The figures are unflattering. Over $150 billion was stolen from Nigeria in the last 10 years, with over 90 per cent of the loot related to oil. Africa’s largest economy also occupies an unenviable seventh position among the top 10 highest illicit capital outflows in the developing world, losing a cumulative $217.7 billion from 1970 to 2008. But there are indications that the President Muhammadu Buhari administration’s war against corruption is off to a good start. This has raised hopes that the monster may soon be caged to pave the way for real development. Assistant Editor CHIKODI OKEREOCHA reports.
It may have been long in coming, but when it finally did last week, the shake-up at the Nigerian National Petroleum Corporation (NNPC), beginning with the appointment of a new Group Managing Director (GMD), Dr. Emmanuel Kachikwu, gladdened the hearts of not a few Nigerians.
For one, it was an indication that the war against corruption is off to a good start. Most importantly perhaps, the choice of NNPC for the beginning of the cleansing, is seen by many as a clear and bold statement that President Muhammadu Buhari’s administration’s resolve to tackle the manace is on to a promising start.
Barely a day after the appointment of Kachikwu as NNPC’s helmsman, all the Corporation’s Group Executive Directors were also booted out.
That the NNPC is one of the first to come under the administration’s scrutiny is hardly surprising. The oil & gas industry, which the NNPC supervises, both as industry regulator and active player, is the cash cow and mainstay of Nigeria’s economy.
It accounts for over 90 per cent of her foreign exchange earnings, about 8.97 per cent of the Gross Domestic Product (GDP), and 80 per cent of government revenue.
However, under its watch, much of Nigeria’s oil fortune is being squandered on account of the Corporation’s long history of graft, waste and mismanagement. This was what prompted persistent calls by experts and Nigerians for a probe of the management.
Such calls are not without justification, considering the mind-boggling revelations of pervasive corruption in the industry. For instance, between 2009 and 2012, about 160 million barrels of oil worth $13.7b was stolen, according to the Nigerian Extractive Industries Transparency Initiative (NEITI).
The United Nations Development Programme (UNDP), also estimates that $400billion was stolen from the country between 1960 and 1999. Even Buhari himself raised the alarm that up to last month, July 10, some people in government were illegally selling 250,000 barrels of oil per day.
To date, Nigerians are yet to come to terms with the fact that despite earning about $500 billion from crude oil in the five years to 2014 and about $1tr in 50 years, according to the US Department of Energy, there is not much on ground to show for it either in physical infrastructure or human development indices. For instance, United Nations Children’s Fund (UNICEF) estimated that 76.8 million of the 170 million population still lack access to drinking water in 2014, while 64 million Nigerians were illiterate, according to the National Mass Education Commission. Over 50 per cent of Nigerians also lack access to basic health care services.
Illicit financial flows
Much of the disturbing statistics of Nigeria’s heavy losses to corruption appear to be in form of illicit financial flows (IFFs). For instance, a Washington DC-based research and advisory organisation, Global Financial Integrity (GFI), recently released a report, which placed Nigeria 7th among the top 10 highest illicit capital outflows in the developing world.
GFI, which produces high-calibre analyses of illicit financial flows, said while Africa loses $50 billion annually in IFFs, Nigeria topped the league, losing a cumulative $217.7b from 1970 to 2008. GFI said over 90 per cent of that loss was related to oil. It also added that in the last 10 years alone, $150b was stolen from Nigeria, which perhaps, was why the recovery of the $150b stolen oil wealth was on the priority list of Buhari’s request on Kachikwu.
GFI did not say anything new. It only added its voice to growing public outcry, particularly by economic experts and stakeholders that the economy is bleeding profusely from IFFs.
Sometime last year, the immediate past Director General of the Securities and Exchange Commission (SEC) and Vice President/Treasurer of the World Bank, Ms. Arunma Oteh, raised the alarm that Nigeria lost over $140 billion to IFFs between 2002 and 2011, a period of nine years.
Oteh, who was keynote speaker at the 2nd Christopher Kolade Lecture on business integrity held in Lagos in September, last year, said: “Nigeria has lost more to illicit financial flows than any other African country between 2002 and 2011, even being listed in the top 10 globally. Within a 9-year period we lost over $140 billion to illicit financial flows.”
She added that poor countries are losing an estimated $1 trillion annually to such illegal financial activities as money laundering, tax evasion, transfer pricing and embezzlement.
Multinational companies,
banks culpable
Oteh said a lot of the illicit outflows, which are basically monies illegally earned, transferred or utilised, was through the illicit commercial activities of multinational companies. The multinational companies some of which are in the oil & gas industry are allegedly involved in big ticket crude oil swap deals and contract splitting through the help of unscrupulous government officials and their collaborators in the organised private sector including foreign businesses.
Some commercial banks are also said to be involved in the transfer of the loot.
“In all sincerity, I don’t think the banks are doing or have done enough to curtail these sharp practices. More often than not, they are complicit. Such deals can’t be pulled without the active connivance of financial institutions,” a Security Expert and Founder, Forenovate Technologies Ltd, an Abuja-based security risk management consultancy, Mr. Don Okereke, said.
The UK-trained security expert added that lately, Nigerian banks had found a new love: a penchant for opening foreign branches. “Some schools of thought see this as an avenue to siphon, launder money abroad. The Nigerian government must beam its searchlight on the plethora of foreign bank branches operated by Nigerian parent banks, Okereke told The Nation.
How IFFs hurt economy,
fuel terrorism
Mr. Okereke said the implications of IFFs on the economy are grave and far-reaching. He said, for instance, that IFFs deplete the nation’s resources while enriching that of foreign countries where these monies are domiciled. Said he: “If these monies were/are invested in the Nigerian economy, even though ‘stolen’, at least jobs will be created for the teeming unemployed youths. It means that these outflows indirectly lead to increase in crime since our country’s resources are being looted by people in corridors of power and no jobs are created, this leaves idle youths with no choice than to do crime.”
Another implication of this, he said, is that Nigeria now has a situation where some folks are richer than their State, possibly as rich as the country. “Some of these nouveau-riches use their ill-gotten resources to fight the government and ferment trouble. In other words, they see themselves as a government. Some even argue that illicit financial outflows could be channelled into sponsoring terrorism and insurgency,” he added.
Oteh confirmed this much, saying: “We now have a situation where these illicit outflows are not only depriving our country of desperately needed capital but are also being used to finance terrorism abroad and within our shores.” she said a security expert who trained members of staff of SEC recently shared some pieces of intelligence with the Commission indicating that the rampaging Boko Haram sect received over $70 million between 2006 and 2011 through shady activities like money laundering, oil bunkering, kidnapping and dealing in drugs.
That is not all. The $150 billion stolen in the last decade as confirmed by GFI is more than the about $100 billion the World Bank said Nigeria needed to invest in power in 10 years to lift electricity supply to an acceptable level and tackle poverty and unemployment.
Again, Oteh agrees. While noting that this is money desperately needed for the Millennium Development Goals (MDGs) and could prevent as much as 3.6 million deaths annually in the world’s poorest countries, she said in the case of Nigeria, an estimated $50 billion investment is required to ensure stable electricity supply.
The World Bank Vice President was emphatic that IFFs and corruption are two issues that countries have been battling with and Nigeria suffers greatly from both issues. “Corruption has been identified as the second most problematic factor to doing business in Nigeria ahead of factors including access to finance and terrorism,” she stated, adding that the G-20 is focusing on combating illicit financial flows especially considering the fact that poor countries are losing a lot to such illegal activities.
Oteh, however, said considering the impact of corruption and anti-money laundering violations on Nigeria, efforts have been made to strengthen the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) regime in Nigeria.
“Other countries are also implementing reforms to make it harder for wrongdoers to find a hiding place. The United Kingdom has the Anti-Bribery Act 2010 that requires companies with any link to the UK to have robust structures to forestall shady dealings. The United States has long had the Foreign Corrupt Practices Act of 1977, which provides for up to $25 million in fines and 20-year jail term,” she said.
What options for Buhari?
Since the inauguration of Buhari’s administration on May 29, his perceived hard stance against corruption has largely been read from his body language. His body language is believed to have galvanised the hitherto inefficient anti-corruption agencies, such as the Economic and Financial Crimes Commission (EFCC), Independent Corrupt Practices and Other Related Offences Commission (ICPC), and the Code of Conduct Bureau (CCB) into action, leading to the arrest of some Politically Exposed Persons (PPPs). However, the thinking is that last week’s shake up in NNPC was a pointer that the days of reckoning are finally here for corrupt people.
However, experts have proposed some measures that they believe will guarantee success in the war against entrenched corruption. With regards to IFFs, for instance, Okereke said ensuring strict financial regulation and intelligence surveillance of financial transactions as well as genuine cooperation and partnership with Western governments and institutions to check money laundering would go a long way in curbing the trend.
Okereke was not done. He also wants the Federal Government to “Mandate all revenue generating, collecting Ministries, Departments and Agencies (MDA’s) to henceforth remit every dime they collect/generate to the federation account. Ensure that award of government contracts, crude oil blocks etc. are very transparent and in line with global best practices, and allow unfettered access to public information and free speech. Unnecessary bureaucracy enshrined in the freedom of information law must be purged.”
He also urged government to strengthen the Federal Inland Revenue Service (FIRS), the Nigerian Financial Intelligence Unit (NFIU) and the anti-corruption agencies to be alive to their responsibilities.
The thinking is that reforming the EFCC, the ICPC and the CCB involves a radical overhaul of their scandalous and uncoordinated investigations and weak prosecution, which are factors believed to be responsible for losing high profile cases in the past. It also involves the strategy of making the institutions strong and efficient and without overt interference from the political class. Incidentally, the need for some of these institutional reforms is not lost on Buhari. This was why the President gave the new NNPC helmsman a matching order to reshape the Corporation, by, among other things, cleaning up the NNPC system of corrupt elements, work with the EFCC and the Directorate of State Service (DSS) to trace and recover stolen oil cash, review NNPC’s structure to compete globally, and give targets to all subsidiaries and put in place performance benchmarks.
The President also wants the GMD to fixe all refineries, which must work at optimal level, “even if it means using expatriates in the interim.”
Support rises for fight against IFFs
This must be music in the ears of African governments, which are hard-hit by the unbridled looting of their commonwealth. Already, the continent appears poised to compliment and collaborate with the world powers in the bid to halt the rampaging monster that has continued to frustrate efforts at sustainable growth and development.
For instance, the International Trade Union Confederation (ITUC)-Africa pledged its commitment to support African countries and the African Union (AU) in the fight against IFFs from Africa. At the end of a two-day ITUC-Africa Human and Trade Union Rights Network meeting in Abuja, Nigeria, the ITUC-Africa General Secretary Mr. Kwesi Aou-Amankwah, said the Thabo Mbeki panel report on IFF from Africa showed that a conservative figure of $50b was leaving the continent annually.
Aou-Amankwah therefore, pledged that ITUC-Africa shall continue to pressure big business and multinational companies to pay their fair and true share tax in countries where their production and profit activities take place. “The financial haemorrhage as a result of IFF continues to harm our economies and people, as it reduces monies for social spending on education, potable water, health and sanitation, among others.
“These real drivers of development are lost because businesses continue to find ways to manipulate tax rules and administrations. We, therefore, say `stop the bleeding,’ which is our ongoing campaign on halting IFFs from Africa,” he said, urging governments to desist from the current harmful tax competition among themselves with the use of sundry and endless incentives.
AfDB joins the fray
The African Development Bank (AfDB) has also joined the battle to stop IFFs. In doing so, AfDB Country Director, Nigeria, Dr Ousmane Dore, said while Nigeria had embarked on milestone reforms aimed at improving her Domestic Resource Mobilisation (DRM), large scale IFFs out of the country still required urgent attention. “Some of the push factors in illicit capital flows include mainly issues like corruption perception indicators, the size of the underground economy, and weak regulatory institutions,” Dore said.
Dore, while delivering a keynote address at a ‘Multi- Stakeholders’ meeting on Illicit Financial Flows (IFFs) out of Nigeria” in Abuja, said the AfDB recently commissioned a study entitled, ‘Nigeria: Illicit Financial Flows due to Trade Misinvoicing, 1960-2012″, with its report focused on trade mis-invoicing. According to him, Nigeria has for many decades experienced serious problem with trade misinvoicing in the form of over-invoicing of imports and under-invoicing of exports for the purpose of shifting money out of the country.
“Between 1960 and 2011, Nigeria experienced cumulative IFFs totalling $83.3b or 5.6 per cent of total goods trade through trade misinvoicing only. Export under-invoicing takes the larger share of $44b, while the balance of $39.3b was due to import over-invoicing,” he added, stressing the need for government to undertake critical tax reforms with focus on regulatory, institutional and legal issues, including reduction in complications in tax assessment, computation and collection.
Former UN Secretary-General Kofi Annan could not agree less. He noted that “Stemming the hemorrhage of finance lost through illicit financial transfers will be a key driver of domestic resources that can be used for future development.” Annan is Chairman of the Africa Progress Panel whose recent report ‘People, Power, Planet’ highlighted the impact illicit flows have on the continent of Africa. The report calls on the international community to “support African efforts to strengthen tax and customs administration and reduce illicit financial outflows, especially via trade misinvoicing.”
The buck stops on Nigeria’s table
Though a continental problem, Nigeria, Africa’s largest economy with GDP size of $500b is saddled with the responsibility of coordinating the fight against corruption, especially with regards to IFFs. Buhari may have put the right foot forward in halting the trend by beaming the searchlight on the NNPC, but the consensus is that a strong commitment and political will, backed by the involvement of all stakeholders, is required to fight and win the war.
