For years, illicit financial flows (IFFs) have continued to undermine Nigeria’s economic growth and weaken the government’s capacity to invest in critical sectors. The latest figures show that Nigeria may be losing as much as $17.8 billion every year to IFFs. The alarming estimate was highlighted during a recent capacity-building workshop for journalists by the Africa Network for Environment and Economic Justice (ANEEJ) against illicit financial flows in sub-Saharan Africa.
Besides, Nigeria is reported to have lost between $90 billion and $108 billion to illicit financial flows over a six- year period spanning 2020 through 2025. These are enormous amounts of money. Official records from the federal government, the African Union (AU) and the United Nations Economic Commission for Africa (UNECA) indicate that Africa loses roughly $88 billion annually, with Nigeria accounting for an estimated 20 per cent of the total losses. In 2021, Africa lost $148 billion to IFFs.
The massive drainage of Nigeria’s economic resources is driven by several primary channels, which include unregulated and illegal bunkering of crude oil, trade over-invoicing of imports and under-invoicing of exports, tax evasion, profit-shifting schemes and tax avoidance deployed by multinational corporations. Other illicit channels are high level corruption, money laundering and illicit cross-border transfers by public and private actors. These unrecorded capital flights severely weaken Nigeria’s public institutions and deprive the economy of the much-needed revenue required to fund education, healthcare and other sectors.
We decry the huge amount lost to illicit financial flows every year. The onus lies with the relevant government agencies to track those behind the nefarious activities. They discourage genuine investors, and provide safe havens for illegal trade. Last year, the Managing Director of the International Monetary Fund (IMF), Ms. Kristalina Georgieva, at the annual meetings of the IMF and the World Bank in Washington DC, United States, decried degree of illicit financial flows out of Nigeria. She lamented that the unsavoury situation is worsening Nigeria’s revenue problem, and called for a renewed focus on tracing such flows and plugging all fiscal leakages. Her warning is timely and should be heeded.
Though Nigeria is not the only developing economy fingered in the ‘dirty’ money outflows, the IMF and other international financial intelligence groups have observed that in the case of Nigeria, the problem appears to have grown bigger, and therefore, requires a blueprint that will plug the numerous fiscal leakages that undermine revenue collection, sustainable growth and financial stability. Statistics show that Nigeria is one of the transit countries for dirty funds through the banking industry and other illegal channels.
Undoubtedly, these outflows drain the country’s public resources, foreign exchange, worsen poverty, and hinder economic growth. Strengthening good governance is a crucial step towards rebuilding the nation’s economy. According to the IMF, illicit financial flows have developed into a new “multiple dimension” that range from outright embezzlement of taxpayers’ money, to private funds channeled into illegal ventures that threaten the welfare of the citizens. This is evident in Nigeria, today. In a shocking revelation last year, the vice president of the International Police Organisation(Interpol) Garba Umar, noted that, “hundreds of thousands of dollars are being laundered out of Nigeria every hour without a trace.”
He stated that based on the evidence at the disposal of Interpol, Nigeria has become a transit nation of illicit money laundering to other African countries, and across the world. If the trend is not curbed, the proceeds of the dirty funds may get into the hands of criminals, who will use it to destabilise the economy, and the country. This is why insecurity persists despite government’s effort. The warning by Interpol should be heeded. Also, all relevant agencies should double their efforts to check illicit financial flows.
A recent statistics showed that the Nigerian banking sector accounted for an estimated $854billion of illicit cash flows in Africa between 1971 and 2009. This figure is believed to be rising steadily at an average of 12 per cent in the last ten years, and has contributed to the present slow economic growth and development of the economy. No country can make sustainable progress with illicit cash flows. The Central Bank of Nigeria (CBN) must tighten loopholes in the banking sector that enables illicit transactions. The EFCC should help in tracing illicit transactions in the banks.
Let suspected illicit financial transactions be thoroughly investigated. The government should apprehend and prosecute those behind illicit financial flows. About 60 international tax havens and secret jurisdictions were recently identified across the world as conduits for illicit financial transactions. Others are disguised as shell companies, anonymous trust accounts, fake charitable foundations, money laundering and transfer pricing mechanism.
Not long ago, Washington-based Global Financial Integrity (GFI), in its report, blamed some Nigerian banks in the dirty money transactions. Some reports of the Nigeria Extractive Industries Transparency Initiative (NEITI) have also corroborated the huge amount the country loses in capital flight as a result of money laundering activities through the financing institutions. Let the EFCC work with similar agencies abroad to curb illicit money transactions.
(The Sun)
