The high level of illicit financial flows from Africa and its debilitating impact on the economies of Nigeria and the rest of the continent once again took the centre stage at the recent 73rd Session of the United Nations General Assembly in New York, United States, where President Muhammadu Buhari solicited the support of international financial institutions to curtail or even stop the menace. The Nigerian President also challenged Africans in the Diaspora to come up with concrete suggestions on how to contain financial corruption on the continent.
Although it was not the first time that President Buhari has seized the opportunity presented by the UN General Assembly to address the problems of illicit funds transactions in Africa, his latest appeal came against the background of a 2015 study by the African Union (AU) Panel chaired by former South African President, Thabo Mbeki, which showed that an estimated $50bn illicit funds leave the continent annually. It also came against the backdrop of a report by Global Financial Integrity group based in Washington which ranked Nigeria among the ten largest countries for illegal financial flows in the world.
Equally disturbing is another study that claimed that Nigerian banking system accounted for the lion share of an estimated $854bn illicit cash flows in Africa between 1971 and 2009. The trend, according to the Global Financial group, is rising steadily at a disturbing average of 12 per cent in the last ten years. These statistics, the AU Panel categorically stated, has stunted Africa’s development. It is therefore expedient that President Buhari has drawn world attention to this and the need for African leaders to unite to tackle illicit financial transactions. But of crucial importance is how to prevent the illicit funds transactions. Advocacy is not enough. The government should put in place measures to curb illicit financial flows.
However, we agree with President Buhari that all hands should be on deck against safe havens of illicit financial flows. Indeed, reports vindicate the President’s worry. A recent report showed that about $2.5bn of the $50bn illicit funds was in respect of commercial activities. Besides, illegal fuel exporters and oil bunkerers are reported to fleece Nigeria of over $10bn annually. This exceeds the $2.5bn lost through commercial activities referred to by President Buhari.
Nigeria reportedly lost $140bn in illicit financial flows between 2002 and 2011. According to the World Bank Vice President and Treasurer, Ms. Arunma Oteh, Nigeria lost over $1trn through money laundering, tax evasion, transfer pricing and embezzlement of public funds. As the Nigerian leader rightly pointed out, the negative impact of this includes draining of foreign exchange reserves, reduction of tax revenue collection, poor investment inflows and escalation of poverty.
Undoubtedly, these are major obstacles to economic growth. This calls for tightening of loose ends in our banking system since the sector is a major conduit for illicit financial transactions. It is also in this respect that the Central Bank of Nigeria (CBN) insists on greater vigilance to check illegal financial flows through the banking system. The introduction of Bank Verification Number (BVN) is believed to have helped a lot to identify and curb some of these corrupt practices by looters of government treasury, but much still needs to be done. .
The government should set necessary machinery in motion for monitoring, assessing and reporting on the UN 2030 Goals on Sustainable Development. Such safeguards have become more expedient now. But beyond that, all financial organisations, not just Deposit Money Banks, should be closely monitored to avoid illicit funds movement. This measure is crucial because most illicit fund flows are traceable to money laundering, terrorism financing, illicit drug trade and oil theft. There is no doubt that emerging trends in global financial systems, especially the management of deposit transactions and new technologies have predisposed financial institutions to abuse.
We urge the National Assembly and the Economic and Financial Crimes Commission (EFCC) to take the challenge of the President’s address at the UN General Assembly and expeditiously enact stricter laws that will make illicit financial transactions attract stiffer sanctions. Good governance, transparency, due process and zero tolerance for corruption are key to curbing illicit financial flows. Government and its officials must lead by example.