Nigeria Loses Between $15 To $18 Billion To Illicit Financial Flows

Stakeholders in the oil, gas and mining sectors have called for the development of adequate policy framework to combat the menace of Illicit Financial Flows (IFFs) in Nigeria’s extractive sector.

This was the consensus amongst stakeholders at the recent launch of a report on “Averting Illicit Financial Flows in Nigeria’s Extractive Industries”, by the Nigeria Extractive Industries Transparency Initiative (NEITI).

The report, which reveals that Nigeria’s oil and gas sector contributes 92.9 per cent to IFFs annually, noted that the country is losing between $15 and $18 billion every year to these illicit practices.

It revealed that out of the 92.9 per cent contribution of the sector to IFFs in Nigeria, oil bunkering accounted for about 35 per cent, while commercial transactions by multinationals contribute more than 60 per cent.

“Multinationals, often resort to tax evasion; money laundering; and transfer pricing in their practice of IFFs. Nigeria’s oil industry has remained vulnerable to the thriving practice of IFFs because the country itself depends on the sector to survive economically”, the report added.

The report cited Nigeria’s over reliance on cash-based economy as another reason why IFFs thrive in the oil sector that is technically and structurally complex, and highly influenced and controlled by the political class.

“Opportunities for IFFs through fraud and money laundering in Nigeria’s oil industry generally starts as administrative control failures by those expected to exercise statutory and regulatory frameworks in the industry”, the report stated.

The NEITI publication identified high politicization of discretionary powers, lack of transparency, inadequate corporate governance, regulatory capture, political interference, conflict of interests, tax evasion and bribery as major drivers of IFFs in the Nigeria’s oil and gas industries.

Speaking at the launch, NEITI Executive Secretary, Mr. Waziri Adio, opined that to combat the menace of IFFs, Nigerians must move from merely asking questions about how much companies paid, to a deeper question of whether they pay what they ought to pay in taxes, royalties, signature bonuses etc.

He explained that NEITI has done a lot of work focusing on financial transparency, but stressed that, “it is also very important that we go beyond focusing on how much companies pay, we should also be looking at if that is how much they should pay because that is where Illicit financial flows come in”.

Adio said: “Everybody is talking about illicit financial flow, and there are all kinds of reports out there about how countries are bleeding from this. There is a report published by One Campaign in 2014 about how developing countries lose about $1 trillion annually from this, and you can imagine what that would do for these countries”.

“Some of these reports have also focused on Nigeria and when you look at the latest estimate from the Thabo Mbeki-led High Level Panel on IFFs, Africa loses about $50 to $60 billion every year to IFFs and it is estimated that Nigeria accounts for 30 per cent of that loss, that means Nigeria is losing between $15 to $18 billion every year to IFFs and that is not a small amount of money”,Mr. Adio reiterated.

Speaking at the event, Dr. A. Gusau, representative of the acting chairperson, Economic and Financial Crimes Commission (EFCC) commended NEITI for its work and noted that the only way the anti-corruption war could be successful is to make it a collaborative one that would involve all the citizens and institutions.

“We believe that we cannot achieve everything without the cooperation of the citizens. For that reason, the EFCC has collaborated with the judiciary. We started joint seminars together with the judiciary which has made them understand what we are doing and has helped us carry out our jobs better,” he said.

Also speaking at the event, the representative of Trust Africa, Mr. Chinedu Nwangu said his organization’s support to NEITI was part of its broader efforts to support the anti-corruption drive of the current administration.

Meanwhile, the report identified ways of mitigating the risks associated with illicit financial flows to include: transparency and accountability instruments, certificates of validation, enforcement of existing global governance regulation, collaboration approach, and taxation instruments. Other measures are: adoption of technology and automation, and effective, proportionate and dissuasive sanctions regimes.