Reps probe reports on $348bn illicit financial flow, loss of public funds

The House of Representatives on Thursday unveiled plans to invite the Minister of Finance, Budget and National Planning, Dr Zainab Ahmed, Governor of Central Bank of Nigeria (CBN), Godwin Emefiele and Group Managing Director of Nigerian National Petroleum Corporation (NNPC), Mele Kyari over the loss of government revenues to illicit financial flows.

The resolution was passed sequel to the adoption of a motion sponsored by Hon Ochiglegor Idagbo who frowned at the spiral effects of corruption on the nation’s economy.

According to Global Financial Integrity, 2014 report, Nigeria lost a minimum of $140 billion to illicit financial flows between 2000 and 2014, mainly to crude oil and commercial activities mispricing, thus Nigeria was ranked among the global top 30 countries having illicit financial outflows by dollar value and in 2015, a total of $8.3 billion was involved in the illicit financial outflows.

The lawmakers also expressed concern over reports on Tax Justice Network and the International Monetary Fund (IMF) estimated that developing countries, including Nigeria, lose over $200 billion per year to illicit financial flows as Multinational Corporations neglect, fail, and/or refuse to pay taxes, despite generating substantial profits.

Also expected to appear before the lawmakers are: Chairman, Federal Inland Revenue Service (FIRS), Muhammad Nami; Chairman, Economic and Financial Crimes Commission (EFCC), Abdulrasheed Bawa; Chairman, Independent Corrupt Practices and Other Related Offences Commission (ICPC), Prof. Bolaji Owasanoye and Director/CEO of Nigerian Financial Intelligence Unit (NFIU), Modibbo Tukur, as well as Executive Secretary of Nigerian Export-Import Bank (NEXIM), Abba Bello and other relevant institutions.

In his lead debate, Hon Idagbo observed that illicit financial flows are the cross-border transfer of capital that was illegally earned, transferred, or utilized, and often consists of commercial money laundering, tax evasion and proceeds of corruption and criminal activities.

“The House also notes that the socio-economic development of Nigeria has deeply suffered due to the unabated cross-border financial dealings of the nation’s revenues resulting from illicit financial flows.

“The House is disturbed that the Report of the Global Financial Integrity, 2014 showed that Nigeria lost a minimum of $140 billion to illicit financial flows between 2000 and 2014, mainly to crude oil and commercial activities mispricing, thus Nigeria was ranked among the global top 30 countries having Illicit Financial Outflows by dollar value and in 2015, a total of $8.3 billion has involved in the Illicit Financial Outflows.

“The House also disturbed that the Tax Justice Network and the International Monetary Fund (IMF) estimated that developing countries, including Nigeria, lose over $200 billion per year to illicit financial flows as Multinational Corporations neglect, fail and/or refuse to pay taxes, despite generating substantial profits.

“The House is concerned that the incessant financial drain on the country’s economy by the Illicit Financial Outflow continues to have negative implications for domestic resource, mobilization and long-term economic growth and development, as approximately 5% of the IFF from Africa can be attributed to corruption, while the remaining 95% comes from commercial and criminal activities.

“The House is also concerned about statistics which show that the amount of revenues lost annually is more than the sums provided as Development Aid.

“The House observes that the net Official Development Aid received by Nigeria in 2017 was US$3,358,790,000 and the United States Agency for International Development (USAID) has donated over US$526.7 million in humanitarian assistance to Nigeria and the Lake Chad Basin since 2017, yet neither of the aforementioned figures matches the estimated US$15 and US$18 billion Nigeria loses to IFFs annually hence Nigeria continues to struggle with growing inequality, poor infrastructure and lacking service delivery.

“The House also observes that despite having at least 12 institutions and agencies responsible for tackling IFF and related crimes, Nigeria continues to be menaced by weak regulatory structures and complicity of other financial secrecy, among others.

“The House further observes that global awareness has prompted governments to develop measures and policies such as the Organisation for Economic Co-operation and Development’s (OECD) and Common Reporting Standard (CRS) aimed at eradicating the perpetuation of IFF and assist tax authorities to track offshore holdings of taxpayers.

“The House is worried that an estimated 60% of IFF from Nigeria is predominantly committed by Multinational Corporations which continue to drive the cross-border siphoning of the country’s revenues to the direct and/or indirect benefit of foreign economies.

“The House is also worried that international information sharing and domestication of relevant policies have become a global priority to ensure cross-border cooperation to tackle this global threat to national revenue generation and its negative economic and developmental impacts.

“The House is aware that to ensure the domestication and implementation of the international legal framework, the Federal Inland Revenue Service (FIRS) published the Income Tax (Common Reporting Standard) Regulations, 2019, through which Nigeria aims to commence the implementation of a standardised automatic exchange of information to curb future revenue losses due to tax evasion.

“The House is also aware that Nigeria is taking steps to curtail IFF, especially from tax evasion, billions of dollars have already been lost to IFF as 2014 Financial Stability Report from the Central Bank of Nigeria (CBN) estimated that 35% of illicit financial flows out of Nigeria could be attributed to oil bunkering; Further aware that the Oil Sector accounted for 95% of Nigeria’s foreign exchange earnings and 80% of Nigeria’s total budgetary revenue, it has become imperative to recover those funds to increase short term national revenues, particularly to alleviate the pressures of the current Covid-19 pandemic, while implementing a mechanism to prevent further IFFs.

“The House is convinced that international best practices have shown that a carefully formulated funds and asset repatriation scheme could have multiple benefits for the country.

“The House is also convinced that to foster the repatriation of Nigeria’s offshore funds, the Nigerian government could introduce an appealing, yet legally acceptable offshore repatriation framework, with legal and economic incentives to taxpayers and Multinational Corporations to repatriate such resources, which could be used to boost Nigeria’s economic growth.

To this end, the House mandated the Committees on Finance, Anti-Corruption, Financial Crimes, Banking and Currency and, Insurance and Actuarial Matters to investigate the phenomenon of illicit financial flows and appraise the Federal Government’s current policy framework to curb the continuous loss of Nigeria’s revenues to illicit financial flows.

The House also mandated the Committees on Finance, National Planning and Economic Development, Anti-Corruption, Financial Crimes, Banking and Currency and, Insurance and Actuarial Matters to appraise the Federal Inland Revenue Services (FIRS) current framework for identifying, tracing, preventing and sanctioning cross-border tax evasion and other illicit financial outflows.

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