Legislations in NigeriaThe first pension legislation in Nigeria wasenacted in 1951 by the British colonialadministration, referred to as the PensionOrdinance, with retrospective effect from 1stJanuary, 1946. The pension scheme whichwas initially designed for colonial officerswho were moved from the British Empirewas to ensure their continuity of servicewherever and whenever they were deployedto serve the colonial administration. Whenthe law eventually became applicable toNigerians, the application was at thediscretion of the Governor – General.Pension was therefore not a right forNigerians under the Ordinance. To redressthis, a new Pensions Act was enacted in1979 which was referred to as the PensionsAct No. 102 of 1979; retroactively effectivefrom 1st April, 1974. The Act consolidatedall enactments on pensions and incorporated

In the last few years a number of pensionreviews have been carried out by the federalgovernment. A few of them are highlightedbelow:• Review of the new pension scheme

increase the retirement age for publicofficers (circular B.63207/VI/001 of 26thApril 1978). The review affected onlyJudges. The compulsory ages of retirementfor High Court Judges and Court of Appeal/Supreme Court of Justice to be 62 and 65respectively and not 60 and 65 as earlierstipulated.

• Decree No.5 of 1985 awards a judge100% of his total emolument after servingfor fifteen continuous years as a judge ofthe High Court.

• Review of Pension Benefits – Circular NoB.6321/XT/8 of 22nd July, 1992. Thereview addressed three main subjects.

a. The period of qualifying service forpension is reduced from 15 years to 10years.

b. The period of qualifying for gratuity isreduced from 15 to 10 years; and

c. The maximum rate of pension for 35 yearsof service is increased from 70% to 80%.

• Review of Pension Benefits – Circular NoB.6321/S.I./X/701 of 20th January, 1993.

Defined-Benefit Plan The Contributory Pension Scheme

1. Provides stable benefits. 1. Allow for matching of cash flow with needs

2. Plan sponsor bears the risk 2. Individual bears risk

3. Pool investment risk 3. Individual has choice in investment


One of the challenges of the public sectorDefined Benefit Scheme was its dependenceon budgetary provision from various tiersof government for funding. The schemebecame largely unsustainable due to lackof adequate and timely budgetaryprovisions. The old define benefit schemehas been largely weak, inefficient andcumbersome due to poor staffing and recordkeeping at all pension offices throughout thecountry as a result of which many pensionerhad to spend years before their retirementbenefit were paid. The most challenging factis where payment procedures were oftentedious and characterized by bribery andcorruption. Sometimes pensioner had towait for months and years to collect theirentitlement (Tonia, 2012).

The new pension scheme requires funds tobe managed by licensed Pension FundAdministrators (PFA). Pension FundAdministrators (PFAs) have been licensed toopen Retirement Savings Accounts foremployees, invest and manage the pensionfunds in a manner as the Commission(PenCom) may from time to time prescribe,maintain books of accounts on alltransactions relating to the pension fundsmanaged by it, provide regular informationto the employees or beneficiaries and payretirement benefits to employees inaccordance with the provisions of thePension Reform Act 2004. Before it is issuedwith an operating license, the PFA must bea limited liability company whose soleobjective is the management of pensionfunds. To discourage frivolous applicationsand to ensure credibility, such companymust have a paid up share capital of N1000,000,000 and demonstrate capacity tomanage pension funds and administerretirement benefits.

2.4 Elements of the New ContributoryPension Scheme in NigeriaThe key objectives of the new scheme areto:1. Ensure that every person who has

worked in either the public or privatesector receives his retirement benefits asand when due;

2. Assist improvident individuals byensuring that they save to cater for theirlivelihood during old age;

3. Establish a uniform set of rules andregulations for the administration andpayment of retirement benefits in both

the public and private sectors; and4. Stem the growth of outstanding pension

liabilitiesThe new pension scheme is contributory, fullyfunded, based on individual accounts that areprivately managed by pension fundadministrators with the pension funds assetsheld by pension fund custodians under strictregulation and supervised by the NationalPension Commission.

Eligibility for the SchemeThe law makes it mandatory for all workers inthe public service of the federation and theFederal Capital Territory, and workers in theprivate sector where the total number ofemployees is 5 or more to join the contributoryscheme at commencement.

Contributory SystemUnder this system, the employees contributea minimum of 7.5% of their Basic Salary,Housing and Transport Allowances and 2.5%for the Military. Employers shall contribute7.5% in the case of the public sector and12.5% in the case of the Military. Employersand employees in the private sector willcontribute a minimum of 7.5% each. Anemployer may elect to contribute on behalf ofthe employees such that the total contributionshall not be less than 15% of the Basic Salary,Housing and Transport allowances of theemployees.

An employer is obliged to deduct and remitcontributions to a custodian within 7 days fromthe day the employee is paid his Salary whilethe Custodian shall notify the PFA within 24hours of the receipt of contribution.Contribution and retirement benefits are taxexempt.

Fully FundedThe contributions are deducted immediatelyfrom the salary of the employee and transferredto the relevant retirement savings account. Byso doing, the pension funds exist from theonset and payments will be made when due.

Individual AccountsThe employee opens an account to be knownas a ‘Retirement Savings Account’ in his namewith a Pension Fund Administrator of hischoice. This individual account belongs to theemployee and will remain with him/herthrough her out his or her life time. He maychange employers or pension fundadministrators but the account remains the

same. The employee may only withdrawfrom this account at the age of 50 or uponretirement thereafter. This withdrawal maytake the form of:• A programmed monthly or quarterly

withdrawal;• A purchase of annuity for life through a

licensed life insurance company withmonthly or quarterly payments; and

• A lump sum from the balance standingto the credit of his retirement savingsaccount; provided that the amountremaining after the lump sumwithdrawal shall be sufficient to procurean annuity or fund programmedwithdrawals that will produce anamount not less than 50% of his monthlyremuneration as at the date of hisretirement.

With any of the above options, there is anassurance that the pensioner has sufficientfunds available at old age. Although manyhave contended that at the end of theworking period, they should be allowed tocollect their savings in one lump sum,experience has shown that very fewindividuals have the discipline to managefunds effectively over a long period of time.The above was considered a better processthan to allow the individual withdraw hisaccumulated savings at once, spend it alland then have no income when he is nolonger in a position to work.

Life Insurance PolicyEvery employer is mandated to maintaininsurance policy in favour of an employeefor a minimum of three times the annualtotal emolument of the employee.

2.5 Pension Fund Administrators, PensionFund Custodians & the National PensionCommissionThe new scheme requires pension funds tobe privately managed by Pension FundAdministrators (PFAs),Pension FundCustodians (PFCs) and as well regulated bythe National Pension Commission.

Pension Fund Administrators (PFAs)Pension Fund Administrators (PFA’s) havebeen duly licensed to open retirementsavings accounts for employees, invest andmanage the pension funds in fixed incomesecurities listed and other instruments as thecommission may from time to timeprescribe, maintain books of accounts on

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all transactions relating to the pension fundsmanaged by it, provide regular informationon investment strategy to the employees orbeneficiaries and pay retirement benefits toemployees in accordance with theprovisions of the Act.

Pension Fund Custodians (PFC’s)Pension Fund Custodian’s (PFC’s) areresponsible for the warehousing of thepension fund assets. It is envisaged that atno time will the PFA’s hold the pensionfunds assets. The employer sends thecontributions directly to the custodian, whonotifies the PFA of the receipt of thecontribution and the PFA subsequentlycredits the retirement savings account of theemployee. The custodian will executetransactions and undertake activities relatingto the administration of pension fundinvestments upon instructions by the PFA.

The National Pension CommissionThe National Pension Commission(PenCom) regulates, supervises and ensuresthe effective administration of pensionmatters in Nigeria. The Commission achievethe above by ensuring that payment andremittance of contributions are made andbeneficiaries of retirement savings accountsare paid as and when due. Above all, thecommission ensures the safety of the pensionfunds by issuing guidelines for licensing,approving, regulating and monitoring theinvestment activities of Pension FundsAdministrators.

Under the contributory pension scheme, theNational Pension Commission is theregulatory institution of pension matters thatreceives and investigates any complaint ofimpropriety leveled against any PensionFund Administrator, Pension FundCustodian or employer or any of their staffor agents. Basically, the National PensionCommission (PenCom) stands as awatchdog, with the overriding objective ofensuring that all pension matters areadministered with minimum exposure tofraud and risk. The National PensionCommission (PenCom) employs the use ofapproved risk rating agencies to determinethe viability of an investment instrument.

2.6 Structures/Mechanism For Safe-guarding the New Pension Scheme FundsThere are a number of stringent provisionscontained in the Act with the singular

objective of protecting the pension fund assets.These include:

Separation of PFA and PFCAlthough they both deal with pension fundassets, the functions of the Pension FundAdministrator (PFA) and the Pension FundCustodian (PFC) are so clearly delineated thatit is difficult for either to misuse the pensionfunds assets to the detriment of the contributor.At no time will the PFA have the custody ofcontributions of the employee. Thecontributions go directly from the employerto the custodian. On the other hand, thecustodian will not invest the pension assetsexcept by the order of the PFA.

Pension Fund Custodian GuaranteeApplicant Custodian (PFC) shall issue aguarantee to the full sum and value of thepension fund and assets held by it or to beheld by it.

Government Pension ContributionGovernment contribution is always chargedon the Consolidated Revenue Fund of theFederation.

Risk Rating InstitutionsThese are institutions that are responsible forrating the instruments that pension funds willbe invested in. The National PensionCommission (PenCom) requires that these risk-rating institutions possess the professionalcapacity and are licensed to rate the risk ofinvestment instruments.

Compliance OfficersEvery Pension Fund Administrator (PFA) hasbeen mandated by the National PensionCommission (PenCom) to employ aCompliance Officer who will be responsiblefor ensuring compliance with the provisionsof the law regarding pension matters as wellas the internal rules and regulations of aparticular PFA. They will be required to liaisewith PenCom and the Board of Directors ofthe PFA as regard to the activities of the PFA.

Reporting Requirement for PFAs and PFCsIn order to keep track of the activities of boththe PFA & PFC, the licensed operators arerequired to make regular report of its activitiesto PenCom. Many consider this as an onerousrequirement by PenCom. In view of thevolume and nature of the funds the PFAshandles, it becomes necessary to be able tospot any wrongdoing early. Besides this

information, it is expected to be passed onto PenCom electronically as this would notconstitute hardship for any fully automatedoperator.

Statutory Reserve FundPension Fund Administrators (PFA) has beenmandated by the Commission (PenCom) tomaintain a Statutory Reserve Fund, whichshall be credited annually with 12.5% ofthe net profit after tax, or such percentageof the net profit that may be stipulated byPenCom from time to time to meet anypension claims.

SanctionsClear legal and administrative sanctionshave been provided for non-compliancewith rules and regulations.

Public Disclosure of InformationPension Fund Administrators (PFA’s) andPension Fund Custodians (PFC) are requiredto disclose their rates on return and publishtheir audited accounts at the end of eachfinancial year.

2.7 Benefits of the New ContributoryPension SchemeNigeria stands to benefit from the newcontributory pension scheme. In the firstinstance, it addresses the pension liabilityby stemming its further growth and providesa platform for addressing this liability. Sincethe individuals own the contributions, thepensioner is no longer at the mercy ofgovernment or employer and is assured ofregular payment of retirement benefits.Employee has up to date information on hisretirement savings account. The schemeallows the contributor the freedom tochoose who administers his retirementbenefits account and this promotescompetition among the PFA’s. A majorbenefit of the scheme to the worker is thatthe individual accounts are portable and assuch, the worker is able to changeemployment and still maintain the sameaccount. He is merely required to providethe details of his account to the newemployer.

The scheme imposes fiscal discipline on thenation and is a solid foundation foreconomic development. There is anexpansion of convertible funds, creation ofa huge pool of long term funds andenhanced accountability. The scheme

ICAN Students’ Journal, October / December, 2013 1515ICAN Students’ Journal, October / December, 2013

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introduces clear legal and administrativesanctions and there is a separation ofinvestment, administration and custody ofassets. Transparency is also ensured by therequirements for published rate of returns,regular statements of contributions andearnings and annual audited accounts.

on pension authorities to tell them what theyare entitled to. Information is knowledge andwith this comes power which has been placedin the hands of the contributors andpensioners.

Other factor identified that affect the

“Rethinking Pension Reform”, Journal ofPension and Economic Finance, CambridgeUniversity Press.Olaniyi S. Onifade (2001), “An Examinationof the Nigerian Public Service PensionSystem”.Provident Alliance limited (2005).

3.0 ConclusionWithout mincing words, the pensionindustry under the new contributory pensionscheme is robust, safe and poised to helpretirees live well after their active life inservice.

The new scheme, to a large extent, placesin the hands of the contributors (and ofcourse their employer), the responsibility forthe contribution that is available in theRetirement Savings Account (RSA) uponretirement. One of the major differencesbetween the previous system and the newsystem is that in the old system pensionersqueue up at government offices forverification and collection of their monthlypension. Pensioners in the post 2004contribution pension scheme do not needto queue up to be verified. Their monthlypensions are paid straight into their bankaccount.

Another major difference is that whilepensioners in the old system travel longdistances to be verified, the local office ofthe Pension Fund Administrator (PFA) andthe National Pension Commission managesthat level of interface without any stress,thereby removing the need for continuousverification of pensioners.

One other most fundamental differencebetween the two is the fact that, the post2004 era avails the contributors orpensioners a lot of information, ranging frommonthly balances and contributions, thelump sum available upon retirement tomonthly pension.

Pensioners in the pre-2004 era depended

administrations of pension fund in Nigeriainclude: inadequate enlightenment on thebenefit of the new contributory pensionscheme.

In view of the above, there is need for morepublic enlightenment campaigns on the meritsof the new contributory pension scheme witha view of enhancing compliance by bothemployers and employees in the country

REFERENCESAaron, H.J. (1966), “The Social InsuranceParadox” Canadian Journal of Economics andPolitical Science, Vol.32.Aaron, H.J. and Robert D. Reischauer (1998),“Countdown to Reform”, Century FoundationPress, New York.Abdul, S.J. (2004), “Pension Administration inNigeria-The Past to the Present” Text of PaperOne Delivered at the Seminar/Workshop forAccountants, Internal Auditors andAdministrative Officers of National of NationalOrientation Agency, Lokoja – Nigeria.Alli Amnim, M.M. (2004). “TransitionalArrangements and the Role of Operators.” Textof Paper Two Delivered at the Seminar/Workshop for Accountants, internal Auditorsand Administrative Officers of NationalOrientation Agency, Lokoja – Nigeria.Assets and Resource Management CompanyLtd (2004), “Pension Reform in Nigeria – Asolution in sight?” Lagos – Nigeria.Fashina Oladipo (2003). “Issues in PensionScheme for Workers”.www.nigerdeltacongress.comFelix, N. Akpe, (2003) “Implication, PossibleBenefits of Proposed Pension Reform Bill”.The Guardian December 16.Modigliani, F. and Muralidhar, A. (2004),

National Pension Commission Website-www.pencom.gov.ngThe Guardian Newspaper, 30, December2003.The International Labour Office (1998),“Internal Guidelines for the ActuarialAnalysis of a National Social SecurityPension Scheme” Financial, Actuarial andStatistical Branch, Social SecurityDepartment, Geneva.The Vanguard Newspaper, October 16th,2003.THISDAY online. File://A: \THISDAYonline2.htmTurner, J.A. (1997), “Economic Analysis ofMandatory Defined Contribution PensionSystems”, International Labour Office,Geneva, Switzerland.Tonia,S.(2012).The Contributory PensionScheme & Its Administration.Beach AtlanticLimited,Nigeria.Website of the Office of PublicCommunications, “Senate Passes BPE,Pensions Bill”, July 2004.Website of the Presidential Research andCommunication Unit file:World Pension Archives, (2003)World Bank, (1994). Adverting the Old AgeCrises: Policies to Protect the Old andPromote Growth. Oxford University PressNew York.

James Isaiah Ekele is a seasonedProfessional Accountant, a Credit Analyst,Management Expert, Tax and InvestmentProfessional with vast experience inAccountancy & Finance, Management,Taxation and Portfolio Management.

Key Differences between the Old and the New Contributory Pension Scheme

Source: Provident alliance Ltd, 2005

Feature Old Pension System (Define Benefit Scheme) New Contribution Pension Scheme

Benefit entitlement Fixed and defined Variable-function of the retirement account balance

Contributions Unfunded/very limited funding Funded by employer and employee

Mode of withdrawal Gratuity and pension Annuity or programmed withdrawal + lump sumabove specified minimum

Regularity/payment Depends on government/employer Independent of government


Our goal is to ensure success in ICAN exams. We have, therefore, provided solutions to some past questions toguide candidates in future exams. Although these suggested solutions have been published under the Institute’sname, they do not represent the views of the Council of the Institute. ICAN will, therefore, not enter into anycorrespondence about them.

SECTION A (Attempt All Questions))PART 1 MULTIPLE-CHOICE QUESTIONS (10 Marks)

1. Which of the following is a measure of dispersion?A. MeanB. PercentilesC QuartilesD. Mean Absolute DeviationE. Mode

2. Which of the following is NOT one of the uses of an lndex number?A. To measure the economic well-being of a countryB. Basis for comparing related series for administrative purposeC. To measure the direction of movement of economic variablesD. To deflate seriesE. To determine the value of money.

3. The sum of the Mean and the Median of 4, 6, 3,1, 5, 5 isA. 6.0B. 9.0C. 8.0D. 7.5E. 8.5

4. The delivery cost Y is related to the size of an order X by theregression line which has its constant to be 10,491 and itsregression coefficient as 3,170. Calculate the size of an order, ifthe delivery cost is N43,966.20.A. 10,491.00B. 10.56C. 30,305.20D. 17.18E. 139,383.35

5. In a certain shoe making industry, the cost function is C(X) =N(40x + 10,000) while the revenue function is R (x) = N50x,where x is the number of units produced and sold The profit when1,000 units are produced and sold isA. N40,000B. N50,000C. N5,000D. N0.00E N10,000

Quantitative Analysis (FOUNDATION - November, 2009)

6. lf the average revenue function of a firm is defined as 2Q - 4, thenthe marginal revenue function of the firm isA. 2B. 2Q2 - 4QC. 4Q2 - 4D. 4Q - 4E Q2 - 4Q

7. If A= 3 4 and B = 2 -7 -1 5 1 -6Determine IA + BIA. 5B. -5C. 14D. -4E. 4

8. A typical transportation problem deals withA. a number of sources and one destination onlyB. only one main source and a number of destinationsC. a number of sources and a number of destinationsD. the means of transportationE. the people involved in the transportation.

9. When making decisions under conditions of risk, all of thefollowing are acceptable criteria for choosing an optimal decisionEXCEPT:A. minimizing expected lossB. maximizing expected valueC. choosing the state of nature most likely to occurD. maintaining expected marginal profit greater than expected

marginal lossE. maximizing expected profit.

10. Which of the following is NOT true of simulation used to solvemanagement problems?A. Simulation enables us to provide insight into certain manage-

ment problems where mathematical evaluation of a modelis not feasible

B. Simulation is not an appropriate substitute for mathematicalevaluation of a model in many situations

C. Simulation models may be very expensive and require muchtime to develop

[ ] [ ]


The Examiner The Examiner The Examiner

D. Simulation is applicable only in cases where there is an elem-ent of randomness in a system

E. Simulation does not generate optimal policies by themselves.

PART II SHORT ANSWER QUESTIONS (30 MARKS)

1. The probability that Mr. John wins a visa lottery to USA is 1/5,while the chance of his pregnant wife giving birth to a baby girl is2/3, The probability that Mr. John does not win a visa lottery andhis pregnant wife gives birth to a baby boy is .......

2. In Statistics, sample is a subset of .........

3. The index that takes the currency of data into consideration is......

4. A null hypothesis is a hypothesis of no .......

5. The sales of OWAS foodS from 2003 to 2007 are shown below:

Year (t) 2003 2004 2005 2006 2007

Sales (y) N Million 10 7 11 13 15

Where Σt = 10, Σy = 56, Σt2 =30 and Σty = 128. If the leastsquares trend line equation is given by y = a + bt, then b is .......

6. Forecasting value within the range of values of the independentvariable in a given data is known as .........

7. The overtime hours worked each month for the first quarter of2008 by Mrs. Olorunniisomo are 55, 46 and 58. The standarddeviation is known as............

8. Two items are to be chosen from 10 items of which 3 are defective.The probability that one of them is defective and the other isnon-defective is.........

Use the foilowing information to answer questions 9 and 10

1980 1981 Commodity Price(N) Quantity (g) Price(N) Quantity (g)

Yam 3 1,000 5 1,200

Gari 40 800 45 900

9. Laspeyres lndex is ...................

10. Paasche’s lndex is ..................

11. The median of a set of data is the same as the .......... percentile

12. The set of data in which mean, median and mode are equal issaid to be .............

13. The cardinality of the set P ={2, 4, 8 } is ................

14. For a maximum profit, the second derivative of profit function isalways ........

15. A company has a marginal cost function of X2 - 60x + 800 with afixed cost of N10,000.00, where X is the number of unitsproduced. Find the cost when 25 units are produced.

16. An identity matrix is also kown as ......... matrix.

17. MAZ Nig. Plc. has a monthly fixed cost of N4m and productioncost of N75 for each unit of soap produced. lf the soap sells forN120 per unit and 100,000 units were produced and sold, thenthe profit is ..........

18. If the intersection of sets A and B is empty, then the two sets arecalled ............ set

19. If the marginal cost function of a product is given by 2x - 3, thenthe cost of producing the first ten units is ..........

20. The number of N500 worth of recharge cards from STS, XQX andAIA telecommunication companies sold at three retail outlets ina particular day is shown in the table below:

Telecommunication Company

Outlets STS (Units) XQX (Units) AIA (Units)

I 20 15 17

II 22 18 21

III 14 13 20

The total income of the retail outlets for the day is ...........

21. ln linear programming, the process of changing a maximizationproblem to a minimization one or vice-versa, is known as ..........formulation.

2 2. The assumption of ......... is that, in the absence of informationto the contrary, each state of nature is equally likely.

23 The main objective of a transportation problem is to distribute asingle commodity from various so rces to different destinations at............

24. The customers waiting to be served are known as a .......... while.............. refers to the customers being served.

25. A Markov chain is a prorocess in which the outcomes at anystage of the experiment depend on ..............



= 43966.20 - 10491 3170

= 10.56

5. P(x) = R(x) - C(x) = 50 x - 40x - 10,000 = 10x - 10,000

When x = 1000

P(x) = 10000 - 10000 = 0.

6. R(Q) = (2Q - 4)Q = 2Q2 - 4Q

= 4Q - 4

7. A = , B =

A+B =

:. IA+BI = -5-0 = -5

3 4

-1 5( )

4 +5

2

26. All the factors involved in a linear programming problem musthave ..................relationship.

Use the following information to answer questions: 27 and 28

The following data have been collected on a special component thathas a limited life:

Week(s) after replacement 1 2 3

% of component which have failed bythe endof theweek 20 60 100

850 components are in use at any one time and they can be replacedon a mass replacement basis at N4.00 per component. If they arereplaced individually as they fail, the cost is N12.00.

27. Average number of replacements per week is ...............

28. Cost of individual replacements is ..................

29. The number of arrivals per unit of time in a simple queuing theorygenerally follows a ........ probability distribution while the servicetimes follow a .................... probability distribution.

30. The steady-state distribution vector for the regular Markov chainhaving transition matrix of 0.5 0.2 is ...........

0.5 0.8

SOLUTIONS TO SECTION APART 1 MULTIPLE-CHOICE QUESTIONS1. D2. C3. E4. B5. D6. D7. B8. C9. C10. B

WORKINGS TO SOLUTIONS:3. Put the data in an array

1, 3, 4, 5, 5, 6Mean = 4 + 6 + 3 + 1 + 5 + 5 = 24 = 4 and median= = 4.5

6 6Mean + median = 4 + 4.5

= 8.5

4. Y = 10491 + 31 70X

[ ]

dR (Q)

dQ

( ) 2 -7

1 -6

( ) 5 -3

0 -1

PART ll SHORT-ANSWER QUESTIONS

1. 4/5 = 0.2 72. Population3. Paasche index4. Change5. 1.66. Interpolation7. 5.18 0.47

Examiners’ ReportThe questions test basic principles and are within the syllabus.

All the candidates attempted the questions.

The performance of the Candidates was not good. Less than20% of the candidate scored 50% and above.

Pitfalls were due mainly to inability of the candidates to recallappropriate principles needed for the questions.

Candidates are advised to cover and master the topics in thesyllabus for future examinations.



9. 117.14%10. 117.4%11. 50th

12. Symmetric (normally distributed)1.3. 23 or 81 4. Negative15. 7458.3316. Unit / Unity17. N500,00018. Disjoint19. N70,00020. N80 000.0021. Dual22. Rationality23. Minimum Total Cost24. Queue; system25. Outcome of the preceding stages26. Linear27. 386.35628. 4,636,35629. Poisson; negative exponential

30. =

WORKINGS

1. A = , B=

P (A’) P (B’) = x = = 0.27

5. b =

= = = 1.6

7. x d = x- — d2

46 -7 4955 2 458 5 25

159 78

= = 53

σ2 = = = 26

σ = 26 = 5.1

8. Choosing 2 from 10 items means 10C2= = = = 45

Choosing 1 defective from 3 defective ones means 3C1= = =3

Choosing 1 non-defective from (10-3) or 7 non-defective ones means

7C1 = = = 7

Therefore, the required probability = = or 0.47

9. Laspeyres index - Σp1q0/ΣP0 q0

= (5 x 1000+45 x 800) x 100/ (3000+ 40 x 800)= (5000 + 36000) /35000= 1.1714.14 x 100%= 117.14%

10. Paasches index = Σp1q1/Σp0q1 = (5x1200 + 45 x 900) /39 600= 1.174 x 100 = 117.4%

13. 23 or 8

15. = (x2 - 60x - 800)

c = J(X2 - 60x - 800)dx

i.e C(x)= - - 800x + C

When x= 25 units and C =1,000C(x) = 253/3 - 30(252) + 800 x 25 + 1000= N7,458.33

17. If x is the quantity produced and soldC(x) = 75x+ 4,000,000R(x) = 120xP(x) = R(x) - C(x)= 45x - 4,000,000If x = N100,000then P(x) = 45 (100,000) - 4,000,000

= N500,000

19. dc/dx = 2x - 3J dc = J0

10 (2x - 3)dx

c = [ - 3x] = 102 - 3(10) = 70

c = N70.00

20. 20 15 17 500 2600022 18 21 500 = 3050014 13 20 500 23500

Total income = 26000 + 30500 + 23500 = N80,000 or(20+22+14+15+18+13+17+21+20) x 500 =N80,000

( ) x

y ( ) 2/7

5/7

4 15 3

415

15

23

(56)(10)128 -

30 -102 5

5

x

x

ΣyΣtnΣty -

Σt2 - Σtn

2( ) n

1593

Σd2

n

1610

783

10! 2! (10-2)

10! 2! (10-2)!

10! 2! 8!

10x9 2

3! 1! (3-1)!

3! 1! 2!

7! 1! (7-1)!

7! 1! 6!

3x7 45

7 15

dcdx

x3

360x2

2

’’

’

2x2

2 100

( ) ( )( )



25

x=

y

27. Average life of a component = 1 x 0.2+2 x 0.4 +3 x 0.4 = 0.2 + 0.8+1.2 = 2.2

28. Average number of replacements per week = = 386.363

29. Average number of replacements x cost per unit = 386.363 x 12 = 4,636.356

30. 0.5 0 2 x x=

0.5 0.8 y y

0.5x + 0.2y = x..........(i)0.5x + 0.8y = y.........(ii)(i) - (ii ) 0.5x- 0.2y = 0

x = y

But x+y = 1

2y/5 +y= 1;y = and x =

8502.2

57

27

27

57( ) ( )

( )[ ] [ ]Examiners’ ReportThe questions test basic principles in all the three aspects of thesyllabus. All the candidates attempted the questions.

Many of the candidates could not provide correct answers tomost of the questions which resulted in only about 10% scoring50% and above.

Pitfalls were due to failure of the candidates to recall basicknowledge needed to answer the questions correctly.

Candidates are advised to prepare very well and cover the entiresyllabus for future examinations.

Cost Accounting (INTERMEDIATE - May, 2009)

Question2(a) Fine Houses Construction Limited is engaged in the constructionof a new project called Contract AJ 20. The following informationrelates to the project as at 31 March, 2008.

CONTRACT AJ 20

Wages 84,312

Materials delivered direct to site 108,406

Materials from Main store 1,314

Materials transferred to AX19 site 3,180

Plant purchased (at cost) 25,000

Plant transferred to AJ 20 site 10,500

Sub-contractors charges 39,160

Site expenses (power etc) 10,172

Materials on site: 31, March, 2008 36,600

Plant on site: 31 March, 2008 29,500

Prepayments as at 31, March, 2008 1,014

Accrued wages at 31, March, 2008 1,842

Sales value of work completed 235,000

Cost of work completed 204,600

Progress payments received from client 230,000

Head office charges are 10% of wages

The contract value is N1,100,000 and it is anticipated that there willbe further costs of N750,000 (including guarantees and rectificationclaims). As this is the first year of the contract, no profit has beentaken previously.

Required:a. From the above, prepare the Contract Account for the year,

the Balance Sheet entries as at 31 March 2008. It is company’spolicy to take as interim profit, the difference between the salesvalue nd cost of work completed. (Approximate to the nearestNaira) (12 Marks)

b. How are plant capital costs dealt with in contract accounts?(2 Marks) (Total 14 Marks)



SOLUTIONS TO QUESTION 2CONTRACT AJ 20 ACCOUNT

Site wages 84,312 Material transferred out 3,180

Accrued wages 1,842 Prepayment c/d 1,014

Material purchased 108,406 Material @ sitec/d 36,600

Materials from stores 1,314 Plant on site c/d 29,500

Plant purchased 25,000 WlP c/d 14,427

Plant transferred in 10,500 Cost of work completed 204,600

Sub contractors 39,160

Site expenses 10,172

Head office charges 8,615

289,321 289,321

Cost of work completed 204,600 Sales values of work completed 235,000

Profit for the year 30,400

235,000 235,000

FINE HOUSE CONSTRUCTION LIMITEDBALANCE SHEET EXTRACT AS AT 31/3/2008

N N N N

Fixed Assets Cost Acc. Dep. Net Book

Value

Plant 35,500 6,000 29,500

Current Assets

Stock: Raw materials 36,600

Work in progress 19,427

Prepayment 1,014 57,041

Current liabilities

Wages accrued (1,842) 55,194

b) The usual ways in which plant costs are dealt with are as follows:

(i) When plant is leased: The leasing charges are debited directly to thecontract.

iii) When plant is purchased: There are two methods incommon use:

• Charge new plant at cost to the contract for which itwas purchased. When the plant is no longer requiredand is transferred to another contract or to base, theoriginal contract would be eredited with the secondhand value of the plant.

• Where plant is moved frequently from contract tocontract or where contracts are relatively short, a “PlantService Department” is created. This Departmentorganises transfer of plant from contract to contract asrequired and each contract is charged a daily or weeklyrental.

Examiners’ ReportExaminers’ ReportExaminers’ ReportExaminers’ ReportExaminers’ Report

The question tests candidates’ understanding of therequirements of Contract Costing. This seemspopular and familiar with candidates as majorityof the candidates attempted the question.

Performance was fairly good. About half of thecandidates who attempted the questions performedabove average.

Pitfalls identified were in the following areas:

• Inability to detennine profit to be taken.

• Wrong treatment of plant on site, closing stockand cost of work not yet certified.

• Inaccurate presentation of balance sheet extract.

Improvement by candidates will come from bettercoverage of the syllabus and good quality tuition.

ICAN Students’ Journal, October / December, 201324

student journal 2013

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