By Adanna Nnamani, Abuja

The development of Nigeria is seriously threatened by illicit financial flows (IFF). Despite ongoing efforts by anti-graft agencies to contain the threat, IFFs and money laundering have remained hydra-headed monsters that have continued to deepen their grip on the country and torment it.

IFFs involve money laundering, bribery by international companies, tax evasion, falsification of business transactions and corruption, among others.

One of the major illicit financial outflows from the world is purportedly occurring from Nigeria, with Nigerian leaders being accused of sending money to financial centres like London. There have been questions regarding the willingness and domestic capacity to combat tax evasion, which is primarily committed by western multinational corporations. These worries are in addition to those regarding the agencies in charge of regulating the return of looted assets.

According to the Human and Environmental Development Agenda (HEDA) Resource Centre, the most alarming harm caused to Nigeria by illicit finance flow has been the harm done to its administration of the justice system.

It said that institutions within the administration of justice sector have underperformed and state institutions’ capacity to fight IFF and corruption has been seriously undermined.

According to Professor Bolaji Owasanoye, the chairman of the Independent Corrupt Practices and Other Related Offences Commission (ICPC), Nigeria accounts for 20 per cent, or $10 billion (N3.8 trillion), of the estimated $50 billion that Africa loses to illicit financial flows each year.

The IFF tragedy, according to the ICPC chairman, is that developing nations suffer the losses while wealthy industrialized nations of the West and, more lately, Asia and the Middle East, receive the funds.

Dr. Uche Igwe, a senior political economy analyst, said as Nigeria’s former colonial ruler, the United Kingdom has served as a haven for corrupt elite who steal billions of public funds and use them to finance expansive real estate holdings, opulent purchases or the education of their children in prestigious British private schools.

“Ibori and Dariye may be some of the unlucky ones who are perceived as thieves. Nevertheless, many richer Nigerian politicians continue to keep their dubious assets safely across the world, including Dubai, Beirut, Cape Town and other countries, apparently undetected,” he stated.

He explained that Illicit financial flows drain tens of billions of pounds out of Africa every year, which happens in several ways, including abusive transfer pricing, over invoicing, tax evasion, use of offshore financial banking centres, smuggling of cash and illicit goods and money laundering.

To curb this monster, Igwe noted that successfully tracking illicit financial flows is a multifaceted endeavour that requires political will both nationally and internationally.

“Illicit financial flows are multidimensional and transnational in character. They involve a complex network of interconnected players from banks, company directors and employees to such professionals as lawyers and auditors.

“Efforts must be made to reduce the bureaucracy involved in the repatriation of stolen funds through simplifying Mutual Legal Assistance Agreements between source and destination countries. The same political elite who allegedly engage in these practices cannot be relied on to push policies against it lest they become victims of their own efforts. Alternative complimentary mechanisms must then be sought.

“The ball remains in the court of developing countries like Nigeria to take the bold step of tracking and reclaiming illicit funds and utilising every available framework within the international system. There is a need to develop necessary tools and domestic capacity to challenge tax evasion perpetrated especially, but not exclusively, by multinational corporations. Stakeholders insist that monitoring mechanisms remain weak, maintaining that the Central Bank of Nigeria (CBN) has not done enough to stem the tide of money laundering by omitting policies that sufficiently deter looters,” he added.

Minister of Finance, Budget and National Planning, Zainab Ahmed, said Nigeria has implemented significant measures to curb illicit financial flow and ensure asset recovery.

Ahmed identified Nigeria as one of the nations most impacted by illicit financial flow when speaking at the international conference on illicit financial flows and asset recovery.

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She said: “As one of the most affected countries, Nigeria has demonstrated strong commitment to addressing illicit financial flows through our participation in the open government partnership and the significant progress made in the extractive industry.

“We have demonstrated that technology-enabled improvements in tax collection and compliance help deter tax crime and facilitate public trust.

“Also, the mainstreaming of transparency and anti-corruption measures into economic-policy-making processes significantly reduces crime.”

The executive chairman of the Economic and Financial Crimes Commission (EFCC), Abdulrasheed Bawa, identified absence of transparency as the major facilitator of illicit financial flows.

According to Bawa, “the situation we have seen in Nigeria is that corrupt government officials and their private sector collaborators use fronts and ownership structures that do not provide sufficient information about the true identities of the natural persons behind the title to hide illicit money and transfer same to safe havens in foreign jurisdictions.”

He added that the lack of openness on the side of the nations where these funds are stashed is another factor contributing to the issue of illegal financial flows, in addition to anonymity.

“In Nigeria, we see a case in which influential officials use their positions to pilfer government resources and extract maximum rent from the country’s mineral resources with minimum or no benefit to the citizens. In practical terms, billions of dollars are lost annually in royalties and fees for licenses which politically connected individuals appropriate to themselves using fronts and secret ownership arrangements. This deprives Federal Government huge amounts of monies needed for development,” he said.

To address the issue,  the EFCC boss called for a multifaceted approach in addressing illicit financial flows and adoption of the 2030 Agenda (FACTI Panel) which provides path to financial integrity for sustainable development, showing how to redirect the resources lost from illicit flows to finance the implementation of the 2030 agenda and the achievement of the SDGs.

Dr. Gbenga Oduntan, a UK-based financial crime research expert, noted that vast movement of IFF from Nigeria to the UAE and the UK, among other more developed states, is an undeniable reality of contemporary international life.

“Nigeria currently grossly underperforms economically and scores extremely low on development indicators. The country has weak state institutions, manifests capacity gaps for regulation and suffers considerable security challenges,” said Oduntan.

He disclosed that the contributions of multinationals and other big businesses to the IFF problem afflicting Nigeria, among other developing states, is a manifestation of IFF in the private and public sectors. These, according to him, include corporations engaged in services such as agriculture, hydrocarbons, mining and manufacturing.

However, he suggested that less attention be paid to what he calls “bread and butter” corruption, which he describes as widespread business corruption under multinationals. He asserted that the UK is a single multinational corrupt nation that uses the banking system to conceal and manipulate actual financial sector data.

“The Nigerian Federal Inland Revenue Service (FIRS) recently calculated that the country loses $15bn annually to tax evasion and that is after it has roughly doubled the tax base since 2015. For Nigeria, the accruable taxes that disappear through both tax evasion and tax avoidance by multinationals is clearly one of the ‘greatest crimes’ of the 20th and 21st centuries,” Oduntan said.

He pointed out that widespread systematic tax evasion has been an indicator of the behavior of foreign enterprises and multinational corporations operating in Nigeria since the country’s independence in 1960.

“Once money is generated through bribery and corruption, the next step in the negative value chain of action is for the money to be laundered. In this context, it is notable that Nigerian PEPs have a penchant for choosing the UK and the UAE, particularly London and Dubai banks and financial institutions,” said Oduntan.

In order to bolster their defences against money laundering by all types of criminal actors, he urged that offshore financial centres in the UAE and the UK’s overseas territories must do significantly better at introducing the transparency required.

“Money illegally earned, transferred or used that crosses borders is the most common definition of illicit financial flows. IFFs reduce domestic resources and tax revenue needed to fund poverty-reducing programs and infrastructure in developing countries; accordingly, they are receiving growing attention as a key development challenge,” said Odunta.