The discovery of huge illicit funds stolen from the country has fueled strident calls for the repatriation of such funds, reports Ibrahim Apekhade Yusuf
To say that Nigeria has been fleeced of funds by successive regimes is to state the obvious. But the humongous discovery of illicit financial flows stolen by some unscrupulous individuals and estimated at over $218 billion has become a source of worry.
Specifically, the recent Global Financial Integrity report ranked Nigeria seventh among the top 10 countries with highest illicit capital outflows in the developing world.
Whodunit?
From crude oil swaps, contract splitting by government officials and their collaborators in the organised private sector including foreign businesses, all have complicity in the matter.
Illicit financial flows are simply money that is illegally earned, transferred or utilised. This money is smuggled or disguised out of the country of origin through tax evasion, trade misinvoicing, and figure alterations and generally do not return to the country of origin.
According to the Global Financial Integrity every year, roughly $1 trillion flows illegally out of developing and emerging economies due to crime, corruption, and tax evasion- more than these countries receive in foreign direct investment and foreign aid combined.
Africa loses about $50 billion annually a half of the entire IFFs lost globally, this clearly explains why African nations continue to suffer most from poverty and underdevelopment.
Concern over IFFs
Though the issue of the impropriety of illicit funds is being hotly debated now, it is instructive to note that a lot of people have continuously raised their voices above the din in their condemnation of the troubling phenomenon.
It would be recalled that at the 4th Joint Annual Meetings of the African Ministers of Finance, Planning and Economic Development at the AU Economic Commission for Africa Conference in March 2011, Resolution L8 was adopted, mandating the establishment of a high level panel, HLP, headed by the former South African President, Thabo Mbeki, to assess the impact of illicit financial flows on the continent’s economy.
Specifically, the mandate of the panel included the review of the complex and long-term implications of illicit financial flows on development.
The panel was to also sensitise African governments, citizens and international development partners on the scale of illicit financial flows and its effect on development.
Concerned about the impact of illicit financial flows on the African economy, ActionAid Nigeria called on the Nigeria government and the country’s delegation to the 24th AU Summit in Addis Ababa, Ethiopia, to support the adoption of the recommendations of the Mbeki Panel report.
The ActionAid Nigeria Country Director, Hussaini Abdu, identified Nigeria among the countries severely affected by illicit financial flows in the world, saying the situation demanded urgent and decisive action if poverty is to be eradicated.
Mr. Abdu, who said Nigeria was losing about $15.746 billion (N2.645trillion) annually as a result of illicit financial flows, called on the Federal Government to be in the vanguard of countries and groups demanding that the Mbeki report be received by the African leaders and acted upon.
“In view of the huge impact of illicit financial flows on the Nigerian economy, especially at this time when the country’s major revenue source, the crude oil money, has been eroded, it is time Nigeria takes the lead in ensuring that the Mbeki Panel Report is received by Africa’s Heads of Government and their Finance Ministers.” Mr. Abdu said.
Shape of IFFs: The Nigerian example
Nigeria has the highest outflows in West and Central Africa, here, money is illegally moved out through tax evasion, corruption, trade mis-invoicing and abusive transfer pricing.
IFFs are extremely worrisome as it is growing at a faster rate than support, at $50 billion per annum, Illicit funds outflows from Africa doubles the official development assistance sent into the continent annually.
The effects of IFFs on developing countries cannot be overemphasised. White-collar crime not only worsens poverty level, it drains foreign exchange reserve, reduces tax collection, cancels out investment inflows. A critical basis why the number of people living on less than $1.25 a day in Africa rose from N290 million in 1990 to 414 in 2010.
According to the Mbeki Panel report, Nigeria tops the league with a cumulative of $217.7 billion from 1970 to 2008 (30.5% of the entire IFFs in Africa) lost with over 90 percent loss related to oil.
This amount is just adequate enough to fund 870,000 standard schools in Nigeria estimated at N50 million each, 400,000 world-class hospitals at N100 million each, enough for 500 primary hospitals for each local council and provide clean water for every street in Nigeria at N10 million each.
As stated in the report, oil remains Nigeria’s problem as 92.9% of the total IFFs in Nigeria are oil-related. In just 2008, 76.4 percent of the IFFs in oil from Nigeria are absorbed by the United States, Spain, France, Japan, and Germany. If Nigeria stops IFF at this current rate and uses funds efficiently for Millennium Development Goals, infant mortality can be drastically cut from 23 years to 10 years.
“We encourage the new government to further promote and enhance transparency and accountability through the implementation of open and transparent budgeting processes such as the Open Budget Initiative, Extractive Industries Transparency Initiative and also strengthening civil society organisations. Multinational companies operating in African countries should be mandated to publish annual financial reports that explicitly include all their activities in Africa,” the report stated.
The African Development Bank further reinforced the report by the Global Financial Integrity.
The Bank inferred that Nigeria had recorded a cumulative illicit financial outflow of about $83.3bn in the past 51 years.
The Country Director, AfDB, Dr. Ousmane Dore, stated this in Abuja while delivering a paper entitled, “Domestic resource mobilisation for Nigeria’s development: Need for national compact against illicit financial flows.”
He spoke at a multi-stakeholders meeting on ‘Illicit financial flows out of Nigeria’ organised by a political think tank called Centre for Democracy and Development.
According to him, the loss accounted for 5.6 per cent of total goods traded without proper invoicing in the last 51 years, between 1960 and 2011.
Dore recalled that Nigeria has for many decades experienced a very serious problem with trade mis-invoicing, in the form of over-invoicing of imports and under-invoicing of exports for the purpose of shifting money out of the country.
He said, “Between 1960 and 2011, Nigeria experienced cumulative illicit financial out flows totalling $83.3bn or 5.6 per cent of a total goods traded through mis-invoicing only. Export under-invoicing takes the larger share of $44bn while the balance of $39.3bn was due to import over-invoicing.
Also speaking, the Director, CDD, Hajia Idayat Hassan, said the nation has sufficient resources to meet its developmental needs.
According to her, the illicit funds can be used to provide about 870, 000 schools and 400, 000 hospitals, among other things.
She however, attributed the widespread illegal financial outflows to governance challenges including weak institutions, inadequate regulatory environment, lack of transparency and accountability.
Mindboggling revelations
President Muhammadu Buhari has revealed that top government officials including ministers in the immediate past administration stole as much as one million barrels of crude oil per day for their personal purposes.
Buhari who noted that he had received some documents which indicted the officials of massive fraud, including oil theft, said this while speaking at an interactive session with Nigerians in the Diaspora at the Nigerian Embassy in Washington DC, United States, in continuation of his four-day official visit to the country.
He alleged that such officials also opened as many as five bank accounts abroad for the purpose of laundering money.
While describing the amount of money involved in the shady deals as mind-boggling, the President promised that his administration would use the indicting documents and others still being compiled to clamp down on the culprits and prosecute them.
He said by the time the process of compiling and identifying the shady deals and those behind them were completed, his administration would approach countries where the loots were kept to assist in repatriating them.
The President added, “We are now looking for evidences of shipping some of our crude, their destinations and where and which accounts they were paid and in which country.
”When we get as much as we can get as soon as possible, we will approach those countries to freeze those accounts and go to court, prosecute those people and let the accounts be taken to Nigeria.
“The amount of money is mind-boggling but we have started getting documents. We have started getting documents where some of the senior people in government, former ministers, some of them operated as much as five accounts and were moving about one million barrels per day on their own. We have started getting those documents.
“And we will use those documents to arrest those people and prosecute them. This, I promise Nigerians.”
Crude provides Africa’s biggest economy with about two-thirds of government revenue and 90 percent of export earnings.
Helping Nigeria to track IFFs
The need to track the illicit financial flows, many experts have argued, becomes inevitable at this time of the parlous state of the nation’s economy currently battling credit crunch.
Thankfully, the United States has offered to help Nigeria track down billions of dollars in stolen assets.
US cooperation with President Muhammadu Buhari’s predecessor, Goodluck Jonathan, had virtually ground to a halt over issues, including his refusal to investigate corruption and human rights abuses by the Nigerian military.
Buhari has said his priorities were strengthening Nigeria’s economy, which has been hard-hit by the fall in oil prices, boosting investment and tackling ‘the biggest monster of all’ – corruption.
In 2014, the US took control of more than $480m siphoned away by former Nigerian dictator, Sani Abacha, and his associates into banks around the world.
Washington has broad powers to track suspicious funds and enforce sanctions against individuals.
Nigerian President Muhammadu Buhari said the U.S. will help trace and recover funds from the sale of about 250,000 barrels of oil that are stolen each day in Africa’s biggest producer of the commodity.
The U.S. and other developed nations are helping identify accounts where money has been deposited and Nigeria will prosecute the suspects, Buhari told an audience of Nigerians in Washington last Tuesday.
“The amount involved is mind-boggling,” Buhari said. “A lot of damage has been done to the integrity of Nigeria with individuals and institutions already compromised.”
A divergent view
Laudable as the move to repatriate the funds, not many people are optimistic that it would pay off on the long run. One of those who feels Nigerians should not be overambitious as far as getting back these funds, is Dr. Bongo Adi.
Adi, who is a senior lecturer in Development Economics, at the Lagos Business School, Pam Atlantic University, holds the view and very strongly too that President Muhammadu Buhari anti-corruption stand notwithstanding, only holistic action plans, not mere rhetorics can help to address endemic corruption in the system.
While noting that if the effort succeeds the repatriated funds can be utilised to provide social infrastructure like good road networks, healthcare delivery, qualitative education among other things for the teeming masses, he however raises some posers: “How easy would it be to repatriate such funds in the first place if they are traceable?”
“We can only succeed with these efforts depending on the amount of political goodwill allowed by the respective countries where these funds are warehoused, especially in the US. But in a place like Switzerland, where there is a oath of secrecy regarding safety of investors’ funds, it might not be an easy task so to speak. Of course, this has a way of dampening morale in this whole effort. So, considering the cumbersomeness efforts to repatriate these stolen funds present, it is not going to be easy at all. But of course, lets pray this whole thing succeeds.”
Adi who is former MTN Research Fellow at the LBS is also worried that there is no strong institutional mechanism in place to protect the funds in such a way that they can be converted into funds readily available for productive use. “This is because we have observed in the past how similar monies repatriated ended up been stolen again by politicians and their collaborators in the civil service.”
